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CATERPILLAR INC — Earnings Release 2016
Apr 22, 2016
29780_iss_2016-04-22_af9f5d81-00fd-48ef-8fcb-6a4b7b93e86b.html
Earnings Release
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Caterpillar Reports First-Quarter 2016 Results
PEORIA, Illinois, April 22, 2016 /PRNewswire/ --
Sales and Revenues and Profit Excluding Restructuring Costs About As Expected
First Quarter
($ in billions except profit per share) 2015 2016
Sales and Revenues $12.702 $9.461
Profit Per Share $2.03 $0.46
Profit Per Share $2.07 $0.67
(Excluding Restructuring Costs)
Caterpillar Inc. (NYSE: CAT) today announced first-quarter 2016 sales and revenues of $9.5 billion, down from $12.7 billion in the first quarter of 2015. First-quarter 2016 profit per share of $0.46 was down from a profit of $2.03 per share in the first quarter of 2015. Excluding restructuring costs, profit per share was $0.67, compared with $2.07 per share in the first quarter of 2015.
"While first-quarter results were about as we expected, sales and profit were well below the first quarter of 2015. Sales declined across the company with substantial reductions in construction, oil and gas, mining and rail. While many of the industries we serve are challenged, we remain focused on what we can control: the quality of our products, our market position, safety in our facilities and continued restructuring and cost reduction. In fact, our period costs and variable manufacturing costs in the quarter were nearly $500 million lower than the first quarter of 2015," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.
2016 Outlook
We have seen recent increases in commodity prices, some signs of improvement in construction equipment in China and better order activity than we expected at bauma, the world's leading trade fair for many of the industries we serve. While we are seeing a few positive signals, other parts of our business remain challenged. As a result, we have lowered the midpoint of the outlook for 2016 sales and revenues about 2 percent.
Sales and revenues in 2016 are expected to be in a range of $40 to $42 billion with a midpoint of $41 billion. The previous outlook was a range of $40 to $44 billion with a midpoint of $42 billion. The decline in the midpoint of the sales and revenues outlook range is a result of several factors that, while not individually large in the context of the outlook, collectively add up to about $1 billion. Those factors include lower transportation sales (rail, marine and the ending of production of on-highway vocational trucks), lower mining sales and weaker price realization than previously expected.
The profit outlook at the midpoint of the sales and revenues range is now $3.00 per share, or $3.70 per share excluding restructuring costs. The previous profit outlook was $3.50 per share, or $4.00 per share excluding restructuring costs at the midpoint of the previous sales and revenues outlook. The expected decline in sales and revenues and an increase in expected restructuring costs are the primary reasons for the decline in the profit outlook.
Restructuring costs are now expected to be about $550 million in 2016, up $150 million from the previous outlook. The decision to end production of on-highway vocational trucks is the primary reason for the increase in restructuring costs.
"While many of the industries we serve are challenged today, we're looking ahead and investing for the future. We're investing substantially in R&D, driving forward on our Lean journey, continuing implementation of Across the Table with our dealers and accelerating our digital strategy," said Oberhelman.
"Our digital strategy is an exciting investment for the long term. We're hard at work, inside Caterpillar and with our digital partners, developing the data architecture and applications that will make our products smarter and help our customers improve productivity and safety. Our goal is to help customers be more productive, better manage their fleets and make more money with Caterpillar than they could with our competitors. Our approximately 400,000 (and growing) connected assets mean entire fleets and job sites - from machines to tablets to drones - will eventually share data on one common technology platform in the age of smart iron. One thing that I am certain of is that it's times like these when the Caterpillar team demonstrates the innovation and ambition to be the leader in all we do," added Oberhelman.
Highlights
- First-quarter sales and revenues and profit excluding restructuring costs about as expected
- Continued tough market conditions in many of the company's businesses - Mining, oil and gas, rail and construction in key developing countries
- Good operational performance continues - Overall machine market position better in first quarter of 2016 than this point last year; continues to improve in China. Focus remains on quality, safety and cost reduction
- Outlook lowered - Midpoint of sales and revenues range lowered about 2 percent
- Strong balance sheet - Maintained $0.77 per share dividend (announced April 13, 2016)
- Significant progress on restructuring actions - Contributed to substantial cost reduction in first quarter
- Investment in the future continues - Focus on accelerated digital technology, R&D, Lean and dealer-focused initiative "Across the Table"
Recast of 2015 Earnings for Change in Accounting Principle
As discussed in the year-end 2015 earnings release, Caterpillar has implemented a change in accounting principle for pension and OPEB costs. Under the new accounting principle, we will recognize actuarial gains and losses as a mark-to-market gain or loss when they occur rather than amortizing them to earnings over time. As a result of the accounting change, 2015 earnings have been recast to make results comparable on a year-over-year basis. The accounting change added $0.68 per share to 2015 profit. Profit per share for 2015 has been recast from $3.50 per share to $4.18 per share. Excluding mark-to-market pension and OPEB losses and restructuring costs, profit per share for 2015 has been recast from $4.64 per share to $5.47 per share. First-quarter 2015 profit per share has been recast from $1.81 per share to $2.03 per share. Excluding restructuring costs first-quarter 2015 profit per share has been recast from $1.86 per share to $2.07 per share. More information on the impact of the change in accounting principle can be found on page 14.
Notes:
- Glossary of terms is included on pages 19-20; first occurrence of terms shown in bold italics.
- Information on non-GAAP financial measures is included on page 21.
- Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 10 a.m. Central Time on Friday, April 22, 2016, to discuss its 2016 first-quarter results. The slides accompanying the webcast will be available before the webcast on the Caterpillar website at http://www.caterpillar.com/investors/events-and-presentations.
About Caterpillar:
For 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2015 sales and revenues of $47.011 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect with us on social media, visit caterpillar.com/social-media.
Forward-Looking Statements
Certain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance, and we do not undertake to update our forward-looking statements.
Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity price changes, component price increases, fluctuations in demand for our products or significant shortages of component products; (iv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (v) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (vi) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (vii) our Financial Products segment's risks associated with the financial services industry; (viii) changes in interest rates or market liquidity conditions; (ix) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (x) new regulations or changes in financial services regulations; (xi) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) international trade policies and their impact on demand for our products and our competitive position; (xiii) our ability to develop, produce and market quality products that meet our customers' needs; (xiv) the impact of the highly competitive environment in which we operate on our sales and pricing; (xv) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (xvi) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost reduction actions; (xvii) inventory management decisions and sourcing practices of our dealers and our OEM customers; (xviii) compliance with environmental laws and regulations; (xix) alleged or actual violations of trade or anti-corruption laws and regulations; (xx) additional tax expense or exposure; (xxi) currency fluctuations; (xxii) our or Cat Financial's compliance with financial covenants; (xxiii) increased pension plan funding obligations; (xxiv) union disputes or other employee relations issues; (xxv) significant legal proceedings, claims, lawsuits or government investigations; (xxvi) changes in accounting standards; (xxvii) failure or breach of IT security; (xxviii) adverse effects of unexpected events including natural disasters; and (xxix) other factors described in more detail under "Item 1A. Risk Factors" in our Form 10-K filed with the SEC on February 16, 2016 for the year ended December 31, 2015.
CONSOLIDATED RESULTS
Consolidated Sales and Revenues
Consolidated Sales and Revenues Comparison
First Quarter 2016 vs. First Quarter 2015
To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 1Q 2016 earnings.
The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the first quarter of 2015 (at left) and the first quarter of 2016 (at right). Items favorably impacting sales and revenues appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting sales and revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees.
Sales and Revenues
Total sales and revenues were $9.461 billion in the first quarter of 2016, compared with $12.702 billion in the first quarter of 2015, a decline of $3.241 billion, or 26 percent. The decrease was primarily due to lower sales volume. While sales for both new equipment and aftermarket parts declined in all segments, most of the decrease was for new equipment. The unfavorable impact of price realization and currency also contributed to the decline.
Sales declined in all regions. In North America, sales decreased 26 percent due to both lower end-user demand, primarily in Energy & Transportation, and the unfavorable impact of changes in dealer inventories, primarily in Construction Industries. In EAME, sales declined 24 percent, primarily in Africa/Middle East due to weak economic conditions resulting from low oil and other commodity prices. Asia/Pacific sales declined 23 percent, primarily due to lower end-user demand for Energy & Transportation applications and products used in mining. Sales decreased 43 percent in Latin America, primarily due to widespread economic weakness across the region. The most significant decreases were in Brazil and Mexico.
Sales decreased in all segments. Energy & Transportation's sales declined 33 percent largely due to lower end-user demand for oil and gas and transportation applications. Construction Industries' sales decreased 19 percent, primarily due to the unfavorable impact of changes in dealer inventories, lower demand from end users and unfavorable price realization. Resource Industries' sales declined 26 percent, mostly due to continued low end-user demand. Financial Products' segment revenues were down 7 percent, primarily due to lower average earning assets and lower average financing rates.
Consolidated Operating Profit
Consolidated Operating Profit Comparison
First Quarter 2016 vs. First Quarter 2015
To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 1Q 2016 earnings.
The chart above graphically illustrates reasons for the change in Consolidated Operating Profit (Loss) between the first quarter of 2015 (at left) and the first quarter of 2016 (at right). Items favorably impacting operating profit appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting operating profit appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees. The bar entitled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses.
Operating profit for the first quarter of 2016 was $494 million, compared with $1.702 billion in the first quarter of 2015. The decrease of $1.208 billion was primarily due to lower sales volume, including an unfavorable mix of products, resulting from continued weak commodity prices globally and economic weakness in developing countries. In addition, price realization and restructuring costs were unfavorable. These items were partially offset by favorable period costs and variable manufacturing costs.
The unfavorable price realization resulted from competitive market conditions and an unfavorable geographic mix of sales. Variable manufacturing costs were favorable, primarily due to improved material costs. Period costs were lower, primarily resulting from substantial restructuring and cost reduction actions and lower short-term incentive compensation expense. The reductions impacted period manufacturing costs and selling, general and administrative expenses (SG&A). Research and development expenses (R&D) were about flat.
Restructuring costs of $161 million in the first quarter of 2016 were primarily related to our decision to discontinue production of on-highway vocational trucks and other restructuring actions across the company. In the first quarter of 2015, restructuring costs were $35 million.
Other Profit/Loss Items
- Other income/expense in the first quarter of 2016 was zero, compared with income of $194 million in the first quarter of 2015. The unfavorable change was primarily due to the absence of a gain of $120 million on the sale of the remaining 35 percent interest in our former third-party logistics business. In addition, the net impact from currency translation and hedging gains and losses was unfavorable. There were net losses in the first quarter of 2016, compared to net gains in the first quarter of 2015.
- The provision for income taxes in the first quarter reflects an estimated annual tax rate of 25 percent, compared to 29.5 percent for the first quarter of 2015 and 25.5 percent for the full-year 2015 excluding discrete items. The full-year rate for 2015 was lower than the first-quarter 2015 rate, primarily due to changes in the geographic mix of profits from a tax perspective along with the impact of the permanent renewal of the U.S. research and development tax credit in the fourth quarter of 2015.
Global Workforce
Caterpillar worldwide, full-time employment was about 101,400 at the end of the first quarter of 2016, compared with about 113,300 at the end of the first quarter of 2015, a decrease of about 11,900 full-time employees. The flexible workforce decreased by about 3,200 for a total decrease in the global workforce of about 15,100. The decrease was primarily the result of restructuring programs and lower production volumes.
March 31
Increase/
2016 2015 (Decrease)
Full-time employment 101,400 113,300 (11,900)
Flexible workforce 12,900 16,100 (3,200)
Total 114,300 129,400 (15,100)
Geographic summary of change
U.S. workforce (8,000)
Non-U.S. workforce (7,100)
Total (15,100)
SEGMENT RESULTS
Segment results for the first quarter of 2015 have been recast. See page 14 for additional details.
Sales and Revenues by
Geographic Region
(Millions of % North % Latin % % Asia/ %
dollars) Total Change America Change America Change EAME Change Pacific Change
First
Quarter 2016
Construction
Industries(1) $4,043 (19)% $ 2,058 (18)% $ 231 (52)% $ 847 (17)% $ 907 (9)%
Resource
Industries(2) 1,449 (26)% 604 (23)% 268 (14)% 262 (43)% 315 (23)%
Energy &
Transport-
ation(3) 3,278 (33)% 1,566 (34)% 200 (53)% 982 (21)% 530 (40)%
All Other
Segments(4) 38 (47)% 15 (42)% 1 (75)% 9 (63)% 13 (28)%
Corporate
Items and
Eliminations (28) (24) (1) (2) (1)
Machinery,
Energy &
Transport-
ation $8,780 (27)% $ 4,219 (26)% $ 699 (43)% $2,098 (24)% $1,764 (23)%
Financial
Products
Segment $ 743 (7)% $ 459 2 % $ 87 (19)% $ 98 (10)% $ 99 (23)%
Corporate
Items and
Eliminations (62) (34) (14) (4) (10)
Financial
Products
Revenues $ 681 (8)% $ 425 - % $ 73 (25)% $ 94 (10)% $ 89 (24)%
Consolidated
Sales and
Revenues $9,461 (26)% $ 4,644 (24)% $ 772 (41)% $2,192 (23)% $1,853 (23)%
First
Quarter 2015
Construction
Industries(1) $5,014 $ 2,520 $ 480 $1,017 $ 997
Resource
Industries(2) 1,971 789 311 462 409
Energy &
Transport-
ation(3) 4,915 2,368 425 1,244 878
All Other
Segments(4) 72 26 4 24 18
Corporate
Items and
Eliminations (11) (16) 1 1 3
Machinery,
Energy &
Transport-
ation $11,961 $ 5,687 $ 1,221 $2,748 $2,305
Financial
Products
Segment $ 795 $ 451 $ 107 $ 109 $ 128
Corporate
Items and
Eliminations (54) (28) (10) (5) (11)
Financial
Products
Revenues $ 741 $ 423 $ 97 $ 104 $ 117
Consolidated
Sales and
Revenues $12,702 $ 6,110 $ 1,318 $2,852 $2,422
1 Does not include inter-segment sales of $8 million and $23 million in first quarter 2016
and 2015, respectively.
2 Does not include inter-segment sales of $71 million and $87 million in first quarter 2016
and 2015, respectively.
3 Does not include inter-segment sales of $632 million and $794 million in first quarter
2016 and 2015, respectively.
4 Does not include inter-segment sales of $92 million and $103 million in first quarter
2016 and 2015, respectively.
Sales and Revenues by
Segment
First First
(Millions of Quarter Sales Price Quarter $ %
dollars) 2015 Volume Realization Currency Other 2016 Change Change
Construction
Industries $ 5,014 $ (701) $ (172) $ (98) $ - $ 4,043 $ (971) (19) %
Resource
Industries 1,971 (463) (38) (21) - 1,449 (522) (26) %
Energy &
Transportation 4,915 (1,543) (24) (70) - 3,278 (1,637) (33) %
All Other
Segments 72 (33) - (1) - 38 (34) (47) %
Corporate
Items and
Eliminations (11) (19) - 2 - (28) (17)
Machinery,
Energy &
Transportation $11,961 $(2,759) $ (234) $(188) $ - $ 8,780 $(3,181) (27) %
Financial
Products
Segment 795 - - - (52) 743 (52) (7) %
Corporate
Items and
Eliminations (54) - - - (8) (62) (8)
Financial
Products
Revenues $ 741 $ - $ - $ - $ (60) $ 681 $ (60) (8) %
Consolidated
Sales and
Revenues $ 12,702 $(2,759) $ (234) $ (188) $ (60) $ 9,461 $(3,241) (26) %
Operating Profit (Loss) by
Segment
First First $ %
(Millions of dollars) Quarter 2016 Quarter 2015 Change Change
Construction Industries $ 440 $ 745 $ (305) (41) %
Resource Industries (96) 96 (192) (200) %
Energy & Transportation 410 1,024 (614) (60) %
All Other Segments (7) (7) - - %
Corporate Items and
Eliminations (357) (319) (38)
Machinery, Energy &
Transportation $ 390 $ 1,539 $ (1,149) (75) %
Financial Products Segment 168 227 (59) (26) %
Corporate Items and
Eliminations (1) 3 (4)
Financial Products $ 167 $ 230 $ (63) (27) %
Consolidating Adjustments (63) (67) 4
Consolidated Operating Profit
(Loss) $ 494 $ 1,702 $ (1,208) (71) %
CONSTRUCTION INDUSTRIES
(Millions of
dollars)
Sales Comparison
First Quarter Sales Price First Quarter $ %
2015 Volume Realization Currency 2016 Change Change
Sales
Comparison(1) $5,014 ($701) ($172) ($98) $4,043 ($971) (19)%
Sales by Geographic
Region
First Quarter First Quarter $ %
2016 2015 Change Change
North
America $2,058 $2,520 ($462) (18) %
Latin
America 231 480 (249) (52) %
EAME 847 1,017 (170) (17) %
Asia/Pacific 907 997 (90) (9) %
Total1 $4,043 $5,014 ($971) (19) %
Operating
Profit
First Quarter First Quarter $ %
2016 2015 Change Change
Operating
Profit $440 $745 ($305) (41) %
1 Does not include inter-segment sales of $8 million and $23 million in first
quarter 2016 and 2015, respectively.
Construction Industries' sales were $4.043 billion in the first quarter of 2016, a decrease of $971 million, or 19 percent, from the first quarter of 2015. The decrease in sales was due to lower volume, unfavorable price realization and the unfavorable impact of currency. While sales declined for both new equipment and aftermarket parts, substantially all of the decrease was for new equipment.
- Sales volume declined primarily due to the unfavorable impact of changes in dealer inventories. Dealers increased inventories in both the first quarter of 2016 and the first quarter of 2015; however, the increase was greater in the first quarter of 2015. In addition, deliveries to end users were lower.
- The unfavorable impact of currency was due to the strengthening of the U.S. dollar compared to most other currencies.
Sales decreased in all regions.
- In North America, the sales decline was primarily due to dealers increasing inventories more significantly in the first quarter of 2015 than the first quarter of 2016. In addition, although residential and nonresidential construction activity is improving, sales to end users were lower than the first quarter of 2015. We believe declines in construction activity related to oil and gas have resulted in the availability of existing construction equipment for other purposes. Unfavorable price realization resulted from competitive market conditions.
- In Latin America, end-user demand was down across the region, with the most significant declines in Brazil due to depressed economic conditions and in Mexico due to weak construction activity.
- Lower sales in EAME were primarily due to unfavorable price realization and lower end-user demand. Price realization was unfavorable across the region due to competitive market conditions. The decline in end-user demand was most significant in oil-producing economies. In addition, sales declined in South Africa where we believe an uncertain regulatory and political environment contributed to lower end-user demand.
- Sales in Asia/Pacific were down as a result of the unfavorable impact of changes in dealer inventories, which were about flat in the first quarter of 2016 and increased in the first quarter of 2015.
Construction Industries' profit was $440 million in the first quarter of 2016, compared with $745 million in the first quarter of 2015. The decrease in profit was primarily due to lower sales volume, including an unfavorable mix of products and unfavorable price realization resulting from competitive market conditions. The decline was partially offset by favorable costs, primarily due to restructuring and cost reduction actions and lower material costs.
RESOURCE INDUSTRIES
(Millions of
dollars)
Sales Comparison
First Quarter Sales Price First Quarter $ %
2015 Volume Realization Currency 2016 Change Change
Sales
Comparison(1) $1,971 ($463) ($38) ($21) $1,449 ($522) (26) %
Sales by Geographic
Region
First Quarter First Quarter $ %
2016 2015 Change Change
North
America $604 $789 ($185) (23) %
Latin
America 268 311 (43) (14) %
EAME 262 462 (200) (43) %
Asia/Pacific 315 409 (94) (23) %
Total1 $1,449 $1,971 ($522) (26) %
Operating Profit (Loss)
First Quarter First Quarter $ %
2016 2015 Change Change
Operating
Profit
(Loss) ($96) $96 ($192) (200) %
1 Does not include inter-segment sales of $71 million and $87 million in first quarter 2016
and 2015, respectively.
Resource Industries' sales were $1.449 billion in the first quarter of 2016, a decrease of $522 million, or 26 percent, from the first quarter of 2015. The decline was primarily due to lower sales volume. Sales were lower for both new equipment and aftermarket parts.
The sales decrease was primarily due to lower end-user demand across all regions. In addition, the sales decline in EAME was partially due to the unfavorable impact of changes in dealer inventories, as dealers lowered inventories in the first quarter of 2016, compared to increasing inventories in the first quarter of 2015.
Commodity prices improved from their recent lows, but excess supply remains. It is not clear at this time that the current prices are either sustainable or sufficient to drive increased demand for equipment. Mining customers continued to focus on improving productivity in existing mines and reducing their total capital expenditures, as they have for several years. As a result, sales and new orders in Resource Industries continue to be weak.
Resource Industries incurred a loss of $96 million in the first quarter of 2016, compared with profit of $96 million in the first quarter of 2015. The unfavorable change was due to lower sales volume and negative price realization. This was partially offset by improved period manufacturing and SG&A expenses due to restructuring and cost reduction actions.
ENERGY & TRANSPORTATION
(Millions of
dollars)
Sales Comparison
First Quarter Sales Price First Quarter $ %
2015 Volume Realization Currency 2016 Change Change
Sales
Comparison(1) $4,915 ($1,543) ($24) ($70) $3,278 ($1,637) (33) %
Sales by Geographic
Region
First Quarter First Quarter $ %
2016 2015 Change Change
North
America $1,566 $2,368 ($802) (34) %
Latin
America 200 425 (225) (53) %
EAME 982 1,244 (262) (21) %
Asia/Pacific 530 878 (348) (40) %
Total1 $3,278 $4,915 ($1,637) (33) %
Operating
Profit
First Quarter First Quarter $ %
2016 2015 Change Change
Operating
Profit $410 $1,024 ($614) (60) %
1 Does not include inter-segment sales of $632 million and $794 million in first quarter 2016
and 2015, respectively.
Energy & Transportation's sales were $3.278 billion in the first quarter of 2016, a decrease of $1.637 billion, or 33 percent, from the first quarter of 2015. The decrease was primarily the result of lower sales volume. Sales decreased in all applications with more than 80 percent of the decline in oil and gas and transportation.
- Oil and Gas - Sales continued to decrease in much of the world due to low oil prices. The sales decline was most significant in equipment used for gas compression, well servicing and production, with the most significant impact in North America. The decline in sales of equipment for gas compression was primarily in reciprocating engines.
- Transportation - Sales decreased in all geographic regions. The most significant decline was in North America, primarily due to significant weakness in the rail industry. In addition, the first quarter of 2015 benefited from deliveries of locomotives that began production in 2014. In Asia/Pacific, the decrease was due to the absence of a large locomotive sale in the first quarter of 2015 and a decline for equipment used in marine applications.
- Power Generation - Sales decreased significantly in Latin America and North America, slightly in EAME and were about flat in Asia/Pacific. The decline is primarily due to weak economic conditions in Latin America and the absence of several large projects in North America.
- Industrial - Sales were lower in Asia/Pacific, Latin America and North America and about flat in EAME. The decline in sales was primarily due to lower end-user demand for most industrial applications.
Energy & Transportation's profit was $410 million in the first quarter of 2016, compared with $1.024 billion in the first quarter of 2015. The decline was due to a decrease in sales volume, partially offset by lower costs primarily due to restructuring and cost reduction actions and favorable material costs.
FINANCIAL PRODUCTS SEGMENT
(Millions of dollars)
Revenues by Geographic Region
First Quarter First Quarter $ %
2016 2015 Change Change
North America $459 $451 $8 2 %
Latin America 87 107 (20) (19) %
EAME 98 109 (11) (10) %
Asia/Pacific 99 128 (29) (23) %
Total $743 $795 ($52) (7) %
Operating Profit
First Quarter First Quarter $ %
2016 2015 Change Change
Operating Profit $168 $227 ($59) (26) %
Financial Products' revenues were $743 million in the first quarter of 2016, a decrease of $52 million, or 7 percent, from the first quarter of 2015. The decline was primarily due to lower average earning assets and lower average financing rates. Average earning assets were down in Asia/Pacific, Latin America and EAME, partially offset by higher average earning assets in North America. Average financing rates decreased across all regions.
Financial Products' profit was $168 million in the first quarter of 2016, compared with $227 million in the first quarter of 2015. The decrease was primarily due to a $17 million decrease in net yield on average earning assets reflecting geographic mix changes and currency impacts, an $11 million increase in the provision for credit losses at Cat Financial and a $10 million unfavorable impact from lower average earning assets.
At the end of the first quarter of 2016, past dues at Cat Financial were 2.78 percent, compared with 3.08 percent at the end of the first quarter of 2015 and 2.14 percent at the end of 2015. There is some seasonality in past due percentages and it is common to see an increase in the first quarter. Write-offs, net of recoveries, were $31 million for the first quarter of 2016, compared with $12 million for the first quarter of 2015. The increase in write-offs, net of recoveries, was primarily driven by Caterpillar Power Finance and North American portfolios.
As of March 31, 2016, Cat Financial's allowance for credit losses totaled $340 million, or 1.21 percent of net finance receivables, compared with $392 million, or 1.38 percent of net finance receivables at March 31, 2015. The allowance for credit losses at year-end 2015 was $338 million, or 1.22 percent of net finance receivables.
Corporate Items and Eliminations
Expense for corporate items and eliminations was $358 million in the first quarter of 2016, an increase of $42 million from the first quarter of 2015. Corporate items and eliminations include: corporate-level expenses; restructuring costs; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences for ME&T, as segment profit is reported using annual fixed exchange rates; cost of sales methodology differences as segments use a current cost methodology; and inter-segment eliminations.
The increase in expense from the first quarter of 2015 was primarily due to a $126 million increase in restructuring costs, partially offset by lower stock-based compensation expense and methodology differences.
2016 OUTLOOK
We have seen recent increases in commodity prices, some signs of improvement in construction equipment in China and better order activity than we expected at bauma, the world's leading trade fair for many of the industries we serve. While we are seeing a few positive signals, other parts of our business remain challenged. As a result, we have lowered the midpoint of the outlook for 2016 sales and revenues about 2 percent.
Sales and revenues in 2016 are expected to be in a range of $40 to $42 billion with a midpoint of $41 billion. The previous outlook was a range of $40 to $44 billion with a midpoint of $42 billion. The decline in the midpoint of the sales and revenues outlook range is a result of several factors that, while not individually large in the context of the outlook, collectively add up to about $1 billion. Those factors include lower transportation sales (rail, marine and the ending of production of on-highway vocational trucks), lower mining sales and weaker price realization than previously expected.
The profit outlook at the midpoint of the sales and revenues range is now $3.00 per share, or $3.70 per share excluding restructuring costs. The previous profit outlook was $3.50 per share, or $4.00 per share excluding restructuring costs at the midpoint of the previous sales and revenues outlook. The expected decline in sales and revenues and an increase in expected restructuring costs are the primary reasons for the decline in the profit outlook.
Restructuring costs are now expected to be about $550 million in 2016, up $150 million from the previous outlook. The decision to end production of on-highway vocational trucks is the primary reason for the increase in restructuring costs.
2016 REPORTING CHANGES
We made several reporting changes effective January 1, 2016. Our 2015 financial information has been recast to be consistent with the 2016 presentation.
Pension and OPEB Costs
Effective January 1, 2016, we changed our accounting principle for recognizing actuarial gains and losses and expected returns on assets for our pension and OPEB plans. Gains and losses historically recognized as a component of equity and amortized to earnings in future periods will be recognized in earnings in the period in which they occur. In addition, we changed our policy for recognizing expected returns on plan assets from a market-related value method (based on a three-year smoothing of asset returns) to a fair value method.
Under the new principle, we will immediately recognize actuarial gains and losses as a mark-to-market gain or loss through earnings upon the annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.
The change in accounting principle has no impact on future pension or OPEB funding or benefits paid to plan participants.
The impact of the change in accounting principle on our 2015 Results of Operations is presented on page 15. Actuarial losses (mark-to-market adjustments) for 2015 are shown separately from the other impacts of the change, which are primarily reversals of actuarial losses that had been amortized to earnings under the prior accounting principle.
Segment Reporting
Effective January 1, 2016, we made the following changes that impacted our segment reporting. These changes were made to reflect changes in organizational accountabilities and refinements to our internal reporting.
- Responsibility for remanufacturing of Cat engines and components and responsibility for on-highway vocational trucks moved from the All Other segments to Energy & Transportation.
- Responsibility for forestry and paving products moved from All Other segments to Construction Industries.
- Responsibility for industrial and waste products moved from All Other segments to Resource Industries.
- Internal charges for component manufacturing and logistics services provided by All Other segments to Construction Industries, Resource Industries and Energy & Transportation in excess of cost have been adjusted to approximate actual cost, resulting in a reduction in profit in the All Other segments and corresponding increases in profit in the other three segments.
- Costs that previously had been included in ME&T Corporate Items, primarily for company-wide strategies such as information technology and manufacturing process transformation, have been included in the ME&T segments that benefit from the costs.
The impacts of both the pension and OPEB and segment reporting changes on our 2015 quarterly operating profit are presented on page 16. The pension and OPEB change is reported in ME&T Corporate Items and had no impact on segment results.
Impact of Pension and OPEB Accounting Principle Change on Consolidated Statement of
Results of Operations
Twelve Months Ended December 31, 2015
(Unaudited)
(Dollars in millions except per share data)
Effect of Accounting Change
2015
Previously Actuarial
Reported Losses Other Recast
Sales and revenues:
Sales of Machinery,
Energy & Transportation $ 44,147 $ - $ - $ 44,147
Revenues of Financial
Products 2,864 - - 2,864
Total sales and revenues 47,011 - - 47,011
Operating costs:
Cost of goods sold 33,742 122 (318) 33,546
Selling, general and
administrative expenses 5,199 18 (266) 4,951
Research and development
expenses 2,165 39 (85) 2,119
Interest expense of
Financial Products 587 - - 587
Other operating (income)
expenses 2,062 - (39) 2,023
Total operating costs 43,755 179 (708) 43,226
Operating profit 3,256 (179) 708 3,785
Interest expense
excluding Financial
Products 507 - - 507
Other income (expense) 106 - 55 161
Consolidated profit before taxes 2,855 (179) 763 3,439
Provision (benefit) for
income taxes 742 (66) 240 916
Profit of consolidated
companies 2,113 (113) 523 2,523
Equity in profit (loss)
of unconsolidated
affiliated companies - - - -
Profit of consolidated and
affiliated companies 2,113 (113) 523 2,523
Less: Profit (loss) attributable to
noncontrolling interests 11 - - 11
Profit 1 $ 2,102 $ (113) $ 523 $ 2,512
Profit per common share $ 3.54 $ 4.23
Profit per common share -
diluted 2 $ 3.50 $ 4.18
1 Profit attributable to common stockholders.
Diluted by assumed exercise of stock-based
compensation awards using the treasury stock
2 method.
2015 Recast Sales and Revenues by Segment
Full
(Millions of First Second Third Fourth Year
dollars) Quarter Quarter Quarter Quarter 2015
Construction
Industries(1) $ 5,014 $ 4,803 $ 4,075 $ 3,905 $ 17,797
Resource
Industries(2) 1,971 2,048 1,842 1,878 7,739
Energy &
Transport-
ation(3) 4,915 4,708 4,352 4,544 18,519
All Other
Segments(4) 72 55 39 37 203
Corporate
Items and
Eliminations (11) (31) (23) (46) (111)
Machinery,
Energy &
Transport-
ation $ 11,961 $ 11,583 $ 10,285 $ 10,318 $ 44,147
Financial
Products
Segment 795 785 752 746 3,078
Corporate
Items and
Eliminations (54) (51) (75) (34) (214)
Financial
Products $ 741 $ 734 $ 677 $ 712 $ 2,864
Consolidated
Sales and
Revenues $ 12,702 $ 12,317 $ 10,962 $ 11,030 $ 47,011
1 Does not
include
inter-segment
sales $ 23 $ 26 $ 17 $ 43 $ 109
2 Does not
include
inter-segment
sales 87 75 88 82 332
3 Does not
include
inter-segment
sales 794 766 702 615 2,877
4 Does not
include
inter-segment
sales 103 100 88 99 390
2015 Recast Operating Profit (Loss) by Segment
Full
(Millions of First Second Third Fourth Year
dollars) Quarter Quarter Quarter Quarter 2015
Construction
Industries $ 745 $ 588 $ 354 $ 178 $ 1,865
Resource
Industries 96 27 (42) (80) 1
Energy &
Transport-
ation 1,024 942 683 741 3,390
All Other
Segments (7) (18) (11) (39) (75)
Corporate
Items and
Eliminations (319) (322) (182) (1,088) (1,911)
Machinery,
Energy &
Transporta-
tion $ 1,539 $ 1,217 $ 802 $ (288) $ 3,270
Financial
Products
Segment 227 184 207 191 809
Corporate
Items and
Eliminations 3 (1) (22) (15) (35)
Financial
Products $ 230 $ 183 $ 185 $ 176 $ 774
Consolidating
Adjustments (67) (67) (62) (63) (259)
Consolidated
Operating
Profit (Loss) $ 1,702 $ 1,333 $ 925 $ (175) $ 3,785
QUESTIONS AND ANSWERS
Your 2015 profit changed from what you reported last year. Can you please
Q1: explain the change?
Effective January 1, 2016, we changed how we account for pension and OPEB
costs. Under the new accounting principle, we will recognize actuarial
gains and losses as a mark-to-market gain or loss when they occur rather
than amortizing them to earnings over time. The presentation of 2015
results has been recast to be consistent with the new method. The change
resulted in an increase to 2015 pre-tax profit of $584 million or $0.68 per
share. This is an accounting principle change only and has no impact on
future pension or OPEB funding or benefits paid to plan participants. Below
A: is the impact on 2015 profit per share.
First Quarter 2015 Full Year 2015
Previously Previously
Reported Recast Reported Recast
Profit Per
Share $1.81 $2.03 $3.50 $4.18
2015 Actuarial
Losses (MTM) $0.19
Restructuring
Costs $0.05 $0.04 $1.14 $1.10
Profit Per Share -
Excluding Restructuring
Costs and MTM $1.86 $2.07 $4.64 $5.47
Can you update us on the progress of the restructuring actions announced on
Q2: September 24, 2015?
Since September 30, 2015, our global workforce is down approximately 8,600, which
is a combination of restructuring actions and production volume-related actions.
Restructuring has resulted in the elimination of approximately 5,300 positions
since the September 24 announcement through the first quarter of 2016. We are
delivering significant cost reduction as a result of these actions. We continue to
contemplate facility consolidations and closures in order to right size our
capacity needs. Since the September 24 announcement, we've announced the closure
A: or consolidation of about 15 facilities.
What caused the price deterioration in the first quarter, especially in
Q3: Construction Industries? What do you expect for the balance of the year?
We continue to see competitive pressure that started in the last half of 2015
driven by excess industry capacity, unfavorable currency pressure and an overall
weak economic environment. We expect the current competitive pressure to continue
for the remainder of the year, although it is expected most of the year-over-year
weakness will occur in the first half of 2016, as price realization was more
A: negative in the second half of 2015 compared to the first half.
Oil prices have improved from the beginning of 2016. How does this affect your
thinking about shipments of reciprocating engines and turbines to this important
Q4: end market for 2016?
While oil prices have improved since the beginning of 2016, it is not clear at
this time that the current price level is either sustainable or sufficient to
drive increased demand for equipment. We monitor a number of factors in addition
to oil prices that shape our outlook, including recent order rates, quotation
activity, our current backlog, trends in retail statistics and discussions with
our customers. Based on all of these factors, we do not see the current oil price
A: driving a turnaround in demand for our products in 2016.
Q5: Can you discuss changes in dealer inventories in the first quarter of 2016?
Dealers generally increase inventories in the first quarter in preparation for the
spring selling season. Dealer machine and engine inventories increased about $300
million in the first quarter of 2016, compared with an increase of about $900
A: million in the first quarter of 2015.
Q6: Can you comment on your order backlog by segment?
At the end of the first quarter of 2016, the order backlog was $13.1 billion,
about the same in total and by segment as the end of 2015. Compared to the first
quarter of 2015, the order backlog declined about $3.5 billion with decreases in
A: all segments.
Can you comment on expense related to your 2016 short-term incentive compensation
Q7: plans?
Short-term incentive compensation expense is directly related to financial and
operational performance, measured against targets set annually. First-quarter 2016
A: expense was about $120 million. First-quarter 2015 expense was about $215 million.
For 2016, our outlook includes short-term incentive compensation expense of about
$480 million.
Q8: Can you give us an update on how Cat Financial is performing?
Cat Financial's portfolio continues to perform well overall despite ongoing
weakness in many key end markets. The first quarter of 2016 past dues were 2.78
percent, compared with 3.08 percent in the first quarter of 2015, with current
past dues remaining lower than historical averages for the first quarter.
Write-offs in the first quarter of 2016 were $31 million, or 0.47 percent of the
average retail portfolio. Although an increase from $12 million in the first
quarter of 2015, write-offs were only slightly above historical averages for the
first quarter. We believe customer risk exposure is well managed, with broad
distribution of portfolio exposure across a global customer base. Cat Financial
continues to work closely with its customers to provide financing support for new
A: Caterpillar product purchases and to actively monitor global portfolio health.
Q9: Can you comment on your balance sheet and cash priorities?
The ME&T debt-to-capital ratio was 37.7 percent, improved from 39.0 percent at the
end of 2015. Our cash and liquidity positions remain strong with an enterprise
cash balance of $5.886 billion as of March 31, 2016. ME&T operating cash flow for
the first quarter of 2016 was $218 million compared with $1.042 billion in the
A: first quarter of 2015. The decline was primarily due to lower profit.
While our long-term priorities for cash deployment are unchanged, we are very
focused on the continuing strength of our balance sheet to maintain our credit
rating and the dividend.
GLOSSARY OF TERMS
All Other Segments - Primarily includes activities such as: the business
strategy, product management, development, and manufacturing of filters and
fluids, undercarriage, tires and rims, ground engaging tools, fluid transfer
products, precision seals and rubber, and sealing and connecting components
primarily for Cat products; parts distribution; distribution services
responsible for dealer development and administration including a wholly
owned dealer in Japan, dealer portfolio management and ensuring the most
efficient and effective distribution of machines, engines and parts; digital
investments for new customer and dealer solutions that integrate data
analytics with state-of-the art digital technologies while transforming the
1. buying experience.
Consolidating Adjustments - Elimination of transactions between Machinery,
2. Energy & Transportation and Financial Products.
Construction Industries - A segment primarily responsible for supporting
customers using machinery in infrastructure, forestry and building
construction applications. Responsibilities include business strategy,
product design, product management and development, manufacturing, marketing
and sales and product support. The product portfolio includes backhoe
loaders, small wheel loaders, small track-type tractors, skid steer loaders,
multi-terrain loaders, mini excavators, compact wheel loaders, telehandlers,
select work tools, small, medium and large track excavators, wheel
excavators, medium wheel loaders, compact track loaders, medium track-type
tractors, track-type loaders, motor graders, pipelayers, forestry and paving
3. products.
Currency - With respect to sales and revenues, currency represents the
translation impact on sales resulting from changes in foreign currency
exchange rates versus the U.S. dollar. With respect to operating profit,
currency represents the net translation impact on sales and operating costs
resulting from changes in foreign currency exchange rates versus the U.S.
dollar. Currency includes the impact on sales and operating profit for the
Machinery, Energy & Transportation lines of business only; currency impacts
on Financial Products' revenues and operating profit are included in the
Financial Products' portions of the respective analyses. With respect to
other income/expense, currency represents the effects of forward and option
contracts entered into by the company to reduce the risk of fluctuations in
exchange rates (hedging) and the net effect of changes in foreign currency
exchange rates on our foreign currency assets and liabilities for
4. consolidated results (translation).
Debt-to-Capital Ratio - A key measure of Machinery, Energy & Transportation's
financial strength used by management. The metric is defined as Machinery,
Energy & Transportation's short-term borrowings, long-term debt due within
one year and long-term debt due after one year (debt) divided by the sum of
Machinery, Energy & Transportation's debt and stockholders' equity. Debt also
includes Machinery, Energy & Transportation's long-term borrowings from
5. Financial Products.
EAME - A geographic region including Europe, Africa, the Middle East and the
6. Commonwealth of Independent States (CIS).
Earning Assets - Assets consisting primarily of total finance receivables net
of unearned income, plus equipment on operating leases, less accumulated
7. depreciation at Cat Financial.
Energy & Transportation - A segment primarily responsible for supporting
customers using reciprocating engines, turbines, diesel-electric locomotives
and related parts across industries serving power generation, industrial, oil
and gas and transportation applications, including marine and rail-related
businesses. Responsibilities include business strategy, product design,
product management and development, manufacturing, marketing and sales and
product support of turbines and turbine-related services, reciprocating
engine powered generator sets, integrated systems used in the electric power
generation industry, reciprocating engines and integrated systems and
solutions for the marine and oil and gas industries; reciprocating engines
supplied to the industrial industry as well as Cat machinery; the
remanufacturing of Cat(R) engines and components and remanufacturing services
for other companies; the business strategy, product design, product
management and development, manufacturing, remanufacturing, leasing and
service of diesel-electric locomotives and components and other rail-related
products and services and product support of on-highway vocational trucks for
8. North America.
Financial Products Segment - Provides financing to customers and dealers for
the purchase and lease of Cat and other equipment, as well as some financing
for Caterpillar sales to dealers. Financing plans include operating and
finance leases, installment sale contracts, working capital loans and
wholesale financing plans. The segment also provides various forms of
insurance to customers and dealers to help support the purchase and lease of
our equipment. Financial Products Segment profit is determined on a pretax
9. basis and includes other income/expense items.
Latin America - A geographic region including Central and South American
10. countries and Mexico.
Lean Management - A holistic management system that uses a sequential cadence
of principles to drive the highest quality and lowest total cost to achieve
11. customer requirements.
Machinery, Energy & Transportation (ME&T) - Represents the aggregate total of
Construction Industries, Resource Industries, Energy & Transportation and All
12. Other Segments and related corporate items and eliminations.
Machinery, Energy & Transportation Other Operating (Income) Expenses -
Comprised primarily of gains/losses on disposal of long-lived assets,
gains/losses on divestitures and legal settlements and accruals.
Restructuring costs classified as other operating expenses on the Results of
13. Operations are presented separately on the Operating Profit Comparison.
Pension and other postemployment benefit (OPEB) costs - Costs for the
14. company's defined benefit pension and postretirement benefit plans.
Period Costs - Includes period manufacturing costs, selling, general and
administrative (SG&A) and research and development (R&D) expenses excluding
the impact of currency. Period manufacturing costs support production but are
defined as generally not having a direct relationship to short-term changes
in volume. Examples include machinery and equipment repair, depreciation on
manufacturing assets, facility support, procurement, factory scheduling,
manufacturing planning and operations management. SG&A and R&D costs are not
linked to the production of goods or services and include marketing, legal
and financial services and the development of new and significant
15. improvements in products or processes.
Price Realization - The impact of net price changes excluding currency and
new product introductions. Price realization includes geographic mix of
sales, which is the impact of changes in the relative weighting of sales
16. prices between geographic regions.
Resource Industries - A segment primarily responsible for supporting
customers using machinery in mining, quarry, waste, and material handling
applications. Responsibilities include business strategy, product design,
product management and development, manufacturing, marketing and sales and
product support. The product portfolio includes large track-type tractors,
large mining trucks, hard rock vehicles, longwall miners, electric rope
shovels, draglines, hydraulic shovels, track and rotary drills, highwall
miners, large wheel loaders, off-highway trucks, articulated trucks, wheel
tractor scrapers, wheel dozers, landfill compactors, soil compactors,
material handlers, continuous miners, scoops and haulers, hardrock continuous
mining systems, select work tools, machinery components and electronics and
control systems. Resource Industries also manages areas that provide services
to other parts of the company, including integrated manufacturing and
17. research and development.
Restructuring Costs - Primarily costs for employee separation costs,
long-lived asset impairments and contract terminations. These costs are
included in Other Operating (Income) Expenses. Restructuring costs also
include other exit-related costs primarily for accelerated depreciation and
equipment relocation (primarily included in Cost of goods sold) and sales
discounts and payments to dealers and customers related to discontinued
18. products (included in Sales of ME&T).
Sales Volume - With respect to sales and revenues, sales volume represents
the impact of changes in the quantities sold for Machinery, Energy &
Transportation as well as the incremental revenue impact of new product
introductions, including emissions-related product updates. With respect to
operating profit, sales volume represents the impact of changes in the
quantities sold for Machinery, Energy & Transportation combined with product
mix as well as the net operating profit impact of new product introductions,
including emissions-related product updates. Product mix represents the net
operating profit impact of changes in the relative weighting of Machinery,
19. Energy & Transportation sales with respect to total sales.
Variable Manufacturing Costs - Represents volume-adjusted costs excluding the
impact of currency. Variable manufacturing costs are defined as having a
direct relationship with the volume of production. This includes material
costs, direct labor and other costs that vary directly with production volume
such as freight, power to operate machines and supplies that are consumed in
20. the manufacturing process.
NON-GAAP FINANCIAL MEASURES
The following definition is provided for "non-GAAP financial measures" in connection with Regulation G issued by the Securities and Exchange Commission. The non-GAAP financial measures we use have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or substituted for the related GAAP measure.
Profit Per Share Excluding Restructuring Costs and Mark-to-Market Losses
We incurred significant restructuring costs in 2015 and expect to incur additional restructuring costs in 2016. We believe it is important to separately quantify the profit per share impact of restructuring costs in order for our 2016 results and the 2016 outlook to be meaningful to our readers. We have also provided 2015 profit per share excluding restructuring costs comparable to the 2016 presentation. In addition, we believe it is important to separately quantify the per share impact of the pension and OPEB mark-to-market losses resulting from plan remeasurements for our 2015 results to be meaningful. We have provided recast 2015 results comparable to the 2016 presentation. Reconciliations of profit per share excluding restructuring costs and mark-to-market losses (2015 only) to the most directly comparable GAAP measure, diluted profit per share, are as follows:
First Quarter 2016 Outlook
2015 2016 Original\[1\] Current\[2\]
Profit (Loss)
per share $2.03 $0.46 $3.50 $3.00
Per share
restructuring
costs \[3\] $0.04 $0.21 $0.50 $0.70
Profit per
share
excluding
restructuring
costs $2.07 $0.67 $4.00 $3.70
First Quarter 2015 Full Year 2015
Previously Previously
Reported Recast Reported Recast
Profit (Loss) per share $1.81 $2.03 $3.50 $4.18
Per share mark-to-market
losses - - - $0.19
Per share restructuring
costs \[3\] $0.05 $0.04 $1.14 $1.10
Profit per share
excluding restructuring
costs and mark-to-market
losses $1.86 $2.07 $4.64 $5.47
1 2016 Sales and Revenues Outlook in a range of $40-44 billion (as of January
28, 2016). Profit per share at midpoint.
2 2016 Sales and Revenues Outlook in a range of $40-42 billion (as of April
22, 2016). Profit per share at midpoint.
1-2 2016 Outlook does not include any impact from mark-to-market gains or
losses resulting from pension and OPEB plan remeasurements.
3 At effective tax rate excluding discrete items
Machinery, Energy & Transportation
Caterpillar defines Machinery, Energy & Transportation as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Machinery, Energy & Transportation information relates to the design, manufacture and marketing of our products. Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. The nature of these businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We also believe this presentation will assist readers in understanding our business. Pages 22-28 reconcile Machinery, Energy & Transportation with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.
Caterpillar's latest financial results and outlook are also available via:
Telephone: 800-228-7717 (Inside the United States and Canada)
858-764-9492 (Outside the United States and Canada)
Internet: www.caterpillar.com/en/investors.html
www.caterpillar.com/en/investors/quarterly-results.html (live broadcast/replays of quarterly conference call)
Caterpillar Inc.
Condensed Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)
Three Months Ended
March 31,
2016 2015
Sales and revenues:
Sales of Machinery,
Energy & Transportation $ 8,780 $ 11,961
Revenues of Financial
Products 681 741
Total sales and revenues 9,461 12,702
Operating costs:
Cost of goods sold 6,822 8,760
Selling, general and
administrative expenses 1,088 1,249
Research and development
expenses 508 524
Interest expense of
Financial Products 152 150
Other operating (income)
expenses 397 317
Total operating costs 8,967 11,000
Operating profit 494 1,702
Interest expense
excluding Financial
Products 129 129
Other income (expense) - 194
Consolidated profit before taxes 365 1,767
Provision (benefit) for
income taxes 92 521
Profit of consolidated
companies 273 1,246
Equity in profit (loss)
of unconsolidated
affiliated companies (1) 2
Profit of consolidated and
affiliated companies 272 1,248
Less: Profit (loss) attributable to
noncontrolling interests 1 3
Profit \[1\] $ 271 $ 1,245
Profit per common share $ 0.46 $ 2.06
Profit per common share - diluted \[2\] $ 0.46 $ 2.03
Weighted-average common shares
outstanding (millions)
- Basic 582.8 604.9
- Diluted\[2\] 587.7 612.7
Cash dividends declared per common
share $ - $ -
1 Profit attributable to common stockholders.
Diluted by assumed exercise of stock-based compensation
2 awards using the treasury stock method.
Caterpillar Inc.
Condensed Consolidated Statement of Financial Position
(Unaudited)
(Millions of dollars)
March 31, December 31,
2016 2015
Assets
Current assets:
Cash and
short-term
investments $ 5,886 $ 6,460
Receivables -
trade and other 6,856 6,695
Receivables -
finance 9,310 8,991
Prepaid expenses
and other
current assets 1,847 1,662
Inventories 9,849 9,700
Total current assets 33,748 33,508
Property, plant and
equipment - net 15,935 16,090
Long-term receivables
- trade and other 1,159 1,170
Long-term receivables
- finance 13,527 13,651
Investments in
unconsolidated
affiliated companies 246 246
Noncurrent deferred
and refundable income
taxes 2,486 2,489
Intangible assets 2,741 2,821
Goodwill 6,710 6,615
Other assets 1,755 1,752
Total assets $ 78,307 $ 78,342
Liabilities
Current liabilities:
Short-term
borrowings:
--
Machinery,
Energy &
Transport-
ation $ 13 $ 9
--
Financial
Products 7,804 6,958
Accounts payable 5,101 5,023
Accrued expenses 3,142 3,116
Accrued wages,
salaries and
employee
benefits 1,158 1,994
Customer
advances 1,328 1,146
Dividends
Payable - 448
Other current
liabilities 1,593 1,671
Long-term debt
due within one
year:
--
Machinery,
Energy &
Transport-
ation 568 517
--
Financial
Products 5,508 5,360
Total current
liabilities 26,215 26,242
Long-term debt due
after one year:
--
Machinery,
Energy &
Transport-
ation 8,914 8,960
--
Financial
Products 15,556 16,209
Liability for
postemployment
benefits 8,600 8,843
Other liabilities 3,269 3,203
Total liabilities 62,554 63,457
Stockholders' equity
Common stock 5,247 5,238
Treasury stock (17,595) (17,640)
Profit employed in the
business 29,517 29,246
Accumulated other
comprehensive income
(loss) (1,493) (2,035)
Noncontrolling
interests 77 76
Total stockholders' equity 15,753 14,885
Total liabilities and
stockholders' equity $ 78,307 $ 78,342
Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)
Three Months Ended
March 31,
2016 2015
Cash flow from operating
activities:
Profit of consolidated
and affiliated companies $ 272 $ 1,248
Adjustments for non-cash
items:
Depreciation
and
amortization 740 753
Other 269 (88)
Changes in assets and
liabilities, net of
acquisitions and
divestitures:
Receivables -
trade and
other 14 6
Inventories (74) (89)
Accounts
payable 211 228
Accrued
expenses 33 35
Accrued
wages,
salaries and
employee
benefits (852) (1,027)
Customer
advances 174 25
Other assets
- net (145) 365
Other
liabilities -
net (153) (186)
Net cash provided by (used
for) operating activities 489 1,270
Cash flow from investing
activities:
Capital expenditures -
excluding equipment
leased to others (357) (437)
Expenditures for
equipment leased to
others (383) (389)
Proceeds from disposals
of leased assets and
property, plant and
equipment 173 167
Additions to finance
receivables (2,014) (2,122)
Collections of finance
receivables 2,047 2,241
Proceeds from sale of
finance receivables 10 43
Investments and
acquisitions (net of
cash acquired) (12) (29)
Proceeds from sale of
businesses and
investments (net of cash
sold) - 167
Proceeds from sale of
securities 49 83
Investments in
securities (62) (70)
Other - net (23) (38)
Net cash provided by (used
for) investing activities (572) (384)
Cash flow from financing
activities:
Dividends paid (448) (424)
Distribution to
noncontrolling interests (1) (7)
Common stock issued,
including treasury
shares reissued (45) 32
Treasury shares
purchased - (400)
Excess tax benefit from
stock-based compensation 1 17
Proceeds from debt
issued (original
maturities greater than
three months) 1,211 1,529
Payments on debt
(original maturities
greater than three
months) (1,706) (2,319)
Short-term borrowings -
net (original maturities
three months or less) 486 950
Net cash provided by (used
for) financing activities (502) (622)
Effect of exchange rate
changes on cash 11 (42)
Increase (decrease) in cash
and short-term investments (574) 222
Cash and short-term
investments at beginning of
period 6,460 7,341
Cash and short-term
investments at end of period $ 5,886 $ 7,563
All short-term investments, which consist primarily of highly liquid
investments with original maturities of three months or less, are
considered to be cash equivalents.
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended March 31, 2016
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery,
Energy & Financial Consolidating
Consolidated Transportation\[1\] Products Adjustments
Sales and
revenues:
Sales of
Machinery,
Energy &
Transporta
tion $ 8,780 $ 8,780 $ - $ -
Revenues
of
Financial
Products 681 - 759 (78)\[2\]
Total
sales and
revenues 9,461 0 759 (78)
Operating
costs:
Cost of
goods sold 6,822 6,822 - -
Selling,
general
and
administrative
expenses 1,088 955 139 (6)\[3\]
Research
and
development
expenses 508 508 - -
Interest
expense of
Financial
Products 152 - 155 (3)\[4\]
Other
operating
(income)
expenses 397 105 298 (6)\[3\]
Total
operating
costs 8,967 8,390 592 (15)
Operating
profit 494 390 167 (63)
Interest
expense
excluding
Financial
Products 129 140 - (11)\[4\]
Other
income
(expense) - (52) - 52 \[5\]
Consolidated
profit before
taxes 365 198 167 -
Provision
(benefit)
for income
taxes 92 40 52 -
Profit of
consolidated
companies 273 158 115 -
Equity in
profit
(loss) of
unconsolidated
affiliated
companies (1) (1) - -
Equity in
profit of
Financial
Products'
subsidiaries - 114 - (114)\[6\]
Profit of
consolidated
and affiliated
companies 272 271 115 (114)
Less: Profit
(loss)
attributable
to
noncontrolling
interests 1 - 1 -
Profit \[7\] $ 271 $ 271 $ 114 $ (114)
Represents Caterpillar Inc. and its subsidiaries with Financial
1 Products accounted for on the equity basis.
Elimination of Financial Products' revenues earned from
2 Machinery, Energy & Transportation.
Elimination of net expenses recorded by Machinery, Energy &
3 Transportation paid to Financial Products.
Elimination of interest expense recorded between Financial
4 Products and Machinery, Energy & Transportation.
Elimination of discount recorded by Machinery, Energy &
Transportation on receivables sold to Financial Products and of
interest earned between Machinery, Energy & Transportation and
5 Financial Products.
Elimination of Financial Products' profit due to equity method of
6 accounting.
7 Profit attributable to common stockholders.
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended March 31, 2015
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery,
Energy & Financial Consolidating
Consolidated Transportation\[1\] Products Adjustments
Sales and
revenues:
Sales of
Machinery,
Energy &
Transport-
ation $ 11,961 $ 11,961 $ - $ -
Revenues
of
Financial
Products 741 - 813 (72)\[2\]
Total
sales and
revenues 12,702 11,961 813 (72)
Operating
costs:
Cost of
goods sold 8,760 8,760 - -
Selling,
general
and
administrative
expenses 1,249 1,114 133 2 \[3\]
Research
and
development
expenses 524 524 - -
Interest
expense of
Financial
Products 150 - 151 (1)\[4\]
Other
operating
(income)
expenses 317 24 299 (6)\[3\]
Total
operating
costs 11,000 10,422 583 (5)
Operating
profit 1,702 1,539 230 (67)
Interest
expense
excluding
Financial
Products 129 139 - (10)\[4\]
Other
income
(expense) 194 138 (1) 57 \[5\]
Consolidated
profit before
taxes 1,767 1,538 229 -
Provision
(benefit)
for income
taxes 521 453 68 -
Profit of
consolidated
companies 1,246 1,085 161 -
Equity in
profit
(loss) of
unconsolidated
affiliated
companies 2 2 - -
Equity in
profit of
Financial
Products'
subsidiaries - 159 - (159)\[6\]
Profit of
consolidated
and affiliated
companies 1,248 1,246 161 (159)
Less: Profit
(loss)
attributable
to
noncontrolling
interests 3 1 2 -
Profit \[7\] $ 1,245 $ 1,245 $ 159 $ (159)
Represents Caterpillar Inc. and its subsidiaries with Financial
1 Products accounted for on the equity basis.
Elimination of Financial Products' revenues earned from
2 Machinery, Energy & Transportation.
Elimination of net expenses recorded by Machinery, Energy &
3 Transportation paid to Financial Products.
Elimination of interest expense recorded between Financial
4 Products and Machinery, Energy & Transportation.
Elimination of discount recorded by Machinery, Energy &
Transportation on receivables sold to Financial Products and of
interest earned between Machinery, Energy & Transportation and
5 Financial Products.
Elimination of Financial Products' profit due to equity method of
6 accounting.
7 Profit attributable to common stockholders.
Caterpillar Inc.
Supplemental Data for Cash Flow
For the Three Months Ended March 31, 2016
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery,
Energy & Financial Consolidating
Consolidated Transportation\[1\] Products Adjustments
Cash flow from
operating activities:
Profit of
consolidated and
affiliated companies $ 272 $ 271 $ 115 $ (114)\[2\]
Adjustments for
non-cash items:
Depreciation
and
amortization 740 525 215 -
Undistributed
profit of
Financial
Products - (107) - 107\[3\]
Other 269 204 16 49\[4\]
Changes in assets and
liabilities, net of
acquisitions and
divestitures:
Receivables -
trade and
other 14 41 20 (47)\[4,5\]
Inventories (74) (74) - -
Accounts
payable 211 288 2 (79)\[4\]
Accrued
expenses 33 34 (1) -
Accrued
wages,
salaries and
employee
benefits (852) (831) (21) -
Customer
advances 174 174 - -
Other assets
- net (145) (118) 17 (44)\[4\]
Other
liabilities -
net (153) (189) (8) 44 \[4\]
Net cash provided by
(used for) operating
activities 489 218 355 (84)
Cash flow from
investing activities:
Capital expenditures
- excluding equipment
leased to others (357) (356) (1) -
Expenditures for
equipment leased to
others (383) (23) (369) 9 \[4\]
Proceeds from
disposals of leased
assets and property,
plant and equipment 173 21 159 (7)\[4\]
Additions to finance
receivables (2,014) - (2,662) 648 \[5\]
Collections of
finance receivables 2,047 - 2,849 (802)\[5\]
Net intercompany
purchased receivables - - (229) 229 \[5\]
Proceeds from sale of
finance receivables 10 - 10 -
Net intercompany
borrowings - (927) (1,000) 1,927 \[6\]
Investments and
acquisitions (net of
cash acquired) (12) (12) - -
Proceeds from sale of
securities 49 4 45 -
Investments in
securities (62) (5) (57) -
Other - net (23) (23) (7) 7 \[8\]
Net cash provided by
(used for) investing
activities (572) (1,321) (1,262) 2,011
Cash flow from
financing activities:
Dividends paid (448) (448) (7) 7 \[7\]
Distribution to
noncontrolling
interests (1) (1) - -
Common stock issued,
including treasury
shares reissued (45) (45) 7 (7)\[8\]
Excess tax benefit
from stock-based
compensation 1 1 - -
Net intercompany
borrowings - 1,000 927 (1,927)\[6\]
Proceeds from debt
issued (original
maturities greater
than three months) 1,211 1 1,210 -
Payments on debt
(original maturities
greater than three
months) (1,706) (3) (1,703) -
Short-term borrowings
- net (original
maturities three
months or less) 486 4 482 -
Net cash provided by
(used for) financing
activities (502) 509 916 (1,927)
Effect of exchange rate
changes on cash 11 (2) 13 -
Increase (decrease) in
cash and short-term
investments (574) (596) 22 -
Cash and short-term
investments at
beginning of period 6,460 5,340 1,120 -
Cash and short-term
investments at end of
period $ 5,886 $ 4,744 $ 1,142 $ -
Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted
1 for on the equity basis.
Elimination of Financial Products' profit after tax due to equity method of
2 accounting.
Elimination of non-cash adjustment for the undistributed earnings from Financial
3 Products.
Elimination of non-cash adjustments and changes in assets and liabilities related
4 to consolidated reporting.
Reclassification of Financial Products' cash flow activity from investing to
5 operating for receivables that arose from the sale of inventory.
Elimination of net proceeds and payments to/from Machinery, Energy &
6 Transportation and Financial Products.
Elimination of dividend from Financial Products to Machinery, Energy &
7 Transportation.
Elimination of change in investment and common stock related to Financial
8 Products.
Caterpillar Inc.
Supplemental Data for Cash Flow
For the Three Months Ended March 31, 2015
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery,
Energy & Financial Consolidating
Consolidated Transportation\[1\] Products Adjustments
Cash flow from
operating activities:
Profit of
consolidated and
affiliated companies $ 1,248 $ 1,246 $ 161 $ (159)\[2\]
Adjustments for
non-cash items:
Depreciation
and
amortization 753 530 223 -
Undistributed
profit of
Financial
Products - (59) - 59 \[3\]
Other (88) (55) (87) 54 \[4\]
Changes in assets and
liabilities, net of
acquisitions and
divestitures:
Receivables -
trade and
other 6 54 (34) (14)\[4,5\]
Inventories (89) (85) - (4)\[4\]
Accounts
payable 228 169 43 16 \[4\]
Accrued
expenses 35 26 9 -
Accrued
wages,
salaries and
employee
benefits (1,027) (1,009) (18) -
Customer
advances 25 25 - -
Other assets
- net 365 246 36 83 \[4\]
Other
liabilities -
net (186) (46) (57) (83)\[4\]
Net cash provided by
(used for) operating
activities 1,270 1,042 276 (48)
Cash flow from
investing activities:
Capital expenditures
- excluding equipment
leased to others (437) (435) (2) -
Expenditures for
equipment leased to
others (389) (42) (355) 8 \[4\]
Proceeds from
disposals of leased
assets and property,
plant and equipment 167 6 162 (1)\[4\]
Additions to finance
receivables (2,122) - (2,901) 779 \[5,8\]
Collections of
finance receivables 2,241 - 2,954 (713)\[5\]
Net intercompany
purchased receivables - - 118 (118)\[5\]
Proceeds from sale of
finance receivables 43 - 43 -
Net intercompany
borrowings - (8) - 8 \[6\]
Investments and
acquisitions (net of
cash acquired) (29) (29) - -
Proceeds from sale of
businesses and
investments (net of
cash sold) 167 174 - (7)\[8\]
Proceeds from sale of
securities 83 3 80 -
Investments in
securities (70) (4) (66) -
Other - net (38) 4 (42) -
Net cash provided by
(used for) investing
activities (384) (331) (9) (44)
Cash flow from
financing activities:
Dividends paid (424) (424) (100) 100 \[7\]
Distribution to
noncontrolling
interests (7) (7) - -
Common stock issued,
including treasury
shares reissued 32 32 - -
Treasury shares
purchased (400) (400) - -
Excess tax benefit
from stock-based
compensation 17 17 - -
Net intercompany
borrowings - - 8 (8)\[6\]
Proceeds from debt
issued (original
maturities greater
than three months) 1,529 2 1,527 -
Payments on debt
(original maturities
greater than three
months) (2,319) (6) (2,313) -
Short-term borrowings
- net (original
maturities three
months or less) 950 - 950 -
Net cash provided by
(used for) financing
activities (622) (786) 72 92
Effect of exchange rate
changes on cash (42) (24) (18) -
Increase (decrease) in
cash and short-term
investments 222 (99) 321 -
Cash and short-term
investments at
beginning of period 7,341 6,317 1,024 -
Cash and short-term
investments at end of
period $ 7,563 $ 6,218 $ 1,345 $ -
Represents Caterpillar Inc. and its subsidiaries with Financial Products
1 accounted for on the equity basis.
Elimination of Financial Products' profit after tax due to equity method of
2 accounting.
Elimination of non-cash adjustment for the undistributed earnings from
3 Financial Products.
Elimination of non-cash adjustments and changes in assets and liabilities
4 related to consolidated reporting.
Reclassification of Financial Products' cash flow activity from investing to
5 operating for receivables that arose from the sale of inventory.
Elimination of net proceeds and payments to/from Machinery, Energy &
6 Transportation and Financial Products.
Elimination of dividend from Financial Products to Machinery, Energy &
7 Transportation.
Elimination of proceeds received from Financial Products related to
8 Machinery, Energy & Transportation's sale of businesses and investments.
CONTACT: Rachel Potts, Caterpillar, +1-309-675-6892 (Office), +1-309-573-3444 (Mobile) or [email protected]
This is a disclosure announcement from PR Newswire.