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Caterpillar Inc. Message Board

richoncat 40 posts  |  Last Activity: Feb 4, 2016 8:20 PM Member since: Nov 24, 2006
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  • Reply to

    Mutual Funds Updates

    by richoncat Feb 4, 2016 8:13 PM
    richoncat richoncat Feb 4, 2016 8:20 PM Flag

    Never mind they just updated, 2 1/2 hours late.

    Sentiment: Hold

  • richoncat richoncat Feb 1, 2016 6:22 PM Flag

    Toothtoothtooth. He still posts once in a while. He was certainly right. He said we'd see 60 before 160 and he's been proven correct.

    Sentiment: Hold

  • richoncat richoncat Feb 1, 2016 8:46 AM Flag

    Typical debating technique, Attack the opponent when you can't make a legitimate argument. Buffoon huh?

    Mister, I made manufacturing budgets for CAT for 30 years. All in labor costs for shop worker were a tad over 200% of their direct wages. You fail to grasp that most have generous health insurance benefits, life insurance, workman comp, payroll taxes, overtime premium, 401(k) contributions, matching charitable contributions, etc. Trust me it all adds up to 200%. The average unionized factory worker cost CAT right at $100k per head in Illinois. Granted many of these costs were negotiated by the UAW and CAT agreed to pay them. But it's clear that's not sustainable in the long term and hence the motivation to relocate to the southwest US.

    "Every analyst has said the dividend is not safe" I read most of the press for CAT and I've missed "every analysts" comments to this effect. The CEO said he'll protect the dividend at almost any cost. They didn't cut the dividend in '07-'08 they surely won't now. Enough said.

    Sentiment: Hold

  • richoncat richoncat Jan 31, 2016 6:14 PM Flag

    So you think they need as many employees to run a $45B business as they needed to run it at $65B? Really? If you don't adjust your cost structure to match the available revenue you'll be run out of the company on a rail by the board and the owners. Why is it that bleeding heart liberals never think that the owners of the company, i.e. shareholders, deserve a reasonable return on their capital. Remember I own the company, or at least a tiny portion of it. I guarantee that if you owned your own small business, mortgaged you house to start it, poured you heart and soul into growing the business and serving your customers, you'd expect to get a return on your investment. When the business weakens you're not going to keep employees on the payroll that have nothing to do. This is not an socialist, entitlement society yet. You hire people when you have work for them, let them go when you don't. If you don't, you have a business for very long.

    And there's another silly argument. Let's reduce the quality of the senior managers and see if the ordinary folks at median wage can run it. That's exactly the argument of reducing executive pay. How about we just take a 10 yr accountant or engineer and put him behind the Chairman's desk or in the Group manager's office. My guess is he won't even be able to understand the financial statements let alone the strategic issues of the company. You get what you pay for. Almost all of those folks are lifers, 30-35 years experience with a myriad of assignments at CAT over their careers. They work 12-15 hrs a day, 6-7 days a week. Just like anything else, you've got to pay for talent. Huge portion of those folks compensation is "at risk" incentive pay. I haven't seen the annual report yet but I suspect that none of those guys got a penny. We'll see.

    Also, with CAT's pay and benefit structure there are no $40k jobs. A $20/hr job with payroll taxes and benefits costs CAT $80k a year. So your $4M example would pay for only 50 employees.

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 29, 2016 6:34 PM Flag

    So if companies are growing they don't have to pay dividends? What malarkey. No company has to pay dividends. It's a choice. Accumulated earnings and free cash flow are not the same thing. Yes companies may be taxed on excessive accumulated earnings but it is not common. How has Buffett avoided it all these years. And god knows he's got a ton of accumulated earnings as he's never paid a penny in dividends, $50B or so in cash at the moment. But sitting on a pile of free cash flow is not necessarily accumulate earnings.
    I'm really glad you aren't my CPA. If you scroll all the way to the bottom you'll find a link that says "(+) View More Messages". That's all, cheers.

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 29, 2016 10:59 AM Flag

    By the way no company is "required by law to pay a dividend" Just ask Warren Buffett. BRK is wildly profitable and has never, repeat never, paid a dividend. Apple never paid a dividend for many years. Steve Jobs thought he had better uses for the cash. They now sit on cash greater than the GDP of many developed nations.

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 29, 2016 10:56 AM Flag

    Companies don't value inventory at used market prices. Have you ever heard of GM or Ford carrying their inventory at '03 Impala prices? Never happens. How would you value a welded frame on the assembly line. Part of a used machine? Not. Yes you can get used equipment at Richie Brothers auctions, but you get what you pay for. Probably not for pennies on the dollar but they are certainly available. PWH and CAT know the accounting rules.

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 28, 2016 8:59 PM Flag

    You clearly don't know what you're talking about. Dividends have no effect on corporate taxes. They are paid after taxes which obviously results in double taxation because I pay taxes on the dividends when they're paid to me. But that's another discussion. Logical fallacy? Dividends are paid out of free cash flow. Earnings are what Wall Street focuses on. Obviously in the long term profit matters and stock prices are based primarily on earnings and growth. Hence the P/E and P/E/G ratios. But this discussion is about near term dividend cuts. It's not going to happen. Plenty of cash on the balance sheet to pay them. The CEO says he'll allow deterioration of the balance sheet to protect the dividend. How much more evidence do you need?

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 28, 2016 6:23 PM Flag

    He repeats his comments again at 00:53:20. Adding he expects the balance sheet to strengthen in 2016. And he continues on to say at 00:53:50 "If we have to use the strength of the balance sheet to protect the dividend in 2016 or 2017, we will." If you listen you'll hear that all the comments surrounding the dividend are a function of free cash flow. Never do they relate the dividend to earnings. That;s just not they way this business thinks about dividends. Maybe little Mom and Pop businesses with little depreciation and low inventory relate dividends to profit because there are no other moving parts. But CAT will generate cash flow at rates above their Cap-ex and dividend needs. Just listen to the call.

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 28, 2016 5:46 PM Flag

    At 00:22:10 in the conference call Oberhelman says free cash flow was $5.2B. "2016 expects to be another positive cash flow year, more than enough to cover our dividend and Cap-ex." We're scrubbing 2016 Cap-ex and expect it to be below 2015 levels" "Our focus on use of cash is on our balance sheet, our credit rating and protecting our dividend." He went on to say "Cash on our balance sheet is the best it's ever been at this stage of the cycle." "Cat Financial is a strategic advantage."

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 28, 2016 4:33 PM Flag

    Yes I have heard of dividend payout ratio and frankly it's fairly meaningless. A company can have tremendous earnings and absolutely no cash to pay dividends. Another company can have poor earnings and have a ton of cash. Inventory and depreciation are the primary drivers. Use all your cash to load up on inventory or new capital expenditures and it will have no effect on earnings in the short term but could leave no cash for dividends. Conversely, if the same company is able to reduce inventory and cut capital expenditures the cash remains in the till. Depreciation of previously purchased capital equipment will remain a cost on the P&L reducing earnings but the cash will still be there. CAT spends Billions, with a B, on capital and R&D. These are often discretionary and can delayed during tough economic conditions. I kept old equipment running for years in the factory as we delayed replacement capital. We did it every cycle. Watch free cash flow and you can tell if a company can sustain it's dividend.

    Sentiment: Hold

  • Reply to

    YELLEN made RECESSION

    by melodias23 Jan 28, 2016 11:56 AM
    richoncat richoncat Jan 28, 2016 1:06 PM Flag

    Wow another Chicken Little has hit the board. 50% off 50%?

    Sentiment: Hold

  • Reply to

    If CAT is keeping its dividend, I am long

    by santafenm1 Jan 28, 2016 8:13 AM
    richoncat richoncat Jan 28, 2016 1:04 PM Flag

    Companies don't pay dividends with earnings. Dividends are paid with free cash flow. Cat will protect their Aristocrat Dividend Payer title with their last two nickels. 20+ years of dividend increases. If they didn't back off in '08-'09, they won't now. Maybe they'll back off some of the stock buybacks but they've said their primary use of cash will be the dividend. We'll see. I was busy and haven't listened to the conference call yet. Did they mention the dividend?

    Sentiment: Hold

  • richoncat richoncat Jan 27, 2016 1:34 PM Flag

    The Siwie debacle was actually brought to CAT with the BUCY acquisition. The BUCY VP in charge after the acquisition signed off on the deal that was in the works when CAT bought BUCY. He was summarily fired by Oberhelman after the inflated inventory numbers came to light. Unfortunately Ed Rapp got caught up in the story as he was the CFO at the time and was pushing for the deal. He must have been doing some fancy footwork to keep his job. Ultimately he was given the Group President job over Resource Industries to straighten the mess out. Now he's leaving the company to fight ALS. A tougher assignment yet.

    Sentiment: Hold

  • Reply to

    Is CATs dividend threatened.

    by federalistno57 Jan 20, 2016 2:13 PM
    richoncat richoncat Jan 25, 2016 11:27 AM Flag

    I think they will protect their annual dividend aristocrat record at almost any cost. They've raised it every year for over 20 years. I would be very surprised to see a cut. It could happen but I'd doubt it.

    Sentiment: Hold

  • richoncat richoncat Jan 24, 2016 2:29 PM Flag

    So what would you recommend they do? If you were on the board what wide ranging strategy would you suggest that will turn around the end markets that CAT serves. Maybe call back all laid off employees and send them free of charge to the mines and construction sites around the world so they could stand around with nothing to do there? Maybe they could pick up a shovel and load trucks by hand. That would be a lot of work but would accomplish nothing. There is very little CAT management can do other than "hold the course" until W-W economic growth regains momentum. CAT's been through this every decade since it was founded 85 years ago. Their markets swing from boom to bust to boom every cycle. This too shall pass.

    Sentiment: Hold

  • richoncat richoncat Jan 24, 2016 12:11 PM Flag

    They always delay the Sales to Users data on the months that include an earnings release. This year's 4th quarter release is later than normal. It's scheduled for 1/28/16. You'll see the StU data the same day.

    Sentiment: Hold

  • Reply to

    when are the monthly numbers

    by atmotsi34 Jan 19, 2016 10:10 AM
    richoncat richoncat Jan 22, 2016 10:29 AM Flag

    They probably will wait until the quarterly profit report is released. I think they're required to stay quiet for a period prior to the release. On the other two months per quarter the sales data is published around the 20th.

    Sentiment: Hold

  • Reply to

    Is CATs dividend threatened.

    by federalistno57 Jan 20, 2016 2:13 PM
    richoncat richoncat Jan 20, 2016 4:40 PM Flag

    By the way, the annual dividend is $3.08 not $5.

    Sentiment: Hold

  • Reply to

    Is CATs dividend threatened.

    by federalistno57 Jan 20, 2016 2:13 PM
    richoncat richoncat Jan 20, 2016 4:39 PM Flag

    Most of their debt is associated with CAT Financial. That subsidiary has never lost money in over 25 years. They borrow at their AA bond rating, 1-2%, and lend to customers at 4-5%. The equipment is the collateral. It's a license to print money. Their debt does not threaten the dividend. Now if operating cash flow starts to dry up watch out, but so far that's not been the case.

    Sentiment: Hold

CAT
66.12+0.16(+0.24%)Feb 5 4:02 PMEST