Caterpillar Reports Third-Quarter Results, Provides Updated 2013 Outlook and Preliminary 2014 Outlook

PR Newswire

PEORIA, Ill., Oct. 23, 2013 /PRNewswire/ -- Caterpillar Inc. (CAT) today announced third-quarter sales and revenues of $13.423 billion, down from $16.445 billion in the third quarter of 2012.  Profit per share for the third quarter of 2013 was $1.45, down from third-quarter 2012 profit per share of $2.54.

The company has revised its 2013 outlook and now expects sales and revenues to be about $55 billion, with profit per share of about $5.50.  The previous outlook for 2013 sales and revenues was a range of $56 to $58 billion with profit per share of about $6.50 at the middle of that range. 

"This year has proven to be difficult, with expected sales and revenues nearly $11 billion lower than last year.  That is a 17 percent decline from 2012, with about 75 percent of the drop from Resource Industries, which is principally mining.  We expect Resource Industries to be down close to 40 percent for the full year and Power Systems' and Construction Industries' sales to each be down about 5 percent," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.

Not only is mining down from 2012, the demand for equipment has been difficult to forecast.  Orders for new mining equipment began to drop significantly in mid-2012 and have continued at very low levels.  As a result of weak orders and feedback from end users, the sales and revenues outlook provided in January of 2013 included a decline in mining sales.  At that time, based on strong mine production for many commodities, the company's outlook expected that order rates would improve later in 2013.

"Unfortunately, order rates have not picked up much despite continuing strong commodity production.  That has caused us to ratchet down our sales and revenues outlook as we have moved through 2013," Oberhelman said.

A key element of Caterpillar's strategy is focused on cost flexibility and reducing costs in a downturn.  The magnitude of the decline in sales in 2013 has resulted in substantial actions to lower production, costs and employment.  Actions taken already include many temporary plant shutdowns, a reduction of more than 13,000 of our global workforce throughout the past year, temporary layoffs for thousands of salaried and management employees, reductions in program spending, substantially lowered incentive pay, lower capital expenditures and implementation of general austerity measures across the company. 

Caterpillar has taken substantial actions and is mitigating some of the impact of lower mining sales on profit.  The company expects to limit the decline in 2013 operating profit from 2012 to about 30 percent of the sales and revenues change.  This is at the high end of the company's incremental operating profit pull through target range and is a result of unfavorable product mix as the sales decline is weighted toward higher margin mining products.

Although it has been a challenging year for sales and profit, it has been a positive year for cash flow.  In the third quarter, the Machinery and Power Systems (M&PS) operating cash flow was $2.1 billion, and the company is expecting 2013 to be its second best year in history for cash flow and not far from the all-time record.  Strong cash flow has enabled the company to improve its balance sheet, repurchase $2 billion in Caterpillar stock this year, raise the quarterly dividend by 15 percent and improve the debt-to-capital ratio.  The company's debt-to-capital ratio was 34 percent at the end of the third quarter, and it is expected to improve further by year end.  This represents a substantial improvement over the past five years from the 58 percent debt-to-capital ratio at the end of 2008.

"With $11 billion coming off the top line, it has been a painful year and has required wide ranging and substantial actions across the company.  Year-to-date, excluding the impact of inventory absorption, we've lowered costs about $700 million and reduced capital expenditures by about $400 million.  We've continued to improve our operational performance this year, and it's unfortunate that the improvements we've made have been far overshadowed by the sales decline in mining.  Safety levels in our factories continue to improve, and product quality is better — we see it in our metrics and are hearing it from dealers and customers.  While our machine sales are down, in most industries, including mining, we're doing better than our competitors as a whole and that includes those in China.  Our year-to-date sales in China are up, including an increase of almost 30 percent in the third quarter of 2013.  Our balance sheet is the strongest in years; we're having a great year for cash flow; our debt-to-capital ratio is improving; we repurchased $2 billion of stock and raised the dividend 15 percent.  In addition, our Power Systems segment has done a good job this year.  It's our largest segment with sales and profit that has been relatively stable in 2013," Oberhelman said.

Preliminary 2014 Sales and Revenues Outlook

From an economic standpoint, the company expects better world growth in 2014.  However, significant risks and uncertainties remain that could temper global economic growth.  The direction of U.S. fiscal and monetary policy remains uncertain; Eurozone economies are far from healthy and China continues to transition to a more consumer-demand led economy.  In addition, despite higher mine production around the world, new orders for mining equipment remain very low.  As a result, the company is holding its outlook for 2014 sales and revenues flat with 2013 in a plus or minus 5 percent range.  The company expects sales growth in Construction Industries, relatively flat sales in Power Systems and a decline in Resource Industries' sales.

"There are encouraging signs, but there is also a good deal of uncertainty worldwide as we look ahead to 2014, and our preliminary outlook reflects that uncertainty.  Despite prospects for improved economic growth and continued strong mine production around the world, we won't be increasing our expectations for Resource Industries until mining orders improve.  We can't change the economy or industry demand, but we've taken many actions to align our costs with the environment we're in currently.  While we've done much already, we're not finished and expect to take deeper actions to improve our cost structure and balance sheet.  We're not seeing bright spots in mining yet, but the turnaround will happen at some point, and when it does, we'll be ready to respond," Oberhelman added.

Notes:

  • Glossary of terms is included on pages 18-19; first occurrence of terms shown in bold italics.
  • Information on non-GAAP financial measures is included on page 20.

For more than 85 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent.  With 2012 sales and revenues of $65.875 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 also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services and Progress Rail Services.  More information is available at: http://www.caterpillar.com.

FORWARD-LOOKING STATEMENTS

Certain statements in this 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 economic conditions and economic conditions in the industries and markets we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity or component price increases, fluctuations in demand for our products, or limited availability of raw materials and component products, including steel; (iv) our and our customers', dealers' and suppliers' ability to access and manage liquidity; (v) political and economic risks and instability, including national or international conflicts and civil unrest; (vi) our and Cat Financial's ability to: maintain credit ratings, avoid material increases in borrowing costs, and access capital markets; (vii) the financial condition and credit worthiness of Cat Financial's customers; (viii) changes in interest rates or market liquidity; (ix) changes in financial services regulation; (x) inability to realize expected benefits from acquisitions, including ERA Mining Machinery Limited, and divestitures, including the divestiture of the Bucyrus International, Inc. distribution business to our independent dealers; (xi) international trade and investment policies; (xii) market acceptance of our products and services; (xiii) changes in the competitive environment, including market share, pricing and geographic and product mix of sales; (xiv) successful implementation of capacity expansion projects, cost reduction initiatives and efficiency or productivity initiatives, including the Caterpillar Production System; (xv) inventory management decisions and sourcing practices of our dealers or original equipment manufacturers; (xvi) compliance with environmental laws and regulations; (xvii) alleged or actual violations of trade or anti-corruption laws and regulations; (xviii) additional tax expense or exposure; (xix) currency fluctuations; (xx) our or Cat Financial's compliance with financial covenants; (xxi) increased pension plan funding obligations; (xxii) union disputes or other labor matters; (xxiii) significant legal proceedings, claims, lawsuits or investigations; (xxiv) compliance requirements imposed if carbon emissions legislation and/or regulations are adopted; (xxv) changes in accounting standards; (xxvi) failure or breach of information technology security; (xxvii) adverse effects of natural disasters; and (xxviii) other factors described in more detail under "Item 1A.  Risk Factors" in our Form 10-K filed with the SEC on February 19, 2013 for the year ended December 31, 2012.  This filing is available on our website at www.caterpillar.com/secfilings

Key Points


Third Quarter 2013

(Dollars in millions except per share data)


Third Quarter

2013


Third Quarter

 2012


$ Change


% Change

Machinery and Power Systems Sales

$

12,678



$

15,739



$

(3,061)



(19)

%


Financial Products Revenues


745




706




39



6

%


Total Sales and Revenues

$

13,423



$

16,445



$

(3,022)



(18)

%


















Profit

$

946



$

1,699



$

(753)



(44)

%


Profit per common share - diluted

$

1.45



$

2.54



$

(1.09)



(43)

%


















  • Third-quarter sales and revenues of $13.423 billion were 18 percent lower than the third quarter of 2012.  More than half of the decline in sales and revenues was a result of changes in dealer inventories.  In addition, dealer deliveries to end users declined, primarily in Resource Industries.
  • Profit per share was $1.45 in the third quarter of 2013, down $1.09 from the third quarter of 2012.
  • Our inventory continued to decline in the third quarter of 2013, which was positive to operating cash flow but unfavorable to profit.  Inventory was about $500 million below the end of the second quarter of 2013 and $2.2 billion below year-end 2012.
  • Machinery and Power Systems (M&PS) operating cash flow was $2.109 billion in the third quarter of 2013, compared with $994 million in the third quarter of 2012.
  • M&PS debt-to-capital ratio was 34.1 percent, down from 34.9 percent at the end of the second quarter of 2013.
  • We repurchased $1 billion of stock in the third quarter of 2013 in addition to the $1 billion repurchased in the second quarter of 2013.

2013 Outlook

  • The revised 2013 outlook reflects sales and revenues of about $55 billion.  The previous sales and revenues outlook was a range of $56 to $58 billion.
  • The revised 2013 profit outlook is profit per share of about $5.50.  The previous profit outlook was about $6.50 per share at the middle of the sales and revenues outlook range.
  • We expect capital expenditures for 2013 will be less than $3 billion.  Capital expenditures were $3.4 billion in 2012.

Preliminary 2014 Sales and Revenues Outlook

  • While many economic indicators are improving, significant risks and uncertainties remain that could temper global economic growth in 2014.
  • The preliminary 2014 outlook for sales and revenues is flat with 2013 in a plus or minus 5 percent range.

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison
Third Quarter 2013 vs. Third Quarter 2012

To access this chart, go to http://caterpillar.com for the downloadable version of Caterpillar 3Q2013 earnings.

Sales and Revenues

Total sales and revenues were $13.423 billion in the third quarter of 2013, a decrease of $3.022 billion, or 18 percent, from the third quarter of 2012.  When reviewing the change in sales and revenues, we focus on the following perspectives:

  • Reason for the change: Sales volume decreased $2.729 billion with nearly 80 percent of the decline in Resource Industries.  More than half of the total volume decrease was related to changes in dealer machine and engine inventories and the remainder was primarily a result of lower dealer deliveries to end users.  During the third quarter of 2012, dealers increased machine and engine inventories by about $800 million, and during the third quarter of 2013, dealers reduced machine and engine inventories by about $800 million.  Most of the decline was related to Resource Industries' products, as dealers adjusted inventory levels in response to lower end-user demand resulting primarily from mining companies reducing their capital expenditures.

In addition, currency was unfavorable $188 million primarily due to the weaker Japanese yen, as sales in yen translated into fewer U.S. dollars.  The net impact of acquisitions and divestitures was unfavorable $87 million, with more than half of the decline due to the absence of our third party logistics business.  Price realization was unfavorable $57 million mainly due to continuing sales from a large government order in Brazil and an increasingly competitive pricing environment primarily within Construction Industries.  These decreases were partially offset by increased Financial Products' revenues of $39 million.

While almost all of the decline in sales was related to new equipment, aftermarket parts sales declined slightly.    

  • Sales by geographic region: While sales declined in all geographic regions, the most significant reduction was in Asia/Pacific.  The Asia/Pacific decline was primarily related to lower sales in Australia where the most significant decrease was in mining sales, due to continued low demand.  While sales in Asia/Pacific declined overall, sales in China increased.  During the quarter, our total sales and revenues in China increased about 30 percent from the third quarter of 2012 and represented about 6 percent of total sales and revenues.  The declines in North America and EAME were primarily due to unfavorable changes in dealer inventories.
  • Sales by segment: Sales decreased in all segments.  The most significant was a 42-percent decline in Resource Industries resulting primarily from changes in dealer inventories and weaker demand in mining primarily due to mining companies reducing their capital expenditures.  Power Systems' sales and Construction Industries' sales both decreased 7 percent.  Financial Products segment revenues were up 4 percent.

Consolidated Operating Profit

Consolidated Operating Profit Comparison
Third Quarter 2013 vs. Third Quarter 2012

To access this chart, go to http://caterpillar.com for the downloadable version of Caterpillar 3Q2013 earnings. 

Operating profit for the third quarter of 2013 was $1.401 billion, a decline of $1.195 billion from the third quarter of 2012.  The decrease was primarily the result of lower sales volume, which included an unfavorable mix of products.  The unfavorable mix was primarily due to a more significant decline in Resource Industries' sales than sales for other segments.  Acquisitions and divestitures negatively impacted operating profit by $268 million primarily due to the absence of a gain from the sale of a majority interest in our external logistics business during the third quarter of 2012.  Price realization was unfavorable mainly due to continuing sales from a large government order in Brazil and an increasingly competitive pricing environment primarily within Construction Industries.  These unfavorable impacts were partially offset by decreases in SG&A and R&D expenses, a favorable impact from currency and lower manufacturing costs.

Decreases in SG&A and R&D expenses were primarily due to lower discretionary and program spending driven by cost reduction measures implemented in response to lower volumes.  The favorable impact of currency was mostly due to the Japanese yen.  We have a sizeable manufacturing presence in Japan, and while some of this production is sold in Japan, we are a net exporter, and therefore, a weaker yen provides a cost benefit. 

Manufacturing costs decreased $102 million.  The decrease was primarily due to lower material costs and warranty expense, partially offset by unfavorable changes in cost absorption resulting from a decrease in inventory during the third quarter of 2013 and an increase in inventory during the third quarter of 2012.

Despite the significant reduction in sales volume, manufacturing efficiencies were about flat due to cost reduction initiatives including temporary factory shutdowns, rolling layoffs throughout much of the company and reductions in our workforce. 

Other Profit/Loss Items

  • Interest expense excluding Financial Products decreased $13 million compared with the third quarter of 2012.
  • Other income/expense was expense of $24 million compared with expense of $17 million in the third quarter of 2012.  Both periods include unfavorable impacts from currency translation and hedging.
  • The provision for income taxes in the third quarter of 2013 reflects an estimated annual tax rate of 29 percent compared with 30.5 percent for 2012, excluding the item discussed below.  The decrease is primarily due to the U.S. research and development tax credit that was expired in 2012, along with expected changes in our geographic mix of profits from a tax perspective.

The tax provision for the third quarter of 2013 also included a tax benefit of $55 million resulting from true-up of estimated amounts used in the tax provision to the 2012 U.S. tax return as filed in September 2013.    

Global Workforce

Caterpillar worldwide full-time employment was 121,506 at the end of the third quarter of 2013, compared with 129,113 at the end of the third quarter of 2012, a decrease of 7,607 full-time employees.  The flexible workforce decreased 6,054 for a total decrease in the global workforce of 13,661. 

The decrease was primarily the result of lower production volume.



September 30,



2013


2012


Change

Full-time employment


121,506


129,113


(7,607)

Flexible workforce


15,598


21,652


(6,054)

Total


137,104


150,765


(13,661)








Summary of change







U.S. workforce






(4,098)

Non-U.S. workforce






(9,084)







(13,182)








Acquisitions / divestitures - net






(479)

Total






(13,661)

 SEGMENT RESULTS

Sales and Revenues by Geographic Region

(Millions of dollars)

Total


%

Change


North

America


%

Change


Latin

America


%

Change


EAME


%

Change


Asia/

Pacific


%

Change


Third Quarter 2013








































Construction Industries1

$

4,547



(7)

%



$

1,743



(9)

%



$

707



12

%



$

989



(17)

%



$

1,108



(6)

%


Resource Industries2 


3,004



(42)

%




1,028



(28)

%




585



(42)

%




713



(24)

%




678



(63)

%


Power Systems3


4,922



(7)

%




1,905



(12)

%




608



12

%




1,450



(7)

%




959



(7)

%


All Other Segment4


219



(31)

%




148



(19)

%




13



18

%




35



(49)

%




23



(60)

%


Corporate Items and Eliminations


(14)








(13)








-








-








(1)






Machinery & Power Systems Sales

$

12,678



(19)

%



$

4,811



(15)

%



$

1,913



(12)

%



$

3,187



(15)

%



$

2,767



(33)

%










































Financial Products Segment


807



4

%




431



7

%




105



2

%




127



11

%




144



(8)

%


Corporate Items and Eliminations


(62)








(36)








(8)








(7)








(11)






Financial Products Revenues

$

745



6

%



$

395



11

%



$

97



1

%



$

120



11

%



$

133



(8)

%










































Consolidated Sales and Revenues

$

13,423



(18)

%



$

5,206



(14)

%



$

2,010



(12)

%



$

3,307



(14)

%



$

2,900



(32)

%










































Third Quarter 2012








































Construction Industries 1

$

4,904







$

1,910







$

629







$

1,186







$

1,179






Resource Industries2 


5,214








1,421








1,001








936








1,856






Power Systems3


5,317








2,175








543








1,564








1,035






All Other Segment4


318








182








11








68








57






Corporate Items and Eliminations


(14)








(14)








-








-








-






Machinery & Power Systems Sales

$

15,739







$

5,674







$

2,184







$

3,754







$

4,127














































Financial Products Segment


776








403








103








114








156






Corporate Items and Eliminations


(70)








(46)








(7)








(6)








(11)






Financial Products Revenues

$

706







$

357







$

96







$

108







$

145














































Consolidated Sales and Revenues

$

16,445







$

6,031







$

2,280







$

3,862







$

4,272














































1

Does not include inter-segment sales of $68 million and $102 million in third quarter 2013 and 2012, respectively.


2

Does not include inter-segment sales of $208 million and $253 million in third quarter 2013 and 2012, respectively.


3

Does not include inter-segment sales of $471 million and $597 million in third quarter 2013 and 2012, respectively.


4

Does not include inter-segment sales of $778 million and $885 million in third quarter 2013 and 2012, respectively.





































































































































Sales and Revenues by Segment



















(Millions of dollars)

Third

Quarter 2012


Sales

Volume


Price Realization


Currency


Acquisitions/
Divestitures


Other


Third

Quarter 2013


$ Change


%

Change

Construction Industries

$

4,904



$

(119)



$

(84)



$

(154)



$

-



$

-



$

4,547



$

(357)




(7)

%


Resource Industries


5,214




(2,144)




(3)




(29)




(34)




-




3,004




(2,210)




(42)

%


Power Systems


5,317




(420)




30




(5)




-




-




4,922




(395)




(7)

 

%


All Other Segment


318




(45)




(1)




-




(53)




-




219




(99)




(31)

%


Corporate Items and Eliminations


(14)




(1)




1




-




-




-




(14)




-







Machinery & Power Systems Sales

$

15,739



$

(2,729)



$

(57)



$

(188)



$

(87)



$

-



$

12,678



$

(3,061)




(19)

%







































Financial Products Segment


776




-




-




-




-




31




807




31




4

%


Corporate Items and Eliminations


(70)




-




-




-




-




8




(62)




8







Financial Products Revenues

$

706



$

-



$

-



$

-



$

-



$

39



$

745



$

39




6

%







































Consolidated Sales and Revenues

$

16,445



$

(2,729)



$

(57)



$

(188)



$

(87)



$

39



$

13,423



$

(3,022)




(18)

%



















































































































































































Operating Profit by Segment

(Millions of dollars)

Third Quarter

2013


Third Quarter

2012


$

Change


%

Change

Construction Industries 

$

262



$

459



$

(197)




(43)

%


Resource Industries  


409




1,113




(704)




(63)

%


Power Systems  


883




943




(60)




(6)

%


All Other Segment   


170




482




(312)




(65)

%


Corporate Items and Eliminations


(469)




(512)




43







Machinery & Power Systems

$

1,255



$

2,485



$

(1,230)




(49)

%


Financial Products Segment


218




190




28




15

%


Corporate Items and Eliminations


(8)




(9)




1







Financial Products

$

210



$

181



$

29




16

%


Consolidating Adjustments


(64)




(70)




6







Consolidated Operating Profit

$

1,401



$

2,596



$

(1,195)




(46)

%



















 

CONSTRUCTION INDUSTRIES

























































Millions of Dollars



















Sales Comparison




















Third Quarter 2012


Sales Volume


Price Realization


Currency


Third Quarter 2013


$
 Change


%
 Change
























Sales Comparison1

$4,904


($119)


($84)


($154)


$4,547


($357)


(7)  %
























Sales by Geographic Region








































Third Quarter 2013


Third Quarter 2012


$
Change


%
Change












North America

$1,743


$1,910


($167)


(9)  %















Latin America

707


629


78


12   %















EAME

989


1,186


(197)


(17)  %















Asia/Pacific

1,108


1,179


(71)


(6)  %















Total1

$4,547


$4,904


($357)


(7)  %



































Operating Profit









































Third Quarter 2013


Third Quarter 2012


$
Change


%
Change












Operating Profit

$262


$459


($197)


(43)  %



































Does not include inter-segment sales of $68 million and $102 million in the third quarter 2013 and 2012, respectively.




























 

Construction Industries' sales were $4.547 billion in the third quarter of 2013, a decrease of $357 million, or 7 percent, from the third quarter of 2012.  The sales decrease was due to the unfavorable impact of currency, lower sales volume and unfavorable price realization.  Sales of new equipment declined, and sales of aftermarket parts were about flat. 

  • The unfavorable currency impact was primarily from a weaker Japanese yen, as sales in yen translated into fewer U.S. dollars.
  • The decline in sales volume was primarily related to changes in dealer inventories which more than offset improvements in deliveries to end users in North America and Latin America.
  • Price realization was unfavorable primarily due to continuing sales from a large government order in Brazil and an increasingly competitive pricing environment.

Sales declined in all geographic regions except Latin America.

  • The increase in Latin America was primarily due to continuing sales from a large government order in Brazil. 
  • In EAME, end-user demand declined as a result of continuing economic weakness in Europe, dealer inventory changes were negative and price realization was unfavorable, due to an increasingly competitive pricing environment.     
  • In North America, end-user demand increased, but was more than offset by the negative impact of dealer inventory changes.  The increase in end-user demand resulted primarily from construction-related spending in the United States.  Although still below prior peaks, it has improved.
  • In Asia/Pacific, higher sales in China were more than offset by negative currency impacts primarily from the weaker Japanese yen and lower sales in other countries due to slower economic growth.

Construction Industries' profit was $262 million in the third quarter of 2013, compared with $459 million in the third quarter of 2012.  The decrease in profit was primarily due to unfavorable price realization, lower sales volume, which included an unfavorable mix of products, and the absence of a gain on sale of land from the third quarter of 2012. 

RESOURCE INDUSTRIES

























































Millions of Dollars



















Sales Comparison




















Third Quarter 2012


Sales Volume


Price Realization


Currency


Acquisitions/
Divestitures


Third Quarter 2013


$
 Change


%
 Change























Sales Comparison1

$5,214


($2,144)


($3)


($29)


($34)


$3,004


($2,210)


(42)  %























Sales by Geographic Region








































Third Quarter 2013


Third Quarter 2012


$
Change


%
Change












North America

$1,028


$1,421


($393)


(28)  %












Latin America

585


1,001


(416)


(42)  %












EAME

713


936


(223)


(24)  %












Asia/Pacific

678


1,856


(1,178)


(63)  %












Total1

$3,004


$5,214


($2,210)


(42)  %
































Operating Profit









































Third Quarter 2013


Third Quarter 2012


$
Change


%
Change












Operating Profit

$409


$1,113


($704)


(63)  %
































Does not include inter-segment sales of $208 million and $253 million in the third quarter 2013 and 2012, respectively.




























Resource Industries' sales were $3.004 billion in the third quarter of 2013, a decrease of $2.210 billion, or 42 percent, from the third quarter of 2012, almost all from lower sales volume.  About half of the decline in sales volume was due to changes in dealer machine inventory.  Dealers continued to significantly reduce machine inventory during the third quarter of 2013 to better align inventory levels with demand.  This compares with an increase in dealer machine inventory during the third quarter of 2012.  Demand was also lower as dealer deliveries to end users declined resulting from mining companies reducing their capital expenditures.  Almost all of the sales decline was related to new equipment.  Aftermarket part sales also declined as some companies are delaying maintenance and rebuild activities.

Sales were lower in every region of the world, with the most significant decline in Asia/Pacific, where about half of the worldwide dealer inventory impacts occurred.  Although production of most mined commodities is near or above a year ago, after several years of increasing capital expenditures customers in all geographic regions have reduced spending across the mining industry.  As a result, end-user demand was lower, and new orders for mining equipment continued to be weak in the quarter. 

Resource Industries' profit was $409 million in the third quarter of 2013 compared with $1.113 billion in the third quarter of 2012.  The decrease was primarily the result of lower sales volume, partially offset by lower SG&A and R&D expenses and decreased manufacturing costs.

Decreases in SG&A and R&D expenses were primarily due to lower discretionary and program spending driven by cost reduction measures implemented in response to lower volumes.  The decrease in manufacturing costs was driven by lower period manufacturing expenses due to cost reduction measures and lower material costs.  These favorable impacts were partially offset by unfavorable changes in cost absorption resulting from a decrease in inventory during the third quarter of 2013 and an increase in inventory during the third quarter of 2012.  

POWER SYSTEMS
























































Millions of Dollars


















Sales Comparison



















Third Quarter 2012


Sales Volume


Price Realization


Currency


Third Quarter 2013


$
 Change


%
 Change






















Sales Comparison1

$5,317


($420)


$30


($5)


$4,922


($395)


(7)  %






















Sales by Geographic Region






































Third Quarter 2013


Third Quarter 2012


$
Change


%
Change











North America

$1,905


$2,175


($270)


(12)  %















Latin America

608


543


65


12   %















EAME

1,450


1,564


(114)


(7)  %















Asia/Pacific

959


1,035


(76)


(7)  %















Total1

$4,922


$5,317


($395)


(7)  %


































Operating Profit







































Third Quarter 2013


Third Quarter 2012


$
Change


%
Change











Operating Profit

$883


$943


($60)


(6)  %


































1  Does not include inter-segment sales of $471 million and $597 million in the third quarter 2013 and 2012, respectively.







 

Power Systems' sales were $4.922 billion in the third quarter of 2013, a decrease of $395 million, or 7 percent, from the third quarter of 2012.  The decrease was a result of lower volume primarily for electric power, rail and petroleum applications.  Sales declines in electric power and petroleum applications were driven by dealers reducing their inventory levels in the third quarter of 2013, compared with dealers increasing inventory levels in the third quarter of 2012.  Turbine-related sales, which are sold directly to end users and are not affected by dealer inventory, were about flat.  Decreases in rail were driven by a reduction in services and locomotive sales.

Sales decreased in all regions except Latin America. 

  • In North America, the sales decrease was due to declines in end-user demand, primarily in petroleum applications and rail services.  For petroleum, lower demand was due to an oversupply of equipment used in drilling and well servicing applications.  For rail services, declines in railway coal traffic resulted in lower maintenance and repair needs.  In addition, changes in dealer inventories were unfavorable for electric power applications as dealers increased inventories in anticipation of higher demand during the third quarter of 2012, and reduced their inventories during the third quarter of 2013.
  • In EAME, the sales decrease was primarily due to the impact of dealer inventory changes for electric power applications.  During the third quarter of 2012, dealers increased inventories in anticipation of higher demand and reduced their inventories during the third quarter of 2013.
  • In Asia/Pacific, the decline in sales was due to unfavorable changes in dealer inventories.  During the third quarter of 2012, dealers increased inventories in anticipation of higher demand and reduced their inventories during the third quarter of 2013.  Those negative impacts were partially offset by higher end-user demand across most applications. 
  • The improvement in Latin America was primarily due to the completion of two large turbine projects.

Power Systems' profit was $883 million in the third quarter of 2013 compared with $943 million in the third quarter of 2012.  The decrease was primarily due to lower sales volume, partially offset by lower manufacturing costs, decreased SG&A and R&D expenses and favorable price realization.

The decrease in manufacturing costs was driven by lower material costs and a favorable change in cost absorption resulting from an increase in inventory during the third quarter of 2013 and a decrease in inventory during the third quarter of 2012.  SG&A and R&D expenses were favorable primarily due to lower program costs. 

FINANCIAL PRODUCTS SEGMENT






























Millions of Dollars











Revenues by Geographic Region









Third Quarter 2013


Third Quarter 2012


$
Change


%
Change


North America

$431


$403


$28


7  %


Latin America

105


103


2


2  %


EAME

127


114


13


11  %


Asia/Pacific

144


156


(12)


(8)  %


Total

$807


$776


$31


4  %













Operating Profit























Third Quarter 2013


Third Quarter 2012


$
Change


%
Change


Operating Profit

$218


$190


$28


15  %













Financial Products' revenues were $807 million, an increase of $31 million, or 4 percent, from the third quarter of 2012.  The increase was primarily due to the favorable impact from higher average earning assets across all geographic regions except Asia/Pacific and an increase in Cat Insurance revenues in North America partially offset by declines in EAME and Latin America.  These increases were partially offset by the unfavorable impact from lower average financing rates on new and existing finance receivables and operating leases across all geographic regions.

Financial Products' profit was $218 million in the third quarter of 2013, compared with $190 million in the third quarter of 2012.  The increase was primarily due to an $18 million favorable impact from higher average earning assets and a $17 million favorable impact from lower claims experience at Cat Insurance.

At the end of the third quarter of 2013, past dues at Cat Financial were 2.45 percent compared with 2.64 percent at the end of the second quarter of 2013, 2.26 percent at the end of 2012 and 2.80 percent at the end of the third quarter of 2012.  Write-offs, net of recoveries, were $58 million for the third quarter of 2013, up from $29 million for the third quarter of 2012.  The increase in write-offs was primarily related to Cat Financial's European marine portfolio and was previously provided for in the allowance for credit losses.

As of September 30, 2013, Cat Financial's allowance for credit losses totaled $404 million or 1.40 percent of net finance receivables, compared with $426 million or 1.49 percent of net finance receivables at year-end 2012.  The allowance for credit losses as of September 30, 2012, was $404 million or 1.47 percent of net finance receivables. 

All Other Segment

All Other Segment includes groups that provide services such as component manufacturing, remanufacturing and logistics. 

The decrease in sales was primarily due to the absence of our third party logistics business, which was sold in the third quarter of 2012.  Lower profit was primarily due to the absence of the gain on the sale of our third party logistics business.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $477 million in the third quarter of 2013, a decrease of $44 million from the third quarter of 2012.  Corporate items and eliminations include: corporate-level expenses; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences for M&PS, as segment profit is reported using annual fixed exchange rates; and inter-segment eliminations. 

The decrease in expense from the third quarter of 2012 was primarily due to favorable impacts from timing differences, partially offset by unfavorable impacts from currency.  Segment profit for 2013 is based on fixed exchange rates set at the beginning of 2013, while segment profit for 2012 is based on fixed exchange rates set at the beginning of 2012.  The difference in actual exchange rates compared with fixed exchange rates is included in corporate items and eliminations and is not reflected in segment profit.

2013 Outlook

We now expect 2013 sales and revenues of about $55 billion and profit per share of about $5.50.  The previous outlook for 2013 sales and revenues was a range of $56 to $58 billion with profit per share of about $6.50 at the middle of that range.  Sales expectations are lower for Resource Industries and Construction Industries.

The primary reason for the decline in the profit outlook is lower sales volume including an unfavorable mix of products and lower price realization.

The 2013 outlook expects sales and revenues in the fourth quarter to be slightly higher than in the third quarter, but profit per share to be lower.  The expected decline in profit despite higher sales is primarily due to higher costs in the fourth quarter resulting from seasonal spending patterns.

Preliminary 2014 Sales and Revenues Outlook

World purchasing manager surveys for both manufacturing and services have improved in recent months, signaling the world economy is rebounding from more than two years of slowing growth.  Recent economic indicators also suggest that growth in the United States, Europe, Japan and China in 2014 should match or exceed 2013 growth.  Better growth in these key economies would improve export opportunities for other countries and increase commodity demand.  We expect world economic growth will improve from 2.1 percent in 2013 to about 3 percent in 2014.

However, significant risks and uncertainties remain that could temper global economic growth in 2014.  The direction of U.S. fiscal and monetary policy action is highly uncertain; Eurozone economies are far from healthy and China continues to transition to a more consumer-demand led economy.  In addition, despite higher mine production, new orders for mining equipment remain very low.

As a result, we are holding our outlook for 2014 sales and revenues flat with 2013 in a plus or minus 5 percent range.  We are expecting sales growth in Construction Industries, relatively flat sales in Power Systems and a decline in Resource Industries' sales.  As usual for this time of the year, we are in the process of developing our operational and resource planning for next year.  In January 2014, with our year-end financial release, we will provide a more complete outlook including sales and revenues and profit.

 

QUESTIONS AND ANSWERS



Q1:

Dealer machine and engine inventories declined in the third quarter of 2013.  Was this in line with your expectations?  Do you expect continued dealer inventory reduction in the fourth quarter?



A:

Dealer machine and engine inventories decreased in the third quarter of 2013 by about $800 million, which was in line with our expectations.  This compares with an increase of about $800 million in the third quarter of 2012.  We expect another substantial decline in dealer inventories in the fourth quarter.  Most of the change in both periods was in Resource Industries related to mining.  During the third quarter of 2012, dealers received products that they had previously ordered in anticipation of higher demand.  During the third quarter of 2013, most of the decline was related to dealers adjusting inventory levels in response to lower end-user demand resulting primarily from mining companies reducing their capital expenditures.




Throughout today's release we have made several comments on dealer inventory changes.  Dealers are independent and there could be many reasons for changes in their inventory levels.  In general, dealers adjust inventory based on their expectations of future demand and product delivery times.  Dealers' demand expectations take into account seasonal changes, macroeconomic conditions and other factors.  Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers.  In addition, dealers are utilizing inventory from our product distribution centers at a higher rate to meet end-user demand, primarily for Construction Industries' products.



Q2:

Caterpillar inventory declined in the third quarter of 2013.  Do you expect company inventory to decrease in the fourth quarter?



A:

The reduction in Caterpillar inventory was about $500 million in the third quarter of 2013.  The reduction was primarily in finished goods, including inventory held at product distribution centers.  We are working throughout the company to improve our supply chain and inventory performance.  We are not expecting a significant inventory change in the fourth quarter.



Q3: 

Can you comment on your order backlog at the end of the third quarter of 2013?



A:

At the end of the third quarter, the backlog was $19.1 billion, about the same as the end of the second quarter of 2013.  Continuing decreases for Resource Industries were offset by increases for Construction Industries.  Compared to the end of the third quarter of 2012, the order backlog declined significantly, primarily due to a substantial reduction in mining-related products within Resource Industries.  This decline was partially offset by an increase for Construction Industries.



Q4:

You have reduced costs significantly this year.  Are you contemplating additional cost reduction actions?



A:

We are evaluating a wide range of actions throughout our business and anticipated changes may include rationalization of some products, shifting production between certain facilities, rationalization of some of our smaller facilities, workforce reductions and the consolidation of functions within our management structure.



Q5:

You are expecting 2013 profit per share of about $5.50.  Based on your actual results for the first three quarters, that implies that profit in the fourth quarter will decline from the third quarter.  Can you comment on what is causing the decline in profit?



A:

Our outlook for 2013 expects sales and revenues in the fourth quarter to be slightly higher than in the third quarter, but profit per share to be lower.  The expected decline in profit, despite higher sales, is primarily a result of higher costs in the fourth quarter.  Historically, the fourth quarter is the highest cost quarter of the year due to seasonal spending patterns.



Q6:

Can you comment on M&PS operating cash flow for the third quarter of 2013?



A:

M&PS operating cash flow was $2.1 billion in the third quarter — a $1.1 billion increase from the third quarter of 2012.  The improvement was the result of favorable changes in working capital, primarily inventory and accounts payable, partially offset by lower profit.




Our priorities for the uses of cash are maintaining a strong financial position that helps maintain our credit rating, providing capital to support growth, appropriately funding employee benefit plans, paying dividends and repurchasing common stock with excess cash.  Specifically for the third quarter, our cash and liquidity positions were strong, as evidenced by an enterprise cash balance of $6.4 billion.  Given the uncertainty in the global economy, we intend to maintain a strong cash and liquidity position.  So far this year, we have reduced M&PS debt by $1 billion, invested $1.9 billion in capital expenditures and provided $0.5 billion to fund defined benefit  plans.  In addition, we increased the quarterly dividend by 15 percent in the second quarter of 2013 and repurchased $2 billion of common stock, resulting in a significant return to our stockholders.



Q7:

Can you provide an update on your stock repurchase plan?



 A:

In February 2007, the Board of Directors authorized the repurchase of $7.5 billion of Caterpillar stock, and in December 2011, the authorization was extended through December 2015.  We repurchased $1 billion in stock in both the second and third quarters of 2013.  Through the end of the third quarter of 2013, we have completed $5.8 billion, leaving $1.7 billion in the authorization.  With our M&PS debt-to-capital ratio well within our target range and strong cash flow, there is potential to complete the remaining $1.7 billion of the authorization before it expires at the end of 2015.



Q8:

For Resource Industries, particularly mining, can you comment on recent order rates and your expectations for sales in 2014?



 A:

While mining orders have improved from the lows of the past year, they remain very low for mining products.  As a result, we are not anticipating or planning for higher mining sales in 2014, and are continuing our efforts to lower costs.  We understand that mining is an industry where demand can change quickly … as it did to the upside in 2010 and to the downside in 2012.  That is why we are working on additional cost reduction.  While we are working to reduce costs, we are not expecting to make substantial changes in capacity.  We need to be ready when the industry improves.



Q9:

Can you provide an update on what is happening in the U.S. construction equipment industry?



A:

Although we are four years into the recovery, the construction equipment industry is still well below the 2006 peak.  However, the housing industry has improved and many state and local government budgets are showing signs of improvement, which should be helpful to construction.  Dealer machine deliveries to end users in North America were higher in the third quarter of 2013 than in the third quarter of 2012.



Q10:

We have seen a lot of news surrounding the construction industry in China over the past few years.  Can you give us an update on your construction sales in China and your total company sales there?



A:

We continue to build out our business model in China and are seeing the results.  One of the most important construction products in China is hydraulic excavators.  September year-to-date dealer deliveries to end users were higher than September year-to-date 2012.  During that same period, the overall excavator industry in China declined.  As a result, our market position improved. 




Our total company sales and revenues in China were about $800 million in the third quarter 2013 as compared with about $600 million in the third quarter of 2012.  Through September of 2013 sales and revenues in China were about $2.5 billion compared with about $2.1 billion for the same period a year ago.



Q11:

Based on the dealer statistics that you report monthly, demand for your petroleum business showed significant fluctuations in the third quarter.  What is happening?



A:

End-user demand for the petroleum industry was 1 percent lower than the third quarter of 2012.  Monthly fluctuations reported in the retail statistics have been related to the large project nature and timing of shipments of turbines.  Sales of turbines and reciprocating engines and related equipment for gas compression remain strong, but demand for drilling and well servicing is lower. 

GLOSSARY OF TERMS

1.

All Other Segment – Primarily includes activities such as: the remanufacturing of Cat® engines and components and remanufacturing services for other companies as well as the product management, development, manufacturing, marketing and product support of undercarriage, specialty products, hardened bar stock components and ground engaging tools primarily for Caterpillar products; logistics services; the product management, development, marketing, sales and product support of on-highway vocational trucks for North America; distribution services responsible for dealer development and administration, dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts.  On July 31, 2012, we sold a majority interest in Caterpillar's third party logistics business.

2.

Consolidating Adjustments – Eliminations of transactions between Machinery and Power Systems and Financial Products.

3.

Construction Industries – A segment primarily responsible for supporting customers using machinery in infrastructure 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, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, medium track-type tractors, track-type loaders, motor graders and pipe layers.  In addition, Construction Industries has responsibility for Power Systems and three wholly-owned dealers in Japan and an integrated manufacturing cost center.

4.

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 and Power Systems 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 and the net effect of changes in foreign currency exchange rates on our foreign currency assets and liabilities for consolidated results.

5.

Debt-to-Capital Ratio – A key measure of Machinery and Power Systems' financial strength used by both management and our credit rating agencies.  The metric is defined as Machinery and Power Systems' 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 and Power Systems' debt and stockholders' equity.  Debt also includes Machinery and Power Systems' borrowings from Financial Products.

6.

EAME – A geographic region including Europe, Africa, the Middle East and the Commonwealth of Independent States (CIS).

7.

Earning Assets – Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases, less accumulated depreciation at Cat Financial.

8.

Financial Products Segment – Provides financing to customers and dealers for the purchase and lease of Caterpillar 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.

9.

Latin America – Geographic region including Central and South American countries and Mexico.

10.

Machinery and Power Systems (M&PS) – Represents the aggregate total of Construction Industries, Resource Industries, Power Systems and All Other Segment and related corporate items and eliminations.

11.

Machinery and Power Systems Other Operating (Income) Expenses – Comprised primarily of gains/losses on disposal of long-lived assets, long-lived asset impairment charges, pension curtailment charges and employee redundancy costs.

12.

Manufacturing Costs – Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs.  Variable manufacturing costs are defined as having a direct relationship with the volume of production.  This includes material costs, direct labor and other costs that vary directly with production volume such as freight, power to operate machines and supplies that are consumed in the manufacturing process.  Period manufacturing costs support production but are defined as generally not having a direct relationship to short-term changes in volume.  Examples include machinery and equipment repair, depreciation on manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and operations management.

13.

Power Systems – A segment primarily responsible for supporting customers using reciprocating engines, turbines and related parts across industries serving electric power, industrial, petroleum and marine applications as well as rail-related businesses.  Responsibilities include business strategy, product design, product management, development, manufacturing, marketing, sales and product support of 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 petroleum industries; reciprocating engines supplied to the industrial industry as well as Caterpillar machinery; the business strategy, product design, product management, development, manufacturing, marketing, sales and product support of turbines and turbine-related services; the development, manufacturing, remanufacturing, maintenance, leasing, and service of diesel-electric locomotives and components and other rail-related products and services.

14.

Price Realization – The impact of net price changes excluding currency and new product introductions.  Consolidated price realization includes the impact of changes in the relative weighting of sales between geographic regions.

15.

Resource Industries – A segment primarily responsible for supporting customers using machinery in mining and quarrying 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, underground mining equipment, electric rope shovels, draglines, hydraulic shovels, drills, highwall miners, tunnel boring equipment, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, select work tools, forestry products, paving products, industrial and waste products, 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 research and development.  In addition, segment profit includes the impact from divestiture of portions of the Bucyrus distribution business and the acquisition of Siwei.

16.

Sales Volume – With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery and Power Systems 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 and Power Systems 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 and Power Systems sales with respect to total sales.

17.

Siwei – ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., Ltd., commonly known as Siwei, which was acquired during the second quarter of 2012.  Siwei primarily designs, manufactures, sells and supports underground coal mining equipment in China and is included in our Resource Industries segment. 

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.  This non-GAAP financial measure has no standardized meaning prescribed by U.S. GAAP and therefore is unlikely to be comparable to the calculation of similar measures for other companies.  Management does not intend this item to be considered in isolation or substituted for the related GAAP measure.

Machinery and Power Systems

Caterpillar defines Machinery and Power Systems as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.  Machinery and Power Systems 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 24-29 reconcile Machinery and Power Systems with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.

Caterpillar's latest financial results and outlook are also available via:

Telephone:


(800) 228-7717 (Inside the United States and Canada)


(858) 764-9492 (Outside the United States and Canada)

Internet:


http://www.caterpillar.com/investor


http://www.caterpillar.com/irwebcast (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


Nine Months Ended



September 30,


September 30,



2013


2012


2013


2012

Sales and revenues:





















Sales of Machinery and Power Systems

$

12,678




$

15,739




$

39,048




$

47,711




Revenues of Financial Products


745





706





2,206





2,089




Total sales and revenues


13,423





16,445





41,254





49,800
























Operating costs:





















Cost of goods sold


9,774





11,639





30,186





35,156




Selling, general and administrative expenses


1,319





1,471





4,130





4,328




Research and development expenses


469





634





1,579





1,853




Interest expense of Financial Products


178





197





552





599




Other operating (income) expenses


282





(92)





631





329




Total operating costs


12,022





13,849





37,078





42,265
























Operating profit


1,401





2,596





4,176





7,535

























Interest expense excluding Financial Products


116





129





356





352




Other income (expense)


(24)





(17)





(79)





141
























Consolidated profit before taxes


1,261





2,450





3,741





7,324

























Provision (benefit) for income taxes


310





753





943





2,314




Profit of consolidated companies


951





1,697





2,798





5,010

























Equity in profit (loss) of unconsolidated affiliated companies


(1)





5





(1)





12























Profit of consolidated and affiliated companies


950





1,702





2,797





5,022























Less:  Profit (loss) attributable to noncontrolling interests


4





3





11





38























Profit1

$

946




$

1,699




$

2,786




$

4,984












































Profit per common share

$

1.48




$

2.60




$

4.30




$

7.64
























Profit per common share – diluted2

$

1.45




$

2.54




$

4.21




$

7.44
























Weighted-average common shares

outstanding (millions)





















- Basic


639.3





653.6





647.6





652.0




- Diluted2


651.9





668.7





661.3





669.7























Cash dividends declared per common share

$




$




$

1.12




$

0.98














































1

Profit attributable to common stockholders.

2

Diluted by assumed exercise of stock-based compensation awards using the treasury stock method. 


Caterpillar Inc.

Condensed Consolidated Statement of Financial Position

(Unaudited)

(Millions of dollars)



September 30,


December 31,


2013


2012

Assets











Current assets:












Cash and short-term investments

$

6,357




$

5,490





Receivables - trade and other


8,649





10,092





Receivables - finance


9,161





8,860





Deferred and refundable income taxes


1,541





1,547





Prepaid expenses and other current assets


988





988





Inventories


13,392





15,547




Total current assets


40,088





42,524















Property, plant and equipment – net


16,588





16,461




Long-term receivables - trade and other


1,329





1,316




Long-term receivables - finance


14,585





14,029




Investments in unconsolidated affiliated companies


278





272




Noncurrent deferred and refundable income taxes


1,985





2,011




Intangible assets


3,718





4,016




Goodwill


6,968





6,942




Other assets


1,733





1,785



Total assets

$

87,272




$

89,356













Liabilities











Current liabilities:












Short-term borrowings:













-- Machinery and Power Systems

$

290




$

636






-- Financial Products


5,557





4,651





Accounts payable


6,280





6,753





Accrued expenses


3,373





3,667





Accrued wages, salaries and employee benefits


1,391





1,911





Customer advances


2,699





2,978





Other current liabilities


1,854





2,055





Long-term debt due within one year:













-- Machinery and Power Systems


1,110





1,113






-- Financial Products


6,565





5,991




Total current liabilities


29,119





29,755

















Long-term debt due after one year:













-- Machinery and Power Systems


7,951





8,666






-- Financial Products


18,064





19,086




Liability for postemployment benefits


10,785





11,085




Other liabilities


3,176





3,182



Total liabilities


69,095





71,774

































Stockholders' equity











Common stock


4,657





4,481




Treasury stock


(11,914)





(10,074)




Profit employed in the business


31,614





29,558




Accumulated other comprehensive income (loss)


(6,247)





(6,433)




Noncontrolling interests


67





50



Total stockholders' equity


18,177





17,582



Total liabilities and stockholders' equity

$

87,272




$

89,356



















Caterpillar Inc.

Condensed Consolidated Statement of Cash Flow

(Unaudited)

(Millions of dollars)



Nine Months Ended


September 30,


2013


2012

Cash flow from operating activities:











Profit of consolidated and affiliated companies

$

2,797




$

5,022




Adjustments for non-cash items:












Depreciation and amortization


2,263





2,070





Other


377





(267)




Changes in assets and liabilities, net of acquisitions and divestitures:












Receivables – trade and other


1,165





136





Inventories


1,911





(3,118)





Accounts payable


41





(334)





Accrued expenses


(227)





32





Accrued wages, salaries and employee benefits


(500)





(643)





Customer advances


(287)





306





Other assets – net


(74)





(20)





Other liabilities – net


145





34



Net cash provided by (used for) operating activities


7,611





3,218



Cash flow from investing activities:











Capital expenditures – excluding equipment leased to others


(1,862)





(2,270)




Expenditures for equipment leased to others


(1,301)





(1,256)




Proceeds from disposals of leased assets and property, plant and equipment


593





840




Additions to finance receivables


(8,339)





(8,835)




Collections of finance receivables


6,790





6,567




Proceeds from sale of finance receivables


110





109




Investments and acquisitions (net of cash acquired)


(193)





(542)




Proceeds from sale of businesses and investments (net of cash sold)


168





1,009




Proceeds from sale of available-for-sale securities


297





243




Investments in available-for-sale securities


(312)





(299)




Other – net


(29)





82



Net cash provided by (used for) investing activities


(4,078)





(4,352)



Cash flow from financing activities:











Dividends paid


(730)





(937)




Distribution to noncontrolling interests


(10)





(5)




Common stock issued, including treasury shares reissued


77





41




Treasury shares purchased


(2,000)








Excess tax benefit from stock-based compensation


70





165




Acquisitions of redeemable noncontrolling interests






(444)




Proceeds from debt issued (original maturities greater than three months)


6,999





11,632




Payments on debt (original maturities greater than three months)


(8,770)





(6,727)




Short-term borrowings - net (original maturities three months or less)


1,736





166



Net cash provided by (used for) financing activities


(2,628)





3,891



Effect of exchange rate changes on cash


(38)





(125)



Increase (decrease) in cash and short-term investments


867





2,632



Cash and short-term investments at beginning of period


5,490





3,057



Cash and short-term investments at end of period

$

6,357




$

5,689




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 September 30, 2013

(Unaudited)

(Millions of dollars)





Supplemental Consolidating Data


Consolidated


Machinery

and Power Systems 1


Financial Products


Consolidating Adjustments

Sales and revenues:





















Sales of Machinery and Power Systems

$

12,678




$

12,678




$




$




Revenues of Financial Products


745









825





(80)

2



Total sales and revenues


13,423





12,678





825





(80)
























Operating costs:





















Cost of goods sold


9,774





9,774












Selling, general and administrative expenses


1,319





1,168





156





(5)

3



Research and development expenses


469





469












Interest expense of Financial Products


178









179





(1)

4



Other operating (income) expenses


282





12





280





(10)

3



Total operating costs


12,022





11,423





615





(16)
























Operating profit


1,401





1,255





210





(64)

























Interest expense excluding Financial Products


116





127









(11)

4



Other income (expense)


(24)





(81)





4





53

5























Consolidated profit before taxes


1,261





1,047





214





























Provision (benefit) for income taxes


310





248





62








Profit of consolidated companies


951





799





152





























Equity in profit (loss) of unconsolidated affiliated companies


(1)





(1)












Equity in profit of Financial Products' subsidiaries






149









(149)

6






















Profit of consolidated and affiliated companies


950





947





152





(149)























Less:  Profit (loss) attributable to noncontrolling interests


4





1





3



























Profit7

$

946




$

946




$

149




$

(149)





1

Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

2

Elimination of Financial Products' revenues earned from Machinery and Power Systems.

3

Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

4

Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

5

Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

6

Elimination of Financial Products' profit due to equity method of accounting.

7

Profit attributable to common stockholders.



Caterpillar Inc.

Supplemental Data for Results of Operations

For The Three Months Ended September 30, 2012

(Unaudited)

(Millions of dollars)




Supplemental Consolidating Data


Consolidated


Machinery

and Power Systems 1


Financial Products


Consolidating Adjustments

Sales and revenues:





















Sales of Machinery and Power Systems

$

15,739




$

15,739




$




$




Revenues of Financial Products


706









796





(90)

2



Total sales and revenues


16,445





15,739





796





(90)
























Operating costs:





















Cost of goods sold


11,639





11,639












Selling, general and administrative expenses


1,471





1,325





153





(7)

3



Research and development expenses


634





634












Interest expense of Financial Products


197









200





(3)

4



Other operating (income) expenses


(92)





(344)





262





(10)

3



Total operating costs


13,849





13,254





615





(20)
























Operating profit


2,596





2,485





181





(70)

























Interest expense excluding Financial Products


129





140









(11)

4



Other income (expense)


(17)





(89)





13





59

5























Consolidated profit before taxes


2,450





2,256





194





























Provision (benefit) for income taxes


753





697





56








Profit of consolidated companies


1,697





1,559





138





























Equity in profit (loss) of unconsolidated affiliated companies


5





5












Equity in profit of Financial Products' subsidiaries






135









(135)

6






















Profit of consolidated and affiliated companies


1,702





1,699





138





(135)























Less:  Profit (loss) attributable to noncontrolling interests


3









3



























Profit7

$

1,699




$

1,699




$

135




$

(135)





1

Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

2

Elimination of Financial Products' revenues earned from Machinery and Power Systems.

3

Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

4

Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

5

Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

6

Elimination of Financial Products' profit due to equity method of accounting.

7

Profit attributable to common stockholders.



Caterpillar Inc.

Supplemental Data for Results of Operations

For The Nine Months Ended September 30, 2013

(Unaudited)

(Millions of dollars)




Supplemental Consolidating Data


Consolidated


Machinery

and Power Systems 1


Financial Products


Consolidating Adjustments

Sales and revenues:





















Sales of Machinery and Power Systems

$

39,048




$

39,048




$




$




Revenues of Financial Products


2,206









2,462





(256)

2



Total sales and revenues


41,254





39,048





2,462





(256)
























Operating costs:





















Cost of goods sold


30,186





30,186












Selling, general and administrative expenses


4,130





3,721





435





(26)

3



Research and development expenses


1,579





1,579












Interest expense of Financial Products


552









557





(5)

4



Other operating (income) expenses


631





(83)





737





(23)

3



Total operating costs


37,078





35,403





1,729





(54)
























Operating profit


4,176





3,645





733





(202)

























Interest expense excluding Financial Products


356





388









(32)

4



Other income (expense)


(79)





(250)





1





170

5























Consolidated profit before taxes


3,741





3,007





734





























Provision (benefit) for income taxes


943





733





210








Profit of consolidated companies


2,798





2,274





524





























Equity in profit (loss) of unconsolidated affiliated companies


(1)





(1)












Equity in profit of Financial Products' subsidiaries






515









(515)

6






















Profit of consolidated and affiliated companies


2,797





2,788





524





(515)























Less:  Profit (loss) attributable to noncontrolling interests


11





2





9



























Profit7

$

2,786




$

2,786




$

515




$

(515)





1

Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

2

Elimination of Financial Products' revenues earned from Machinery and Power Systems.

3

Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

4

Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

5

Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

6

Elimination of Financial Products' profit due to equity method of accounting.

7

Profit attributable to common stockholders.



Caterpillar Inc.

Supplemental Data for Results of Operations

For The Nine Months Ended September 30, 2012

(Unaudited)

(Millions of dollars)





Supplemental Consolidating Data



Consolidated


Machinery

and Power Systems 1


Financial Products


Consolidating Adjustments

Sales and revenues:





















Sales of Machinery and Power Systems

$

47,711




$

47,711




$




$




Revenues of Financial Products


2,089









2,353





(264)

2



Total sales and revenues


49,800





47,711





2,353





(264)
























Operating costs:





















Cost of goods sold


35,156





35,156












Selling, general and administrative expenses


4,328





3,922





430





(24)

3



Research and development expenses


1,853





1,853












Interest expense of Financial Products


599









602





(3)

4



Other operating (income) expenses


329





(408)





762





(25)

3



Total operating costs


42,265





40,523





1,794





(52)
























Operating profit


7,535





7,188





559





(212)

























Interest expense excluding Financial Products


352





386









(34)

4



Other income (expense)


141





(62)





25





178

5























Consolidated profit before taxes


7,324





6,740





584





























Provision (benefit) for income taxes


2,314





2,146





168








Profit of consolidated companies


5,010





4,594





416





























Equity in profit (loss) of unconsolidated affiliated companies


12





12












Equity in profit of Financial Products' subsidiaries






408









(408)

6






















Profit of consolidated and affiliated companies


5,022





5,014





416





(408)























Less:  Profit (loss) attributable to noncontrolling interests


38





30





8



























Profit7

$

4,984




$

4,984




$

408




$

(408)





1

Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

2

Elimination of Financial Products' revenues earned from Machinery and Power Systems.

3

Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

4

Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

5

Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

6

Elimination of Financial Products' profit due to equity method of accounting.

7

Profit attributable to common stockholders.



Caterpillar Inc.

Supplemental Data for Cash Flow

For The Nine Months Ended September 30, 2013

(Unaudited)

 (Millions of dollars)




Supplemental Consolidating Data


Consolidated


Machinery and Power Systems1


Financial Products


Consolidating Adjustments

Cash flow from operating activities:





















Profit of consolidated and affiliated companies

$

2,797




$

2,788




$

524




$

(515)

2



Adjustments for non-cash items:






















Depreciation and amortization


2,263





1,674





589









Undistributed profit of Financial Products






(365)









365

3




Other


377





247





(33)





163

4



Changes in assets and liabilities, net of acquisitions and divestitures:






















Receivables - trade and other


1,165





758





40





367

4,5




Inventories


1,911





1,916









(5)

4




Accounts payable


41





53





(82)





70

4




Accrued expenses


(227)





(101)





(126)









Accrued wages, salaries and employee benefits


(500)





(494)





(6)









Customer advances


(287)





(287)













Other assets - net


(74)





(51)





3





(26)

4




Other liabilities - net


145





109





10





26

4


Net cash provided by (used for) operating activities


7,611





6,247





919





445



Cash flow from investing activities:





















Capital expenditures - excluding equipment leased to others


(1,862)





(1,851)





(11)








Expenditures for equipment leased to others


(1,301)





(52)





(1,299)





50

4



Proceeds from disposals of leased assets and property, plant and equipment      


593





72





535





(14)

4



Additions to finance receivables


(8,339)









(10,400)





2,061

5,8



Collections of finance receivables


6,790









8,803





(2,013)

5



Net intercompany purchased receivables










600





(600)

5



Proceeds from sale of finance receivables


110









111





(1)

5



Net intercompany borrowings










35





(35)

6



Investments and acquisitions (net of cash acquired)


(193)





(193)












Proceeds from sale of businesses and investments (net of cash sold)


168





246









(78)

8



Proceeds from sale of available-for-sale securities


297





19





278








Investments in available-for-sale securities


(312)





(15)





(297)








Other - net


(29)





(32)





3







Net cash provided by (used for) investing activities


(4,078)





(1,806)





(1,642)





(630)



Cash flow from financing activities:





















Dividends paid


(730)





(730)





(150)





150

7



Distribution to noncontrolling interests


(10)





(10)












Common stock issued, including treasury shares reissued


77





77












Treasury shares purchased


(2,000)





(2,000)












Excess tax benefit from stock-based compensation


70





70












Net intercompany borrowings






(35)









35

6



Proceeds from debt issued (original maturities greater than three months)


6,999





145





6,854








Payments on debt (original maturities greater than three months)


(8,770)





(1,134)





(7,636)








Short-term borrowings - net (original maturities three months or less)


1,736





1





1,735







Net cash provided by (used for) financing activities


(2,628)





(3,616)





803





185



Effect of exchange rate changes on cash


(38)





(23)





(15)







Increase (decrease) in cash and short-term investments


867





802





65







Cash and short-term investments at beginning of period


5,490





3,306





2,184







Cash and short-term investments at end of period

$

6,357




$

4,108




$

2,249




$






1

Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.


2

Elimination of Financial Products' profit after tax due to equity method of accounting.


3

Elimination of non-cash adjustment for the undistributed earnings from Financial Products.


4

Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting. 


5

Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory.


6

Elimination of net proceeds and payments to/from Machinery and Power Systems and Financial Products.


7

Elimination of dividend from Financial Products to Machinery and Power Systems.


8

Elimination of proceeds received from Financial Products related to Machinery and Power Systems' sale of portions of the Bucyrus distribution business to Cat dealers.


























Caterpillar Inc.

Supplemental Data for Cash Flow

For The Nine Months Ended September 30, 2012

(Unaudited)

 (Millions of dollars)




Supplemental Consolidating Data


Consolidated


Machinery and Power Systems1


Financial Products


Consolidating Adjustments

Cash flow from operating activities:





















Profit of consolidated and affiliated companies

$

5,022




$

5,014




$

416




$

(408)

2



Adjustments for non-cash items:






















Depreciation and amortization


2,070





1,523





547









Undistributed profit of Financial Products






(158)









158

3




Other


(267)





(295)





(112)





140

4



Changes in assets and liabilities, net of acquisitions and divestitures:






















Receivables - trade and other


136





191





(59)





4

4,5




Inventories


(3,118)





(3,069)









(49)

4




Accounts payable


(334)





(342)





(2)





10

4




Accrued expenses


32





69





(38)





1

4




Accrued wages, salaries and employee benefits


(643)





(636)





(7)









Customer advances


306





306













Other assets - net


(20)





(5)





(21)





6

4




Other liabilities - net


34





(89)





130





(7)

4


Net cash provided by (used for) operating activities


3,218





2,509





854





(145)



Cash flow from investing activities:





















Capital expenditures - excluding equipment leased to others


(2,270)





(2,259)





(11)








Expenditures for equipment leased to others


(1,256)





(65)





(1,330)





139

4,9



Proceeds from disposals of leased assets and property, plant and equipment      


840





154





702





(16)

4



Additions to finance receivables


(8,835)









(14,195)





5,360

5,8,9



Collections of finance receivables


6,567









11,253





(4,686)

5,9



Net intercompany purchased receivables










366





(366)

5



Proceeds from sale of finance receivables


109









109








Net intercompany borrowings






(203)





17





186

6



Investments and acquisitions (net of cash acquired)


(542)





(486)









(56)

9



Proceeds from sale of businesses and investments (net of cash sold)


1,009





1,489









(480)

8



Proceeds from sale of available-for-sale securities


243





24





219








Investments in available-for-sale securities


(299)





(6)





(293)








Other - net


82





36





46







Net cash provided by (used for) investing activities


(4,352)





(1,316)





(3,117)





81



Cash flow from financing activities:





















Dividends paid


(937)





(937)





(250)





250

7



Distribution to noncontrolling interests


(5)





(5)












Common stock issued, including treasury shares reissued


41





41












Excess tax benefit from stock-based compensation


165





165












Acquisitions of redeemable noncontrolling interests


(444)





(444)












Net intercompany borrowings






(17)





203





(186)

6



Proceeds from debt issued (original maturities greater than three months)


11,632





2,015





9,617








Payments on debt (original maturities greater than three months)


(6,727)





(485)





(6,242)








Short-term borrowings - net (original maturities three months or less)


166





38





128







Net cash provided by (used for) financing activities


3,891





371





3,456





64



Effect of exchange rate changes on cash


(125)





(30)





(95)







Increase (decrease) in cash and short-term investments


2,632





1,534





1,098







Cash and short-term investments at beginning of period


3,057





1,829





1,228







Cash and short-term investments at end of period

$

5,689




$

3,363




$

2,326




$





1

Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

2

Elimination of Financial Products' profit after tax due to equity method of accounting.

3

Elimination of non-cash adjustment for the undistributed earnings from Financial Products.

4

Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting. 

5

Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory.

6

Elimination of net proceeds and payments to/from Machinery and Power Systems and Financial Products.

7

Elimination of dividend from Financial Products to Machinery and Power Systems.

8

Elimination of proceeds received from Financial Products related to Machinery and Power Systems' sale of portions of the Bucyrus distribution business to Cat dealers.

9

Reclassification of Financial Products' payments related to Machinery and Power Systems' acquisition of Caterpillar Tohoku Limited.

 

 

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