1st Quarter Results

Caterpillar Inc 18 April 2000 CATERPILLAR. SALES, REVENUES AND PROFIT INCREASE IN FIRST-QUARTER 2000; OUTLOOK REMAINS LARGELY UNCHANGED PEORIA, III. -- Caterpillar Inc. (NYSE: CAT) today reported first-quarter sales and revenues of $4.92 billion, $52 million higher than first-quarter 1999. The increase was primarily due to higher physical volume. Financial Products revenues increased $25 million from first-quarter 1999. Profit of $258 million or 73 cents per share was $53 million higher than first-quarter 1999. The increase was due primarily to improved manufacturing efficiencies, slightly lower selling, general and administrative (SG&A) costs and the higher physical volume. 'Customer demand for Cat products and services in the first quarter was in line with our expectations, and our product, market and geographic diversification aided our results,' said Caterpillar Chairman and CEO Glen Barton. 'Our solid first-quarter financial performance puts us in position to achieve our full-year 2000 outlook, which remains largely unchanged.' 'We're focused on cost management, accelerating the financial benefits from our acquisitions, reaching new breakthroughs in product quality and becoming even more responsive. All of these help customers obtain even greater value from Cat products and services and drive increased shareholder value,' Barton said. 2 HIGHLIGHTS FIRST-QUARTER 2000 COMPARED WITH FIRST-QUARTER 1999 Sales and revenues of $4.92 billion were $52 million higher. Revenues from Financial Products increased 9 percent. Sales inside the United States were 52 percent of worldwide sales compared with 57 percent a year ago. Five-fold increase in Engine segment operating profit. Profit of $258 million was $53 million above first-quarter 1999. Profit per share of 73 cents was up 28 percent. 5.34 million shares were repurchased during the quarter under the program announced in October 1998 to reduce the number of shares outstanding to 320 million over a three to five year period. On March 31, 2000, there were 348.6 million shares outstanding. OUTLOOK We expect full-year 2000 sales and revenues to be slightly higher than 1999 and profit to increase moderately. (Complete outlook begins on page 10) 3 DETAILED ANALYSIS FIRST-QUARTER 2000 COMPARED WITH FIRST-QUARTER 1999 Sales and revenues for the first-quarter 2000 were $4.92 billion, 1 percent higher than first-quarter 1999. A 2 percent increase in physical sales volume and a 9 percent increase in Financial Products revenue were partially offset by the unfavorable impact of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars (primarily the Euro). Profit of $258 million or 73 cents per share was $53 million higher than first-quarter 1999. The increase was due primarily to improved manufacturing efficiencies, slightly lower selling, general and administrative (SG&A) costs and the higher physical volume. The negative impact of the U.S. dollar on sales was offset by the U.S. dollar's positive impact on costs. MACHINERY AND ENGINES Sales Table (Millions of dollars) North Latin Asia/ Total America EAME* America Pacific First-Quarter 2000 Machinery $2,966 $1,753 $742 $172 $299 Engines ** 1,659 974 427 112 146 $4,625 $2,727 $1,169 $284 $445 First-Quarter 1999 Machinery $3,290 $2,139 $718 $202 $231 Engines ** 1,308 770 340 85 113 $4,598 $2,909 $1,058 $287 $344 * Europe, Africa & Middle East and Commonwealth of Independent States ** Does not include internal engine transfers of $349 million and $316 million in first-quarter 2000 and first-quarter 1999, respectively. Internal engine transfers are valued at prices comparable to those for unrelated parties. 4 Machinery sales were $2.97 billion, a decrease of $324 million or 10 percent from first-quarter 1999. The lower sales resulted primarily from a 7 percent decrease in physical sales volume. Price realization also declined due to the continued effect of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars (primarily the Euro) and geographic mix. Most of the decline in sales occurred in North America. Dealers built inventory at a slower pace than a year ago and sales to end users declined due to weaker industry demand and lower share of industry sales. Sales in Latin America also fell due to the lingering effects of recessions in a number of economies, which depressed industry sales. In EAME, sales improved due to higher new machine inventories and increased sales to end users in Europe. Sales were also higher in the Asia/Pacific region as sales to end users improved in developing Asia, partially offset by dealers building inventory at a slower pace than a year ago. Engine sales were $1.66 billion, an increase of $351 million or 27 percent from first-quarter 1999. Sales were higher due to 23 percent higher physical sales volume. Price realization also improved primarily due to favorable geographic mix and lower sales discounts. Sales were up in all regions of the world, led by significant increases in the power generation segment. In North America, sales increased in both the United States and Canada primarily due to robust demand for power generation and continued strong demand for on-highway truck engines. In EAME, sales were higher in Europe and Africa & Middle East. In the Asia/Pacific region, sales increased due to higher sales in developing Asia. Worldwide sales, especially in EAME, benefited from the conversion of F.G Wilson from an affiliated company to a consolidated subsidiary in July 1999. 5 0perating Profit Table (Millions of dollars) First-Quarter First Quarter 2000 1999 Machinery $236 $283 Engines 153 - 31 $389 $314 Caterpillar operations are highly integrated, therefore, the company uses a number of allocations to determine lines of business operating profit. Machinery operating profit decreased $47 million, or 17 percent from first-quarter 1999. Margin (sales less cost of goods sold) declined primarily due to lower price realization (geographic mix) and lower sales volume, partially offset by improved manufacturing efficiencies. SG&A and research and development (R&D) expenses were lower. Engine operating profit increased $122 million from first-quarter 1999 due to higher sales volume, better price realization and improved manufacturing efficiencies. These were partially offset by higher SG&A and R&D expenses. Interest expense was $4 million higher than a year ago. Other income/expense reflects a net increase in income of $25 million primarily due to a favorable change in foreign exchange gains and losses. 6 FINANCIAL PRODUCTS Revenues for first-quarter 2000 were $330 million, up $27 million or 9 percent compared with first-quarter 1999. The increase resulted primarily from continued growth in Cat Financial's portfolio. Before tax profit was $60 million, down $11 million or 15 percent from first quarter 1999. The decrease resulted primarily from less favorable reserve adjustments and lower underwriting income at Caterpillar Insurance Company Ltd. INCOME TAXES First-quarter tax expense reflects an estimated annual tax rate of 32 percent for both 2000 and 1999. UNCONSOLIDATED AFFILIATED COMPANIES The company's share of unconsolidated affiliated companies' results declined 55 million from first quarter a year ago, primarily due to weaker results at Shin Caterpillar Mitsubishi Ltd. and the conversion of F.G. Wilson from an affiliated company to a consolidated subsidiary in July 1999. SUPPLEMENTAL INFORMATION Dealer Machine Sales to Fad Users and Deliveries to Dealer Rental Operations Sales (including both sales to end users and deliveries to rental operations) in North America were lower compared to first-quarter 1999 due to weaker industry demand in the United States and a lower share of industry sales in the United States and Canada. These factors more than offset stronger industry demand in Canada. Sales were lower in the general construction segment, led by declines in commercial and residential building. Quarry & aggregate, industrial and waste segments declined as well. Sales were also lower in the mining segment due to reduced purchases by coal mines which more than offset improved sales to metal mines. Sales improved in the heavy construction segment even though sales to highway construction were flat. Sales to the agriculture and forestry segments were higher. 7 Sales increased in EAME as a result of growing industry demand in Europe. Higher sales in France, Italy and Germany more than offset weaker sales in the United Kingdom. Sales in Africa & Middle East were down compared to a year earlier. Higher sales in Turkey were more than offset by sales declines in United Arab Emirates and Egypt. Sales in South Africa remained near year-earlier levels. For the region, sales were higher to industrial, quarry & aggregate, mining, forestry, agriculture and general construction segments. Sales to heavy construction and waste segments declined. Sales were significantly higher in the Asia/Pacific region due to gains in developing Asia. Sales in Australia were flat. For the region, sales increased to mining, heavy construction, general construction, industrial and forestry segments. Sales to quarry & aggregate and agriculture segments were lower. Sales were down significantly in Latin America. Strong gains in Mexico were more than offset by sharp declines in Peru, Brazil and Chile. For the region, sales fell in mining, heavy construction and industrial segments which more than offset increases in general construction and quarry & aggregate segments. Dealer Inventories of New Machines Worldwide dealer new machine inventories at the end of the first quarter were significantly lower than a year ago. Declines in North America and Latin America were partially offset by higher inventories in EAME. Inventories in Asia/Pacific were near year-earlier levels. Inventories compared with current selling rates were lower than year earlier in North America, EAME and Asia/Pacific and near year-earlier levels in Latin America. Engine Sales to End Users and OEMs Sales in North America were higher due to improved demand in both the United States and Canada in almost all segments, especially power generation where sales increased significantly from a year earlier. Sales of on-highway truck engines were up due to an improved share of industry sales and continued high levels of industry demand. Sales were also higher in the industrial and marine segments. Sales to the petroleum segment were lower. 8 Sales in EAME increased due to a higher demand from power generation and industrial segments. Sales were lower to the marine and petroleum segments. Sales were higher in Europe as well as Africa & Middle East. In Asia/Pacific, higher sales to the power generation segment more than offset declines in the marine, petroleum and industrial segments. Sales in Latin America rose due to increases in the power generation, marine and petroleum segments. Sales in other segments remained near year-earlier levels. While petroleum sales were down worldwide, increased activity due to higher oil prices is beginning to translate into higher order rates for engines. Worldwide sales, especially in EAME, benefited from the conversion of F.G. Wilson from an affiliated company to a consolidated subsidiary in July 1999. 9 CONDENSED CASH FLOW Net free cash flow (profit after tax adjusted for depreciation, changes in working capital, capital expenditures, and dividends) for Machinery and Engines was $127 million for 2000, an increase of $298 million from 1999. This increase was primarily due to a favorable change in working capital and higher profit after tax. The change in working capital reflects a favorable change in accounts payable and receivables. For the Three Months Ended (Millions of dollars) Consolidated Machinery & Engines* Mar. 31, Mar 31 Mar 31 Mar 31 2000 1999 2000 1999 Profit after Tax $258 $205 $258 $205 Depreciation and amortization 257 232 201 186 Change in working capital excluding cash, debt and dividends payable (80) (620) (113) (344) Capital expenditures excluding equipment leased to others (108) (111) (106) (110) Expenditures for equipment leased to others, net of disposals (61) (51) 2 (1) Dividends paid (115) (107) (115) (107) Net Free Cash Flow 151 (452) 127 (171) Other significant cash flow items: Treasury shares purchased (210) (78) (210) (78) Net (increase) decrease in long term finance receivables (114) (86) - - Net increase in debt 121 477 19 175 Investments and acquisitions - (net of cash acquired) (4) (33) (2) (33) Other (56) 56 (13) 4 Change in cash and short-term Investments $(112) $(116) $(79) $(103) For the Three Months Ended (Millions of dollars) Financial Products Mar. 31, Mar 31 2000 1999 Profit after tax $39 $45 Depreciation and amortization 56 46 Change in working capital excluding cash, debt and dividends payable 64 (235) Capital expenditures excluding equipment leased to others (2) (1) Expenditures for equipment leased to others, net of disposals (63) (50) Dividends paid (29) (36) Net Free Cash Flow 65 (231) Other significant cash flow items: Treasury shares purchased - - Net (increase) decrease in long term finance receivables (114) (86) Net increase (decrease) in debt 99 298 Investments and acquisitions - (net of cash acquired) (2) - Other (81) 6 Change in cash and short-term Investments $(33) $(13) * Represents Caterpillar Inc. and its subsidiaries, except for Financial Products which is accounted for on the equity basis. 10 EMPLOYMENT At the end of first-quarter 2000, Caterpillar's worldwide employment was 66,555 compared with 65,377 one year ago. Acquisitions have added 2,353 since first-quarter 1999. OUTLOOK Summary World economic growth in 2000 is forecast to improve primarily due to stronger growth in EAME and Latin America. Gross Domestic Product (GDP) growth in North America is no longer forecast to slow and may even exceed last year's strong growth rate. Better world growth should lead to higher prices for most commodities although agricultural prices are expected to remain weak and oil prices are likely to remain in the $20 - $30 per barrel range. Company sales and revenues are forecast to increase in 2000 with higher sales expected in each region of the world except North America. In the United States, we expect industry demand for machines to decline, but company sales are expected to be about flat as machine shipments come back into line with retail demand. Engine sales in the United States are expected to remain near 1999 levels as a higher share of industry sales for heavy-duty and mid-range truck engines combined with increased commercial engine sales offsets lower industry demand for on-highway truck engines. Elsewhere, stronger economic growth and higher commodity prices should lead to higher retail demand and higher company sales for machines and engines. In summary, company sales and revenues are forecast to improve slightly in 2000 due to better worldwide growth, higher commodity prices and less dealer inventory reduction. Profit is expected to increase moderately. 11 North America In the United States, GDP growth is now forecast to remain very strong at 4 to 4.5 percent in 2000 despite recent interest rate increases by the Federal Reserve. However, construction equipment industry sales should decline about 10 percent from 1999 levels as higher interest rates and fewer housing starts are expected to result in lower sales in the general construction segment. The heavy construction segment should provide a partial offset since sales into the highway sector are forecast to increase as states accelerate contracts for highway construction. Machine sales into the commodity segments should begin to stabilize with the exception of agriculture where sales are forecast to decline for another year. Overall, retail industry demand for machines is expected to decline because of the drop in general construction, continued weakness in agriculture and a drop in replacement buying due to the age of the current expansion. Company machine sales are expected to be about flat as shipments come back into line with retail demand. Higher interest rates, higher diesel fuel prices, a shortage of drivers and an increased supply of used heavy-duty trucks are expected to impact North American industry demand for on-highway truck engines. However, a higher share of industry sales for heavy and medium-duty truck engines combined with increased demand for other engines, especially power generation, should offset the drop in industry demand. Overall, company engine sales are forecast to remain near 1999 levels. In Canada, good economic growth should lead to higher sales for both machines and engines. For the North American region as a whole, company sales of machines and engines are forecast to remain near last year's level. EAME In Western Europe, GDP growth is expected to accelerate from 2.2 percent in 1999 to 3.1 percent in 2000 leading to stronger demand for both machines and engines. Growth is also expected to improve in Africa & Middle East. Higher commodity prices, particularly oil and natural gas, should lead to higher demand for both machines and engines. Sales in Russia and elsewhere in the Commonwealth of Independent States, however, are likely to remain depressed. For the EAME region as a whole, better growth and improved business confidence should lead to higher company sales. 12 Asia/Pacific In developing Asia, economic recovery is forecast to continue with GDP growth remaining at 6 percent which should lead to better sales of both machines and engines. Good economic growth is also expected to continue in Australia resulting in sales near or slightly above 1999 levels. For the region as a whole, company sales should be higher. Latin America GDP growth is forecast to improve from flat in 1999 to 3 to 4 percent in 2000 as the region recovers from last year's recession. Combined with higher commodity prices, this improved growth should result in higher machine sales, more than offsetting lower engine sales. 13 The information included in the Outlook section is forward looking and involves risks and uncertainties that could significantly affect expected results. A discussion of these risks and uncertainties is contained in Form 8-K filed with the Securities & Exchange Commission (SEC) on April 18, 2000. That filing is available from the SEC web site at http://www.sec.gov/cgi-bin/srch-edgar?0000018230. Caterpillar's latest financial results, current outlook and quarterly conference call are also available via: Telephone: (800) 228-7717 (Inside the United States and Canada) (760) 704-4377 (Outside the United States and Canada) Internet: http://www.CAT.com/investor http://www.CAT.com/irwebeast (live broadcast/replays of quarterly conference call) Caterpillar contact: Marsha Hausser Corporate Public Affairs (309) 675-1307 E-mail: hausser-marsha-m@cat.com Note: Information contained on our web site is not incorporated by reference into this release. Financial Pages Follow 14 CATERPILLAR INC. CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED (Millions of dollars except per share data) Consolidated Machinery & Engines Mar 31, Mar 31, Mar 31, Mar 31, 2000 1999 2000 1999 Sales and revenues: Sales of Machinery & Engines $4,625 $4,598 $4,625 $4,598 Revenues of Financial Products 294 269 - - Total sales and revenues 4,919 4,867 4,625 4,598 Operating costs; Cost of goods sold 3,558 3,578 3,558 3,578 Selling, general, and Administrative expenses 637 653 523 551 Research and development Expenses 155 155 155 155 Interest expense of Financial Products 153 129 - - Total operating costs 4,503 4,515 4,236 4,284 Operating Profit 416 352 389 314 Interest expense excluding Financial Products 71 67 71 67 Other income (expense) 41 16 8 (17) Consolidated profit before taxes 386 301 326 230 Provision for income taxes 123 96 101 70 Profit of consolidated companies 263 205 225 160 Equity in profit of Unconsolidated affiliates (5) - (6) - Equity in profit of Financial Products subsidiaries - - - 39 45 Profit $258 $205 $258 $205 EPS of common stock $0.73 $0.58 EPS of common stock - assuming dilution $0.73 $0.57 Weighted average shares outstanding (thousands) Basic 351,576 356,291 Assuming dilution 354,210 360,497 Financial Products Mar 31, Mar 31, 2000 1999 Sales and revenues: Sales of Machinery & Engines $ - $ - Revenues of Financial Products 330 303 Total sales and revenues 330 303 Operating costs; Cost of goods sold - - Selling, general, and Administrative expenses 122 109 Research and development Expenses - - Interest expense of Financial Products 163 134 Total operating costs 285 243 Operating Profit 45 60 Interest expense excluding Financial Products - - Other income (expense) 15 11 Consolidated profit before taxes 60 71 Provision for income taxes 22 26 Profit of consolidated companies 38 45 Equity in profit of Unconsolidated affiliates 1 - Equity in profit of Financial Products subsidiaries - - - Profit $39 $45 * Represents Caterpillar Inc. and its subsidiaries, except for Financial Products which is accounted for on the equity basis, Transactions between Machinery and Engines and Financial Products have been eliminated to arrive at the Consolidated data. 15 CATERPILLAR INC. CONDENSED FINANCIAL POSITION (Millions of dollars) Consolidated (Caterpillar Inc. and Subsidiaries) Mar. 31, Dec. 31, Mar. 31, 2000 1999 1999 Assets Current assets: Cash and short-term investments $436 $548 $244 Receivables - trade and other 2,580 3,233 4,183 Receivables - finance 5,109 4,206 3,448 Deferred income taxes 416 405 516 Prepaid expenses 770 748 620 Inventories 2,659 2,594 2,892 Total current assets 11,970 11,734 11,903 Property, plant and equipment- net 5,181 5,201 4,852 Long-term receivables - trade and other 79 95 92 Long-term receivables - finance 5,702 5,588 5,144 Investments in unconsolidated affiliated companies 553 553 835 Deferred income taxes 940 954 977 Intangible assets 1,519 1,543 1,235 Other assets 1,019 967 681 Total Assets $26,963 $26,635 $25,719 Liabilities Current liabilities: Short-term borrowings: Machinery & Engines $66 $51 $236 Financial Products 674 719 697 Accounts payable 2,192 2,003 2,123 Accrued expenses 1,079 1,048 990 Accrued wages, salaries, and employee benefits 1,062 1,115 1,090 Dividends payable 115 - Deferred and current income taxes payable 124 23 147 Long-term debt due within one year: Machinery & Engines 167 167 48 Financial Products 2,798 2,937 2,439 Total current liabilities 8,162 8,178 7,770 Long-term debt due after one year: Machinery & Engines 3,103 3,099 2,993 Financial Products 7,115 6,829 6,516 Liability for post-employment benefits 2,543 2,536 2,698 Deferred income taxes and other liabilities 544 528 429 Total Liabilities 21,467 21,170 20,406 Stockholders' Equity Common stock 1,049 1,045 1,062 Profit employed in the business 6,875 6,617 6,328 Accumulated other comprehensive income 52 78 50 Treasury stock (2,480) (2,275) (2,127) Total Stockholders' Equity 5,496 - 5,465 5,313 Total Liabilities and Stockholders' Equity $26,963 $26,635 $25,719 Certain amounts for prior periods have been reclassified to conform with current financial statement presentation.

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