Final Results

Caterpillar Inc 24 January 2002 CATERPILLAR INC. REPORTS 2001 FOURTH-QUARTER AND YEAR-END RESULTS; ACHIEVES OUTLOOK; EXPECTS IMPROVED PROFIT IN 2002 PEORIA, Ill. -- Caterpillar Inc. (NYSE: CAT) today reported fourth-quarter 2001 sales and revenues of $5.10 billion, compared with $5.11 billion in the fourth quarter of 2000. Profit of $167 million or 48 cents per share was impacted by $153 million of pre-tax nonrecurring charges. These charges, which had a 28-cent per share adverse effect on earnings, were for the sale of the Challenger(TM) agricultural tractor line, plant closing and consolidations and costs for planned employment reductions. While sales and revenues were down $18 million, profit -- excluding the nonrecurring charges -- was $264 million, or 76 cents per share, the same as last year. 'Most noteworthy in our fourth quarter were the significant steps we took to position the company for better profit performance in 2002 and long-term success by reducing costs, sharpening our focus on core competencies and improving global efficiencies,' said Caterpillar Chairman and CEO Glen Barton. 'Our cost reduction efforts will continue as we move toward our goal of trimming more than $1 billion from the year 2000 cost base.' Barton said Caterpillar's successful implementation of 6 Sigma methodology will continue to improve processes, efficiencies and reduce spending. 'Our $30 million investment in 6 Sigma in 2001 paid for itself in less than one year as Caterpillar became the first company to simultaneously launch this business improvement methodology across all divisions and achieve net benefits in year one. We expect the amazing results we've seen to increase in 2002 and beyond.' For the full year, sales and revenues were $20.45 billion, or $275 million higher than 2000. Profit was $805 million or $2.32 per share. Excluding the nonrecurring charges of 28 cents per share, profit was $902 million, or $2.60 per share, down 14 percent. 'In a year of extraordinary challenges, including a U.S. recession, Caterpillar's diverse base of businesses, products and geographic regions helped us turn in a profit performance that -- excluding nonrecurring charges -- accomplished what we said we would do,' Barton said. Sales in 2001 were up primarily on the strength of the worldwide coal mining and heavy construction industries, driven in part by strong demand for energy and equipment to rebuild U.S. highways as part of the nation's transportation improvement program. Sales into the waste handling industry were also strong. Electric power sales enjoyed another record year, and sales into the petroleum sector were significantly higher, benefiting both reciprocating and turbine engines. However, worldwide engine sales were down slightly, the result of weak demand for truck engines as the severe trucking industry downturn continued. Higher sales volumes 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 and Australian dollar). Revenues were up as Financial Products reached record revenue levels of $1.42 billion, a 13 percent increase from 2000. The increase is attributed to Caterpillar Financial Services Corporation's (Cat Financial) ability to generate new retail financing in line with its strategy to provide services to a broader range of customers worldwide. Full-year profit benefited from higher sales, the impact of exchange rate changes, and record profits at Cat Financial, but overall was down due to sharp production volume shifts at some manufacturing facilities, slightly higher selling, general and administrative (SG&A) expenses, as well as the nonrecurring charges. 'Based on the global industry outlook, we expect both industry and company sales to be about flat in 2002,' Barton said. 'However, we expect profit to be up slightly in 2002 compared with 2001, excluding nonrecurring charges, because of the strategic actions announced in the fourth quarter and continued aggressive cost reduction efforts.' Caterpillar Inc. is the world's largest manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Additional information can be found on Caterpillar's website at www.CAT.com DETAILED ANALYSIS FOURTH-QUARTER 2001 COMPARED WITH FOURTH-QUARTER 2000 Sales and revenues for fourth-quarter 2001 were $5.10 billion, $18 million lower than fourth-quarter 2000. Slightly higher physical sales volume and an 8 percent increase in Financial Products revenues were more than offset by lower price realization. Profit of $167 million, including pre-tax nonrecurring charges of $153 million ($97 million after tax), was $97 million lower than fourth-quarter 2000. Excluding the nonrecurring charges, profit was $264 million, flat with fourth-quarter 2000. MACHINERY AND ENGINES Sales North Latin Asia/ (Millions of dollars) Total America EAME America Pacific Fourth-Quarter 2001 Machinery $2,799 $1,417 $809 $222 $351 Engines *** 1,936 816 562 348 210 ------ ------ ------ ------ ------ $4,735 $2,233 $1,371 $570 $561 ====== ====== ====== ====== ====== Fourth-Quarter 2000 Machinery $2,795 $1,402 $793 $270 $330 Engines *** 1,985 1,016 582 185 202 ------ ------ ------ ------ ------ $4,780 $2,418 $1,375 $455 $532 ====== ====== ====== ====== ====== *** Does not include internal engine transfers of $296 million and $323 million in 2001 and 2000, respectively. Internal engine transfers are valued at prices comparable to those for unrelated parties. Machinery sales were $2.80 billion, about flat compared with fourth-quarter 2000. Slightly higher physical sales volume was offset by unfavorable price realization. Sales were up in all regions except in Latin America. Engine sales were $1.94 billion, a decrease of $49 million or 2 percent from fourth-quarter 2000. Higher physical sales volume was more than offset by lower price realization. Operating Profit (Millions of dollars) Fourth-Quarter Fourth-Quarter 2001 2000 Machinery $137 $248 Engines 39 192 ----- ----- $176 * $440 ===== ===== * Includes $153 million of nonrecurring charges Caterpillar operations are highly integrated; therefore, the company uses a number of allocations to determine lines of business operating profit. Machinery operating profit decreased $111 million from fourth-quarter 2000. The favorable impact of the slightly higher physical sales volume was more than offset by the nonrecurring charges ($98 million). Engine operating profit decreased $153 million from fourth-quarter 2000. The benefit of higher sales volumes was more than offset by lower price realization and the nonrecurring charges ($55 million). Interest expense was $13 million lower than fourth-quarter 2000. Other income/expense was income of $42 million compared with expense of $52 million last year. The favorable change was mostly due to the absence of foreign exchange losses experienced in 2000 and higher gains on the sales of assets. FINANCIAL PRODUCTS Revenues for the fourth quarter were $415 million, up $25 million or 6 percent compared with fourth-quarter 2000 (excluding revenue transactions with Machinery and Engines, revenues increased $27 million or 8 percent). The increase resulted primarily from continued portfolio growth at Cat Financial, which had record new retail finance activity, as well as increased extended warranty premiums at Caterpillar Insurance Holdings, Inc. (Cat Insurance). Before tax profit decreased $9 million or 10 percent from fourth-quarter 2000. Increased profit at Cat Financial resulting from continued portfolio growth was more than offset by lower market returns on the investment portfolio at Cat Insurance. INCOME TAXES Excluding the nonrecurring charges reported in 2001, fourth-quarter tax expense reflects an effective annual tax rate of 32 percent for both 2001 and 2000. UNCONSOLIDATED AFFILIATED COMPANIES The company's share of unconsolidated affiliated companies' results increased $11 million from a year ago, primarily due to stronger results at Shin Caterpillar Mitsubishi Ltd. 2001 COMPARED WITH 2000 Sales and revenues for 2001 were $20.45 billion, 1 percent more than 2000. A 1 percent increase in physical sales volume and a 13 percent increase in Financial Products revenues 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 and Australian dollar). Profit of $805 million, including nonrecurring charges of $153 million ($97 million after tax), was down $248 million. Excluding nonrecurring charges, profit was $902 million, down $151 million or 14 percent. An increase in profit due to higher sales volume was more than offset by the unfavorable impact of cost inefficiencies caused by sharp volume shifts at some manufacturing facilities, slightly higher SG&A and the absence of a favorable $39 million tax adjustment at Cat Brasil Ltda. in 2000. SG&A increases were related to spending for future growth and to improve long-term cost structure. The negative impact of currency on sales was more than offset by a positive impact on costs. MACHINERY AND ENGINES Sales North Latin Asia/ (Millions of dollars) Total America EAME* America Pacific 2001 Machinery $12,158 $6,790 $3,215 $891 $1,262 Engines ** 6,869 3,470 1,899 748 752 ------- ------- ------ ------ ------ $19,027 $10,260 $5,114 $1,639 $2,014 ======= ======= ====== ====== ====== 2000 Machinery $11,857 $6,607 $3,121 $893 $1,236 Engines ** 7,056 3,885 1,920 538 713 ------- ------- ------ ------ ------ $18,913 $10,492 $5,041 $1,431 $1,949 ======= ======= ====== ====== ====== * Europe, Africa & Middle East and Commonwealth of Independent States ** Does not include internal engine transfers of $1.231 billion and $1.356 billion in 2001 and 2000, respectively. Internal engine transfers are valued at prices comparable to those for unrelated parties. Machinery sales were $12.16 billion, an increase over 2000 of $301 million resulting from a 3 percent increase in physical sales volume. Sales were higher in all regions except Latin America which was about flat. Engine sales were $6.87 billion, a decrease of $187 million or 3 percent from 2000 even though physical volume was flat. Unfavorable price realization resulting from competitive pressures in North America combined with the unfavorable impact of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars caused the sales decline. Operating Profit (Millions of dollars) 2001 2000 Machinery $849 $1,001 Engines 348 667 ------ ------ $1,197 * $1,668 ====== ====== * Includes $153 million of nonrecurring charges Caterpillar operations are highly integrated; therefore, the company uses a number of allocations to determine lines of business operating profit. Machinery operating profit decreased $152 million from 2000. The benefit from slightly higher physical volume was more than offset by higher costs, including the nonrecurring charges ($98 million), employment-related cost increases and higher energy costs. Engine operating profit decreased $319 million from 2000. The decline was primarily due to the lower price realization, impact of manufacturing inefficiencies related to sharp swings in production levels and the nonrecurring charges ($55 million). Interest expense was $7 million lower than a year ago. Other income/expense improved by $38 million due to lower foreign currency losses in 2001. FINANCIAL PRODUCTS Revenues for 2001 were a record $1.65 billion, up $180 million or 12 percent compared with 2000 (excluding revenue transactions with Machinery and Engines, revenues increased $161 million or 13 percent). The increase resulted primarily from continued portfolio growth at Cat Financial. Before tax profit increased $67 million or 24 percent from 2000. Record profit at Cat Financial resulted from increased spread on the receivables portfolio and increased gains on sales of receivables. INCOME TAXES Excluding the tax effect of the nonrecurring charges reported in 2001 and the favorable tax adjustment of $39 million at Caterpillar Brasil Ltda. in 2000, tax expense in both years reflects an effective tax rate of 32 percent. UNCONSOLIDATED AFFILIATED COMPANIES The company's share of unconsolidated affiliated companies' results increased $31 million from a year ago, primarily due to stronger results at Shin Caterpillar Mitsubishi Ltd. SUPPLEMENTAL INFORMATION Dealer Machine Sales to End Users and Deliveries to Dealer Rental Operations Sales (including both sales to end users and deliveries to dealer rental operations) in North America were higher than 2000. Sales increased as a result of strong customer acceptance of several new models and a shift in product mix toward larger machines. These factors more than offset the impact of lower industry demand in the United States and Canada. For the region, sales into mining were up sharply due to strong demand from the coal mining industry. Sales into waste and agriculture also increased. Sales into general construction, quarry & aggregates, forestry and industrial declined. Sales into heavy construction remained at record high levels. For the EAME region, sales increased into general construction, waste, agriculture, heavy construction, mining, forestry and quarry & aggregates. Sales into the industrial sector declined. Sales in Asia/Pacific increased to the mining, heavy construction, quarry & aggregates and waste sectors. Sales into forestry, general construction, industrial and agriculture declined from a year ago. In Latin America, sales were higher as increases in heavy construction, general construction, mining, waste and agriculture more than offset lower sales into forestry, quarry & aggregates and industrial. Dealer Inventories of New Machines Worldwide dealer new inventories at year-end 2001 were below year-earlier levels in all regions. Inventories compared to current selling rates were near year- earlier levels in all regions except EAME where they were lower. Engine Sales to End Users and OEMs Another record year in electric power engine sales and strong sales into the North American petroleum sector, benefiting both reciprocating and turbine engines, partially offset significantly weaker on-highway truck engine sales in North America. In EAME, stronger demand in marine and petroleum sectors was more than offset by significantly lower demand for industrial engines resulting in slightly lower 2001 sales. Sales in Asia/Pacific rose marginally with all of the sales gains coming from the marine sector. Sales in Latin America rose slightly with all of the sales gain coming from substantially improved petroleum and electric power demand. Overall, worldwide engine sales were slightly lower in 2001. EMPLOYMENT At the end of 2001, Caterpillar's worldwide employment was 72,004 compared with 68,440 one year ago. Of the total increase, 1,815 resulted from acquisitions, primarily outside the United States. CONDENSED CASH FLOW Net free cash flow (profit after tax adjusted for depreciation, changes in working capital, other noncash items, capital expenditures and dividends) for Machinery and Engines was negative $140 million in 2001, a decrease of $438 million from 2000. This decrease was primarily due to lower profit after tax, an increase in working capital and capital expenditures excluding equipment leased to others. For the Twelve Months Ended (Millions of dollars) Consolidated Machinery & Financial Products Engines * Dec. 31, Dec. 31, Dec.31, Dec. 31, Dec. 31, Dec. 31, 2001 2000 2001 2000 2001 2000 Profit after tax $805 $1,053 $805 $1,053 $224 $184 Depreciation and amortization 1,169 1,063 835 813 334 250 Nonrecurring charges 153 - 153 - - - Change in working capital; and Other (130) (57) (382) (235) 42 40 Capital expenditures excluding equipment leased to others (1,100) (928) (1,071) (891) (29) (37) Expenditures for equipment leased to others, net of disposals (512) (402) (6) 20 (506) (422) Dividends paid (474) (462) (474) (462) (105) (29) Net Free Cash Flow (89) 267 (140) 298 (40) (14) Other significant cash flow items: Treasury shares purchased (43) (412) (43) (412) - - Net (increase) decrease in long-term finance receivables (838) (1,197) - - (838) (1,197) Net increase (decrease) in debt 1,529 1,413 289 115 1,240 1,298 Investments and acquisitions - (net of cash acquired) (405) (115) (110) (102) (295) (13) Other (88) (170) 49 (133) (46) (54) Change in cash and short-term Investments $66 $(214) $45 $(234) $21 $20 *Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Note: 'Change in working capital; and Other' excludes changes in cash, debt, and dividends payable. Also, due to the acquisition and consolidation of new companies, certain amounts have been removed from 'Change in working capital; and Other' and 'Capital expenditures excluding equipment leased to others' and included in 'Investments and acquisitions' or 'Other'. OUTLOOK Summary After a severe slowdown in 2001, world economic growth as well as growth in industrial production are projected to improve, albeit gradually, over the course of 2002. This improvement will be driven by lower interest rates and energy costs around the globe, combined with significant fiscal stimulus in North America. While world growth is expected to improve gradually, momentum is expected to build from very weak activity levels at the beginning of 2002. As a result, world growth is expected to be about flat in the first half - a significant slowdown from growth rates in the first half of 2001 - before picking up momentum and closing the year with annualized growth rates approaching 3 percent. In this economic environment, worldwide industry opportunity and company sales and revenues are projected to be about flat compared with 2001. For the full year we expect profit to be up slightly compared to 2001, excluding the 2001 nonrecurring charges, although we expect significantly lower profit in the first half, particularly the first quarter. The full-year profit improvement reflects the company's continuing actions to reduce costs and improve efficiencies. North America In the United States, even though a supplementary fiscal stimulus package was not approved, Congress approved an increase for transportation funding in 2002. Leading economic indicators began recovering at the close of 2001 as consumer spending and expectations rebounded from the retrenchment that we saw after the September 11 terrorist attacks. As a result, the U.S. economy is on track for flat to slightly positive growth in the first quarter, followed by stronger growth in the second, and gaining momentum in the third and fourth quarters of 2002. The Canadian economy will track the U.S. closely, and consumer spending and housing in Canada will benefit as well from scheduled personal tax reductions. Industry sales of construction and industrial machines are projected to be flat to down slightly in most sectors. Coal mining is expected to be down moderately. Reciprocating and turbine engine sales are expected to be flat to up slightly. As a result, company sales in North America are expected to be about flat. EAME In EAME, growth in Europe is expected to lag the recovery in North America by about a quarter. We expect a weak first quarter to be followed by a flat second quarter and improving growth in the second half of 2002. Weak commodity prices are expected to restrain growth in Africa/Middle East and the CIS. Company sales in the EAME region are projected to be about flat. Asia/Pacific In Asia/Pacific, business conditions are expected to improve in developing Asia in the second half of 2002 in response to the U.S. recovery, but Japan is expected to remain weak and continue to be a drag on the regional recovery. Growth in China is expected to continue at a solid rate, leading to higher sales, and sales in Australia are expected to be up slightly. Company sales in the region are expected to be down slightly. Latin America In Latin America, business conditions in Mexico are expected to improve in conjunction with the U.S. recovery, while power shortages in Brazil are expected to become less acute in 2002. There was a sharp increase in political and economic uncertainty in Argentina at the end of last year. Our outlook assumes that the majority of the negative shocks to machine and engine industry demand will be confined to Argentina. Company sales for the region are expected to be down slightly. 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 January 23, 2002. That filing is available from the SEC website at http://www.sec.gov/cgi-bin/srch-edgar Caterpillar's latest financial results and current outlook are also available via: Telephone: (800) 228-7717 (Inside the United States and Canada) (858) 244-2080 (Outside the United States and Canada) Internet: http://www.CAT.com/investor http://www.CAT.com/irwebcast (live broadcast/replays of quarterly conference call) Caterpillar contact: Marsha Hausser Corporate Public Affairs 309-675-1307 hausser_marsha_m@CAT.com Note: Information contained on our Web site is not incorporated by reference into this release. CATERPILLAR INC. CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED (Millions of dollars except per share data) Consolidated Machinery & Financial Products Engines * Dec. 31, Dec. 31, Dec.31, Dec. 31, Dec. 31, Dec. 31, 2001 2000 2001 2000 2001 2000 Sales and revenues: Sales of Machinery & Engines $4,735 $4,780 $4,735 $4,780 $ - $ - Revenues of Financial Products 361 334 - - 415 390 Total sales and revenues 5,096 5,114 4,735 4,780 415 390 Operating costs: Cost of goods sold 3,666 3,628 3,666 3,628 - - Selling, general, and administrative expenses 653 606 550 536 122 81 Research and development expenses 190 176 190 176 - - Interest expense of Financial Products 139 179 - - 143 193 Other Operating expenses 245 64 153 - 92 64 Total operating costs 4,893 4,653 4,559 4,340 357 338 Operating Profit 203 461 176 440 58 52 Interest expense excluding Financial Products 63 76 63 76 - - Other income (expense) 97 18 42 (52) 24 39 Consolidated profit before taxes 237 403 155 312 82 91 Provision for income taxes 70 128 40 96 30 32 Profit of consolidated companies 167 275 115 216 52 59 Equity in profit of unconsolidated affiliates - (11) (2) (12) 2 1 Equity in profit of Financial Products subsidiaries - - 54 60 - - Profit $167 $264 $167 $264 $54 $60 EPS of common stock $0.49 $0.77 EPS of common stock - assuming dilution $0.48 $0.76 Weighted average shares outstanding (thousands) Basic 343,299 343,524 Assuming dilution 347,068 345,433 * Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Transactions between Machinery and Engines and Financial Products have been eliminated to arrive at the Consolidated data. CATERPILLAR INC. CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE YEAR ENDED (Millions of dollars except per share data) Consolidated Machinery & Financial Products Engines * Dec. 31, Dec. 31, Dec.31, Dec. 31, Dec. 31, Dec. 31, 2001 2000 2001 2000 2001 2000 Sales and revenues: Sales of Machinery & Engines $19,027 $18,913 $19,027 $18,913 $ - $ - Revenues of Financial Products 1,423 1,262 - - 1,645 1,465 Total sales and revenues 20,450 20,175 19,027 18,913 1,645 1,465 Operating costs: Cost of goods sold 14,752 14,497 14,752 14,497 - - Selling, general, and administrative expenses 2,567 2,367 2,229 2,099 389 307 Research and development expenses 696 649 696 649 - - Interest expense of Financial Products 657 688 - - 685 739 Other Operating expenses 467 237 153 - 314 237 Total operating costs 19,139 18,438 17,830 17,245 1,388 1,283 Operating Profit 1,311 1,737 1,197 1,668 257 182 Interest expense excluding Financial Products 285 292 285 292 - - Other income (expense) 143 83 (88) (126) 88 96 Consolidated profit before taxes 1,169 1,528 824 1,250 345 278 Provision for income taxes 367 447 239 350 128 97 Profit of consolidated companies 802 1,081 585 900 217 181 Equity in profit of unconsolidated affiliates 3 (28) (4) (31) 7 3 Equity in profit of Financial Products subsidiaries - - 224 184 - - Profit $805 $1,053 $805 $1,053 $224 $184 EPS of common stock $2.35 $3.04 EPS of common stock - assuming dilution $2.32 $3.02 Weighted average shares outstanding (thousands) Basic 343,324 346,818 Assuming dilution 347,092 348,898 * Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Transactions between Machinery and Engines and Financial Products have been eliminated to arrive at the Consolidated data. CATERPILLAR INC. CONDENSED FINANCIAL POSITION (Millions of dollars) Consolidated (Caterpillar Inc. and Subsidiaries) Dec. 31, Dec 31, 2001 2000 Assets Current assets: Cash and short-term investments $400 $334 Receivables - trade and other 2,592 2,608 Receivables - finance 5,849 5,471 Deferred income taxes 423 397 Prepaid expenses 1,211 1,019 Inventories 2,925 2,692 Total current assets 13,400 12,521 Property, plant, and equipment - net 6,603 5,951 Long-term receivables - trade and other 55 76 Long-term receivables - finance 6,267 6,095 Investments in unconsolidated affiliated companies 787 551 Deferred income taxes 938 907 Intangible assets 1,671 1,507 Other assets 936 856 Total Assets $30,657 $28,464 Liabilities Current liabilities: Short-term borrowings: -- Machinery & Engines $219 $369 -- Financial Products 1,961 602 Accounts payable 2,123 2,339 Accrued expenses 1,419 1,148 Accrued wages, salaries, and employee benefits 1,292 1,274 Dividends payable 120 117 Deferred and current income taxes payable 11 57 Long-term debt due within one year: -- Machinery & Engines 73 204 -- Financial Products 3,058 2,558 Total current liabilities 10,276 8,668 Long-term debt due after one year: -- Machinery & Engines 3,492 2,854 -- Financial Products 7,799 8,480 Liability for post-employment benefits 3,103 2,514 Deferred income taxes and other liabilities 376 348 Total Liabilities 25,046 22,864 Stockholders' Equity Common stock 1,043 1,048 Profit employed in the business 7,533 7,205 Accumulated other comprehensive income (269) 23 Treasury stock (2,696) (2,676) Total Stockholders' Equity 5,611 5,600 Total Liabilities and Stockholders' Equity $30,657 $28,464 Certain amounts for 2000 have been reclassified to conform with the 2001 financial statement presentation. 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