01—Abstract
Summary
Summary of the 10-K filed March 2, 1994. Cited figures are marked; the original filing is the authoritative source.
Caterpillar's 1993 Form 10-K is a short wrapper document.
Its core financial statements, Management's Discussion and Analysis, and the eleven-year financial summary are incorporated by reference from the Appendix to the 1994 Annual Meeting Proxy Statement, so this filing alone does not disclose 1993 revenue, net profit, or EPS. What it does show is a company with 101.9 million common shares outstanding and a non-affiliate market value of about $9.0 billiona as of December 31, 1993. It operates three segments (Machinery, Engines, and Financial Products) and employed 51,250 people, about 26% of them outside the U.S. The filing points to a recovery from losses.
The ratio of profit to fixed charges was 2.4x in 1993, while pretax losses in 1992 and 1991 left coverage deficiencies of roughly $341 millionb and $529 million. Sales outside the U.S. fell to 49% of consolidated sales from 55% in 1992, and total short-term borrowings declined to $1.28 billion from $1.74 billion. Capital spending was constrained, with net property investment falling by $127 million in 1993, and R&D rose modestly to $455 million from $446 million.
The main risk items are legal and environmental. Caterpillar faces a European Community Statement of Objections on dealer and export practices, a new EC complaint, and a securities class action settlement that is contingent on court approval and a pending coverage dispute with its D&O insurer.
The Solar Turbines Harbor Drive contamination in San Diego is estimated at $30 to $50 millionc over 25 years, against a $13 million reserve, and the company is a potentially responsible party at 18 active CERCLA sites. Management says none of these is expected to have a materially adverse effect on consolidated financial position.
02—Key points
Key Highlights
- Three segments: Machinery, Engines, and Financial Products, with Financial Products providing dealer and customer financing and insurance.
- Profit-to-fixed-charges ratio of 2.4x in 1993, after pretax losses in 1992 and 1991 that failed to cover fixed charges by about $341 million and $529 million.
- Research and engineering spending rose to $455 million in 1993 from $446 million in 1992, with $319 million directed at new prime products and major components.
- International exposure declined: sales outside the U.S. were 49% of 1993 consolidated sales, down from 55% in 1992 and 59% in 1991.
- Short-term borrowings fell to $1,277 million at year-end 1993 from $1,736 million, including $832 million of commercial paper at a 3.6% weighted average rate.
- Environmental exposure includes about $126 million in annual environmental operating costs, the Solar Harbor Drive remediation estimate of $30 to $50 million, and PRP status at 18 CERCLA sites.
- Legal overhang: EC competition Statement of Objections and new complaint, plus a securities class action settlement pending court approval and a coverage dispute with the D&O insurer.
03—Questions
Frequently Asked Questions
Where are Caterpillar's 1993 revenue, net profit, and EPS reported?
They are not in this 10-K. Items 6 through 8 incorporate the financial statements, selected data, and MD&A by reference from the Appendix to the 1994 Annual Meeting Proxy Statement (pages A-3 through A-36). Investors need that appendix to see the full income statement, balance sheet, and cash flow figures.
How financially strong does the company look based on this filing?
The filing shows a 2.4x profit-to-fixed-charges ratio for 1993 after coverage shortfalls in 1992 and 1991, which signals a return to earnings coverage. Short-term borrowings fell by about $459 million during 1993, and net property investment declined. Full leverage and liquidity metrics, however, require the incorporated financial statements.
What are the biggest legal and environmental risks?
The main legal risks are the European Community antitrust Statement of Objections (dealer service fees, subdealer restrictions, and export pricing and parts policies) and a new EC complaint on export parts policies, plus the securities class action settlement, which depends on court approval and the outcome of a suit against the D&O insurer. The main environmental risk is the Solar Turbines Harbor Drive site in San Diego, estimated at $30 to $50 million over 25 years against a $13 million reserve. Management says none of these is expected to have a materially adverse effect on financial position.
Is Caterpillar becoming less dependent on international markets?
Based on the sales mix, yes. Sales outside the U.S. were 49% of consolidated sales in 1993, compared with 55% in 1992 and 59% in 1991. Outside-U.S. properties were 25.7% of net properties, and the Brazilian operations were consolidated into Piracicaba, with the Sao Paulo facilities closed and sold in 1993.
What do the company's capital spending and R&D trends suggest?
Capital spending was restrained: U.S. additions were $508 million and outside-U.S. additions were $124 million, against $661 million of depreciation, so net property fell by $127 million in 1993. R&D rose modestly to $455 million, and management expects continued new product development, including the 3406E truck engine introduced in 1993.
04—Continue