01—Abstract
Summary
Summary of the 10-K filed February 23, 1995. Cited figures are marked; the original filing is the authoritative source.
Caterpillar's 1994 10-K reports a record year.
Consolidated sales and revenues rose 23% to $14.33 billiona, and profit reached $955 million, or $4.70 per share, versus $652 million ($3.21) in 1993. Machinery and Engines sales grew 25% in physical volume terms (about 19% overall volume), driven by strong worldwide industry demand, higher price realization of roughly 4%, and gains in North America, Europe, and Asia/Pacific. Operating profit for Machinery and Engines improved sharply, and the return on average common equity rose to 37.4% from 34.6%.
Management also said that its operations continued at high rates during a UAW strike that began June 21, 1994, at eight U.S. facilities, with production at struck plants running 14% higher in the second half than in the first. The balance sheet strengthened. Stockholders' equity rose to $2.91 billionb from $2.20 billion, and the Machinery and Engines debt-to-capital ratio improved to 41% from 52%.
Consolidated operating cash flow reached $1.76 billionc. Financial Products debt grew to $3.87 billion as Cat Financial expanded its receivables portfolio, which is a point investors should watch in terms of leverage and credit quality. Management guided to moderately higher worldwide machine and engine sales in 1995, with profits also expected to be higher.
It expects U.S. industry demand to remain near 1994 levels. The filing also flags several risks.
These include environmental exposure (17 CERCLA sites with accruals below 1% of the relevant liability line), an Illinois Pollution Control Board complaint seeking up to $199 milliond in penalties (which the company says is without merit), and two European Commission competition complaints. The company considers none of these likely to have a material effect on its financial position.
02—Key points
Key Highlights
- Record 1994 results: sales and revenues of $14.33 billion (up 23%) and profit of $955 million, or $4.70 per share, compared with $652 million ($3.21) in 1993.
- Machinery and Engines sales of $13.86 billion were up 25% from 1993, on roughly 19% higher physical volume and about 4% better price realization.
- Return on average common stock equity rose to 37.4% from 34.6%, and stockholders' equity reached $2.91 billion, up from $2.20 billion.
- Machinery and Engines debt-to-capital ratio improved to 41% from 52%, and Machinery and Engines debt fell $350 million to $2.04 billion.
- Financial Products debt rose $825 million to $3.87 billion as Cat Financial's portfolio grew; net finance receivables increased $843 million.
- Dividends declared rose to $0.63 per share from $0.30, and the company repurchased 4.4 million shares for its stock option plans.
- Operations were maintained during the UAW strike at eight U.S. plants, which began June 21, 1994; struck plants' production rates were 14% higher in the second half than the first.
03—Questions
Frequently Asked Questions
How did Caterpillar perform financially in 1994?
Caterpillar posted record results. Sales and revenues were $14.33 billion, up 23% from 1993. Profit was $955 million, or $4.70 per share, versus $652 million ($3.21 per share) in 1993. Higher sales volume, which reflected strong industry demand, was the main driver of the improvement.
What is the outlook for 1995?
Management expects worldwide sales of machines and engines to improve moderately, mainly from growth outside the United States, and expects profits to be higher. It expects U.S. industry demand to stay near 1994 levels because of higher interest rates and slower housing starts, while Europe, Japan, and Africa/Middle East are expected to improve. The company says the outlook holds regardless of how long the UAW strike lasts.
How is the UAW strike affecting the company?
About 9,000 UAW members have been on strike since June 21, 1994, at eight U.S. facilities. The company kept production running with temporary and contract personnel and salaried employees working in manufacturing, and average production at the struck plants was 14% higher in the second half of 1994 than in the first. The strike added costs, but those costs were offset by the absence of UAW wages.
What are the main legal and environmental risks?
The company is a potentially responsible party at 17 CERCLA sites, and it has accrued less than 1% of the related line item. An Illinois complaint alleges penalties of up to $199 million over East Peoria property, which the company disputes. Two European Commission complaints allege violations of EC competition law. Management says none of these matters is expected to have a material impact on the company's financial position.
How strong is Caterpillar's balance sheet and cash generation?
Consolidated operating cash flow rose to $1.76 billion from $1.41 billion. Machinery and Engines' debt-to-capital ratio improved to 41%, and total stockholders' equity rose to $2.91 billion. Financial Products' debt grew to $3.87 billion to fund Cat Financial's larger receivables portfolio, so investors should monitor leverage and credit quality in that segment.
04—Continue