01—Abstract
Summary
Summary of the 10-K filed March 15, 2001. Cited figures are marked; the original filing is the authoritative source.
Caterpillar's 2000 Form 10-K shows a company whose full-year results held up reasonably well, with sales and revenues of $20.18 billiona (up 2% from $19.70 billion in 1999) and profit of $1.053 billion, or $3.02 per diluted share, up 39 cents from 1999.
Growth came from a 3% increase in physical sales volume and a 10% rise in Financial Products revenues, partly offset by the stronger U.S. dollar. Machinery and Engines sales were $18.91 billionb, with engines growing 3% while truck engine demand in North America fell sharply. Operating profit rose 24% to $1.74 billion, helped by higher volume, better price realization ex-currency, and manufacturing efficiencies.
Returns on average common equity were 19.0%, compared with 17.9% in 1999. The balance sheet and funding profile deserve attention. Total debt rose to $15.07 billionc, driven mainly by Financial Products (Cat Financial), whose debt reached $11.96 billion.
Machinery and Engines debt was $3.43 billiond, with a debt-to-capital ratio of 38.0%. Operating cash flow fell to $2.06 billion from $2.59 billion, mainly because of higher inventories and trade receivables. Share repurchases continued, with 10.8 million shares bought in 2000 and 343.4 million shares outstanding at year-end.
Management's 2001 outlook is cautious. It projects roughly flat company sales and revenues, with North American sales slipping while other regions grow slightly.
It also expects profit to fall about 5% to 10% because of weaker North American volumes, continued pricing pressure, the absence of a 2000 tax benefit, and strategic investments. The filing identifies a pending medium-duty engine alliance with DaimlerChrysler, expected to close in Q2 2001, and flags macroeconomic, currency, dealer-inventory, and political risks in its forward-looking statements.
02—Key points
Key Highlights
- Sales and revenues rose 2% to $20.18 billion in 2000, and profit increased 11% to $1.05 billion ($3.02 diluted EPS vs. $2.63 in 1999).
- Operating profit improved 24% to $1.74 billion, driven by a 3% increase in physical sales volume, better price realization, and manufacturing efficiencies.
- Financial Products revenues reached a record $1.47 billion (up 15%), reflecting Cat Financial's portfolio growth, but total debt rose to $15.07 billion, mostly at Financial Products.
- Operating cash flow declined to $2.06 billion from $2.59 billion due to higher inventories and trade receivables.
- 2001 guidance calls for roughly flat sales and a 5%–10% decline in profit, reflecting weaker North American demand, pricing pressure, and the absence of a favorable 2000 tax adjustment.
- Truck engine sales fell sharply in North America due to OEM production cuts, while electric power generation and petroleum engine demand grew.
- Caterpillar repurchased 10.8 million shares in 2000 and announced a medium-duty engine alliance with DaimlerChrysler, expected to be finalized in Q2 2001.
03—Questions
Frequently Asked Questions
How did Caterpillar perform financially in 2000?
Caterpillar reported 2000 sales and revenues of $20.18 billion, up 2% from 1999, and profit of $1.053 billion, or $3.02 per diluted share, up from $2.63. Return on average common equity improved to 19.0% from 17.9%. Growth came from higher physical volume and improved price realization, partly offset by a stronger U.S. dollar.
What is the outlook for 2001?
Management expects company sales and revenues to be roughly flat in 2001. North American sales are forecast to decline slightly, while EAME, Asia/Pacific, and Latin America are expected to rise modestly. Profit is projected to fall about 5% to 10%, reflecting lower North American volumes, global pricing pressure, the absence of a 2000 tax benefit, and strategic investments.
Why did debt increase so much, and is it a concern?
Total debt rose $1.27 billion to $15.07 billion. Most of the increase came from Financial Products, whose debt grew to $11.96 billion to fund growth in Cat Financial's receivables portfolio. Machinery and Engines debt rose only $110 million to $3.43 billion, with a debt-to-capital ratio of 38.0%. Investors should watch the rising finance receivables past-due rate, which increased to 3.6% from 2.8%, and the 2000 decline in operating cash flow.
What risks does the company highlight?
The filing cites a possible U.S. recession or a more protracted slowdown, currency volatility and a strong dollar, oil and commodity price swings, political instability in key markets such as Latin America, Asia, and the Middle East, changes in dealer inventory levels, and intense competitive pricing. It also flags risks to the expected cost synergies from the DaimlerChrysler alliance.
What is the DaimlerChrysler alliance?
Caterpillar agreed in Q4 2000 to form a global alliance with DaimlerChrysler's commercial vehicle division to develop, manufacture, and distribute medium-duty engines and fuel systems. It will create a medium-duty engine joint venture, a fuel systems joint venture, and research cooperation, along with combined purchasing to achieve procurement savings. The alliance was expected to be finalized in Q2 2001.
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