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CATERPILLAR INC Annual Report (Amendment), Year Ended Dec 31, 2005

Filing Date
Filed May 31, 2006
Period End
December 31, 2005
Security
CAT
In the record · 2016–202610-K1110-Q328-K184

CAT filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 184 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Material agreement8-K · Sep ’19Sep ’19
  3. Leadership change8-K · Feb ’22Feb ’22
  4. Leadership change8-K · Jan ’26Jan ’26

01—Abstract

Summary

Summary of the 10-K/A filed May 31, 2006. Cited figures are marked; the original filing is the authoritative source.

Caterpillar's amended 2005 Form 10-K/A (filed May 31, 2006) reports a record year: sales and revenues rose 20% to $36.339 billiona, and profit reached $2.854 billion, or $4.04 per diluted share, up 40%.

Operating profit increased 41% to $3.784 billionb, driven by price realization of $1.827 billion and sales volume growth of $3.715 billion, partially offset by higher material costs (primarily steel), higher core operating costs, and rising retirement benefit expense. Operating cash flow for Machinery and Engines was $2.81 billion, and consolidated operating cash flow was $3.11 billion, a sharp improvement from negative $3.99 billion in 2004, which had been distorted by receivables reclassifications. The amendment was filed to revise segment disclosures to reflect 2006 organizational changes; no individual segment was materially affected.

Management guided to 2006 sales and revenues of about $40 billionc (up roughly 10%) and profit per share of $4.65 to $5.00, with stock-based compensation expensing beginning in 2006 (roughly $125 million). Balance sheet strength is evident in total assets of $47.1 billion and stockholders' equity of $8.4 billion, though total debt rose to $25.7 billion, mostly from Financial Products growth at Cat Financial. The company also disclosed an agreement to acquire Progress Rail Services for about $1.0 billion in cash, stock and assumed debt, expected to close around the end of the second quarter of 2006.

Key risks for investors include the significant increase in pension and postretirement obligations (unrecognized actuarial losses of $3.82 billiond for pensions and $1.60 billion for other postretirement benefits), exposure to commodity costs, a pending Navistar lawsuit and a related International Truck suit with trial scheduled for Q3 2006, and an unresolved IRS dispute over 1995-1999 returns. The effective tax rate rose to 28.7% (29.5% excluding discrete items) as export-related tax benefits phase out.

02—Key points

Key Highlights

  1. Record 2005 sales and revenues of $36.339 billion, up 20% year over year, with price realization contributing $1.827 billion and volume contributing $3.715 billion.
  2. Profit of $2.854 billion, or $4.04 per diluted share, up 40%; operating profit rose 41% to $3.784 billion.
  3. Operating cash flow of $3.11 billion, compared with negative $3.99 billion in 2004, which was affected by receivables reclassifications.
  4. 2006 guidance calls for sales and revenues of about $40 billion and profit per share of $4.65 to $5.00, implying 15% to 24% growth.
  5. Pending acquisition of Progress Rail Services for about $1.0 billion, announced May 2006 and expected to close around the end of Q2 2006.
  6. Large pension and retiree health obligations remain a concern, with unrecognized actuarial losses of $3.82 billion for pensions and $1.60 billion for other postretirement benefits; postretirement benefit liability was $2.06 billion.
  7. Total debt rose to $25.7 billion, with Financial Products debt of $21.8 billion funding growth at Cat Financial; share repurchases of $1.68 billion in 2005 reduced shares outstanding to 671 million.

03—Questions

Frequently Asked Questions

  1. What drove Caterpillar's profit growth in 2005?

    Profit rose 40% to $2.854 billion, mainly from higher price realization of $1.827 billion and sales volume growth of $3.715 billion. These gains were partially offset by higher material costs, primarily steel, increased core operating costs to support volume, and higher retirement benefit expense.

  2. What is Caterpillar's outlook for 2006?

    Management expects 2006 sales and revenues of about $40 billion, a roughly 10% increase, with about 7 points from volume and Financial Products and about 3 points from price. Profit per share is projected at $4.65 to $5.00. Stock-based compensation expense of about $125 million begins in 2006, and the effective tax rate is expected to rise about one percentage point as ETI benefits phase out.

  3. Why was this 10-K amended, and does it change the financial results?

    The amendment revises segment information to reflect methodology and organizational changes made January 1, 2006. Prior-period amounts were restated to conform to the new presentation. The company stated that no individual segment was materially affected. The amendment also adds disclosure of the Progress Rail Services acquisition as a subsequent event.

  4. What are the main legal and financial risks disclosed?

    Caterpillar is pursuing a breach-of-contract suit against Navistar over unit injector pricing and related claims, and is defending a suit by International Truck and Engine Corporation alleging fraud and breach, with a related trial scheduled for Q3 2006. The company is also disputing IRS proposed adjustments for 1995-1999 tax returns. Large unfunded postretirement obligations and volatile commodity costs are additional risks for investors.

04—Continue

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