10-KPeriod: FY2008

CATERPILLAR INC Annual Report, Year Ended Dec 31, 2008

Filed February 20, 2009For Securities:CAT

Summary

Caterpillar Inc. (CAT) filed its 2008 10-K on February 19, 2009, reporting record sales of $51.324 billion for the year, marking the sixth consecutive year of growth. Despite this top-line performance, the company experienced a significant downturn in its fourth quarter profitability, down 28% year-over-year, primarily due to rising manufacturing costs and inefficiencies resulting from a sharp decline in production volume, as well as the turbulence in financial markets impacting its financial products segment. Looking ahead to 2009, Caterpillar projected a challenging year with sales expected to decrease by approximately 25% from 2008 levels, estimating sales in the range of $40 billion. The company outlined aggressive cost-reduction measures, including executive compensation cuts, workforce reductions, hiring freezes, and decreased capital expenditures, to navigate the severe global economic downturn. While the full year 2009 is anticipated to be difficult, with a potential first-quarter loss, the company remains committed to strategic growth initiatives, particularly in emerging markets, and has been actively managing its financial product offerings amidst market volatility.

Financial Highlights

50 data points
Beta

Revenue

$51.32B

25.2% Gross Margin

Net Income

$3.56B

6.9% Net Margin

EPS (Diluted)

$5.66

Total Assets

$67.78B

Cash & Equivalents

$2.74B

Free Cash Flow

$4.67B

Financial Statements
Beta
Revenue$51.32B
Cost of Revenue$38.41B
Gross Profit$12.91B
R&D Expenses$1.73B
SG&A Expenses$4.40B
Operating Expenses$46.88B
Operating Income$4.45B
Net Income$3.56B
EPS (Basic)$5.83
EPS (Diluted)$5.66
Shares Outstanding (Basic)610.50M
Shares Outstanding (Diluted)627.90M

Key Highlights

  • 1Record sales of $51.324 billion in 2008, representing the sixth consecutive year of record performance.
  • 2Fourth-quarter 2008 profit per share declined 28% compared to the prior year due to increased manufacturing costs and production inefficiencies.
  • 3Anticipates a challenging 2009 with projected sales down 25% to approximately $40 billion.
  • 4Implementing significant cost-reduction measures, including workforce reductions and decreased capital expenditures, to address the economic downturn.
  • 5Record of 300 consecutive quarters of dividend payments, underscoring a commitment to shareholder returns.
  • 6Reduced outstanding shares by 27.3 million through stock repurchases in 2008, though the repurchase program was temporarily suspended in January 2009.
  • 7Continued strategic investments in emerging markets, including China and India, with acquisitions and capacity expansions aimed at long-term growth.

Frequently Asked Questions

In 2008, Caterpillar achieved record sales of $51.324 billion, its sixth consecutive year of record performance. However, the global economic crisis significantly impacted its fourth-quarter results, leading to a 28% decrease in profit per share compared to the prior year. This decline was attributed to higher manufacturing costs, production inefficiencies, and the negative effects of financial market volatility on its financial products segment.

Caterpillar projected a challenging 2009, forecasting a sales decrease of approximately 25% to around $40 billion. To mitigate the impact of the global economic downturn, the company is implementing aggressive cost-reduction measures. These include significant reductions in executive compensation, workforce reductions through voluntary and involuntary separations, hiring freezes, reduced indirect expenses, and a sharp decrease in capital expenditures.

The financial products segment, primarily Cat Financial, experienced a significant decrease in profitability in the fourth quarter of 2008 due to turbulence in the financial markets. Key risks include credit risk associated with customers, volatility in interest rates and foreign currency exchange rates, and the company's ability to access liquidity and capital markets for funding. Cat Financial relies on diversified funding sources, but continued market disruption could increase financing costs and affect its ability to operate.

Caterpillar continues to prioritize expansion in China and other emerging markets as part of its long-term strategy. In 2008, the company made progress through acquisitions, such as the full acquisition of SEM in China and Lovat Inc. for its global mining business. It also announced significant investments in expanding manufacturing capacity in India and strengthening its presence in Brazil and China through various strategic initiatives.