01—Abstract
Summary
Summary of the 10-K filed February 22, 2011. Cited figures are marked; the original filing is the authoritative source.
Caterpillar's 2010 Form 10-K (filed February 22, 2011) reports a sharp recovery year.
Total sales and revenues rose 31% to $42.588 billiona from $32.396 billion in 2009, and profit more than tripled to $2.7 billion, or $4.15 per diluted share versus $1.43 in 2009. Machinery sales grew 53%, Engines sales 6%, and Financial Products revenues fell 5%. Operating profit reached $3.963 billion versus $577 million, helped by higher volume, better price realization and lower manufacturing costs, partly offset by higher SG&A and R&D spending.
Machinery and Engines operating cash flow hit a record $5.638 billionb, and the Machinery and Engines debt-to-capital ratio fell to 34.8% from 47.2%. The filing is also a growth-and-capacity story. Management plans about $3 billion of capital expenditures in 2011, up more than 80%, and has agreed to acquire Bucyrus International for roughly $8.6 billion (funded by cash, new debt and up to $2 billion of new equity) plus MWM for about euro 580 million.
Its 2010 acquisitions included Electro-Motive Diesel, FCM Rail and others. Dealer inventories rose about $800 millionc in 2010 after a $3.4 billion reduction in 2009. Backlog was $18.7 billion at year-end, versus $9.6 billion a year earlier.
The company suspended share buybacks, and the stock repurchase program was not expected to be used in 2011 given the size of the pending acquisitions. Key risks flagged include the pending Bucyrus integration and possible antitrust conditions, Tier 4 emissions compliance, pension and postretirement funding (the U.S. support pension plans move to defined contribution from 2011), reliance on Cat Financial's access to capital markets, covenant limits on its credit facilities, and the upcoming expiry of the U.S. UAW master labor agreement on March 1, 2011. Overall the filing presents a financially stronger company, but it carries higher leverage and integration risk as it ramps up investment.
02—Key points
Key Highlights
- Sales and revenues rose 31% to $42.588 billion, with Machinery sales up 53% and Engines up 6%.
- Profit was $2.7 billion, up 202%, and diluted EPS was $4.15 versus $1.43 in 2009.
- Operating profit was $3.963 billion versus $577 million, aided by volume, price realization and lower manufacturing costs.
- Machinery and Engines operating cash flow was a record $5.638 billion, and the debt-to-capital ratio fell to 34.8% from 47.2%.
- Pending acquisitions of Bucyrus (about $8.6 billion) and MWM, plus capex of about $3 billion planned for 2011, signal a major expansion push.
- Order backlog nearly doubled to $18.7 billion, and dealers rebuilt machine inventories by about $800 million.
- Key risks include Bucyrus integration, Tier 4 emissions compliance, pension funding, Cat Financial's market access and the UAW contract expiring March 1, 2011.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Caterpillar Inc kept $0.06.
- Revenue$42.59B100.0%
- Cost of revenue−$30.37B71.3%
- Gross profit$12.22B28.7%
- Operating costs−$8.26B19.4%
- Operating income$3.96B9.3%
- Interest, other & tax−$1.26B3.0%
- Net income$2.70B6.3%
Where FY2010 revenue went
$42.59B- Cost of revenue: $30.37B, 71% of revenue
- Net income: $2.70B, 6.3% of revenue
- R&D: $1.91B, 4.5% of revenue
- SG&A: $4.25B, 10.0% of revenue
- Other operating costs: $2.10B, 4.9% of revenue
- Interest, other & tax: $1.26B, 3.0% of revenue
Kept 6.3% as net incomeNet income $2.70B · 6.3%Interest, other & tax $1.26B · 3.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 22, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $42.59B$32.40B | +31.5% |
| Cost of Revenue | $30.37B$23.89B | +27.1% |
| Gross Profit | $12.22B$8.51B | +43.6% |
| R&D Expenses | $1.91B$1.42B | +34.1% |
| SG&A Expenses | $4.25B$3.65B | +16.5% |
| Operating Expenses | $38.63B$31.82B | +21.4% |
| Operating Income | $3.96B$577.00M | +586.8% |
| Net Income | $2.70B$895.00M | +201.7% |
| EPS (Basic) | $4.28$1.45 | +195.2% |
| EPS (Diluted) | $4.15$1.43 | +190.2% |
| Shares Outstanding (Basic) | 631.50M615.20M | +2.6% |
| Shares Outstanding (Diluted) | 650.40M626.00M | +3.9% |
05—Questions
Frequently Asked Questions
How did Caterpillar's 2010 financial performance compare with 2009?
Sales and revenues were $42.588 billion, up 31%. Profit was $2.7 billion, up 202%, and diluted EPS was $4.15 versus $1.43. Operating profit rose to $3.963 billion from $577 million, driven mainly by higher volume and better pricing, with lower manufacturing costs.
What major acquisitions is Caterpillar pursuing?
Caterpillar agreed to buy Bucyrus International, a mining equipment maker, for roughly $8.6 billion including net debt assumed, and MWM, a German gas engine maker, for about euro 580 million. In 2010 it completed the purchase of Electro-Motive Diesel for about $901 million, plus several smaller rail and component acquisitions.
How strong is Caterpillar's balance sheet and liquidity?
Machinery and Engines debt-to-capital fell to 34.8%, slightly below the company's 35–45% target range. Consolidated cash was $3.6 billion, and the company held $7.23 billion of global credit facilities. Net worth of $15.56 billion exceeded the $9 billion covenant. Cat Financial's interest coverage was 1.34 to 1 against a 1.15 minimum, which leaves less headroom than the consolidated figures suggest.
What are the main risks investors should watch?
Key risks include integrating Bucyrus, possible antitrust conditions, meeting Tier 4 emissions standards on schedule, rising pension and retiree health costs, Cat Financial's access to funding markets, and the UAW master contract expiring March 1, 2011. Commodity price swings and cyclical end-market demand also remain material.
Will Caterpillar continue returning cash to shareholders?
Dividends paid were $1.08 billion in 2010, with the quarterly dividend raised 5% to $0.44 in June 2010. Share repurchases have been suspended since early 2009, and management does not expect to buy back stock in 2011 because of the size of the pending acquisitions.
06—Continue