01—Abstract
Summary
Summary of the 10-K filed February 21, 2012. Cited figures are marked; the original filing is the authoritative source.
Caterpillar's 2011 10-K reports record results: total sales and revenues rose 41% to $60.1 billiona and profit attributable to common stockholders rose 83% to $4.93 billion, or $7.40 per diluted share.
The increase was driven mainly by higher sales volume across all regions and segments, improved price realization, and the acquisitions of Bucyrus International (July 2011) and MWM (October 2011). Operating profit reached $7.15 billionb, up from $3.96 billion, though the incremental operating margin of 18% was diluted by acquisition and currency effects. Excluding Bucyrus, 2011 profit per share was $7.79.
The balance sheet expanded materially. Total assets grew to $81.4 billionc from $64.0 billion, largely from roughly $8.8 billion of Bucyrus purchase consideration and related goodwill and intangibles. Total debt rose to $34.6 billion, including $4.5 billion of notes issued in May 2011 to fund Bucyrus.
The Machinery and Power Systems debt-to-capital ratio climbed to 42.7%, within the company's 30–45% target range. Dealer inventories also built by about $2.5 billion during the year, and inventories rose to $14.5 billiond, which warrants monitoring for future demand normalization.
Key risks flagged include exposure to global economic cycles, commodity price swings, Tier 4 emissions product transitions, integration of Bucyrus and the planned sale of its distribution business to dealers, pension funding obligations (funded-status deficit of roughly $10.4 billion across plans), and Cat Financial's covenant headroom, which is tighter than in prior years. Management guided to about $4.0 billion of 2012 capital expenditures and roughly $1 billion of pension contributions.
02—Key points
Key Highlights
- Record 2011 sales and revenues of $60.138 billion, up 41%, the largest percentage increase since 1947, with profit per diluted share of $7.40 (up 78%).
- Bucyrus acquisition (July 2011, ~$8.8 billion) contributed $2.5 billion of sales and a $403 million pretax loss in 2011 after inventory step-up, deal costs and amortization; excluding Bucyrus, EPS was $7.79.
- Machinery and Power Systems operating cash flow was a record $7.97 billion, up 41% from $5.64 billion in 2010.
- Total debt rose to $34.6 billion from $28.4 billion; M&PS debt-to-capital was 42.7%, within the 30–45% target range but up about 8 points from 34.8%.
- Dealer inventories increased about $2.5 billion in 2011 versus about $0.9 billion in 2010, and company inventories rose to $14.5 billion, a potential risk if end demand softens.
- Backlog of firm orders reached $29.8 billion at year-end 2011, versus $18.7 billion a year earlier, including about $4.1 billion added via Bucyrus.
- Pension and other postretirement liabilities totaled about $10.96 billion on the balance sheet, with accumulated other comprehensive loss of $6.3 billion; 2012 pension contributions are expected near $1 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Caterpillar Inc kept $0.08.
- Revenue$60.14B100.0%
- Cost of revenue−$43.58B72.5%
- Gross profit$16.56B27.5%
- Operating costs−$9.41B15.6%
- Operating income$7.15B11.9%
- Interest, other & tax−$2.23B3.7%
- Net income$4.93B8.2%
Where FY2011 revenue went
$60.14B- Cost of revenue: $43.58B, 72% of revenue
- Net income: $4.93B, 8.2% of revenue
- R&D: $2.30B, 3.8% of revenue
- SG&A: $5.20B, 8.7% of revenue
- Other operating costs: $1.91B, 3.2% of revenue
- Interest, other & tax: $2.23B, 3.7% of revenue
Kept 8.2% as net incomeNet income $4.93B · 8.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 21, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $60.14B$42.59B | +41.2% |
| Cost of Revenue | $43.58B$30.37B | +43.5% |
| Gross Profit | $16.56B$12.22B | +35.5% |
| R&D Expenses | $2.30B$1.91B | +20.6% |
| SG&A Expenses | $5.20B$4.25B | +22.5% |
| Operating Expenses | $52.98B$38.63B | +37.2% |
| Operating Income | $7.15B$3.96B | +80.5% |
| Net Income | $4.93B$2.70B | +82.5% |
| EPS (Basic) | $7.64$4.28 | +78.5% |
| EPS (Diluted) | $7.40$4.15 | +78.3% |
| Shares Outstanding (Basic) | 645.00M631.50M | +2.1% |
| Shares Outstanding (Diluted) | 666.10M650.40M | +2.4% |
05—Questions
Frequently Asked Questions
How much did Caterpillar's profitability improve in 2011?
Profit attributable to common stockholders rose 83% to $4.928 billion, and diluted EPS rose to $7.40 from $4.15. Operating profit increased 80% to $7.153 billion, with incremental operating margin of 18% (about 23% excluding Bucyrus, EMD and MWM).
What drove the growth in sales and revenues?
Sales volume contributed $12.5 billion of the $17.6 billion increase, with price realization adding $724 million, currency $831 million, and acquisitions $3.4 billion (primarily Bucyrus at $2.5 billion and EMD at $0.9 billion). Growth was broad across regions, most strongly in Asia/Pacific and mining-related products.
How did the Bucyrus acquisition affect the financials?
Bucyrus was bought for about $8.8 billion, creating $4.6 billion of goodwill and $3.9 billion of intangible assets. It reduced 2011 profit by about $0.39 per share, mainly due to a $303 million inventory step-up, $168 million of deal and integration costs, $149 million of swap losses and incremental amortization. Caterpillar plans to transition the Bucyrus distribution business to its dealers, with $360 million of sales completed in December 2011.
Is Caterpillar's leverage and liquidity position a concern for investors?
Consolidated debt rose to $34.6 billion, but much is at Cat Financial and supported by its receivables. M&PS debt-to-capital of 42.7% remains within target. Cat Financial's interest coverage was 1.60x against a 1.15x minimum and its leverage was 7.88x against a 10x maximum, so covenant headroom is adequate but narrower than in some prior periods. Consolidated net worth of $19.5 billion exceeds the $9.0 billion requirement.
What are the main risks highlighted in the filing?
Key risks include cyclicality of construction and mining demand, commodity price volatility, supply constraints on steel and components, integration risk from Bucyrus and MWM, Tier 4 emissions product rollout, pension funding obligations, currency exposure (a 10% stronger dollar would reduce expected 2012 M&PS cash flow by about $569 million), and potential credit rating downgrades raising borrowing costs.
06—Continue