10-KPeriod: FY2013

CATERPILLAR INC Annual Report, Year Ended Dec 31, 2013

Filed February 18, 2014For Securities:CAT

Summary

Caterpillar Inc.'s 2013 10-K filing reveals a company that, while a global leader in heavy machinery and engines, faced headwinds in 2013. Sales and revenues reached $55.656 billion. The company operates through four primary segments: Resource Industries, Construction Industries, Power Systems, and Financial Products. While the Construction Industries segment saw slight improvements and increased order rates towards the end of the year, sales declined due to currency impacts and dealer inventory adjustments. The Resource Industries segment experienced a significant sales decline driven by reduced capital spending from mining customers and dealer inventory reductions, leading to cost-cutting measures. The Power Systems segment saw engine sales decrease due to lower demand in electric power, petroleum, and rail applications, though the company is focused on expanding product offerings and integrating solutions. The Financial Products segment, primarily Cat Financial, continues to provide essential financing for Caterpillar products, though its results are tied to equipment sales and broader economic conditions. The company also highlighted its extensive global dealer network and ongoing investments in research and development, with R&D spending at 3.7% of sales in 2013.

Financial Highlights

50 data points
Beta

Revenue

$55.66B

26.8% Gross Margin

Net Income

$3.79B

6.8% Net Margin

EPS (Diluted)

$5.75

Total Assets

$84.90B

Free Cash Flow

$10.19B

Financial Statements
Beta
Revenue$55.66B
Cost of Revenue$40.73B
Gross Profit$14.93B
R&D Expenses$2.05B
SG&A Expenses$5.55B
Operating Expenses$50.03B
Operating Income$5.63B
Net Income$3.79B
EPS (Basic)$5.87
EPS (Diluted)$5.75
Shares Outstanding (Basic)645.20M
Shares Outstanding (Diluted)658.60M

Key Highlights

  • 1Caterpillar reported 2013 sales and revenues of $55.656 billion, positioning itself as a world leader in construction and mining equipment, engines, and turbines.
  • 2The company operates through four key segments: Resource Industries, Construction Industries, Power Systems, and Financial Products (Cat Financial).
  • 3Construction Industries experienced a slight sales decline in 2013, attributed mainly to unfavorable currency impacts (weaker Japanese yen) and dealer inventory management, though order rates showed improvement towards year-end.
  • 4Resource Industries faced a significant sales decline due to reduced mining customer capital spending and lower dealer inventories, prompting cost-saving actions including workforce reductions and production slowdowns.
  • 5Power Systems saw a decrease in engine sales driven by lower demand in electric power, petroleum, and rail sectors.
  • 6Cat Financial, the company's finance arm, plays a crucial role in supporting sales of Caterpillar products globally.
  • 7Caterpillar's extensive global dealer network, comprising 178 dealers across 182 countries, remains a key element of its distribution strategy.

Frequently Asked Questions

Caterpillar faced challenges primarily related to the global economic environment impacting its key customer industries. Specifically, the Resource Industries segment was significantly affected by reduced capital spending in the mining sector and high dealer inventories. The Construction Industries segment, while showing some signs of improvement, experienced sales declines due to currency fluctuations and dealer inventory adjustments. Overall, demand for heavy machinery and related products is cyclical and sensitive to global economic conditions.

Cat Financial provides retail and wholesale financing for Caterpillar products to customers and dealers worldwide. This segment is designed to facilitate sales by offering financing and leasing options, thereby supporting the demand for Caterpillar's machinery, engines, and other equipment. Its success is closely linked to the sales performance of Caterpillar's core product segments and overall economic health.

Caterpillar places a strong emphasis on product-oriented research and development to create new or improved machines and engines. In 2013, the company spent $2.046 billion on R&D (3.7% of sales) and expected this to increase by about 7% in 2014. A significant focus is on developing products that meet stringent regulatory emissions standards, such as EPA Tier 4, which the company views as a competitive advantage.

The filing extensively details risks, with a major one being the company's high sensitivity to global economic conditions and the cyclical nature of the industries it serves (construction, mining, energy). Other significant risks include fluctuations in commodity prices, changes in government monetary and fiscal policies, currency exchange rate volatility, disruptions in global financial markets, international trade policies, competitive pressures, and the successful integration of acquisitions. The company also faces risks related to supply chain disruptions, environmental regulations, and potential labor disputes.