01—Abstract
Summary
Summary of the 10-K filed February 16, 2016. Cited figures are marked; the original filing is the authoritative source.
Caterpillar Inc. (CAT) reported a challenging year in 2015, with sales and revenues declining 15% to $47.011 billiona, primarily driven by weakening global economic growth and a significant drop in commodity prices, particularly oil.
This impacted all segments, with Energy & Transportation and Construction Industries experiencing the most pronounced decreases in sales volume. The company incurred substantial restructuring costs of $908 millionb, reflecting efforts to align costs with lower demand, which significantly impacted profitability, resulting in a profit of $2.102 billion or $3.50 per diluted share, down from $3.695 billion or $5.88 per diluted share in 2014. Despite the downturn, Caterpillar's balance sheet remained strong, with total debt decreasing and the company ending the year with substantial cash reserves.
The company also returned capital to shareholders through repurchases and dividends, demonstrating a commitment to shareholder value even amidst economic headwinds. Management anticipates continued weakness in 2016, expecting lower sales and revenues due to persistent economic challenges and commodity price pressures, though they are focused on operational improvements and cost management.
02—Key points
Key Highlights
- 2015 sales and revenues decreased by 15% to $47.011 billion, impacted by weak global economic conditions and lower commodity prices.
- Profitability significantly declined, with profit per diluted share falling to $3.50 in 2015 from $5.88 in 2014.
- The company incurred $908 million in restructuring costs in 2015, primarily for workforce reductions and facility consolidations.
- Inventory levels decreased by approximately $2.5 billion during 2015.
- Machinery, Energy & Transportation (ME&T) segment operating cash flow was strong at $5.2 billion.
- Caterpillar repurchased approximately $2 billion of its stock and increased its quarterly dividend by 10% during the year.
- The company anticipates lower sales and revenues in 2016 due to ongoing economic and commodity price challenges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Caterpillar Inc kept $0.05.
- Revenue$47.01B100.0%
- Cost of revenue−$33.55B71.4%
- Gross profit$13.46B28.6%
- Operating costs−$9.68B20.6%
- Operating income$3.79B8.1%
- Interest, other & tax−$1.27B2.7%
- Net income$2.51B5.3%
Where FY2015 revenue went
$47.01B- Cost of revenue: $33.55B, 71% of revenue
- Net income: $2.51B, 5.3% of revenue
- R&D: $2.12B, 4.5% of revenue
- SG&A: $4.95B, 11% of revenue
- Other operating costs: $2.61B, 5.6% of revenue
- Interest, other & tax: $1.27B, 2.7% of revenue
Kept 5.3% as net incomeNet income $2.51B · 5.3%Interest, other & tax $1.27B · 2.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 16, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $47.01B$55.18B | −14.8% |
| Cost of Revenue | $33.55B$40.72B | −17.6% |
| Gross Profit | $13.46B$14.47B | −6.9% |
| R&D Expenses | $2.12B$2.38B | −11.0% |
| SG&A Expenses | $4.95B$6.53B | −24.2% |
| Operating Expenses | $43.23B$51.87B | −16.7% |
| Operating Income | $3.79B$3.31B | +14.2% |
| Net Income | $2.51B$2.45B | +2.4% |
| EPS (Basic) | $4.23$3.97 | +6.5% |
| EPS (Diluted) | $4.18$3.90 | +7.2% |
| Shares Outstanding (Basic) | 594.30M617.20M | −3.7% |
| Shares Outstanding (Diluted) | 601.30M628.90M | −4.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of Caterpillar's financial performance in 2015?
The primary drivers of Caterpillar's performance in 2015 were weakening global economic growth, particularly in developing countries like China and Brazil, and substantially lower commodity prices, especially for oil. These factors led to reduced demand for construction, mining, and energy-related equipment, impacting sales volumes across all segments.
How did the company address the challenging market conditions?
Caterpillar implemented significant restructuring and cost reduction actions, incurring $908 million in restructuring costs. These actions included workforce reductions and the closure or consolidation of manufacturing facilities to better align costs with lower demand and improve long-term efficiency.
What is the outlook for Caterpillar in 2016?
Management anticipates continued weakness in 2016, expecting lower sales and revenues compared to 2015. This outlook is based on the expectation of persistent weak economic growth and commodity price pressures, particularly impacting the oil and gas and mining industries.
How did the Financial Products segment perform?
The Financial Products segment saw revenues decrease by 7% to $3.078 billion in 2015, primarily due to lower average earning assets and financing rates. Profitability also declined by 10% to $809 million, influenced by a decrease in net yield on earning assets, though this was partially offset by a lower provision for credit losses.
06—Continue