01—Abstract
Summary
Summary of the 10-K filed February 19, 2020. Cited figures are marked; the original filing is the authoritative source.
Caterpillar Inc.'s 2019 annual report (filed Feb 2020) shows a slight year-over-year decrease in sales and revenues to $53.8 billiona, primarily driven by lower sales volume due to changes in dealer inventories, though end-user demand provided some offset.
Despite the revenue dip, profit per share saw a modest increase to $10.74b, benefiting from lower SG&A and R&D expenses, as well as a strong performance from the Financial Products segment. The company's core Machinery, Energy & Transportation (ME&T) segment experienced sales declines in Construction Industries and Energy & Transportation, while Resource Industries remained relatively flat. The company maintained a strong operating cash flow of $6.9 billion, which was sufficient to cover capital expenditures and dividends.
Caterpillar's liquidity position remained robust, with $8.3 billionc in cash and short-term investments at year-end. The company also continued its capital allocation strategy, repurchasing $4.05 billion in common stock and paying dividends, indicating a focus on returning value to shareholders while managing its financial health and maintaining its mid-A credit rating. The report highlights a commitment to strategic growth initiatives and operational efficiency.
02—Key points
Key Highlights
- Total sales and revenues for 2019 decreased by 2% to $53.8 billion, primarily due to lower sales volume influenced by dealer inventory adjustments, partially offset by higher end-user demand.
- Profit per share increased to $10.74 in 2019 from $10.26 in 2018, supported by lower SG&A and R&D expenses and improved financial products segment profit.
- The Machinery, Energy & Transportation (ME&T) segment saw a 2% decline in sales, with Construction Industries down 3% and Energy & Transportation down 3%, while Resource Industries was flat.
- Enterprise operating cash flow increased to $6.9 billion in 2019 from $6.6 billion in 2018, demonstrating strong cash generation.
- Caterpillar repurchased $4.05 billion of its common stock in 2019 and maintained a healthy cash position of $8.3 billion.
- The Financial Products segment reported a 5% increase in revenues and a significant 44% increase in profit, driven by lower credit loss provisions and higher average financing rates.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Caterpillar Inc kept $0.11.
- Revenue$53.80B100.0%
- Cost of revenue−$36.63B68.1%
- Gross profit$17.17B31.9%
- Operating costs−$8.88B16.5%
- Operating income$8.29B15.4%
- Interest, other & tax−$2.20B4.1%
- Net income$6.09B11.3%
Where FY2019 revenue went
$53.80B- Cost of revenue: $36.63B, 68% of revenue
- Net income: $6.09B, 11% of revenue
- R&D: $1.69B, 3.1% of revenue
- SG&A: $5.16B, 9.6% of revenue
- Other operating costs: $2.02B, 3.8% of revenue
- Interest, other & tax: $2.20B, 4.1% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 19, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $53.80B$54.72B | −1.7% |
| Cost of Revenue | $36.63B$37.00B | −1.0% |
| Gross Profit | $17.17B$17.73B | −3.1% |
| R&D Expenses | $1.69B$1.85B | −8.5% |
| SG&A Expenses | $5.16B$5.48B | −5.8% |
| Operating Expenses | $45.51B$46.43B | −2.0% |
| Operating Income | $8.29B$8.29B | 0.0% |
| Net Income | $6.09B$6.15B | −0.9% |
| EPS (Basic) | $10.85$10.39 | +4.4% |
| EPS (Diluted) | $10.74$10.26 | +4.7% |
| Shares Outstanding (Basic) | 561.60M591.40M | −5.0% |
| Shares Outstanding (Diluted) | 567.50M599.40M | −5.3% |
05—Questions
Frequently Asked Questions
What was Caterpillar's overall financial performance in 2019 compared to 2018?
In 2019, Caterpillar reported total sales and revenues of $53.8 billion, a slight decrease of 2% compared to $54.7 billion in 2018. This was primarily due to lower sales volume, influenced by changes in dealer inventories, although higher end-user demand provided some support. Despite the revenue dip, profit per share saw an increase to $10.74, benefiting from cost control measures and a stronger performance from the Financial Products segment.
How did the company's different business segments perform?
The Machinery, Energy & Transportation (ME&T) segment experienced a 2% decline in sales, with Construction Industries sales down 3% and Energy & Transportation sales down 3%. Resource Industries sales remained flat year-over-year. The Financial Products segment was a strong performer, with revenues increasing by 5% and segment profit rising by 44%, driven by improved credit loss provisions and higher financing rates.
What is Caterpillar's outlook on dealer inventories?
The company noted that dealer machine and engine inventories increased significantly more in 2018 than in 2019. For 2020, Caterpillar expected dealer inventories to decline by approximately $1.0 to $1.5 billion, suggesting a potential normalization of inventory levels.
How is Caterpillar managing its cash flow and returning capital to shareholders?
Caterpillar generated strong operating cash flow of $6.9 billion in 2019. The company continued its capital allocation strategy by repurchasing $4.05 billion of its common stock and paying dividends. With a robust cash position of $8.3 billion, Caterpillar aims to fund strategic growth initiatives and return capital to shareholders while maintaining its mid-A credit rating.
06—Continue