What are the primary reasons for the decline in sales and profits in the second quarter of 1999?

The decline in sales was primarily due to an 8% decrease in physical sales volume, particularly in large machines and large engines, driven by weak demand in key segments like mining and oil & gas, as well as in several geographic regions. The decrease in profit was largely a result of selling lower volumes of higher-margin products, partially offset by an increase in lower-margin truck engine sales. Lower price realization and manufacturing inefficiencies also contributed to the profit decline.

How is the Financial Products segment performing?

The Financial Products segment showed strong performance, with revenues increasing by 13% in the second quarter of 1999 compared to the same period in 1998. This growth was attributed to the expanding portfolio of Cat Financial.

What is Caterpillar's outlook for the remainder of 1999?

Caterpillar expects the second half of 1999 to be stronger than the first half. However, the company has revised its full-year profit per share outlook downwards, now anticipating a 20-25% decrease compared to 1998. This revision is due to an expected unfavorable change in sales mix, with lower-than-anticipated sales of high-margin large machines and engines and higher-than-anticipated sales of lower-margin truck engines.

What actions is Caterpillar taking to address the weaker demand and profit pressures?

Caterpillar is continuing to implement aggressive cost reduction actions, including a 6% decrease in SG&A expenses and an 8% reduction in R&D expenses for the second quarter. The company is also adjusting factory schedules to align production with demand, leading to expected additional factory shutdowns in the third quarter.

CAT 10-Q Quarterly Report Q2 FY1999 — Revenue, Net Income, EPS

Summary

Caterpillar Inc. reported second-quarter 1999 results showing a decline in both sales and profits compared to the record-setting second quarter of 1998. Total sales and revenues decreased by 9% to $5.10 billion, primarily driven by an 8% drop in physical sales volume. Profit also saw a significant decrease of 37% to $283 million, translating to a profit per share of $0.78, down from $1.20 in the prior year. This profit decline was largely attributed to lower sales of higher-margin large machines and engines, partially offset by increased sales of lower-margin truck engines. Despite the challenging quarter, the company highlighted growth in its Financial Products segment, which saw revenues increase by 13%. Caterpillar also continued its cost-reduction efforts, reducing Selling, General & Administrative (SG&A) expenses by 6% and Research & Development (R&D) expenses by 8%. Management expects the second half of 1999 to be stronger than the first, though demand for larger machines is not anticipated to be as robust as previously thought. The company now forecasts full-year profit per share to be 20-25% lower than 1998 due to an unfavorable sales mix.

Key Highlights

1Second-quarter sales and revenues of $5.10 billion were down 9% from the prior year's record, driven by an 8% decrease in physical sales volume.
2Profit for the quarter fell 37% to $283 million, with profit per share at $0.78 compared to $1.20 in Q2 1998, due to lower sales of high-margin large machines and engines.
3Financial Products revenues increased by a strong 13%, indicating resilience in this segment.
4Operating expenses were managed, with SG&A down 6% and R&D down 8% compared to Q2 1998.
5The company acquired the remaining 51% of F.G. Wilson during the quarter.
6Caterpillar repurchased 1.2 million shares under its program to reduce outstanding shares, with 355.6 million shares outstanding as of June 30, 1999.
7The full-year profit per share outlook was revised downwards to a 20-25% decrease compared to 1998, reflecting anticipated shifts in sales mix.

CATERPILLAR INC Quarterly Report for Q2 Ended Jun 30, 1999

Summary

Key Highlights

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