10-QPeriod: Q3 FY2001

CATERPILLAR INC Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 1, 2001For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported its third-quarter 2001 results, demonstrating resilience amidst a challenging economic environment. Total sales and revenues reached $5.06 billion, an increase of 6% year-over-year, driven by a 6% rise in physical sales volume and a 9% increase in Financial Products revenues. Despite higher sales, profit was slightly down by 5% to $205 million ($0.59 per share) compared to the prior year's quarter. This decrease was primarily due to a non-recurring $39 million tax adjustment in Q3 2000. Excluding this adjustment, profit saw a 16% increase, highlighting underlying operational improvements. However, cost inefficiencies from volume shifts and higher selling, general, and administrative expenses (SG&A) for growth initiatives impacted profitability. The company's outlook for the full year 2001 anticipates sales and revenues to be flat compared to 2000, with profit projected to be down 10-15%. The economic uncertainty, exacerbated by the September 11th terrorist attacks, is expected to cause a slight decrease in fourth-quarter sales compared to the prior year. Despite these headwinds, Caterpillar remains committed to its long-term growth and cost reduction goals, expecting to achieve first-year bottom-line benefits from its 6 Sigma implementation.

Key Highlights

  • 1Third-quarter sales and revenues increased by 6% to $5.06 billion, driven by higher physical sales volume and strong performance from Caterpillar Financial Services.
  • 2Profit for the quarter was $205 million, or $0.59 per share, a 5% decrease from the prior year's quarter, but up 16% when excluding a favorable $39 million tax adjustment in Q3 2000.
  • 3Sales within the United States represented 49% of worldwide sales, consistent with the prior year.
  • 4Caterpillar Financial Services Corporation (Cat Financial) reported record revenues and profit for the third quarter.
  • 5The company repurchased 218,000 shares during the quarter.
  • 6A quarterly dividend of $0.35 per share was declared, maintaining the previous quarter's level.
  • 7Despite increased sales, profit was negatively impacted by cost inefficiencies from volume shifts and higher SG&A expenses related to growth projects.

Frequently Asked Questions

The primary drivers of the revenue increase to $5.06 billion were a 6% increase in physical sales volume across various regions and a 9% rise in revenues from Caterpillar Financial Services, stemming from a larger receivables portfolio.

While sales increased, profit was impacted by several factors. A significant factor was a $39 million non-recurring tax adjustment in the prior year's third quarter, which made the current year's comparison appear weaker. Excluding this, profit actually increased. However, cost inefficiencies arising from significant volume shifts in manufacturing facilities and increased Selling, General & Administrative (SG&A) expenses for future growth initiatives also negatively affected profitability.

Caterpillar anticipates full-year 2001 sales and revenues to be about flat with 2000, but projects full-year profit to be down 10-15%. The company expects fourth-quarter 2001 sales to be slightly down year-over-year due to economic uncertainty amplified by the September 11th attacks. For 2002, preliminary expectations are for worldwide sales and revenues to be flat to up slightly, with recovery expected to gain momentum in the second half of the year.

Caterpillar is employing diversification strategies and focusing on long-term growth and cost reduction initiatives, including the implementation of 6 Sigma. The company is also actively managing risks through hedging strategies for foreign currency and interest rate fluctuations. Management acknowledges the significant economic uncertainty following the September 11th attacks but remains committed to its strategic goals and expects to deliver results close to its initial outlook for the full year.