10-QPeriod: Q3 FY2008

CATERPILLAR INC Quarterly Report for Q3 Ended Sep 30, 2008

Filed October 31, 2008For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported third-quarter 2008 results showing an increase in sales and revenues, driven by strong demand in emerging markets and higher commodity prices, which helped offset weakness in North America, Europe, and Japan. Despite record sales for the quarter, profit per share slightly decreased due to higher manufacturing costs, particularly for materials like steel, and freight costs. The company maintained its full-year 2008 outlook, expecting sales to exceed $50 billion and profit per share around $6.00. The company's balance sheet remains strong, and its captive finance arm, Caterpillar Financial Services Corporation (Cat Financial), has maintained access to capital despite challenging market conditions. However, the economic outlook for 2009 is highly uncertain due to significant global financial market turmoil, leading to an expected flat sales and revenue performance compared to 2008, with continued strength in mining, energy, and emerging markets, balanced against acute weakness in developed economies. Caterpillar is preparing for increased volatility and remains positive about its long-term prospects, leveraging its financial strength and global network.

Financial Highlights

27 data points
Beta

Revenue

$12.98B

25.2% Gross Margin

Net Income

$868.00M

6.7% Net Margin

EPS (Diluted)

$1.39

Cash & Equivalents

$2.14B

Free Cash Flow

$1.38B

Financial Statements
Beta
Revenue$12.98B
Cost of Revenue$9.70B
Gross Profit$3.28B
R&D Expenses$437.00M
SG&A Expenses$1.06B
Operating Expenses$11.81B
Operating Income$1.17B
Net Income$868.00M
EPS (Basic)$1.43
EPS (Diluted)$1.39
Shares Outstanding (Basic)607.00M
Shares Outstanding (Diluted)624.80M

Key Highlights

  • 1Total sales and revenues for Q3 2008 were $12.98 billion, up 13% from $11.44 billion in Q3 2007.
  • 2Profit per share for Q3 2008 was $1.39, a slight decrease from $1.40 in Q3 2007.
  • 3Higher manufacturing costs, primarily due to increased material (steel) and freight costs, negatively impacted operating profit.
  • 4Sales and revenues outside North America accounted for 60% of total sales, up from 56% in the prior year, highlighting geographic diversification.
  • 5The company maintained its full-year 2008 sales and revenue outlook, expecting over $50 billion, and profit per share of approximately $6.00.
  • 6The 2009 economic outlook is uncertain, with an expectation for sales and revenues to be flat compared to 2008.
  • 7Caterpillar Financial Services Corporation (Cat Financial) reported increased revenues and average earning assets but a decrease in operating profit due to lower net yield and increased credit loss provisions.

Frequently Asked Questions

Sales and revenues increased by 13% to $12.98 billion, primarily driven by higher sales volume from emerging markets and industries like mining and energy, improved price realization, and a positive impact from currency exchange rates. Financial Products revenues also contributed to the growth.

The Machinery segment's operating profit decreased by 32% year-over-year due to higher manufacturing costs (material and freight), unfavorable currency impacts, and increased selling, general, and administrative (SG&A) and research and development (R&D) expenses. These higher costs more than offset the benefits of improved price realization and higher sales volume.

Caterpillar expects 2009 sales and revenues to be about flat with 2008 levels. They are focusing on growth opportunities in developing countries, the mining and energy sectors, and service areas, while acknowledging that these positive factors are expected to be offset by sharp declines in industry demand in developed economies. The company will issue its 2009 profit per share outlook in January 2009 due to the prevailing uncertainties.

Despite difficult market conditions and increased credit spreads, Cat Financial has maintained good access to capital and continues to offer lending options. The company emphasizes its conservative business model and sound lending practices. However, past due accounts and write-offs have increased, reflecting economic conditions in North America and Europe, and the company has increased its allowance for credit losses.