10-QPeriod: Q1 FY2009

CATERPILLAR INC Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 1, 2009For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported a net loss of $112 million, or $(0.19) per diluted share, for the first quarter of 2009, a significant decline from the $922 million profit in the same period of 2008. This downturn is primarily attributed to a 22% decrease in sales and revenues, totaling $9.225 billion, driven by the severe global recession impacting demand across all major segments. The company incurred substantial redundancy costs of $558 million ($0.58 per share) related to workforce reductions aimed at aligning costs with lower sales volumes. Despite these challenges, Caterpillar highlighted ongoing efforts to manage costs, reduce inventory levels, and maintain financial strength, positioning itself for a recovery when global economic conditions improve. Looking ahead, Caterpillar updated its 2009 outlook, now expecting sales and revenues to be within a range of plus or minus 10 percent around a midpoint of $35 billion. The company anticipates continued profitability excluding redundancy costs, with an expected profit per share of approximately $1.25. Efforts to strengthen the balance sheet and maintain liquidity remain a priority, with a focus on inventory reduction and careful capital expenditure management. The company is actively managing through this challenging economic cycle by adjusting production, controlling costs, and making strategic investments for long-term competitiveness.

Financial Statements
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Key Highlights

  • 1Net loss of $112 million ($0.19 per diluted share) for Q1 2009, a significant decrease from Q1 2008 profit of $922 million.
  • 2Sales and revenues declined 22% to $9.225 billion, largely due to the severe global recession impacting machinery and engine demand.
  • 3Substantial redundancy costs of $558 million ($0.58 per share) were incurred due to workforce reductions to align costs with lower sales.
  • 4The company is actively managing costs and inventory, with a target to lower inventory by approximately $3 billion in 2009.
  • 5Updated 2009 sales and revenue outlook is now a range of +/- 10% around $35 billion, reflecting continued economic uncertainty.
  • 6Financial Products segment experienced a 49% decrease in operating profit due to lower net yield on earning assets and a write-down on retained interests.
  • 7Despite the challenging environment, the company is focusing on maintaining financial strength, liquidity, and making strategic investments for long-term growth.

Frequently Asked Questions

The primary driver of Caterpillar's financial performance in Q1 2009 was the severe global recession, which led to a significant decrease in sales and revenues across all its business segments, particularly in machinery and engines. This downturn necessitated substantial cost-cutting measures, including workforce reductions and associated redundancy costs, which heavily impacted the company's profitability.

Caterpillar implemented a strategic 'trough' plan focused on swift cost reduction, aggressive inventory management (aiming for a $3 billion reduction in 2009), and maintaining financial strength. This included significant workforce reductions, suspension of stock repurchases, and careful management of capital expenditures to preserve liquidity and position the company for future recovery.

Caterpillar updated its 2009 outlook, now expecting sales and revenues to be in a range of plus or minus 10 percent around a midpoint of $35 billion, reflecting significant uncertainty in the global economy. The company anticipates being profitable in 2009, excluding redundancy costs, with an expected profit per share of approximately $1.25 at the midpoint. The focus remains on managing through the recession by controlling costs, reducing inventory, and strengthening the balance sheet.

The Financial Products segment saw a significant decline in operating profit (down 49%) in Q1 2009. This was primarily due to a decrease in net yield on average earning assets caused by lower interest rates, a $22 million write-down on retained interests in securitized assets, and increased bad debt write-offs driven by adverse economic conditions, particularly in North America. Past due accounts also increased.