10-QPeriod: Q3 FY2010

CATERPILLAR INC Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 4, 2010For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported a strong rebound in its third quarter of 2010, with sales and revenues increasing by 53% year-over-year to $11.134 billion. This significant growth was driven by a broad-based recovery in demand across developed and developing economies, particularly in the Machinery and Engines segments. Profit also saw a substantial increase, up 329% to $1.187 billion, with earnings per share rising to $1.22, a significant improvement from the prior year's $0.64. The company's strategic initiatives, including cost management and operational efficiencies from the Caterpillar Production System, contributed to improved profitability. The company also raised its full-year 2010 outlook for sales and revenues and profit per share, reflecting continued positive momentum. The nine-month performance also showed robust growth, with sales and revenues up 22% to $29.781 billion and profit up 495% to $2.672 billion. The company successfully completed the acquisition of Electro-Motive Diesel (EMD) in August 2010, which is expected to bolster its presence in the global rail industry. Caterpillar's financial position remains solid, with a lower debt-to-capital ratio and strong operating cash flow, positioning the company for continued growth.

Financial Highlights

42 data points
Beta

Revenue

$11.13B

24.3% Gross Margin

Net Income

$792.00M

7.1% Net Margin

EPS (Diluted)

$1.22

Total Assets

$61.64B

Free Cash Flow

$921.00M

Financial Statements
Beta
Revenue$11.13B
Cost of Revenue$7.75B
Gross Profit$2.70B
R&D Expenses$510.00M
SG&A Expenses$1.15B
Operating Expenses$9.95B
Operating Income$1.19B
Net Income$792.00M
EPS (Basic)$1.25
EPS (Diluted)$1.22
Shares Outstanding (Basic)632.60M
Shares Outstanding (Diluted)651.60M

Key Highlights

  • 1Total sales and revenues for the third quarter of 2010 reached $11.134 billion, a 53% increase from the prior year's $7.298 billion, driven by strong end-user demand across various regions.
  • 2Operating profit surged to $1.187 billion, a 329% increase from $277 million in Q3 2009, reflecting higher sales volume, price realization, and improved manufacturing costs.
  • 3Profit per common share (diluted) for the third quarter was $1.22, a significant increase from $0.64 in the same period last year.
  • 4The company raised its full-year 2010 outlook for sales and revenues to $41-$42 billion and profit per share to $3.80-$4.00.
  • 5The acquisition of Electro-Motive Diesel (EMD) was completed in August 2010 for approximately $928 million, adding to the company's rail industry offerings.
  • 6Machinery and Engines (M&E) operating cash flow was $3.215 billion for the first nine months of 2010, compared to $1.535 billion for the same period in 2009.
  • 7The Machinery and Engines debt-to-capital ratio improved to 39.1% at the end of Q3 2010 from 49.5% at the end of Q3 2009.

Frequently Asked Questions

The primary driver was a significant increase in end-user demand across both developed and developing economies, coupled with the absence of dealer inventory reductions that occurred in the third quarter of 2009. Higher price realization and improved sales volume in both Machinery and Engines segments also contributed significantly.

The acquisition of EMD, completed in August 2010, added $216 million to sales in the third quarter. While it contributed to revenue, its impact on profit in the quarter was minimal. The acquisition is strategically important for growing Caterpillar's presence in the global rail industry.

Caterpillar raised its full-year 2010 outlook for sales and revenues to $41-$42 billion and profit per share to $3.80-$4.00, indicating continued positive momentum. For 2011, the preliminary outlook suggests sales and revenues approaching $50 billion, driven by expected continued growth in developing economies and a recovery in developed economies.

Caterpillar's financial position strengthened, with the Machinery and Engines debt-to-capital ratio decreasing to 39.1% at the end of Q3 2010 from 49.5% a year prior. This improvement was due to higher profits and lower debt levels, reflecting the company's focus on financial strength and liquidity.