10-QPeriod: Q2 FY2013

CATERPILLAR INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 2, 2013For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported a significant year-over-year decline in both sales and profits for the second quarter and first half of 2013. Total sales and revenues for Q2 2013 decreased by 16% to $14.62 billion, while profit per share fell by 43% to $1.45 compared to Q2 2012. This downturn was primarily driven by a substantial decrease in sales volume, particularly in the Resource Industries segment, impacted by a significant reduction in dealer machine inventory and lower end-user demand in mining. The Machinery and Power Systems segment saw a 17% decline in sales for the six-month period, with Resource Industries being the hardest hit. Despite the challenging top-line performance, Caterpillar managed operating costs, with SG&A and R&D expenses decreasing. The company also continued its efforts to optimize inventory levels, which saw a notable decline. The Financial Products segment showed resilience, with revenues increasing by 5% in Q2 and profit up 31% year-over-year, demonstrating strength in its financing and insurance operations. Caterpillar also announced a $1 billion stock repurchase in Q2 2013, signaling confidence in its financial position.

Financial Highlights

47 data points
Beta

Revenue

$14.62B

21.3% Gross Margin

Net Income

$960.00M

6.6% Net Margin

EPS (Diluted)

$1.45

Total Assets

$87.38B

Free Cash Flow

$3.17B

Financial Statements
Beta
Revenue$14.62B
Cost of Revenue$10.77B
Gross Profit$3.11B
R&D Expenses$548.00M
SG&A Expenses$1.42B
Operating Expenses$13.06B
Operating Income$1.56B
Net Income$960.00M
EPS (Basic)$1.48
EPS (Diluted)$1.45
Shares Outstanding (Basic)649.90M
Shares Outstanding (Diluted)662.70M

Key Highlights

  • 1Total sales and revenues for Q2 2013 were $14.62 billion, a 16% decrease from $17.37 billion in Q2 2012.
  • 2Profit per share for Q2 2013 was $1.45, a 43% decrease from $2.54 in Q2 2012.
  • 3The decline in sales was primarily driven by lower sales volume, especially in the Resource Industries segment (-34% in Q2), attributed to reduced dealer inventory and weaker mining demand.
  • 4Machinery and Power Systems (M&PS) segment sales decreased by 17% for the first six months of 2013.
  • 5Financial Products segment revenues increased by 5% in Q2 2013, with profit up 31% year-over-year.
  • 6Caterpillar repurchased $1 billion of its common stock during Q2 2013 as part of its ongoing share repurchase program.
  • 7The company's debt-to-capital ratio for M&PS improved to 34.9% from 37.4% at year-end 2012.

Frequently Asked Questions

The primary driver of the sales decline was a substantial decrease in sales volume, particularly in the Resource Industries segment. This was largely due to dealers reducing their machine inventory and weaker end-user demand in the mining sector, reflecting slower economic growth and uncertainty.

The Financial Products segment demonstrated resilience, with revenues increasing by 5% and profit up 31% year-over-year in Q2 2013. This contrasts with the Machinery and Power Systems segment, which experienced a significant sales decline, especially in the Resource Industries.

Caterpillar is focusing on managing operating costs by reducing SG&A and R&D expenses. They are also actively managing inventory levels, which decreased significantly. The company is also taking substantial action to adjust production levels and reduce costs in segments like Resource Industries due to substantial sales declines and market uncertainty.

Caterpillar expects substantial reductions in dealer machine inventory throughout 2013, with more than half of the decline expected in the second half, particularly from Resource Industries products. While dealer inventory is low by historic standards, dealers are utilizing inventory from Caterpillar's product distribution centers at a higher rate.