10-QPeriod: Q2 FY2014

CATERPILLAR INC Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 1, 2014For Securities:CAT

Summary

Caterpillar Inc. reported a 3% decrease in total sales and revenues for the second quarter of 2014, reaching $14.15 billion, down from $14.62 billion in the same period of 2013. Despite the revenue decline, profit per share increased by 8% to $1.57, and net profit rose 4% to $999 million. This performance was driven by a combination of factors, including lower sales volume, particularly in the Resource Industries segment due to weak mining demand, which was partially offset by favorable price realization and changes in dealer inventories. Restructuring costs were a significant factor, impacting profit per share by $0.12. The company also announced a substantial $2.5 billion common stock repurchase program, signaling confidence in its financial position and a commitment to returning capital to shareholders.

Financial Highlights

48 data points
Beta

Revenue

$14.15B

22.6% Gross Margin

Net Income

$999.00M

7.1% Net Margin

EPS (Diluted)

$1.57

Total Assets

$87.83B

Free Cash Flow

$2.24B

Financial Statements
Beta
Revenue$14.15B
Cost of Revenue$10.20B
Gross Profit$3.19B
R&D Expenses$516.00M
SG&A Expenses$1.44B
Operating Expenses$12.68B
Operating Income$1.48B
Net Income$999.00M
EPS (Basic)$1.60
EPS (Diluted)$1.57
Shares Outstanding (Basic)626.30M
Shares Outstanding (Diluted)638.30M

Key Highlights

  • 1Total sales and revenues decreased by 3% to $14.15 billion for the quarter, primarily due to lower sales volume in the Resource Industries segment affected by reduced mining demand.
  • 2Profit per share increased by 8% to $1.57, and net profit rose 4% to $999 million, indicating improved profitability despite lower revenues.
  • 3Restructuring costs of $114 million were incurred, primarily related to workforce reductions at the Gosselies, Belgium facility, impacting diluted earnings per share by $0.12.
  • 4Machinery, Energy & Transportation (ME&T) operating cash flow decreased to $2.064 billion from $3.049 billion year-over-year.
  • 5The ME&T debt-to-capital ratio increased to 32.5% from 29.7% at the end of 2013, mainly due to debt issuances.
  • 6Caterpillar announced plans to repurchase $2.5 billion of its common stock in the third quarter of 2014, funded by a new $10 billion repurchase authorization.
  • 7The Financial Products segment showed a 3% increase in revenues to $834 million and a 5% increase in profit to $244 million, driven by higher average earning assets.

Frequently Asked Questions

The primary driver for the 3% decrease in sales and revenues was a decline in sales volume, particularly in the Resource Industries segment, due to lower end-user demand for mining equipment. This was partially offset by favorable price realization and changes in dealer inventories.

Caterpillar incurred $114 million in restructuring costs during the second quarter of 2014, primarily related to workforce reductions. These costs had an after-tax impact of $0.12 per share, reducing the reported profit per share.

Caterpillar expects dealers to continue decreasing inventories for both construction and mining equipment in the third and fourth quarters of 2014, as they are satisfying more demand directly from inventory.

Caterpillar is actively managing its cash. They generated strong operating cash flow, increased dividends by 17%, and announced plans to repurchase $2.5 billion of common stock, demonstrating a commitment to returning capital to shareholders and maintaining a strong financial position.