10-QPeriod: Q1 FY2017

CATERPILLAR INC Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 3, 2017For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported its first-quarter 2017 financial results, indicating a 4% increase in total sales and revenues to $9.82 billion compared to the prior year, driven by higher sales volume, particularly in Resource Industries due to increased demand for aftermarket parts, and favorable price realization. Despite the revenue growth, profit for the quarter decreased by 29% to $192 million, resulting in a diluted earnings per share of $0.32, down from $0.46 in the first quarter of 2016. This decline in profitability was significantly impacted by a substantial increase in restructuring costs, which amounted to $752 million in Q1 2017, a sharp rise from $161 million in Q1 2016, largely attributable to the announced closure of the Gosselies, Belgium facility. Excluding these restructuring costs, profit per share would have been $1.28, a significant improvement from $0.64 in the prior year, highlighting the underlying operational strength. The Machinery, Energy & Transportation (ME&T) segment demonstrated robust operating cash flow of $1.52 billion, a substantial increase from $219 million in the prior year, reflecting improved operational performance and working capital management. The company maintained a solid liquidity position with $9.47 billion in cash and short-term investments at the end of the quarter.

Financial Highlights

49 data points
Beta

Revenue

$9.82B

23.7% Gross Margin

Net Income

$192.00M

2.0% Net Margin

EPS (Diluted)

$0.32

Total Assets

$77.55B

Cash & Equivalents

$9.54B

Free Cash Flow

$1.54B

Financial Statements
Beta
Revenue$9.82B
Cost of Revenue$6.80B
Gross Profit$2.33B
R&D Expenses$425.00M
SG&A Expenses$1.06B
Operating Expenses$9.44B
Operating Income$380.00M
Net Income$192.00M
EPS (Basic)$0.33
EPS (Diluted)$0.32
Shares Outstanding (Basic)587.50M
Shares Outstanding (Diluted)593.20M

Key Highlights

  • 1Total sales and revenues increased by 4% year-over-year to $9.82 billion, driven by higher sales volume and favorable price realization.
  • 2Profitability declined significantly, with net income falling 29% to $192 million and diluted EPS decreasing to $0.32 from $0.46 in the prior year.
  • 3Restructuring costs surged to $752 million in Q1 2017, primarily due to the closure of the Gosselies, Belgium facility, significantly impacting reported profit.
  • 4Excluding restructuring costs, adjusted profit per share showed a strong improvement, indicating underlying operational health.
  • 5Machinery, Energy & Transportation (ME&T) segment operating cash flow saw a substantial increase to $1.52 billion, up from $219 million in Q1 2016.
  • 6The company ended the quarter with a strong cash position of $9.47 billion, an increase from the previous year-end.
  • 7Sales in the Resource Industries segment showed strong growth of 15%, driven by aftermarket parts demand and new equipment sales.

Frequently Asked Questions

The primary reason for the significant decrease in net income and earnings per share was a substantial increase in restructuring costs. Caterpillar incurred $752 million in restructuring costs in the first quarter of 2017, primarily related to the announced closure of its facility in Gosselies, Belgium. This compares to $161 million in restructuring costs in the first quarter of 2016. Excluding these costs, the company's operational performance showed improvement.

Caterpillar's total sales and revenues increased by 4% to $9.82 billion in the first quarter of 2017, up from $9.46 billion in the first quarter of 2016. This growth was primarily driven by higher sales volume, particularly in the Resource Industries segment due to increased demand for aftermarket parts, and favorable price realization.

Caterpillar anticipates further restructuring actions throughout 2017, with total estimated restructuring costs for the year expected to be around $1.25 billion. While these costs negatively impact reported earnings in the short term, the company expects them to generate longer-term benefits through cost reductions and improved operating efficiency.

The Machinery, Energy & Transportation (ME&T) segment showed strong operational cash flow and increased sales. Resource Industries saw a 15% increase in sales, driven by aftermarket parts. Construction Industries' sales were relatively flat. The Financial Products segment's revenues increased slightly due to higher average financing rates, and its profit grew due to a lower provision for credit losses.