10-QPeriod: Q3 FY2017

CATERPILLAR INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 1, 2017For Securities:CAT

Summary

Caterpillar Inc. reported a significant increase in sales and revenues for the third quarter and first nine months of 2017 compared to the prior year, driven by higher sales volumes across its Construction Industries, Resource Industries, and Energy & Transportation segments. This growth was attributed to improved end-user demand and favorable adjustments in dealer inventories. Consequently, profit per share and overall profit saw substantial improvements, reflecting the positive impact of increased sales, favorable price realization, and reduced restructuring costs. Despite higher period costs, notably short-term incentive compensation, the company's operational performance improved considerably. Management highlighted a strategic focus on structural cost reduction and an increase in production levels to meet demand. The Financial Products segment showed stable revenues and a slight increase in profit. Caterpillar continues to manage its liquidity and capital resources effectively, with a strong cash position and a focus on maintaining its credit rating.

Financial Highlights

49 data points
Beta

Revenue

$11.41B

26.6% Gross Margin

Net Income

$1.06B

9.3% Net Margin

EPS (Diluted)

$1.77

Total Assets

$78.56B

Cash & Equivalents

$9.66B

Free Cash Flow

$1.24B

Financial Statements
Beta
Revenue$11.41B
Cost of Revenue$7.63B
Gross Profit$3.04B
R&D Expenses$461.00M
SG&A Expenses$1.25B
Operating Expenses$9.90B
Operating Income$1.51B
Net Income$1.06B
EPS (Basic)$1.79
EPS (Diluted)$1.77
Shares Outstanding (Basic)592.90M
Shares Outstanding (Diluted)600.10M

Key Highlights

  • 1Total sales and revenues increased by 25% to $11.413 billion in Q3 2017 compared to $9.160 billion in Q3 2016.
  • 2Profit per share increased significantly to $1.77 in Q3 2017 from $0.48 in Q3 2016.
  • 3Nine-month sales and revenues grew 12% to $32.566 billion compared to $28.963 billion in the prior year.
  • 4Nine-month profit per share rose to $3.44 from $1.88 in the comparable period of 2016.
  • 5Restructuring costs were substantial, totaling $1.011 billion for the nine months ended September 30, 2017, primarily related to the closure of the Gosselies, Belgium facility.
  • 6Machinery, Energy & Transportation (ME&T) operating cash flow improved to $4.164 billion for the first nine months of 2017, up from $1.795 billion in the prior year.
  • 7The company is increasing production levels in response to improved end-user demand across various end markets.

Frequently Asked Questions

The primary driver was a significant increase in sales and revenues, up 25% year-over-year, fueled by higher sales volumes across key segments like Construction Industries, Resource Industries, and Energy & Transportation. This was attributed to better end-user demand and favorable changes in dealer inventories.

Restructuring costs were substantial, particularly related to the closure of the Gosselies, Belgium facility, amounting to $1.011 billion for the nine months ended September 30, 2017. While these costs negatively impacted the reported profit, the company views these actions as strategic for long-term cost structure improvement. Adjusted profit per share, excluding restructuring costs, showed an even more significant increase.

Dealer machine and engine inventories increased in Q3 2017 after decreasing in Q3 2016. The company is increasing production levels and working with its supply chain to reduce lead times, signaling confidence in sustained or growing demand.

The Financial Products segment reported stable revenues and a slight increase in profit. This was driven by higher average financing rates and intercompany lending, partially offset by lower average earning assets and an increase in the provision for credit losses.