8-KRegulation FD

CATERPILLAR INC 8-K Report, Regulation FD Disclosure (Apr 24, 2006)

Filed April 24, 2006For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported a robust first quarter of 2006, exceeding expectations and prompting an upward revision of its full-year profit outlook. The company announced first-quarter sales and revenues of $9.4 billion, a 13% increase year-over-year, driven by strong price realization and increased physical sales volume in both machinery and engines. Profit per share surged by 48% to $1.20, with consolidated operating profit rising by 61%. The company highlighted a significant improvement in profitability, with the consolidated return on sales reaching 8.9%, the highest since the second quarter of 1997. Looking ahead, Caterpillar raised its full-year 2006 profit per share guidance to a range of $4.85 to $5.20, a 20-cent increase at both ends. This optimism is underpinned by a positive outlook for the global economy and the industries Caterpillar serves, including mining, road building, infrastructure, and construction. Despite strong results, the company acknowledges challenges in meeting demand, with longer delivery times and increased production costs due to capacity constraints and labor inflation. Caterpillar's strategic focus remains on improving operational execution, increasing production, and launching new products.

Key Highlights

  • 1Reported a strong Q1 2006 with sales and revenues up 13% to $9.4 billion.
  • 2Profit per share increased significantly by 48% to $1.20 compared to Q1 2005.
  • 3Consolidated operating profit saw a 61% increase year-over-year.
  • 4Consolidated return on sales improved to 8.9%, a substantial increase from 7.0% in the prior year.
  • 5Raised the full-year 2006 profit outlook to $4.85 - $5.20 per share, an increase of $0.20.
  • 6Full-year sales and revenue guidance maintained at approximately $40 billion, representing a 10% increase from 2005.
  • 7Acknowledged longer delivery times and increased operating costs due to efforts to ramp up production.

Frequently Asked Questions

The strong first quarter was driven by a 13% increase in sales and revenues to $9.4 billion. This growth was fueled by significant price realization ($587 million) and a substantial increase in physical sales volume ($511 million) across both machinery and engines. Financial products revenue also contributed positively.

Profitability showed significant improvement. Profit per share rose 48% to $1.20, and consolidated operating profit increased by 61% year-over-year. The consolidated return on sales improved to 8.9% from 7.0% in the prior year, reaching a level not seen since the second quarter of 1997.

Caterpillar raised its full-year 2006 profit per share outlook to a range of $4.85 to $5.20, an increase of $0.20 per share at both ends of the previous range. The company reiterated its sales and revenue forecast of approximately $40 billion for the full year.

The company is experiencing longer delivery times for its machines and engines, indicating strong demand that is challenging current production levels. Core operating costs increased by $303 million, primarily due to manufacturing costs associated with ramping up production, supporting new product programs, labor inflation, and higher energy costs. There were also inefficiencies related to operating at near capacity.