Caterpillar Inc.: Form 8-K Exhibit 99.1
Caterpillar Inc. Exhibit 99.1 Caterpillar Inc. 3Q 2020 Earnings Release October 27, 2020 FOR IMMEDIATE RELEASE Caterpillar Reports Third-Quarter 2020 Results
DEERFIELD Ill. - Caterpillar Inc. (NYSE: CAT) today announced third-quarter 2020 sales and revenues of $9.9 billion, a 23% decrease compared with $12.8 billion in the third quarter of 2019. The decline was primarily due to lower sales volume driven by lower end-user demand for equipment and services. Third-quarter 2020 profit per share was $1.22, compared with $2.66 profit per share in the third quarter of 2019. Profit per share in the third quarter of 2020 included pre-tax remeasurement losses of $77 million, or $0.12 per share, resulting from the settlements of pension obligations. Profit per share benefited from lower than expected taxes in the quarter. Operating profit margin was 10.0% for the third quarter of 2020, compared with 15.8% for the third quarter of 2019. For the nine months ended September 30, 2020, enterprise operating cash flow was $4.3 billion. Caterpillar ended the third quarter with $9.3 billion of enterprise cash and more than $14 billion of available liquidity sources. "I'm proud of our global team's performance as we continue to safely navigate the pandemic while remaining firmly committed to serving our customers," said Caterpillar Chairman and CEO Jim Umpleby. "Our third-quarter results largely aligned with our expectations, and we're encouraged by positive signs in certain industries and geographies. We're executing our strategy and are ready to respond quickly to changing market conditions." (more) 2 CONSOLIDATED RESULTS Consolidated Sales and Revenues
The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the third quarter of 2019 (at left) and the third quarter of 2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees. Total sales and revenues for the third quarter of 2020 were $9.881 billion, a decrease of $2.877 billion, or 23%, compared with $12.758 billion in the third quarter of 2019. The decline was mostly due to lower sales volume driven by lower end-user demand for equipment and services and the impact from changes in dealer inventories. Dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2019. Sales were lower across all regions and the three primary segments. Sales and Revenues by Segment
(more) 3 Sales and Revenues by Geographic Region External Sales Total Sales North America Latin America EAME Asia/Pacific and Revenues Inter-Segment and Revenues (Millions of dollars) $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg Third Quarter 2020 Construction Industries $ 1,781 (35%) $ 230 (44%) $ 796 (24%) $ 1,241 14% $ 4,048 (23%) $ 8 (43%) $ 4,056 (23%) Resource Industries 487 (38%) 269 (23%) 384 (3%) 564 (13%) 1,704 (22%) 112 (15%) 1,816 (21%) Energy & Transportation 1,584 (26%) 221 (42%) 1,113 (9%) 557 (33%) 3,475 (24%) 686 (23%) 4,161 (24%) All Other Segment 10 900% 1 (83%) 1 (88%) 13 8% 25 (7%) 81 (4%) 106 (5%) Corporate Items and Eliminations (22) (2) - - (24) (887) (911) Machinery, Energy & Transportation 3,840 (31%) 719 (37%) 2,294 (14%) 2,375 (8%) 9,228 (23%) - -% 9,228 (23%) Financial Products Segment 448 (20%) 63 (20%) 100 (2%) 113 (9%) 724 (16%) - -% 724 (16%) Corporate Items and Eliminations (37) (10) (10) (14) (71) - (71) Financial Products Revenues 411 (21%) 53 (17%) 90 (4%) 99 (9%) 653 (17%) - -% 653 (17%) Consolidated Sales and Revenues $ 4,251 (30%) $ 772 (36%) $ 2,384 (14%) $ 2,474 (8%) $ 9,881 (23%) $ - -% $ 9,881 (23%) Third Quarter 2019 Construction Industries $ 2,728 $ 413 $ 1,048 $ 1,086 $ 5,275 $ 14 $ 5,289 Resource Industries 789 349 396 645 2,179 131 2,310 Energy & Transportation 2,129 378 1,224 831 4,562 890 5,452 All Other Segment 1 6 8 12 27 84 111 Corporate Items and Eliminations (62) 1 (7) (1) (69) (1,119) (1,188) Machinery, Energy & Transportation 5,585 1,147 2,669 2,573 11,974 - 11,974 Financial Products Segment 560 79 102 124 865 - 865 Corporate Items and Eliminations (43) (15) (8) (15) (81) - (81) Financial Products Revenues 517 64 94 109 784 - 784 Consolidated Sales and Revenues $ 6,102 $ 1,211 $ 2,763 $ 2,682 $ 12,758 $ - $ 12,758
(more) 4 Consolidated Operating Profit
The chart above graphically illustrates reasons for the change in consolidated operating profit between the third quarter of 2019 (at left) and the third quarter of 2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other operating (income) expenses. Operating profit for the third quarter of 2020 was $985 million, a decrease of $1.035 billion, or 51%, compared with $2.020 billion in the third quarter of 2019. The decrease was primarily due to lower sales volume. Favorable selling, general and administrative (SG&A) and research and development (R&D) expenses were mostly offset by unfavorable price realization and lower profit from financial products. SG&A/R&D expenses benefited from reduced short-term incentive compensation expense and other cost reductions related to lower sales volumes. Profit (Loss) by Segment
(more) 5 Other Profit/Loss and Tax Items
In the third quarter of 2020, the company recorded discrete tax benefits of $80 million to adjust prior year U.S. taxes and $13 million for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. In addition, the company recorded a $12 million tax benefit related to the $77 million of remeasurement losses resulting from the settlements of pension obligations. (more) 6 CONSTRUCTION INDUSTRIES (Millions of dollars) Segment Sales Third Sales Price Inter- Third $ % Quarter 2019 Volume Realization Currency Segment Quarter 2020 Change Change
Segment Profit $ 585 $ 940 $ (355) (38%) Segment Profit Margin 14.4 % 17.8 % (3.4 pts) Construction Industries' total sales were $4.056 billion in the third quarter of 2020, a decrease of $1.233 billion, or 23%, compared with $5.289 billion in the third quarter of 2019. The decrease was due to lower sales volume, driven by lower end-user demand and the impact from changes in dealer inventories. During the third quarter of 2020, dealers decreased inventories in all regions except for Asia/Pacific where dealers increased inventories, compared with the third quarter of 2019 when dealer inventories were about flat in all regions except for Asia/Pacific where dealers decreased inventories. Overall, dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2019.
Construction Industries' profit was $585 million in the third quarter of 2020, a decrease of $355 million, or 38%, compared with $940 million in the third quarter of 2019. The decrease was mainly due to lower sales volume and unfavorable price realization, partially offset by favorable manufacturing costs and lower SG&A/R&D expenses. Favorable manufacturing costs were driven by lower period manufacturing costs and favorable variable labor and burden. SG&A/R&D expenses and period manufacturing costs both benefited from cost reductions related to lower sales volumes. (more) 7 RESOURCE INDUSTRIES (Millions of dollars) Segment Sales Third Sales Price Inter- Third $ % Quarter 2019 Volume Realization Currency Segment Quarter 2020 Change Change
Resource Industries' total sales were $1.816 billion in the third quarter of 2020, a decrease of $494 million, or 21%, compared with $2.310 billion in the third quarter of 2019. The decrease was due to lower sales volume driven by lower end-user demand for equipment and aftermarket parts, partially offset by the impact of changes in dealer inventories. Dealers decreased inventories more during the third quarter of 2019 than during the third quarter of 2020. End-user demand was lower across non-residential construction and quarry and aggregates and mining, primarily in North America. Resource Industries' profit was $167 million in the third quarter of 2020, a decrease of $144 million, or 46%, compared with $311 million in the third quarter of 2019. The decrease was mainly because of lower sales volume and unfavorable price realization, partially offset by favorable manufacturing costs and lower SG&A/R&D expenses. Favorable manufacturing costs were driven by lower period manufacturing costs, favorable material costs and lower warranty expense, partially offset by unfavorable cost absorption. Cost absorption was unfavorable as inventory increased in the third quarter of 2019, compared with a decrease in the third quarter of 2020. SG&A/R&D expenses, along with period manufacturing costs, benefited from lower short-term incentive compensation expense, other cost-reduction actions implemented in response to lower sales volumes and benefits from prior restructuring programs. (more) 8 ENERGY & TRANSPORTATION (Millions of dollars) Segment Sales Third Sales Price Inter- Third $ % Quarter 2019 Volume Realization Currency Segment Quarter 2020 Change Change Total Sales $ 5,452 $ (1,086) $ (16) $ 15 $ (204) $ 4,161 $ (1,291) (24%) Sales by Application
Energy & Transportation's total sales were $4.161 billion in the third quarter of 2020, a decrease of $1.291 billion, or 24%, compared with $5.452 billion in the third quarter of 2019. Sales declined across all applications and inter-segment engine sales.
Energy & Transportation's profit was $492 million in the third quarter of 2020, a decrease of $529 million, or 52%, compared with $1.021 billion in the third quarter of 2019. The decrease was due to lower sales volume, partially offset by lower SG&A/R&D expenses and period manufacturing costs. SG&A/R&D expenses and period manufacturing costs were mostly impacted by a reduction in short-term incentive compensation expense and other cost-reduction actions implemented in response to lower sales volumes. In addition, segment profit was unfavorably impacted by other operating income/expense and higher inventory write-downs during the third quarter of 2020. (more) 9 FINANCIAL PRODUCTS SEGMENT (Millions of dollars) Revenues by Geographic Region
Segment Profit Third Third % Quarter 2020 Quarter 2019 Change Change Segment Profit $ 142 $ 218 $ (76) (35%) Financial Products' segment revenues were $724 million in the third quarter of 2020, a decrease of $141 million, or 16%, from the third quarter of 2019. The decrease was primarily because of lower average financing rates across all regions and lower average earning assets primarily in North America. Financial Products' segment profit was $142 million in the third quarter of 2020, compared with $218 million in the third quarter of 2019. The decrease was due to higher provision for credit losses, lower net yield on average earning assets and lower average earning assets at Cat Financial. These unfavorable impacts were partially offset by a reduction in SG&A expenses primarily due to lower short-term incentive compensation and employee benefit expenses. At the end of the third quarter of 2020, past dues at Cat Financial were 3.81%, compared with 3.19% at the end of the third quarter of 2019. Past dues increased primarily due to the impacts of the COVID-19 pandemic, offset by decreases in the Caterpillar Power Finance and Latin American portfolios. Write-offs, net of recoveries, were $125 million for the third quarter of 2020, compared with $103 million for the third quarter of 2019. As of September 30, 2020, Cat Financial's allowance for credit losses totaled $460 million, or 1.74% of finance receivables, compared with $515 million, or 1.92% of finance receivables at June 30, 2020. The decrease in the allowance for credit losses was primarily driven by write-offs of previously reserved accounts in the Caterpillar Power Finance portfolio. The allowance for credit losses at year-end 2019 was $424 million, or 1.50% of finance receivables. Corporate Items and Eliminations Expense for corporate items and eliminations was $361 million in the third quarter of 2020, an increase of $19 million from the third quarter of 2019, primarily due to higher restructuring costs and an unfavorable change in fair value adjustments related to deferred compensation plans, partially offset by lower corporate costs and segment reporting methodology differences. (more) 10 Notes
About Caterpillar Since 1925, Caterpillar Inc. has been helping our customers build a better world - making sustainable progress possible and driving positive change on every continent. With 2019 sales and revenues of $53.8 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Services offered throughout the product life cycle, cutting-edge technology and decades of product expertise set Caterpillar apart, providing exceptional value to help our customers succeed. The company principally operates through three primary segments - Construction Industries, Resource Industries and Energy & Transportation - and provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect on social media, visit caterpillar.com/social-media. Caterpillar's latest financial results are also available online: https://investors.caterpillar.com/overview/default.aspx https://investors.caterpillar.com/financials/quarterly-results/default.aspx (live broadcast/replays of quarterly conference call) Caterpillar investor relations contact: Jennifer Driscoll, +1 224-551-4382 or Driscoll [email protected] Caterpillar media contact: Kate Kenny, +1 309-361-9333 or Kenny [email protected] Forward-Looking Statements Certain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "forecast," "target," "guide," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements. Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers' needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment's risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (xviii) currency fluctuations; (xix) our or Cat Financial's compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) the duration and geographic spread of, business disruptions caused by, and the overall global economic impact of, the COVID-19 pandemic; and (xxvii) other factors described in more detail in Caterpillar's Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission. (more) 11 APPENDIX NON-GAAP FINANCIAL MEASURES The following definitions are provided for the non-GAAP financial measures. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. Adjusted Profit Per Share The company believes it is important to separately quantify the profit impact of a significant item in order for the company's results to be meaningful to readers. This item is remeasurement losses resulting from the settlements of pension obligations in the third quarter of 2020. The company does not consider this item indicative of earnings from ongoing business activities and believes the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing the company's period-over-period results. The company intends to discuss adjusted profit per share for the fourth quarter and full-year 2020, excluding mark-to-market gains or losses for remeasurement of pension and other postemployment benefit plans along with any other discrete items. Reconciliations of adjusted profit per share to the most directly comparable GAAP measure, diluted profit per share, are as follows: Third Quarter
1 At statutory tax rates. Note: On March 26, 2020, the company withdrew its previous financial outlook due to the continued global economic uncertainty related to the COVID-19 pandemic. Supplemental Consolidating Data The company is providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows: Consolidated - Caterpillar Inc. and its subsidiaries. Machinery, Energy & Transportation (ME&T) - The company defines ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T's information relates to the design, manufacturing and marketing of its products. Financial Products - The company defines Financial Products as it is presented in the supplemental data as its finance and insurance subsidiaries, primarily Cat Financial and Insurance Services. Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. Consolidating Adjustments - Eliminations of transactions between ME&T and Financial Products. The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. The company believes this presentation will assist readers in understanding its business. Pages 12 to 22 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information. (more) 12 Caterpillar Inc.
1 Profit attributable to common shareholders. 2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.
13 Caterpillar Inc.
(more) 14 Caterpillar Inc.
All short-term investments, which consist primarily of highly liquid investments with original maturities of three months or less, are considered to be cash equivalents.
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2 Elimination of net expenses recorded by ME&T paid to Financial Products. 3 Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T. 4 Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries. 5 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 6 Profit attributable to common shareholders. (more) 16 Caterpillar Inc.
2 Elimination of net expenses recorded by ME&T paid to Financial Products. 3 Elimination of interest expense recorded between Financial Products and ME&T. 4 Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T. 5 Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries. 6 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 7 Profit attributable to common shareholders. (more) 17 Caterpillar Inc.
2 Elimination of net expenses recorded by ME&T paid to Financial Products. 3 Elimination of interest expense recorded between Financial Products and ME&T. 4 Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T. 5 Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries. 6 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 7 Profit attributable to common shareholders. (more) 18 Caterpillar Inc.
1 Elimination of Financial Products' revenues earned from ME&T. 2 Elimination of net expenses recorded by ME&T paid to Financial Products. 3 Elimination of interest expense recorded between Financial Products and ME&T. 4 Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T. 5 Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries. 6 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 7 Profit attributable to common shareholders. (more) 19 Caterpillar Inc.
1 Elimination of receivables between ME&T and Financial Products. 2 Reclassification of ME&T's trade receivables purchased by Financial Products and Financial Products' wholesale inventory receivables. 3 Elimination of ME&T's insurance premiums that are prepaid to Financial Products. 4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction. 5 Elimination of other intercompany assets between ME&T and Financial Products. 6 Elimination of payables between ME&T and Financial Products. 7 Elimination of prepaid insurance in Financial Products' other liabilities. 8 Elimination of debt between ME&T and Financial Products. 9 Eliminations associated with ME&T's investments in Financial Products' subsidiaries. (more) 20 Caterpillar Inc.
1 Elimination of receivables between ME&T and Financial Products. 2 Reclassification of ME&T's trade receivables purchased by Financial Products and Financial Products' wholesale inventory receivables. 3 Elimination of ME&T's insurance premiums that are prepaid to Financial Products. 4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction. 5 Elimination of other intercompany assets between ME&T and Financial Products. 6 Elimination of debt between ME&T and Financial Products. 7 Elimination of payables between ME&T and Financial Products. 8 Elimination of prepaid insurance in Financial Products' other liabilities. 9 Eliminations associated with ME&T's investments in Financial Products' subsidiaries. (more) 21 Caterpillar Inc.
1 Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries. 2 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting. 3 Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory. 4 Elimination of net proceeds and payments to/from ME&T and Financial Products. 5 Elimination of dividend activity between Financial Products and ME&T. (more) 22 Caterpillar Inc.
1 Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries. 2 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting. 3 Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory. 4 Elimination of net proceeds and payments to/from ME&T and Financial Products. # Regulatory filing PDF file File: Caterpillar Inc.: Form 8-K Exhibit 99.1 |
Language: | English |
Company: | Caterpillar Inc. |
510 Lake Cook Road, Suite 100 | |
60015 Deerfield, Illinois | |
United States | |
Phone: | 224-551-4000 |
Internet: | www.caterpillar.com |
ISIN: | US1491231015 |
Euronext Ticker: | CATR |
AMF Category: | Inside information / News release on accounts, results |
EQS News ID: | 1143754 |
End of Announcement | EQS News Service |
1143754 28-Oct-2020 CET/CEST
Caterpillar Inc. Stock
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