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Caterpillar Inc. Reports Operating Results (10-Q)

November 02, 2012 | About:
10qk

10qk

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Caterpillar Inc. (CAT) filed Quarterly Report for the period ended 2012-09-30.

Caterpillar Inc has a market cap of $55.04 billion; its shares were traded at around $86.55 with a P/E ratio of 8.9 and P/S ratio of 0.9. The dividend yield of Caterpillar Inc stocks is 2.5%. Caterpillar Inc had an annual average earning growth of 12.2% over the past 10 years. GuruFocus rated Caterpillar Inc the business predictability rank of 2-star.

Highlight of Business Operations:

Sales and revenues for the nine months ended September 30, 2012 were $49.800 billion, up $6.905 billion, or 16 percent, from $42.895 billion for the nine months ended September 30, 2011. Profit per share for the nine months ended September 30, 2012 was $7.44 per share, an increase of $2.36 per share from a profit of $5.08 per share for the nine months ended September 30, 2011.

Financial Products' profit was $583 million in the first nine months of 2012 compared with $453 million in the first nine months of 2011. The increase was primarily due to a $57 million favorable impact from higher average earning assets, a $53 million favorable impact due to lower claims experience at Cat Insurance and a $32 million decrease in provision expense at Cat Financial. These increases were partially offset by a $21 million unfavorable impact from gains/losses on returned or repossessed equipment.

In the third quarter of 2012, four sale transactions were completed whereby we sold portions of the Bucyrus distribution business to Barloworld South Africa Proprietary Limited, Toromont Industries Ltd., Hewitt Equipment Limited, and Cavill Power Products Pty Ltd. for $126 million, $18 million, $28 million and $20 million, respectively, subject to certain working capital adjustments. After-tax profit was unfavorably impacted by $18 million in the third quarter of 2012 as a result of the ongoing divestiture activities. This is comprised of $31 million of income (included in Other operating (income) expenses) related to the sales transactions and an income tax benefit of $1 million, offset by costs incurred related to the ongoing divestiture activities of $50 million (included in Selling, general and administrative expenses).

In the second quarter of 2012, three sale transactions were completed whereby we sold portions of the Bucyrus distribution business to Finning International, WesTrac Pty Limited, a wholly owned subsidiary of Seven Group Holdings Limited, and Ferreyros S.A.A. for $306 million, $400 million and $75 million, respectively, subject to certain working capital adjustments. After-tax profit was unfavorably impacted by $8 million in the second quarter of 2012 as a result of the divestiture activities. This is comprised of $160 million of income (included in Other operating (income) expenses) related to the sales transactions, offset by costs incurred related to the divestiture activities of $57 million (included in Selling, general and administrative expenses) and income tax of $111 million.

We recognized pension expense of $180 million and $542 million for the three and nine months ended September 30, 2012, as compared to $164 million and $491 million for the three and nine months ended September 30, 2011. The increase in expense was due to higher amortization of net actuarial losses due to lower discount rates at the end of 2011 and asset losses in 2011. In addition, the 2012 expense includes $10 million of special termination benefits recognized in February 2012 related to the closure of the Electro-Motive Diesel facility (discussed below), $7 million of curtailment expense recognized in August 2012 due to changes in our hourly U.S. pension plan (discussed below) and $6 million of settlement losses recognized in July 2012 due to the disposal of the third party logistics business. The increase in expense was partially offset by higher amortization of asset gains from 2009 and 2010. Accounting guidance on retirement benefits requires companies to discount future benefit obligations back to today s dollars using a discount rate that is based on high-quality fixed-income investments. A decrease in the discount rate increases the pension benefit obligation, while an increase in the discount rate decreases the pension benefit obligation. This increase or decrease in the pension benefit obligation is recognized in Accumulated other comprehensive income (loss) and subsequently amortized into earnings as an actuarial gain or loss. The guidance also requires companies to use an expected long-term rate of asset return for computing current year pension expense. Differences between the actual and expected returns are also recognized in Accumulated other comprehensive income (loss) and subsequently amortized into earnings as actuarial gains and losses. As of September 30, 2012, total actuarial losses, recognized in Accumulated other comprehensive income (loss), related to pensions were $8.61 billion. The majority of the actuarial losses are due to lower discount rates, plan asset losses and losses from other demographic and economic assumptions over the past several years.

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