DJ Caterpillar Inc.: Exhibit 99.1 to Form 8-K Earnings Release dated 30 July 2018
Dow Jones received a payment from EQS/DGAP to publish this press release.
Caterpillar Inc.
Caterpillar Inc.: Exhibit 99.1 to Form 8-K Earnings Release dated 30 July 2018
01-Aug-2018 / 17:24 CET/CEST
Dissemination of a French Regulatory News, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Exhibit 99.1
Caterpillar Inc.
2Q 2018 Earnings Release
July 30, 2018
FOR IMMEDIATE RELEASE
Caterpillar Reports Second-Quarter 2018 Results
Record Second-Quarter Profit Per Share; Raised Full-Year Outlook on Continued Strength in End
Markets
($ in billions except profit per share)
Second 2018 Quarter
2017
Sales and Revenues $14.0 $11.3
Profit Per Share $2.82 $1.35
Adjusted Profit Per Share $2.97 $1.49
DEERFIELD, Ill. - Caterpillar Inc. (NYSE: CAT) today announced second-quarter 2018 sales and
revenues of $14.0 billion, compared with $11.3 billion in the second quarter of 2017, a 24
percent increase. Second-quarter 2018 profit per share of $2.82 was a second-quarter record.
Profit per share was $1.35 in the second quarter of 2017. Adjusted profit per share in the
second quarter of 2018 was $2.97, compared with second-quarter 2017 adjusted profit per share
of $1.49.
During the second quarter of 2018, Machinery, Energy & Transportation (ME&T) operating cash
flow was $2.1 billion, and the company repurchased $750 million of Caterpillar common stock. In
June 2018, the board of directors approved an increase to the quarterly dividend of 10 percent
to $0.86 per share. The second quarter of 2018 ended with an enterprise cash balance of $8.7
billion.
"Caterpillar delivered record second-quarter profit per share," said Caterpillar CEO Jim
Umpleby. "Our team is doing a great job executing our strategy for profitable growth, focusing
on operational excellence, expanded offerings and services."
2018 Outlook
The company is raising its 2018 profit per share outlook to a range of $10.50 to $11.50.
Excluding restructuring costs of about $400 million, the company expects adjusted profit per
share to be in a range of $11.00 to $12.00. The prior profit per share outlook range was $9.75
to $10.75, and the adjusted profit per share outlook range was $10.25 to $11.25.
"Based on outstanding results in the first half of the year and continued strength in many of
our end markets, Caterpillar is again raising our profit outlook for 2018. We remain focused on
operational excellence, cost discipline and investing for long-term profitable growth," said
Umpleby.
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Sales and revenues - Most end markets continue to improve, order rates are healthy and the
backlog remained solid in the quarter. For certain applications, particularly in oil and gas
and mining, the company is seeing strong demand and taking orders for delivery well into 2019.
Operating profit - The company is raising the outlook range primarily due to the continued
strength in many end markets. Recently imposed tariffs are expected to impact material costs in
the second half of the year by approximately $100 million to $200 million, and the company
expects supply chain challenges to continue to pressure freight costs. However, the company
intends to largely offset these impacts through announced mid-year price increases and using
the Operating & Execution Model to further drive operational excellence and structural cost
discipline.
The outlook does not include a mark-to-market gain or loss for remeasurement of pension and
other postemployment benefit (OPEB) plans, changes to provisional estimates recorded in 2017
for U.S. tax reform, or any impact from future geopolitical risks, including increased trade
restrictions above those currently in place.
Share Repurchase; Authorization for New $10 Billion Share Repurchase Program
In January 2014, the board of directors authorized the repurchase of $10.0 billion of
Caterpillar common stock. The current program expires at the end of this year. Under this
authorization, the company repurchased $1.25 billion in common stock in the first half of 2018,
of which $750 million was repurchased in the second quarter. As of June 30, 2018, $4.2 billion
remained on the current authorization. The company currently expects share repurchases during
the second half of 2018 to be in a similar range as the first half, but the amount could vary
depending upon market conditions and investing priorities. Aligned with the cash deployment
strategy, the company plans to be in the market for share repurchases on a fairly consistent
basis.
In July 2018, the board of directors authorized the repurchase of up to $10.0 billion of
Caterpillar common stock effective January 1, 2019, with no expiration date.
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Notes:
? Glossary of terms is included on pages 14-15; first occurrence of terms shown in bold
italics.
? Information on non-GAAP financial measures is included on page 16.
? Caterpillar will conduct a teleconference and live webcast, with a slide presentation,
beginning at 10 a.m. Central Time on Monday, July 30, 2018, to discuss its 2018 second-quarter
financial results. The accompanying slides will be available before the webcast on the
Caterpillar website at http://www.caterpillar.com/investors/events-and-presentations. [1]
About Caterpillar:
For more than 90 years, Caterpillar Inc. has been making sustainable progress possible and
driving positive change on every continent. Customers turn to Caterpillar to help them develop
infrastructure, energy and natural resource assets. With 2017 sales and revenues of $45.462
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. The
company principally operates through its three primary segments - Construction Industries,
Resource Industries and Energy & Transportation - and also provides financing and related
services through its Financial Products segment. For more information, visit caterpillar.com
[2]. To connect with us on social media, visit caterpillar.com/social-media. [3]
Caterpillar contact: Corrie Scott, 224-551-4133 (Office), 808-351-3865 (Mobile) or [4] Scott
Corrie@cat.com
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," "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) additional restructuring costs or a failure to realize anticipated savings or
benefits from past or future cost reduction actions; (x) failure to realize all of the
anticipated benefits from initiatives to increase our productivity, efficiency and cash flow
and to reduce costs; (xi) inventory management decisions and sourcing practices of our dealers
and our OEM customers; (xii) a failure to realize, or a delay in realizing, all of the
anticipated benefits of our acquisitions, joint ventures or divestitures; (xiii) union disputes
or other employee relations issues; (xiv) adverse effects of unexpected events including
natural disasters; (xv) disruptions or volatility in global financial markets limiting our
sources of liquidity or the liquidity of our customers, dealers and suppliers; (xvi) 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; (xvii) our Financial Products segment's risks associated with the financial services
industry; (xviii) changes in interest rates or market liquidity conditions; (xix) an increase
in delinquencies, repossessions or net losses of Cat Financial's customers; (xx) currency
fluctuations; (xxi) our or Cat Financial's compliance with financial and other restrictive
covenants in debt agreements; (xxii) increased pension plan funding obligations; (xxiii)
alleged or actual violations of trade or anti-corruption laws and regulations; (xxiv)
additional tax expense or exposure, including the impact of U.S. tax reform; (xxv) significant
legal proceedings, claims, lawsuits or government investigations; (xxvi) new regulations or
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DJ Caterpillar Inc.: Exhibit 99.1 to Form 8-K -2-
changes in financial services regulations; (xxvii) compliance with environmental laws and
regulations; and (xxviii) other factors described in more detail in Caterpillar's Forms 10-Q,
10-K and other filings with the Securities and Exchange Commission.
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CONSOLIDATED RESULTS
Consolidated Sales and Revenues
The chart above graphically illustrates reasons for the change in Consolidated Sales and
Revenues between the second quarter of 2017 (at left) and the second quarter of 2018 (at
right). Items favorably impacting sales and revenues appear as upward stair steps with the
corresponding dollar amounts above each bar, while items negatively impacting sales and
revenues appear as downward stair steps with dollar amounts reflected in parentheses above each
bar. Caterpillar management utilizes these charts internally to visually communicate with the
company's board of directors and employees.
Total sales and revenues were $14.011 billion in the second quarter of 2018, an increase of
$2.680 billion, or 24 percent, compared with $11.331 billion in the second quarter of 2017. The
increase was primarily due to higher sales volume driven by improved demand across the three
primary segments, with the largest increase in Construction Industries. Sales were also higher
due to currency impacts, primarily from a stronger euro and Chinese yuan.
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Sales and Revenues by Geographic Region
(Millions of North Latin EAME Asia/Pacific External Inter-Segment Total
dollars) America America Sales Sales and
Second Quarter and Revenues
2018 Revenues
$ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg
Construction $ 18% $ 8% $ 21% $ 43% $ 24% 35 21% $ 24%
Industries 2,73 392 1,1 1,835 6,13 6,17
9 71 7 2
Resource 804 31% 394 32% 569 44% 664 47% 2,43 38% 95 23% 2,52 38%
Industries 1 6
Energy & 2,58 30% 287 (8%) 1,1 7% 692 22% 4,71 20% 1,010 22% 5,72 20%
Transportation 2 53 4 4
All Other 17 70% 1 -% 4 (64%) 19 73% 41 24% 83 (21%) 124 (10%)
Segments
Corporate (40) (3) - (1) (44) (1,223) (1,2
Items and 67)
Eliminations
Machinery,
Energy &
Transportation $ 25% $1,0 10% $ 18% $ 39% $13, 25% $ - -% $13, 25%
6,10 71 2,8 3,209 279 279
2 97
Financial $ 6% $ 71 (10%) $ -% $ 120 32% $ 7% $ - -% $ 7%
Products 537 101 829 829
Segment
Corporate (57) (11) (7) (22) (97) - (97)
Items and
Eliminations
Financial $ 6% $ 60 (6%) $ (2%) $ 98 26% $ 6% $ - -% $ 6%
Products 480 94 732 732
Revenues
Consolidated
Sales and
Revenues $ 23% $1,1 9% $ 18% $ 38% $14, 24% $ - -% $14, 24%
6,58 31 2,9 3,307 011 011
2 91
Second Quarter
2017
Construction $ $ $ $ $ $ 29 $
Industries 2,31 364 964 1,284 4,93 4,95
8 0 9
Resource 612 299 396 452 1,75 77 1,83
Industries 9 6
Energy & 1,98 312 1,0 568 3,94 827 4,76
Transportation 2 79 1 8
All Other 10 1 11 11 33 105 138
Segments
Corporate (22) - (2) - (24) (1,038) (1,0
Items and 62)
Eliminations
Machinery,
Energy &
Transportation $ $ $ $ $10, $ - $10,
4,90 976 2,4 2,315 639 639
0 48
Financial $ $ 79 $ $ 91 $ $ - $
Products 505 101 776 776
Segment
Corporate (51) (15) (5) (13) (84) - (84)
Items and
Eliminations
Financial $ $ 64 $ $ 78 $ $ - $
Products 454 96 692 692
Revenues
Consolidated
Sales and
Revenues $ $1,0 $ $ $11, $ - $11,
5,35 40 2,5 2,393 331 331
4 44
Sales and Revenues by Segment
Second Sales Price Inter- Second $ %
Segment
/
(Millions of Quarter Volume Realization Currency Other Quarter Change Change
dollars) 2017 2018
Construction $ 4,959 $ $ (68) $ 149 $ 6 $ 6,172 $ 24%
Industries 1,126 1,213
Resource 1,836 565 94 13 18 2,526 690 38%
Industries
Energy & 4,768 641 64 68 183 5,724 956 20%
Transportati
on
All Other 138 6 - 2 (22) 124 (14) (10%)
Segments
Corporate (1,062) (21) 1 - (185) (1,267) (205)
Items and
Eliminations
Machinery, $ $ $ 91 $ 232 $ - $ 13,279 $ 25%
Energy & 10,639 2,317 2,640
Transportati
on
Financial $ 776 $ - $ - $ - $ 53 $ 829 $ 53 7%
Products
Segment
Corporate (84) - - - (13) (97) (13)
Items and
Eliminations
Financial $ 692 $ - $ - $ - $ 40 $ 732 $ 40 6%
Products
Revenues
Consolidated $ $ $ 91 $ 232 $ 40 $ $ 24%
Sales and 11,331 2,317 14,011 2,680
Revenues
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Consolidated Operating Profit
The chart above graphically illustrates reasons for the change in Consolidated Operating Profit
between the second quarter of 2017 (at left) and the second quarter of 2018 (at right). Items
favorably impacting operating profit appear as upward stair steps with the corresponding dollar
amounts above each bar, while items negatively impacting operating profit appear as downward
stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management
utilizes these charts internally to visually communicate with the company's board of directors
and employees. The bar entitled Other includes consolidating adjustments and Machinery, Energy
& Transportation other operating (income) expenses.
Operating profit for the second quarter of 2018 was $2.167 billion, compared to $1.184 billion
in the second quarter of 2017. The increase of $983 million was mostly due to higher sales
volume. Favorable price realization was partially offset by higher manufacturing costs.
Manufacturing costs were higher due to increased freight and material costs, partially offset
by lower warranty expense. Freight costs were unfavorable primarily due to supply chain
inefficiencies as the industry responds to strong global demand. Material costs were higher
primarily due to increases in steel prices.
Lower operating profit from Financial Products and slightly higher selling, general and
administrative (SG&A) and research and development (R&D) expenses were partially offset by a
decrease in restructuring costs.
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Profit by Segment
Second Quarter Second Quarter $ %
(Millions of 2018 2017 Change Change
dollars)
Construction $ 1,154 $ 900 $ 254 28%
Industries
Resource 411 99 312 315%
Industries
Energy & 1,012 694 318 46%
Transportatio
n
All Other 23 (19) 42
Segments
Corporate (466) (589) 123
Items and
Eliminations
Machinery, $ 2,134 $ 1,085 $ 97%
Energy & 1,049
Transportatio
n
Financial $ 134 $ 191 $ (57) (30%)
Products
Segment
Corporate (5) (5) -
Items and
Eliminations
Financial $ 129 $ 186 $ (57) (31%)
Products
Consolidating (96) (87) (9)
Adjustments
Consolidated $ 2,167 $ 1,184 $ 983 83%
Operating
Profit
Other Profit/Loss Items
Other income/expense in the second quarter of 2018 was income of $121 million, compared with
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income of $96 million in the second quarter of 2017. The favorable change was primarily a
result of lower currency translation and hedging net losses, the impact from pension and OPEB
plans and other miscellaneous items, mostly offset by the absence of a pretax gain of $85
million on the sale of Caterpillar's equity investment in IronPlanet in the second quarter of
2017.
The provision for income taxes in the second quarter of 2018 reflected an estimated annual tax
rate of 24 percent, compared to 32 percent for the second quarter of 2017, excluding the
discrete items discussed in the following paragraph. The decrease was primarily due to the
reduction in the U.S. corporate tax rate beginning January 1, 2018, along with other changes in
the geographic mix of profits from a tax perspective.
The provision for income taxes in the second quarter of 2018 also included a $25 million
benefit for the release of a valuation allowance against the deferred tax assets of a non-U.S.
subsidiary. In addition, a discrete tax benefit of $9 million was recorded in the second
quarter of 2018, compared to $10 million in the second quarter of 2017, for the settlement of
stock-based compensation awards with associated tax deductions in excess of cumulative U.S.
GAAP compensation expense.
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Global Workforce
Caterpillar worldwide, full-time employment was about 101,600 at the end of the second quarter
of 2018. The increase of about 6,800 full-time employees from the end of the second quarter of
2017 was primarily due to an increase in production employment to support higher volumes. The
flexible workforce increased by about 3,300, also primarily due to higher production volumes.
In total, the global workforce increased by about 10,100 from the end of the second quarter of
2017.
June 30
2018 2017 Increase
Full-time employment 101,600 94,800 6,800
Flexible workforce 19,700 16,400 3,300
Total 121,300 111,200 10,100
Geographic summary
U.S. workforce 52,900 48,500 4,400
Non-U.S. workforce 68,400 62,700 5,700
Total 121,300 111,200 10,100
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CONSTRUCTION INDUSTRIES
(Millions of dollars)
Segment Sales
Second Price Second $ %
Quarter 2017 Sales Volume Realization Currency Inter-Segment Quarter 2018 Change Change
Total Sales $4,959 $1,126 ($68) $149 $6
$6,172
$1,213 24%
Sales by Geographic Region Second $
Quarter 2017
%
Change
Second Change
Quarter
2018
North America $2,739 $2,318 $421 18%
Latin America 392 364 28 8%
EAME 1,171 964 207 21%
Asia/Pacific 1,835 1,284 551 43%
External Sales $6,137 $4,930 $1,207 24%
Inter-segment 35 29 6 21%
Total Sales $6,172 $4,959 $1,213 24%
Segment Profit
Second Second %
Quarter 2018 Quarter 2017 Change Change
Segment Profit $1,154 $900 $254 28%
Segment Profit Margin 18.7% 18.1% 0.6 pts
Construction Industries' total sales were $6.172 billion in the second quarter of 2018,
compared with $4.959 billion in the second quarter of 2017. The increase was mostly due to
higher sales volume for construction equipment. Sales were also higher due to currency impacts,
primarily from a stronger Chinese yuan and euro, partially offset by unfavorable price
realization.
Sales increased in all regions.
In North America, the sales increase was mostly due to higher demand for construction
equipment, primarily due to oil and gas, including pipelines, and non-residential construction
activities. The sales increase was partially offset by unfavorable price realization.
Although construction activities remained weak in Latin America, sales were slightly higher in
the region.
Sales increased in EAME primarily due to higher demand and the favorable impact of currency,
mostly from a stronger euro. Higher demand was driven by increased construction activities
across several countries in the region.
Sales in Asia/Pacific were higher across the region, with most of the improved demand in China
stemming from increased building construction and infrastructure investment. The favorable
impact of a stronger Chinese yuan also contributed to increased sales.
Construction Industries' profit was $1.154 billion in the second quarter of 2018, compared with
$900 million in the second quarter of 2017. The increase in profit was a result of higher sales
volume, partially offset by unfavorable price realization, higher material and freight costs,
and increased SG&A/R&D expenses.
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RESOURCE INDUSTRIES
(Millions of dollars)
Segment Sales
Second Price Second $ %
Quarter 2017 Sales Volume Realization Currency Inter-Segment Quarter 2018 Change Change
Total Sales $1,836 $565 $94 $13 $18 $2,526 $690 38%
Sales by Geographic Region
Second Second Quarter 2017 $ %
Quarter 2018 Change
Change
North America $804 $612 $192 31%
Latin America 394 299 95 32%
EAME 569 396 173 44%
Asia/Pacific 664 452 212 47%
External Sales $2,431 $1,759 $672 38%
Inter-segment 95 77 18 23%
Total Sales $2,526 $1,836 $690 38%
Segment Profit
Second Second %
Quarter 2018 Quarter 2017 Change Change
Segment Profit $411 $99 $312 315%
Segment Profit Margin 16.3% 5.4% 10.9 pts
Resource Industries' total sales were $2.526 billion in the second quarter of 2018, an increase
of $690 million from the second quarter of 2017. The increase was primarily due to higher
demand for equipment across all regions. Commodity prices remained strong in the second quarter
of 2018, and the company saw mining customers invest in current fleets and mine expansions,
resulting in higher equipment sales. However, we believe mining customers have not yet
commenced full-scale fleet replacements. Increased mine production and higher machine
utilization resulted in improved aftermarket parts sales. In addition, global economic growth
contributed to stronger sales for heavy construction equipment. Favorable price realization
also contributed to increased sales.
Resource Industries' profit was $411 million in the second quarter of 2018, compared with $99
million in the second quarter of 2017. The improvement was mostly due to higher sales volume
and favorable price realization. Manufacturing costs were favorable primarily due to lower
warranty expense, partially offset by higher freight costs. The favorable warranty was mostly
driven by the absence of a customer warranty program that occurred in the second quarter of
2017.
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ENERGY & TRANSPORTATION
(Millions of dollars)
Segment Sales
Second Price Second $ %
Quarter 2017 Sales Volume Realization Currency Inter-Segment Quarter 2018 Change Change
Total Sales $4,768 $641 $64 $68 $183 $5,724 $956 20%
Sales by Application
Second Second Quarter 2017 $ %
Quarter 2018 Change
Change
Oil and Gas $1,467 $1,053 $414 39%
Power Generation 992 877 115 13%
Industrial 969 884 85 10%
Transportation 1,286 1,127 159 14%
External Sales $4,714 $3,941 $773 20%
Inter-segment 1,010 827 183 22%
Total Sales $5,724 $4,768 $956 20%
Segment Profit
Second Second %
Quarter 2018 Quarter 2017 Change Change
Segment Profit $1,012 $694 $318 46%
Segment Profit Margin 17.7% 14.6% 3.1 pts
Energy & Transportation's total sales were $5.724 billion in the second quarter of 2018,
compared with $4.768 billion in the second quarter of 2017. The increase was primarily due to
higher sales volume across all applications. Favorable currency impacts, mostly from a stronger
euro, and favorable price realization also contributed to the increase in sales.
Oil and Gas - Sales increased due to higher demand in North America for gas compression, well
servicing and production applications. Higher energy prices and growth in U.S. onshore oil and
gas drove increased sales for reciprocating engines and related aftermarket parts. Sales in
North America were also positively impacted by the timing of turbine project deliveries.
Power Generation - Sales improved mostly due to higher demand in EAME, primarily from growth in
the gas power generation market and favorable currency impacts.
Industrial - Sales were higher in North America and Asia/Pacific due to favorable economic
conditions.
Transportation - Sales were higher for rail services, driven primarily by acquisitions in
Asia/Pacific and EAME, and increased rail traffic in North America. Marine sales were higher in
EAME primarily due to activity in the cruise sector and favorable currency.
Energy & Transportation's profit was $1.012 billion in the second quarter of 2018, compared
with $694 million in the second quarter of 2017. The improvement was due to higher sales
volume, favorable price realization and lower short-term incentive compensation expense. This
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