Caterpillar Reports First-Quarter 2016 Results

April 22, 2016

Caterpillar Reports First-Quarter 2016 Results

Sales and Revenues and Profit Excluding Restructuring Costs About As Expected

PEORIA, Ill. — Caterpillar Inc. (NYSE: CAT) today announced first-quarter 2016 sales and revenues of $9.5 billion, down from $12.7 billion in the first quarter of 2015.  First-quarter 2016 profit per share of $0.46 was down from a profit of $2.03 per share in the first quarter of 2015.  Excluding restructuring costs, profit per share was $0.67, compared with $2.07 per share in the first quarter of 2015.

“While first-quarter results were about as we expected, sales and profit were well below the first quarter of 2015.  Sales declined across the company with substantial reductions in construction, oil and gas, mining and rail.  While many of the industries we serve are challenged, we remain focused on what we can control: the quality of our products, our market position, safety in our facilities and continued restructuring and cost reduction.  In fact, our period costs and variable manufacturing costs in the quarter were nearly $500 million lower than the first quarter of 2015,” said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman. 

2016 Outlook

We have seen recent increases in commodity prices, some signs of improvement in construction equipment in China and better order activity than we expected at bauma, the world’s leading trade fair for many of the industries we serve.  While we are seeing a few positive signals, other parts of our business remain challenged.  As a result, we have lowered the midpoint of the outlook for 2016 sales and revenues about 2 percent.

Sales and revenues in 2016 are expected to be in a range of $40 to $42 billion with a midpoint of $41 billion.  The previous outlook was a range of $40 to $44 billion with a midpoint of $42 billion.  The decline in the midpoint of the sales and revenues outlook range is a result of several factors that, while not individually large in the context of the outlook, collectively add up to about $1 billion.  Those factors include lower transportation sales (rail, marine and the ending of production of on-highway vocational trucks), lower mining sales and weaker price realization than previously expected.

The profit outlook at the midpoint of the sales and revenues range is now $3.00 per share, or $3.70 per share excluding restructuring costs.  The previous profit outlook was $3.50 per share, or $4.00 per share excluding restructuring costs at the midpoint of the previous sales and revenues outlook.  The expected decline in sales and revenues and an increase in expected restructuring costs are the primary reasons for the decline in the profit outlook.

Restructuring costs are now expected to be about $550 million in 2016, up $150 million from the previous outlook.  The decision to end production of on-highway vocational trucks is the primary reason for the increase in restructuring costs.

“While many of the industries we serve are challenged today, we’re looking ahead and investing for the future.  We’re investing substantially in R&D, driving forward on our Lean journey, continuing implementation of Across the Table with our dealers and accelerating our digital strategy,” said Oberhelman.

“Our digital strategy is an exciting investment for the long term.  We’re hard at work, inside Caterpillar and with our digital partners, developing the data architecture and applications that will make our products smarter and help our customers improve productivity and safety.  Our goal is to help customers be more productive, better manage their fleets and make more money with Caterpillar than they could with our competitors.  Our approximately 400,000 (and growing) connected assets mean entire fleets and job sites – from machines to tablets to drones – will eventually share data on one common technology platform in the age of smart iron.  One thing that I am certain of is that it’s times like these when the Caterpillar team demonstrates the innovation and ambition to be the leader in all we do,” added Oberhelman.

Highlights

·        First-quarter sales and revenues and profit excluding restructuring costs about as expected

·        Continued tough market conditions in many of the company’s businesses – Mining, oil and gas, rail and construction in key developing countries

·        Good operational performance continues – Overall machine market position better in first quarter of 2016 than this point last year; continues to improve in China.  Focus remains on quality, safety and cost reduction

·        Outlook lowered – Midpoint of sales and revenues range lowered about 2 percent

·        Strong balance sheet ­– Maintained $0.77 per share dividend (announced April 13, 2016)

·        Significant progress on restructuring actions – Contributed to substantial cost reduction in first quarter

·        Investment in the future continues – Focus on accelerated digital technology, R&D, Lean and dealer-focused initiative “Across the Table”

Recast of 2015 Earnings for Change in Accounting Principle

As discussed in the year-end 2015 earnings release, Caterpillar has implemented a change in accounting principle for pension and OPEB costs.  Under the new accounting principle, we will recognize actuarial gains and losses as a mark-to-market gain or loss when they occur rather than amortizing them to earnings over time.  As a result of the accounting change, 2015 earnings have been recast to make results comparable on a year-over-year basis.  The accounting change added $0.68 per share to 2015 profit.  Profit per share for 2015 has been recast from $3.50 per share to $4.18 per share.  Excluding mark-to-market pension and OPEB losses and restructuring costs, profit per share for 2015 has been recast from $4.64 per share to $5.47 per share.  First-quarter 2015 profit per share has been recast from $1.81 per share to $2.03 per share.  Excluding restructuring costs first-quarter 2015 profit per share has been recast from $1.86 per share to $2.07 per share.  More information on the impact of the change in accounting principle can be found on page 14. 

Notes:

-        Glossary of terms is included on pages 19-20; first occurrence of terms shown in bold italics.

-        Information on non-GAAP financial measures is included on page 21.

-        Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 10 a.m. Central Time on Friday, April 22, 2016, to discuss its 2016 first-quarter results.  The slides accompanying the webcast will be available before the webcast on the Caterpillar website at http://www.caterpillar.com/investors/events-and-presentations.

About Caterpillar:

For 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 2015 sales and revenues of $47.011 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 product 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.  To connect with us on social media, visit caterpillar.com/social-media.

Click here to download the full version of the Caterpillar Inc. 1Q 2016 results release.

Caterpillar contact:  Rachel Potts, 309-675-6892 (Office), 309-573-3444 (Mobile) or [email protected]