Caterpillar Inc. Announces 1Q 2010 Results

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Jim Dugan
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Improving Economic Conditions and a Focus on Execution Drive First Quarter Profit; Caterpillar Increases 2010 Outlook for Sales and Revenues and Profit

Order rates and production have increased and, as a result, sales and revenues are expected to improve as the year unfolds.

PEORIA, Ill.— Caterpillar Inc. (NYSE: CAT) today reported a first-quarter profit of $0.36 per share, up $0.55 per share from a loss of $0.19 per share in the first quarter of 2009. Excluding a tax charge of $90 million related to the recently signed U.S. health care legislation, profit in the first quarter of 2010 was $0.50 per share. The loss of $0.19 per share in the first quarter of 2009 included $558 million of employee redundancy costs. Excluding redundancy costs, profit in the first quarter of 2009 was $0.39 per share. First-quarter sales and revenues of $8.238 billion were down from $9.225 billion in the first quarter of 2009.

"Economic conditions are definitely improving, particularly in the world's developing economies. Industry activity and orders are significantly higher than last year and are at record levels in some areas. As a result, we are hard at work ramping up production to meet increasing demand from customers," said Chairman and Chief Executive Officer Jim Owens. "Despite the recession in 2009, we continued to invest in our facilities throughout the world, and those investments will position us for success as global growth continues. We are also seeing strong order activity related to mining and energy, and that should be very positive for our U.S. exports as the year unfolds," Owens added.

First-quarter profit was $233 million compared with a loss of $112 million in the first quarter of 2009. The improvement in profit was a result of lower manufacturing costs, the absence of redundancy costs and favorable price realization. The improvements were partially offset by the impact of lower sales volume and higher taxes, including the $90 million charge related to the recently signed U.S. health care legislation.

"We are very encouraged by our performance in the first quarter. We focused on cost management and deployment of the Caterpillar Production System—factory efficiency improved, margins improved and our Machinery business returned to profitability," Owens said. "In addition, cash flow was positive, and we strengthened our balance sheet with continued improvement in our debt-to-capital ratio. As a result, we are well positioned to invest for growth where needed," Owens added.

Outlook

Caterpillar is increasing its outlook for 2010 by raising the sales and revenues range and profit expectations. For sales and revenues, the revised range is $38 to $42 billion. The revised 2010 profit outlook is a range of $2.50 to $3.25 per share.

"The main driver behind our improved outlook is robust growth in Asia/Pacific and Latin America and continued improvement in mining and energy globally," Owens said.

"We are increasing production schedules and expect sales to improve as we move through 2010. We remain highly focused on execution—the deployment of the Caterpillar Production System using 6 Sigma, tight cost management, efficiently ramping up production and preparing for Environmental Protection Agency (EPA) Tier 4 emission requirements. We expect to continue to add employees around the world to support growth and in the United States to support growing exports. We are confident in the ability of the entire Caterpillar team—our suppliers, employees and dealers—to work together to meet growing customer demand," Owens said.

Employment

Caterpillar's worldwide employment was 95,290 at the end of the first quarter of 2010. Employment declined by approximately 7,800 from the first quarter of 2009 as we took steps to bring our workforce in line with demand. Since year-end 2009, worldwide employment has increased approximately 1,500, primarily due to increases in production volume. About 600 of the additional employees were in the United States and about 900 were outside the United States.

About Caterpillar

For more than 85 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2009 sales and revenues of $32.396 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at http://www.cat.com/.

To download a full version of Caterpillar Inc. 1Q 2010 results,click here.

FORWARD-LOOKING STATEMENTS
Certain statements in this release relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to known and unknown factors that may cause actual results of Caterpillar Inc. to be different from those expressed or implied in the forward-looking statements. 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 Caterpillar does not undertake to update its forward-looking statements. It is important to note that actual results of the company may differ materially from those described or implied in such forward-looking statements based on a number of factors, including, but not limited to: (i) economic volatility in the global economy generally and in capital and credit markets; (ii) Caterpillar's ability to generate cash from operations, secure external funding for operations and manage liquidity needs; (iii) adverse changes in the economic conditions of the industries or markets Caterpillar serves; (iv) government regulations or policies, including those affecting interest rates, liquidity, access to capital and government spending on infrastructure development; (v) commodity price increases and/or limited availability of raw materials and component products, including steel; (vi) compliance costs associated with environmental laws and regulations; (vii) Caterpillar's and Cat Financial's ability to maintain their respective credit ratings, material increases in either company's cost of borrowing or an inability of either company to access capital markets; (viii) financial condition and credit worthiness of Cat Financial's customers; (ix) material adverse changes in our customers' access to liquidity and capital; (x) market acceptance of Caterpillar's products and services; (xi) effects of changes in the competitive environment, which may include decreased market share, lack of acceptance of price increases, and/or negative changes to our geographic and product mix of sales; (xii) Caterpillar's ability to successfully implement Caterpillar Production System or other productivity initiatives; (xiii) international trade and investment policies, such as import quotas, capital controls or tariffs; (xiv) failure of Caterpillar or Cat Financial to comply with financial covenants in their respective credit facilities; (xv) adverse changes in sourcing practices for our dealers or original equipment manufacturers; (xvi) additional tax expense or exposure; (xvii) political and economic risks associated with our global operations, including changes in laws, regulations or government policies, currency restrictions, restrictions on repatriation of earnings, burdensome tariffs or quotas, national and international conflict, including terrorist acts and political and economic instability or civil unrest in the countries in which Caterpillar operates; (xviii) currency fluctuations, particularly increases and decreases in the U.S. dollar against other currencies; (xix) increased payment obligations under our pension plans; (xx) inability to successfully integrate and realize expected benefits from acquisitions; (xxi) significant legal proceedings, claims, lawsuits or investigations; (xxii) potential imposition of significant costs due to the enactment of health care reform legislation; (xxiii) changes in accounting standards or adoption of new accounting standards; (xxiv) adverse effects of natural disasters; and (xxv) other factors described in more detail in "Item 1A - Risk Factors" in Part I of our Form 10-K filed with the SEC on February 19, 2010 for the year ended December 31, 2009. This filing is available on our website at www.cat.com/sec_filings.

 

About Cat

The Cat equipment product line, consisting of more than 300 machines, sets the standard for our industry. We plan to help you meet your needs with our equipment, with our distribution and product support system, and the continual introduction and updating of products.

Our Company

Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.