Form 8-K CATERPILLAR INC For: Dec 01
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 | ||||
FORM 8-K | ||||
Current Report | ||||
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
Date of Report (Date of earliest event reported): December 1, 2016 | ||||
CATERPILLAR INC. (Exact name of registrant as specified in its charter) | ||||
Delaware (State or other jurisdiction of incorporation) | ||||
1-768 (Commission File Number) | 37-0602744 (IRS Employer Identification No.) | |||
100 NE Adams Street, Peoria, Illinois (Address of principal executive offices) | 61629 (Zip Code) | |||
Registrant’s telephone number, including area code: (309) 675-1000 | ||||
Former name or former address, if changed since last report: N/A | ||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||||
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01. Regulation FD Disclosure.
On December 1, 2016 Caterpillar Inc. Group President of Resource Industries Denise Johnson and Director of Investor Relations Amy Campbell will present at a Credit Suisse Industrials Conference scheduled to begin at 11:15 a.m. EST. The event is available via webcast at https://www.webcaster4.com/Webcast/Page/1302/18518. Presentation materials are available at http://www.caterpillar.com/en/investors/events-and-presentations.html.
A copy of the presentation materials is attached hereto as Exhibit 99.1 and is incorporated into this Item 7.01 by reference.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished in accordance with the provisions of General Instruction B.2 of Form 8-K.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits: | ||
The following is furnished as an exhibit to this report: | |||
99.1 | Caterpillar Inc. presentation materials dated December 1, 2016. |
SIGNATURES | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | ||
CATERPILLAR INC. | ||
December 1, 2016 | By: | /s/James B. Buda |
James B. Buda | ||
Executive Vice President, Law and Public Policy |
EXHIBIT INDEX | |
Exhibit No. | Description |
99.1 | Caterpillar Inc. presentation materials dated December 1, 2016. |
CUSTOMERS. PEOPLE. STOCKHOLDERS. 1
Credit Suisse Conference
December 1, 2016
Denise Johnson – Caterpillar Group President – Resource Industries
Amy Campbell – Caterpillar IR Director
CUSTOMERS. PEOPLE. STOCKHOLDERS. 2
Discussion
• 3Q 2016 Results / 2017 Discussion
• Resource Industries
• Q&A
Amy Campbell
Denise Johnson
CUSTOMERS. PEOPLE. STOCKHOLDERS. 3
Forward-Looking Statements
Forward-looking Statements
Certain statements in this financial review 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 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) government monetary or fiscal policies and
infrastructure spending; (iii) commodity price changes, component price increases, fluctuations in demand for our products or significant shortages of
component products; (iv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and
suppliers; (v) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (vi) 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; (vii) our Financial Products segment’s risks associated with the financial services industry; (viii) changes in interest rates or market liquidity
conditions; (ix) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (x) new regulations or changes in financial services
regulations; (xi) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) international trade
policies and their impact on demand for our products and our competitive position; (xiii) our ability to develop, produce and market quality products that meet
our customers’ needs; (xiv) the impact of the highly competitive environment in which we operate on our sales and pricing; (xv) failure to realize all of the
anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (xvi) additional restructuring costs or a failure to
realize anticipated savings or benefits from past or future cost reduction actions; (xvii) inventory management decisions and sourcing practices of our dealers
and our OEM customers; (xviii) compliance with environmental laws and regulations; (xix) alleged or actual violations of trade or anti-corruption laws and
regulations; (xx) additional tax expense or exposure; (xxi) currency fluctuations; (xxii) our or Cat Financial’s compliance with financial covenants; (xxiii)
increased pension plan funding obligations; (xxiv) union disputes or other employee relations issues; (xxv) significant legal proceedings, claims, lawsuits or
government investigations; (xxvi) changes in accounting standards; (xxvii) failure or breach of IT security; (xxviii) adverse effects of unexpected events including
natural disasters; and (xxix) other factors described in more detail under “Item 1A. Risk Factors” in our Form 10-K filed with the SEC on February 16, 2016 for
the year ended December 31, 2015.
Information on non-GAAP financial measures is included in this presentation.
CUSTOMERS. PEOPLE. STOCKHOLDERS. 4
Q3 2016 vs Q3 2015
Operating Profit Comparison
M
illi
on
s
of
d
ol
la
rs
Substantial Cost Reduction is mitigating
much of the impact of lower sales
Machine market position and cost structure continue to improve
Quality remains at high levels and safety is world class
2015 2016 Change
Sales and Revenues (billions) $11.0 $9.2 $(1.8)
Profit Per Share $0.94 $0.48 $(0.46)
Restructuring Costs (millions) $98 $324 $226
Profit Per Share $1.05 $0.85 $(0.20)
Excluding Restructuring Costs
3rd Quarter
CUSTOMERS. PEOPLE. STOCKHOLDERS. 5
2016 Cost Reduction On track for over $2 billion
of period and variable cost reduction for the full year of 2016
Three Main Areas of 2016 Cost Reduction
Restructuring Material Costs Everything Else
• Combined and reduced
functions – fewer people
• Reduction in manufacturing
floor space and costs
• Design and sourcing related
cost reduction
• Commodity-related cost
reduction
• Less short-term incentive
pay
• All other cost reduction
actions
(millions of dollars)
1st Qtr 2nd Qtr 3rd Qtr 9 Months
Variable Cost Reduction 107$ 243$ 234$ 584$
Period Cost Reduction 367 427 420 1,214
Total 474$ 670$ 654$ 1,798$
Cost Reduction versus Prior Year
CUSTOMERS. PEOPLE. STOCKHOLDERS. 6
2016 – 3rd Quarter Year-to-date Summary
• Not much recent change in the industries we serve with the exception of North
American Construction – More stable commodity prices, but no significant rebound in
order activity in mining or oil and gas yet … rail continues to be weak in North America.
• Good operational performance continues – Overall market position for machines was
better in Q3 2016 than in Q3 2015 ... and continues to improve in China. Decremental
operating profit pull through was better than our target range despite a difficult pricing
environment and lower sales.
• Cost reduction is substantial – Period and variable costs were favorable over $650
million in Q3 2016 and are favorable nearly $1.8 billion year to date vs 2015.
• We are on track with restructuring actions – They’ve contributed substantially to cost
reduction this year. All significant actions included in our restructuring announcement
from September 2015 have been announced.
• Strong balance sheet – Important because our credit rating and maintaining the
dividend are high priorities. The ME&T debt-to-capital ratio was about 37% at the end of
the third quarter and our enterprise cash balance was over $6 billion.
CUSTOMERS. PEOPLE. STOCKHOLDERS. 7
Consensus for Sales and Revenues is $38 Billion
In our view, $38 Billion is a reasonable midpoint expectation
Potential Positives for 2017 What Concerns Us
• Sustained mined commodity prices could
help mining aftermarket (not likely much
improvement in new equipment sales)
• Construction in China ... generally positive,
but dependent on continued government
support for growth
• Construction sales in other developing
countries are currently at very low levels
• Potential infrastructure bill in U.S. a positive,
but little impact expected in 2017
• Oil prices remain volatile and not high enough
to drive substantial investment
• Current weakness in North American
construction equipment
• Economic growth in Europe, and the impact
of Brexit on growth and business investment
• Power generation … particularly in oil
producing regions
• Sales to North American rail customers
Our Thoughts on 2017 Thomson First Call Consensus*
Sales & Revenues
We are encouraged by the potential of a U.S. infrastructure bill, tax reform,
smart regulation, commodity prices and the recent OPEC announcement
* Based on Thomson First Call - Analyst Consensus as of 11/29/16
CUSTOMERS. PEOPLE. STOCKHOLDERS. 8
In our view, $3.25 on $38 Billion of Sales and Revenues is
too optimistic considering expected headwinds
Significant Operating Profit Tailwinds Significant Operating Profit Headwinds
• Cost reduction carryover from
restructuring actions $300-400 million
• Additional cost reduction and
operational improvement (price,
material cost, etc.), net of labor
inflation expected to be favorable
$300-500 million
• At $38 billion, sales are about $1B
Lower than the 2016 outlook … that’s a
variable margin headwind of $350 to
$450 million.
• Short-term incentive compensation for
employees for 2017 is expected to be
$500-600 million more than 2016
• Cat Financial unfavorable ~$100M
Net of headwinds & tailwinds, we remain committed to
decrementals of 25-30%, excluding restructuring costs
Our Thoughts on 2017 Thomson First Call Consensus*
PPS, Excluding Restructuring
Consensus PPS, Excluding Restructuring Costs is $3.25
* Based on Thomson First Call - Analyst Consensus as of 11/29/16
CUSTOMERS. PEOPLE. STOCKHOLDERS. 9
Discussion
• 3Q 2016 Results / 2017 Discussion
• Resource Industries
• Q&A
Amy Campbell
Denise Johnson
CUSTOMERS. PEOPLE. STOCKHOLDERS. 10
Resource Industries Has an Expansive Reach
Ultra Class UndergroundMaterial Handling
Products, Parts, Services, and Support
CUSTOMERS. PEOPLE. STOCKHOLDERS. 11
60
80
100
120
140
160
180
200
220
188
7
189
3
189
9
190
5
191
1
191
7
192
3
192
9
193
5
194
1
194
7
195
3
195
9
196
5
197
1
197
7
198
3
198
9
199
5
200
1
200
7
201
6
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
2016
E
C
at
E
n
d
-U
se
r
D
em
an
d
Commodity Decline Among the Fastest in Past 132 Years
and Places Resource Industries at its Deepest Trough
Commodity Dollar Index source is “The Economist”
Commodity Dollar Index Cat Mining Machine End User Demand
Average Sales to End Users 2006 - 16E
CUSTOMERS. PEOPLE. STOCKHOLDERS. 12
What Have We Done to Mitigate the Sales Drop?
Since 2012 Resource Industries has…
• Closed or announced the exit of 17 manufacturing facilities
• Downsized 5 other facilities
• Reduced its headcount – Accounting for almost half of the
overall Caterpillar reductions of 34,000
• Lowered the breakeven point every year
CUSTOMERS. PEOPLE. STOCKHOLDERS. 13
The Portfolio is Positioned for Growth with New
Technologies and New Products
Autonomous Capabilities
Hard Rock Cutting
New Products
CUSTOMERS. PEOPLE. STOCKHOLDERS. 14
Autonomous Capabilities
• Tremendous customer pull
to improve safety and
productivity
• “Command for Hauling is 20
percent more productive
than a manned fleet of
trucks of the same type”
Customer quote
• Can retrofit trucks or
provide on new units
• Applications for drills,
tractors and underground
vehicles
CUSTOMERS. PEOPLE. STOCKHOLDERS. 15
• Strong customer interest for
continuous mining systems
• Rock Straight System
• First commercial
continuous mining and
hauling system for
underground hard rock
applications
• Disrupt old drill and blast by
using our patent protected
activated undercutting
technology
Hard Rock Cutting
CUSTOMERS. PEOPLE. STOCKHOLDERS. 16
• Hydraulic Mining Shovels
• 6015B
• 6020B
• Large Mining Trucks
• 794AC
• Surface Rock Drills
• MD6420C
• Articulated Truck
• 745C
New Products
CUSTOMERS. PEOPLE. STOCKHOLDERS. 17
State of the Business
• Mining customers have expressed increased optimism
• Current focus on maximizing asset utilization and lowering
costs by leveraging existing fleets; growing aftermarket
opportunity
• Machine replacements needed over time, even with no
increase in commodity production levels
• Increasingly, technology is becoming a differentiator
among OEMs…. and also a revenue growth driver
CUSTOMERS. PEOPLE. STOCKHOLDERS. 18
Non-GAAP Financial Measures
The following definition is provided for “non-GAAP financial measures” in connection with Regulation G issued by the Securities
and Exchange Commission. The non-GAAP financial measures we use 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 substituted for the related GAAP measure.
Profit Per Share Excluding Restructuring Costs
We have incurred restructuring costs during the third-quarter 2016 and 2015. We believe it is important to separately quantify
the profit per share impact of restructuring costs in order for our results to be meaningful to our readers as these costs are
incurred in the current year to generate longer-term benefits. Reconciliations of profit per share excluding restructuring costs to
the most directly comparable GAAP measure, diluted profit per share, are as follows:
. 2016 2015
Profit per share……………………………………………………………………… $0.48 $0.94
Per share restructuring costs1……………………………………………………… $0.37 $0.11
Profit per share excluding restructuring costs…………………………………… $0.85 $1.05
1 At statutory tax rates.
Third Quarter
CUSTOMERS. PEOPLE. STOCKHOLDERS. 19
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