UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
|
|
|
|
FORM 10-Q
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|
[X] QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended March 31, 2009
OR
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from ________________ to ________________
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Commission File
Number: 1-768
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CATERPILLAR
INC.
(Exact name of registrant as
specified in its charter)
|
|
Delaware
(State or other jurisdiction of
incorporation)
|
37-0602744
(IRS Employer I.D.
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
|
|
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No
[ ]
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer”, “accelerated filer" and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
|
Large accelerated
filer
|
X
|
Accelerated
filer
|
|||||||
Non-accelerated
filer
|
Smaller reporting
company
|
||||||||
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes [ ] No [ X ]
|
|||||||||
At March 31,
2009, 601,709,681 shares of common stock of the Registrant were
outstanding.
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Table
of Contents
|
|||
Page
|
|||
Part
I. Financial Information
|
|||
Item
1.
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Financial
Statements
|
3
|
|
Item
2.
|
Management’s
Discussion and
Analysis
|
35
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
61
|
|
Item
4.
|
Controls and
Procedures
|
62
|
|
Part
II. Other Information
|
|||
Item
1.
|
Legal
Proceedings
|
62
|
|
Item
1A.
|
Risk
Factors
|
*
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
62
|
|
Item
3.
|
Defaults Upon
Senior
Securities
|
*
|
|
Item
4.
|
Submission of
Matters to a Vote of Security
Holders
|
*
|
|
Item
5.
|
Other
Information
|
*
|
|
Item
6.
|
Exhibits
|
63
|
|
* Item omitted because no answer
is called for or item is not applicable.
|
Caterpillar
Inc.
Consolidated Statement of Results
of Operations
(Unaudited)
(Dollars in millions except per
share data)
|
||||||||
Three Months
Ended
|
||||||||
March
31,
|
||||||||
2009
|
2008
|
|||||||
Sales and
revenues:
|
||||||||
Sales of Machinery and
Engines
|
$
|
8,510
|
$
|
10,979
|
||||
Revenues of Financial
Products
|
715
|
817
|
||||||
Total sales and
revenues
|
9,225
|
11,796
|
||||||
Operating
costs:
|
||||||||
Cost of goods
sold
|
7,027
|
8,609
|
||||||
Selling, general and
administrative expenses
|
882
|
959
|
||||||
Research and development
expenses
|
388
|
369
|
||||||
Interest expense of Financial
Products
|
279
|
284
|
||||||
Other operating (income)
expenses
|
824
|
282
|
||||||
Total operating
costs
|
9,400
|
10,503
|
||||||
Operating profit
(loss)
|
(175
|
)
|
1,293
|
|||||
Interest expense excluding
Financial Products
|
101
|
74
|
||||||
Other income
(expense)
|
64
|
122
|
||||||
Consolidated profit (loss) before
taxes
|
(212
|
)
|
1,341
|
|||||
Provision (benefit) for income
taxes
|
(80
|
)
|
420
|
|||||
Profit (loss) of consolidated
companies
|
(132
|
)
|
921
|
|||||
Equity in profit (loss) of
unconsolidated affiliated companies
|
1
|
11
|
||||||
Profit (loss) of consolidated and
affiliated companies
|
(131
|
)
|
932
|
|||||
Less: Profit (loss) attributable
to noncontrolling interests
|
(19
|
)
|
10
|
|||||
Profit (loss)
1
|
$
|
(112
|
)
|
$
|
922
|
|||
Profit (loss) per common
share
|
$
|
(0.19
|
)
|
$
|
1.49
|
|||
Profit (loss) per common share –
diluted 2
|
$
|
(0.19
|
)
|
$
|
1.45
|
|||
Weighted-average common shares
outstanding (millions)
|
||||||||
-
Basic
|
602.1
|
617.5
|
||||||
- Diluted 2
|
602.1
|
637.9
|
||||||
Cash dividends declared per common
share
|
$
|
—
|
$
|
—
|
||||
1
|
Profit (loss)
attributable to common stockholders.
|
2
|
2008 diluted
by assumed exercise of stock-based compensation awards using the treasury
stock method. In 2009, the assumed exercise of stock-based
compensation awards was not considered because the impact would be
anti-dilutive.
|
See
accompanying notes to Consolidated Financial
Statements.
|
Caterpillar
Inc.
Consolidated
Statement of Financial Position
(Unaudited)
(Dollars
in millions)
|
||||||||||
March
31,
2009
|
December
31,
2008
|
|||||||||
Assets
|
||||||||||
Current
assets:
|
||||||||||
Cash and
short-term investments
|
$
|
3,566
|
$
|
2,736
|
||||||
Receivables –
trade and other
|
7,779
|
9,397
|
||||||||
Receivables –
finance
|
8,287
|
8,731
|
||||||||
Deferred and
refundable income taxes
|
1,300
|
1,223
|
||||||||
Prepaid
expenses and other current assets
|
748
|
765
|
||||||||
Inventories
|
7,992
|
8,781
|
||||||||
Total current
assets
|
29,672
|
31,633
|
||||||||
Property,
plant and equipment – net
|
12,342
|
12,524
|
||||||||
Long-term
receivables – trade and other
|
1,035
|
1,479
|
||||||||
Long-term
receivables – finance
|
13,597
|
14,264
|
||||||||
Investments in
unconsolidated affiliated companies
|
92
|
94
|
||||||||
Noncurrent
deferred and refundable income taxes
|
3,219
|
3,311
|
||||||||
Intangible
assets
|
492
|
511
|
||||||||
Goodwill
|
2,256
|
2,261
|
||||||||
Other
assets
|
1,735
|
1,705
|
||||||||
Total
assets
|
$
|
64,440
|
$
|
67,782
|
||||||
Liabilities
|
||||||||||
Current
liabilities:
|
||||||||||
Short-term
borrowings:
|
||||||||||
Machinery and
Engines
|
$
|
1,174
|
$
|
1,632
|
||||||
Financial
Products
|
4,887
|
5,577
|
||||||||
Accounts
payable
|
3,340
|
4,827
|
||||||||
Accrued
expenses
|
3,799
|
4,121
|
||||||||
Accrued wages,
salaries and employee benefits
|
827
|
1,242
|
||||||||
Customer
advances
|
1,700
|
1,898
|
||||||||
Dividends
payable
|
—
|
253
|
||||||||
Other current
liabilities
|
998
|
1,027
|
||||||||
Long-term debt
due within one year:
|
||||||||||
Machinery and
Engines
|
469
|
456
|
||||||||
Financial
Products
|
4,895
|
5,036
|
||||||||
Total current
liabilities
|
22,089
|
26,069
|
||||||||
Long-term debt
due after one year:
|
||||||||||
Machinery and
Engines
|
5,705
|
5,736
|
||||||||
Financial
Products
|
17,761
|
17,098
|
||||||||
Liability for
postemployment benefits
|
9,755
|
9,975
|
||||||||
Other
liabilities
|
2,281
|
2,190
|
||||||||
Total
liabilities
|
57,591
|
61,068
|
||||||||
Commitments
and contingencies (Notes 10 and 12)
|
||||||||||
Redeemable
noncontrolling interest
|
513
|
524
|
||||||||
Stockholders'
equity
|
||||||||||
Common stock of $1.00 par
value:
|
||||||||||
Authorized
shares: 900,000,000
Issued shares: (3/31/09
and 12/31/08 – 814,894,624) at paid-in amount
|
3,086
|
3,057
|
||||||||
Treasury stock (3/31/09 –
213,184,943; 12/31/08 – 213,367,983) at cost
|
(11,214
|
)
|
(11,217
|
)
|
||||||
Profit
employed in the business
|
19,694
|
19,826
|
||||||||
Accumulated
other comprehensive income
|
(5,332
|
)
|
(5,579
|
)
|
||||||
Noncontrolling
interests
|
102
|
103
|
||||||||
Total
stockholders' equity
|
6,336
|
6,190
|
||||||||
Total
liabilities, redeemable noncontrolling interest and stockholders’
equity
|
$
|
64,440
|
$
|
67,782
|
See accompanying notes to
Consolidated Financial
Statements.
|
Caterpillar
Inc.
Consolidated Statement of Changes
in Stockholders' Equity
(Unaudited)
(Dollars
in millions)
|
Common
|
Treasury
|
Profit
employed
in
the
|
Accumulated
other
comprehensive
|
Noncontrolling
|
Comprehensive
|
||||||||||||||||||||||||
Three
Months Ended March 31, 2008
|
stock
|
stock
|
business
|
income (loss) 1
|
interests
|
Total
|
income
(loss)
|
||||||||||||||||||||||
Balance
at December 31, 2007
|
$
|
2,744
|
$
|
(9,451
|
)
|
$
|
17,398
|
$
|
(1,808
|
)
|
$
|
113
|
$
|
8,996
|
|||||||||||||||
Adjustment to adopt
measurement date
|
|||||||||||||||||||||||||||||
provisions
of FAS 158, net of tax 2
|
—
|
—
|
(33
|
)
|
17
|
—
|
(16
|
)
|
|||||||||||||||||||||
Balance
at January 1, 2008
|
2,744
|
(9,451
|
)
|
17,365
|
(1,791
|
)
|
113
|
8,980
|
|||||||||||||||||||||
Profit
(loss)
|
—
|
—
|
922
|
—
|
10
|
932
|
$
|
932
|
|||||||||||||||||||||
Foreign
currency translation
|
—
|
—
|
—
|
101
|
—
|
101
|
101
|
||||||||||||||||||||||
Pension
and other postretirement benefits
|
|||||||||||||||||||||||||||||
Amortization
of actuarial (gain) loss,
|
|||||||||||||||||||||||||||||
net
of tax of $21
|
—
|
—
|
—
|
37
|
—
|
37
|
37
|
||||||||||||||||||||||
Derivative
financial instruments and other
|
|||||||||||||||||||||||||||||
Gains
(losses) deferred, net of tax of $5
|
—
|
—
|
—
|
(8
|
)
|
—
|
(8
|
)
|
(8
|
)
|
|||||||||||||||||||
(Gains)
losses reclassified to earnings,
|
|||||||||||||||||||||||||||||
net
of tax of $13
|
—
|
—
|
—
|
(25
|
)
|
—
|
(25
|
)
|
(25
|
)
|
|||||||||||||||||||
Available-for-sale
securities
|
|||||||||||||||||||||||||||||
Gains
(losses) deferred, net of tax of $12
|
—
|
—
|
—
|
(23
|
)
|
—
|
(23
|
)
|
(23
|
)
|
|||||||||||||||||||
(Gains)
losses reclassified to earnings,
|
|||||||||||||||||||||||||||||
net
of tax of $0
|
—
|
—
|
—
|
(1
|
)
|
—
|
(1
|
)
|
(1
|
)
|
|||||||||||||||||||
Change
in ownership for noncontrolling interests
|
—
|
—
|
—
|
—
|
(17
|
)
|
(17
|
)
|
—
|
||||||||||||||||||||
Dividends
declared
|
—
|
—
|
2
|
—
|
—
|
2
|
—
|
||||||||||||||||||||||
Common shares issued from treasury
stock
|
|||||||||||||||||||||||||||||
for stock-based
compensation: 1,043,284
|
(1
|
)
|
28
|
—
|
—
|
—
|
27
|
—
|
|||||||||||||||||||||
Stock-based compensation
expense
|
37
|
—
|
—
|
—
|
—
|
37
|
—
|
||||||||||||||||||||||
Tax benefits from stock-based
compensation
|
12
|
—
|
—
|
—
|
—
|
12
|
—
|
||||||||||||||||||||||
Shares
repurchased: 10,260,026
|
—
|
(692
|
)
|
—
|
—
|
—
|
(692
|
)
|
—
|
||||||||||||||||||||
Stock
repurchase derivative contracts
|
(38
|
)
|
—
|
—
|
—
|
—
|
(38
|
)
|
—
|
||||||||||||||||||||
Balance
at March 31,
2008
|
$
|
2,754
|
$
|
(10,115
|
)
|
$
|
18,289
|
$
|
(1,710
|
)
|
$
|
106
|
$
|
9,324
|
$
|
1,013
|
|||||||||||||
Three Months Ended
March 31, 2009
|
|||||||||||||||||||||||||||||
Balance
at December 31,
2008
|
$
|
3,057
|
$
|
(11,217
|
)
|
$
|
19,826
|
$
|
(5,579
|
)
|
$
|
103
|
$
|
6,190
|
|||||||||||||||
Profit
(loss)
|
—
|
—
|
(112)
|
—
|
(19
|
)
|
(131
|
)
|
$
|
(131
|
)
|
||||||||||||||||||
Foreign
currency translation, net of tax of $38
|
—
|
—
|
—
|
(120
|
)
|
(3
|
)
|
(123
|
)
|
(123
|
)
|
||||||||||||||||||
Pension
and other postretirement benefits
|
|||||||||||||||||||||||||||||
Current
year actuarial gain (loss), net of tax of $83 3
|
—
|
—
|
—
|
50
|
—
|
50
|
50
|
||||||||||||||||||||||
Amortization
of actuarial (gain) loss, net of tax of $30
|
—
|
—
|
—
|
50
|
2
|
52
|
52
|
||||||||||||||||||||||
Current
year prior service cost, net of tax of $197 3
|
—
|
—
|
—
|
236
|
—
|
236
|
236
|
||||||||||||||||||||||
Amortization
of prior service cost, net of tax of $3
|
—
|
—
|
—
|
6
|
—
|
6
|
6
|
||||||||||||||||||||||
Derivative
financial instruments and other
|
|||||||||||||||||||||||||||||
(Gains)
losses reclassified to earnings,
|
|||||||||||||||||||||||||||||
net
of tax of $12
|
—
|
—
|
—
|
22
|
(1
|
)
|
21
|
21
|
|||||||||||||||||||||
Available-for-sale
securities
|
|||||||||||||||||||||||||||||
Gains
(losses) deferred, net of tax of $4
|
—
|
—
|
—
|
(8
|
)
|
—
|
(8
|
)
|
(8
|
)
|
|||||||||||||||||||
(Gains)
losses reclassified to earnings,
|
|||||||||||||||||||||||||||||
net
of tax of $6
|
—
|
—
|
—
|
11
|
—
|
11
|
11
|
||||||||||||||||||||||
Common shares issued from treasury
stock
|
|||||||||||||||||||||||||||||
for stock-based
compensation: 183,040
|
(3
|
)
|
3
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
Stock-based compensation
expense
|
32
|
—
|
—
|
—
|
—
|
32
|
—
|
||||||||||||||||||||||
Cat
Japan share redemption 4
|
—
|
—
|
(20)
|
—
|
20
|
—
|
—
|
||||||||||||||||||||||
Balance
at March 31, 2009
|
$
|
3,086
|
$
|
(11,214
|
)
|
$
|
19,694
|
$
|
(5,332
|
)
|
$
|
102
|
$
|
6,336
|
$
|
114
|
1
|
Pension
and other postretirement benefits include net adjustments for Cat Japan,
while they were an unconsolidated affiliate, of ($1) million for the three
months ended March 31, 2008. The ending balance was ($53)
million at March 31, 2008.
|
2
|
Adjustments
to profit employed in the business and pension and other postretirement
benefits were net of tax of ($17) million and $9 million,
respectively. See Note 2 for additional
information.
|
3
|
Changes
in amounts due to plan re-measurements. See Note 9 for additional
information.
|
4
|
See
Note 15 regarding the Cat Japan share redemption.
|
See
accompanying notes to Consolidated Financial
Statements.
|
Caterpillar
Inc.
Consolidated
Statement of Cash Flow
(Unaudited)
(Millions
of dollars)
|
|||||||||
Three Months
Ended
|
|||||||||
March
31,
|
|||||||||
2009
|
2008
|
||||||||
Cash flow from operating
activities:
|
|||||||||
Profit
(loss)
|
$
|
(112
|
)
|
$
|
922
|
||||
Adjustments for non-cash
items:
|
|||||||||
Depreciation and
amortization
|
534
|
472
|
|||||||
Other
|
87
|
128
|
|||||||
Changes in assets and
liabilities:
|
|||||||||
Receivables – trade and
other
|
1,622
|
(455
|
)
|
||||||
Inventories
|
764
|
(864
|
)
|
||||||
Accounts payable and accrued
expenses
|
(1,727
|
)
|
463
|
||||||
Customer
advances
|
(179
|
)
|
165
|
||||||
Other assets –
net
|
48
|
78
|
|||||||
Other liabilities –
net
|
(142
|
)
|
(203
|
)
|
|||||
Net cash provided by (used for)
operating activities
|
895
|
706
|
|||||||
Cash flow from investing
activities:
|
|||||||||
Capital expenditures – excluding
equipment leased to others
|
(224
|
)
|
(343
|
)
|
|||||
Expenditures for equipment leased
to others
|
(221
|
)
|
(302
|
)
|
|||||
Proceeds from disposals of
property, plant and equipment
|
208
|
122
|
|||||||
Additions to finance
receivables
|
(1,789
|
)
|
(3,062
|
)
|
|||||
Collections of finance
receivables
|
2,450
|
2,301
|
|||||||
Proceeds from sales of finance
receivables
|
27
|
46
|
|||||||
Investments and acquisitions (net
of cash acquired)
|
—
|
(19
|
)
|
||||||
Proceeds from sale of
available-for-sale securities
|
87
|
104
|
|||||||
Investments in available-for-sale
securities
|
(58
|
)
|
(160
|
)
|
|||||
Other – net
|
23
|
192
|
|||||||
Net cash provided by (used for)
investing activities
|
503
|
(1,121
|
)
|
||||||
Cash flow from financing
activities:
|
|||||||||
Dividends
paid
|
(253
|
)
|
(223
|
)
|
|||||
Common stock issued, including
treasury shares reissued
|
—
|
27
|
|||||||
Payment for stock repurchase
derivative contracts
|
—
|
(38
|
)
|
||||||
Treasury shares
purchased
|
—
|
(692
|
)
|
||||||
Excess tax benefit from
stock-based compensation
|
—
|
13
|
|||||||
Proceeds from debt issued
(original maturities greater than three months):
|
|||||||||
– Machinery and
Engines
|
121
|
62
|
|||||||
– Financial
Products
|
4,697
|
3,858
|
|||||||
Payments on debt (original
maturities greater than three months):
|
|||||||||
– Machinery and
Engines
|
(205
|
)
|
(98
|
)
|
|||||
– Financial
Products
|
(3,116
|
)
|
(3,422
|
)
|
|||||
Short-term borrowings – net
(original maturities three months or less)
|
(1,779
|
)
|
554
|
||||||
Net cash provided by (used for)
financing activities
|
(535
|
)
|
41
|
||||||
Effect of exchange rate changes on
cash
|
(33
|
)
|
29
|
||||||
Increase (decrease) in cash and
short-term investments
|
830
|
(345
|
)
|
||||||
Cash and short-term investments at
beginning of period
|
2,736
|
1,122
|
|||||||
Cash and short-term investments at
end of period
|
$
|
3,566
|
$
|
777
|
|||||
All short-term
investments, which consist primarily of highly liquid investments with
original maturities of three months or less, are considered to be cash
equivalents.
|
See
accompanying notes to Consolidated Financial
Statements.
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
1.
|
A. Basis
of Presentation
In the opinion
of management, the accompanying financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary
for a fair statement of (a) the consolidated results of operations for the
three month periods ended March 31, 2009 and 2008, (b) the consolidated
financial position at March 31, 2009 and December 31, 2008, (c) the
consolidated changes in stockholders' equity for the three month periods
ended March 31, 2009 and 2008, and (d) the consolidated cash flow for
the three month periods ended March 31, 2009 and 2008. The
financial statements have been prepared in conformity with generally
accepted accounting principles in the United States of America (U.S. GAAP)
and pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). Certain amounts for prior periods have been
reclassified to conform to the current period financial statement
presentation.
Interim
results are not necessarily indicative of results for a full year. The
information included in this Form 10-Q should be read in conjunction with
the audited financial statements and notes thereto included in our Company's annual report on Form
10-K for the year ended December 31, 2008 (2008 Form
10-K).
Comprehensive
income (loss) is comprised of profit (loss), as well as adjustments for
foreign currency translation, derivative instruments designated as cash
flow hedges, available-for-sale securities, pension and other
postretirement benefits and noncontrolling interests. Total
comprehensive income for the three months ended March 31, 2009 and 2008
was $114 million and $1,013 million, respectively.
The December 31, 2008 financial
position data included herein is derived from the audited consolidated
financial statements included in the 2008 Form 10-K but does not include
all disclosures required by U.S. GAAP.
|
B. Nature
of Operations
We operate in
three principal lines of business:
|
||
(1)
|
Machinery— A principal
line of business which includes the design, manufacture, marketing and
sales of construction, mining and forestry machinery—track and wheel
tractors, track and wheel loaders, pipelayers, motor graders, wheel
tractor-scrapers, track and wheel excavators, backhoe loaders, log
skidders, log loaders, off-highway trucks, articulated trucks, paving
products, skid steer loaders, underground mining and tunnel boring
equipment and related parts. Also includes logistics services for other
companies and the design, manufacture, remanufacture, maintenance and
service of rail-related products.
|
|
(2)
|
Engines— A principal line of
business including the design, manufacture, marketing and sales of engines
for Caterpillar machinery; electric power generation systems; on-highway
vehicles and locomotives; marine, petroleum, construction, industrial,
agricultural and other applications; and related parts. Also
includes remanufacturing of Caterpillar engines and a variety of
Caterpillar machine and engine components and remanufacturing services for
other companies. Reciprocating engines meet power needs ranging
from 10 to 21,700 horsepower (8 to over 16 000
kilowatts). Turbines range from 1,600 to 30,000 horsepower (1
200 to 22 000 kilowatts).
|
|
(3)
|
Financial Products— A
principal line of business consisting primarily of Caterpillar Financial
Services Corporation (Cat Financial), Caterpillar Insurance Holdings, Inc.
(Cat Insurance) and their respective subsidiaries. Cat
Financial provides a wide range of financing alternatives to customers and
dealers for Caterpillar machinery and engines, Solar gas turbines as well
as other equipment and marine vessels. Cat Financial also
extends loans to customers and dealers. Cat Insurance provides
various forms of insurance to customers and dealers to help support the
purchase and lease of our equipment.
|
|
Our Machinery
and Engines operations are
highly integrated. Throughout the Notes, Machinery and Engines
represents the aggregate total of these principal lines of
business.
|
2.
|
New
Accounting Pronouncements
|
SFAS 157 – In September
2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 157 (SFAS 157), “Fair Value
Measurements.” SFAS 157 provides a common definition of fair value and a
framework for measuring assets and liabilities at fair values when a
particular standard prescribes it. In addition, the Statement expands
disclosures about fair value measurements. In February 2008, the FASB
issued final Staff Positions that (1) deferred the effective date of this
Statement for one year for certain nonfinancial assets and nonfinancial
liabilities (see below) and (2) removed certain leasing transactions from
the scope of the Statement. We applied this new accounting
standard to all other fair value measurements effective January 1, 2008.
The adoption of SFAS 157 did not have a material impact on our financial
statements. See Note 14 for additional
information.
|
FSP 157-2 – In February
2008, the FASB issued FASB Staff Position on Statement 157, "Effective
Date of FASB Statement No. 157, "(FSP 157-2). FSP 157-2 delayed
the effective date of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed on a recurring
basis, to fiscal years beginning after November 15, 2008. Our
significant nonfinancial assets and liabilities include those initially
measured at fair value in a business combination and goodwill tested
annually for impairment. We adopted this new accounting
standard on January 1, 2009. The adoption of FSP 157-2 did not
have a material impact on our financial statements.
FSP 157-3 – In October
2008, the FASB issued FASB Staff Position on Statement 157, "Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active” (FSP 157-3). FSP 157-3 clarifies how SFAS 157 should be
applied when valuing securities in markets that are not active by
illustrating key considerations in determining fair value. It
also reaffirms the notion of fair value as the exit price as of the
measurement date. FSP 157-3 was effective upon issuance, which
included periods for which financial statements have not yet been
issued. We adopted this new accounting standard effective July
1, 2008. The adoption of FSP 157-3 did not have a material
impact on our financial statements.
SFAS 158 – In September
2006, the FASB issued Statement of Financial Accounting Standards No. 158
(SFAS 158), “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and
132(R).” SFAS 158 requires recognition of the overfunded or
underfunded status of pension and other postretirement benefit plans on
the balance sheet. Also, the measurement date – the date at
which the benefit obligation and plan assets are measured – is required to
be the company’s fiscal year-end. We adopted the balance sheet
recognition provisions at December 31, 2006, and adopted the year-end
measurement date effective January 1, 2008 using the “one measurement”
approach. Under the one measurement approach, net periodic
benefit cost for the period between any early measurement date and the end
of the fiscal year that the measurement provisions are applied are
allocated proportionately between amounts to be recognized as an
adjustment of retained earnings and net periodic benefit cost for the
fiscal year. Previously, we used a November 30th measurement
date for our U.S. pension and other postretirement benefit plans and
September 30th for our
non-U.S. plans. The following summarizes the effect of adopting
the year-end measurement date provisions as of January 1,
2008. See Note 9 for additional
information.
|
Adoption
of SFAS 158 year-end measurement date
|
January 1,
2008
|
January 1,
2008
|
||||||||||
(Millions
of dollars)
|
Prior to SFAS
158 Adjustment
|
SFAS 158
Adjustment
|
Post SFAS 158
Adjustment
|
|||||||||
Noncurrent
deferred and refundable income taxes
|
$
|
1,553
|
$
|
8
|
$
|
1,561
|
||||||
Liability for
postemployment benefits
|
5,059
|
24
|
5,083
|
|||||||||
Accumulated
other comprehensive income
|
(1,808
|
)
|
17
|
(1,791
|
)
|
|||||||
Profit
employed in the business
|
17,398
|
(33
|
)
|
17,365
|
SFAS 159 – In February
2007, the FASB issued Statement of Financial Accounting Standards No. 159
(SFAS 159), “The Fair Value Option for Financial Assets and Financial
Liabilities – including an amendment of SFAS No. 115.” SFAS 159 creates a
fair value option under which an entity may irrevocably elect fair value
as the initial and subsequent measurement attribute for certain financial
assets and liabilities on a contract by contract basis, with changes in
fair values recognized in earnings as these changes occur. We
adopted this new accounting standard on January 1, 2008. We have not
elected to measure any financial assets or financial liabilities at fair
value which were not previously required to be measured at fair value.
Therefore, the adoption of SFAS 159 did not have a material impact on our
financial statements.
|
SFAS 141R and SFAS 160 – In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141 (revised 2007) (SFAS 141R), “Business Combinations,” and No. 160
(SFAS 160), “Noncontrolling Interests in Consolidated Financial Statements
– an amendment of ARB No. 51.” SFAS 141R requires the acquiring entity in
a business combination to recognize the assets acquired and liabilities
assumed. Further, SFAS 141R also changes the accounting for acquired
in-process research and development assets, contingent consideration,
partial acquisitions and transaction costs. Under SFAS 160, all
entities are required to report noncontrolling (minority) interests in
subsidiaries as equity in the consolidated financial statements. In
addition, transactions between an entity and noncontrolling interests will
be treated as equity transactions. We adopted these new
accounting standards on January 1, 2009. As required, SFAS 160
was adopted through retrospective application, and all prior period
information has been adjusted accordingly. The adoption of SFAS 141R and
SFAS 160 did not have a material impact on our financial
statements.
SFAS 161 – In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161
(SFAS 161), “Disclosures about Derivative Instruments and Hedging
Activities – an amendment of FASB Statement No. 133.” SFAS 161 expands
disclosures for derivative instruments by requiring entities to disclose
the fair value of derivative instruments and their gains or losses in
tabular format. SFAS 161 also requires disclosure of
information about credit risk-related contingent features in derivative
agreements, counterparty credit risk, and strategies and objectives for
using derivative instruments. We adopted this new accounting
standard on January 1, 2009. The adoption of SFAS 161 did not
have a material impact on our financial statements. See Note 4
for additional information.
SFAS 162 – In May 2008, the
FASB issued Statement of
Financial Accounting Standards No. 162 (SFAS 162), “The Hierarchy of
Generally Accepted Accounting Principles.” SFAS 162 identifies the sources
of accounting principles and the framework for selecting the principles to
be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with U.S. GAAP. SFAS
162 was effective November 16, 2008. This Statement did not
result in a change in our current practice.
SFAS 163 – In May 2008, the
FASB issued Statement of Financial Accounting Standards No. 163 (SFAS
163), “Accounting for Financial Guarantee Insurance Contracts – an
interpretation of FASB Statement No. 60.” SFAS 163 requires that an
insurance enterprise recognize a claim liability prior to an event of
default (insured event) when there is evidence that credit deterioration
has occurred in an insured financial obligation. It also requires
disclosure about (1) the risk-management activities used by an insurance
enterprise to evaluate credit deterioration in its insured financial
obligations and (2) the insurance enterprise’s surveillance or watch
list. We adopted this new accounting standard on January 1,
2009. The adoption of SFAS 163 did not have a material impact
on our financial statements.
|
FSP FAS 140-4 and FIN
46R-8 –
In December 2008, the FASB issued FASB Staff Position on Statement 140 and
FIN 46R, "Disclosures by Public Entities (Enterprises) about Transfers of
Financial Assets and Interests in Variable Interest Entities" (FSP FAS
140-4 and FIN 46R-8). This FSP expands the disclosure
requirements in SFAS 140 and FIN 46R by requiring additional information
about companies’ involvement with variable interest entities (VIEs) and
their continuing involvement with transferred financial assets. This new
accounting standard was adopted for our financial statements ended
December 31, 2008. The adoption of FSP FAS 140-4 and FIN 46R-8
did not have a material impact on our financial
statements.
|
FSP FAS 132R-1 – In December 2008,
the FASB issued FASB Staff Position on Statement 132R, "Employers’
Disclosures about Postretirement Benefit Plan Assets" (FSP FAS 132R-1).
This FSP expands the disclosure set forth in SFAS 132R by adding required
disclosures about (1) how investment allocation decisions are made by
management, (2) major categories of plan assets, and (3) significant
concentration of risk. Additionally, the FSP requires an employer to
disclose information about the valuation of plan assets similar to that
required under SFAS 157. We will adopt this new accounting
standard for our financial statements ending December 31,
2009. We do not expect the adoption of FSP FAS 132R-1 will have
a material impact on our financial
statements.
|
FSP EITF 99-20-1 – In January 2009, the
FASB issued FASB Staff Position on EITF Issue No. 99-20, "Amendments to
the Impairment Guidance of EITF Issue No. 99-20" (FSP EITF
99-20-1). FSP EITF 99-20-1 aligns the impairment guidance in
EITF Issue No. 99-20 with that in Statement of Financial Accounting
Standards No. 115 (SFAS 115), “Accounting for Certain Investments in Debt
and Equity Securities.” It changes how companies determine
whether an other-than-temporary impairment exists for certain beneficial
interests by allowing management to exercise more
judgment. This new accounting standard was adopted for our
financial statements ended December 31, 2008. The adoption of
FSP EITF 99-20-1 did not have a material impact on our financial
statements.
|
FSP FAS 107-1 and APB 28-1
– In
April 2009, the FASB issued FASB Staff Position on FAS 107-1 and APB 28-1,
"Interim Disclosures about Fair Value of Financial Instruments" (FSP FAS
107-1 and APB 28-1). This FSP requires that the fair value
disclosures required by SFAS 107 “Disclosures about Fair Value of
Financial Instruments” be included for interim reporting
periods. We will adopt this new accounting standard effective
April 1, 2009. We do not expect the adoption of FSP FAS
107-1 and APB 28-1 will have a material impact on our financial
statements.
|
FSP FAS 115-2 and FAS
124-2 – In April 2009, the
FASB issued FASB Staff Position on FAS 115-2 and FAS 124-2, “Recognition
and Presentation of Other-Than-Temporary Impairments” (FSP FAS 115-2 and
FAS 124-2). This FSP amends the impairment guidance relating to
certain debt securities and will require a company to assess the
likelihood of selling the security prior to recovering its cost
basis. Additionally, when a company meets the criteria for
impairment, the impairment charges related to credit losses would be
recognized in earnings, while non-credit losses would be reflected in
other comprehensive income. We will adopt this new accounting
standard effective April 1, 2009. We do not expect the adoption
of FSP FAS 115-2 and FAS 124-2 will have a material impact on our
financial statements.
FSP FAS 157-4 – In April 2009, the
FASB issued FASB Staff Position on FAS 157-4, “Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly”
(FSP FAS 157-4). FSP FAS 157-4 provides guidance on determining
when the trading volume and activity for an asset or liability has
significantly decreased, which may indicate an inactive market, and on
measuring the fair value of an asset or liability in inactive
markets. We will adopt this new accounting standard effective
April 1, 2009. We do not expect the adoption of FSP FAS 157-4
will have a material impact on our financial
statements.
|
FSP FAS 141R-1 – In April 2009, the
FASB issued FASB Staff Position on FAS 141R-1, “Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies” (FSP FAS 141R-1). FSP FAS 141R-1 requires that
an acquirer recognize at fair value, at the acquisition date, an asset
acquired or a liability assumed in a business combination that arises from
a contingency if the acquisition-date fair value of the asset or liability
can be determined during the measurement period. We adopted
this new accounting standard on January 1, 2009. The adoption
of FSP FAS 140R-1 did not have a material impact on our financial
statements.
|
3.
|
Stock-Based
Compensation
Statement of
Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment” (SFAS 123R), requires that the cost resulting from all
stock–based payments be recognized in the financial statements based on
the grant date fair value of the award. Stock-based
compensation primarily consists of stock-settled stock appreciation rights
(SARs), restricted stock units (RSUs) and stock options. We
recognized pretax stock-based compensation cost of $32 million and $37
million in the first quarter of 2009 and 2008,
respectively.
|
The following
table illustrates the type and fair market value of the stock-based
compensation awards granted during the first quarter of 2009 and 2008,
respectively:
|
2009
|
2008
|
|||||||||||||||
#
Granted
|
Fair Value Per
Award
|
#
Granted
|
Fair Value Per
Award
|
|||||||||||||
SARs
|
6,260,647
|
$
|
7.10
|
4,476,095
|
$
|
22.32
|
||||||||||
RSUs
|
2,185,674
|
20.22
|
1,511,523
|
69.17
|
||||||||||||
Stock
options
|
562,580
|
7.10
|
410,506
|
22.32
|
||||||||||||
The stock
price on the date of grant was $22.17 and $73.20 for 2009 and 2008,
respectively.
|
The following
table provides the assumptions used in determining the fair value of the
stock-based awards for the three month periods ended March 31, 2009 and
2008, respectively:
|
Grant
Year
|
||||||||
2009
|
2008
|
|||||||
Weighted-average
dividend yield
|
3.07%
|
1.89%
|
||||||
Weighted-average
volatility
|
36.02%
|
27.14%
|
||||||
Range of
volatilities
|
35.75-61.02%
|
27.13-28.99%
|
||||||
Range of
risk-free interest rates
|
0.17-2.99%
|
1.60-3.64%
|
||||||
Weighted-average
expected lives
|
8
years
|
8
years
|
||||||
As of March
31, 2009, the total remaining unrecognized compensation cost related to
nonvested stock-based compensation awards was $194 million, which will be
amortized over the weighted-average remaining requisite service periods of
approximately 2.2 years.
|
Our
long-standing practices and policies specify all stock-based compensation
awards are approved by the Compensation Committee (the Committee) of the
Board of Directors on the date of grant. The stock-based award
approval process specifies the number of awards granted, the terms of the
award and the grant date. The same terms and conditions are
consistently applied to all employee grants, including Officers. The
Committee approves all individual Officer grants. The number of
stock-based compensation awards included in an individual’s award is
determined based on the methodology approved by the
Committee. In 2007, under the terms of the Caterpillar Inc.
2006 Long-Term Incentive Plan (approved by stockholders in June of 2006),
the Committee approved the exercise price methodology to be the
closing price of the Company stock on the date of
grant.
|
4.
|
Derivative
Instruments and Hedging Activities
|
Our earnings
and cash flow are subject to fluctuations due to changes in foreign
currency exchange rates, interest rates and commodity
prices. In addition, the amount of Caterpillar stock that can
be repurchased under our stock repurchase program is impacted by movements
in the price of the stock. Our Risk Management Policy (policy)
allows for the use of derivative financial instruments to prudently manage
foreign currency exchange rate, interest rate, commodity price and
Caterpillar stock price exposures. Our policy specifies that
derivatives are not to be used for speculative
purposes. Derivatives that we use are primarily foreign
currency forward and option contracts, interest rate swaps and commodity
forward and option contracts. Our derivative activities are
subject to the management, direction and control of our senior financial
officers. Risk management practices, including the use of
financial derivative instruments, are presented to the Audit Committee of
the Board of Directors at least
annually.
|
All
derivatives are recognized on the Consolidated Statement of Financial
Position at their fair value. On the date the derivative contract is
entered, we designate the derivative as (1) a hedge of the fair value of a
recognized asset or liability ("fair value" hedge), (2) a hedge of a
forecasted transaction or the variability of cash flow to be paid ("cash
flow" hedge), or (3) an "undesignated" instrument. Changes in the fair
value of a derivative that is qualified, designated and highly effective
as a fair value hedge, along with the gain or loss on the hedged liability
that is attributable to the hedged risk, are recorded in current earnings.
Changes in the fair value of a derivative that is qualified, designated
and highly effective as a cash flow hedge are recorded in Accumulated
other comprehensive income (AOCI) in the Consolidated Statement of
Financial Position until they are reclassified to earnings in the same
period or periods during which the hedged transaction affects
earnings. Changes in the fair value of undesignated derivative
instruments and the ineffective portion of designated derivative
instruments are reported in current earnings. Cash flow from designated
derivative financial instruments are classified within the same category
as the item being hedged on the Consolidated Statement of Cash
Flow. Cash flow from undesignated derivative financial
instruments are included in the investing category on the Consolidated
Statement of Cash Flow.
We formally
document all relationships between hedging instruments and hedged items,
as well as the risk-management objective and strategy for undertaking
various hedge transactions. This process includes linking all
derivatives that are designated as fair value hedges to specific assets
and liabilities on the Consolidated Statement of Financial Position and
linking cash flow hedges to specific forecasted transactions or
variability of cash flow.
We also
formally assess, both at the hedge's inception and on an ongoing basis,
whether the designated derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash flow of
hedged items. When a derivative is determined not to be highly
effective as a hedge or the underlying hedged transaction is no longer
likely to occur, we discontinue hedge accounting prospectively, in
accordance with Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging
Activities."
We adopted
SFAS 161, “Disclosures about Derivative Instruments and Hedging
Activities” as of January 1, 2009. See Note 2 for additional
information.
|
Foreign Currency
Exchange Rate Risk
Foreign
currency exchange rate movements create a degree of risk by affecting the
U.S. dollar value of sales made and costs incurred in foreign currencies.
Movements in foreign currency rates also affect our competitive position
as these changes may affect business practices and/or pricing strategies
of non-U.S.-based competitors. Additionally, we have balance sheet
positions denominated in foreign currency, thereby creating exposure to
movements in exchange rates.
Our Machinery
and Engines operations purchase, manufacture and sell products in many
locations around the world. As we have a diversified revenue and cost
base, we manage our future foreign currency cash flow exposure on a net
basis. We use foreign currency forward and option contracts to manage
unmatched foreign currency cash inflow and outflow. Our objective is to
minimize the risk of exchange rate movements that would reduce the U.S.
dollar value of our foreign currency cash flow. Our policy allows for
managing anticipated foreign currency cash flow for up to five
years.
We generally
designate as cash flow hedges at inception of the contract any Australian
dollar, Brazilian real, British pound, Canadian dollar, Chinese yuan,
euro, Japanese yen, Mexican peso, Singapore dollar, New Zealand dollar or
Swiss franc forward or option contracts that meet the requirements for
hedge accounting and the maturity extends beyond the current quarter-end.
Designation is performed on a specific exposure basis to support hedge
accounting. The remainder of Machinery and Engines foreign currency
contracts are undesignated. We also designate as fair value
hedges specific euro forward contracts used to hedge firm
commitments.
As of March
31, 2009, $75 million of deferred net gains, net of tax, included in
equity (Accumulated other comprehensive income (loss) in the Consolidated
Statement of Financial Position), are expected to be reclassified to
current earnings (Other income (expense) in the Consolidated Statement of
Results of Operations) over the next twelve months when earnings are
affected by the hedged transactions. The actual amount recorded
in Other income (expense) will vary based on exchange rates at the time
the hedged transactions impact earnings.
In managing
foreign currency risk for our Financial Products operations, our objective
is to minimize earnings volatility resulting from conversion and the
remeasurement of net foreign currency balance sheet positions. Our policy
allows the use of foreign currency forward and option contracts to offset
the risk of currency mismatch between our receivables and debt. All such
foreign currency forward and option contracts are
undesignated.
|
Interest Rate
Risk
Interest rate
movements create a degree of risk by affecting the amount of our interest
payments and the value of our fixed-rate debt. Our practice is to use
interest rate derivatives to manage our exposure to interest rate changes
and, in some cases, lower the cost of borrowed funds.
Machinery and
Engines operations generally use fixed rate debt as a source of
funding. Our objective is to minimize the cost of borrowed
funds. Our policy allows us to enter into fixed-to-floating
interest rate swaps and forward rate agreements to meet that objective
with the intent to designate as fair value hedges at inception of the
contract all fixed-to-floating interest rate swaps. Designation
as a hedge of the fair value of our fixed rate debt is performed to
support hedge accounting.
Financial
Products operations have a match-funding policy that addresses interest
rate risk by aligning the interest rate profile (fixed or floating rate)
of Cat Financial’s debt portfolio with the interest rate profile of their
receivables portfolio within predetermined ranges on an on-going basis. In
connection with that policy, we use interest rate derivative instruments
to modify the debt structure to match assets within the receivables
portfolio. This match-funding reduces the volatility of margins between
interest-bearing assets and interest-bearing liabilities, regardless of
which direction interest rates move.
Our policy
allows us to use fixed-to-floating, floating-to-fixed, and
floating-to-floating interest rate swaps to meet the match-funding
objective. We designate fixed-to-floating interest rate swaps
as fair value hedges to protect debt against changes in fair value due to
changes in the benchmark interest rate. We designate most
floating-to-fixed interest rate swaps as cash flow hedges to protect
against the variability of cash flows due to changes in the benchmark
interest rate.
|
As of
March 31, 2009, $59 million of deferred net losses, net of tax,
included in equity (Accumulated other comprehensive income (loss) in the
Consolidated Statement of Financial Position), related to Financial
Products floating-to-fixed interest rate swaps, are expected to be
reclassified to current earnings (Interest expense of Financial Products
in the Consolidated Statement of Results of Operations) over the next
twelve months.
|
We have, at
certain times, liquidated fixed-to-floating and floating-to-fixed swaps at
both Machinery and Engines and Financial Products. The gains or
losses associated with these swaps at the time of liquidation are
amortized into earnings over the original term of the underlying hedged
item.
|
Commodity Price
Risk
Commodity
price movements create a degree of risk by affecting the price we must pay
for certain raw material. Our policy is to use commodity forward and
option contracts to manage the commodity risk and reduce the cost of
purchased materials.
|
Our Machinery
and Engines operations purchase aluminum, copper and nickel embedded in
the components we purchase from suppliers. Our suppliers pass on to us
price changes in the commodity portion of the component cost. In addition,
we are also subject to price changes on natural gas purchased for
operational use.
Our objective
is to minimize volatility in the price of these commodities. Our policy
allows us to enter into commodity forward and option contracts to lock in
the purchase price of a portion of these commodities within a five-year
horizon. All such commodity forward and option contracts are
undesignated. There were no contracts outstanding for the three
months ended March 31, 2009 or
2008.
|
The location
and fair value of derivative instruments reported in the Statement of
Financial Position are as follows:
|
(Millions of dollars) |
March
31, 2009
|
|||||||
Statement
of Financial Position Location
|
Asset
(Liability)
Fair
Value
|
|||||||
Designated
derivatives
|
||||||||
Foreign
exchange contracts
|
||||||||
Machinery and
Engines
|
Receivables –
trade and other
|
$
|
119
|
|||||
Machinery and
Engines
|
Long-term
receivables – trade and other
|
133
|
||||||
Machinery and
Engines
|
Accrued
expenses
|
(51
|
)
|
|||||
Interest rate
contracts
|
||||||||
Financial
Products
|
Receivables –
trade and other
|
2
|
||||||
Financial
Products
|
Long-term
receivables – trade and other
|
239
|
||||||
Financial
Products
|
Accrued
expenses
|
(106
|
)
|
|||||
$
|
336
|
|||||||
Undesignated
derivatives
|
||||||||
Foreign
exchange contracts
|
||||||||
Machinery and
Engines
|
Receivables –
trade and other
|
$
|
55
|
|||||
Machinery and
Engines
|
Long-term
receivables – trade and other
|
62
|
||||||
Machinery and
Engines
|
Accrued
expenses
|
(1
|
)
|
|||||
Financial
Products
|
Receivables –
trade and other
|
60
|
||||||
Financial
Products
|
Accrued
expenses
|
(81
|
)
|
|||||
Interest rate
contracts
|
||||||||
Machinery and
Engines
|
Accrued
expenses
|
(5
|
)
|
|||||
Financial
Products
|
Receivables –
trade and other
|
5
|
||||||
Financial
Products
|
Long-term
receivables – trade and other
|
5
|
||||||
Financial
Products
|
Accrued
expenses
|
(13
|
)
|
|||||
$
|
87
|
|||||||
The effect of
derivatives designated as hedging instruments on the Statement of Results
of Operations is as follows:
|
Fair
Value Hedges
(Millions
of dollars)
|
|||||||||||||
Three
Months Ended March 31, 2009
|
|||||||||||||
Classification
|
Gains
(Losses) on Derivative
|
Gains
(Losses)
on
Borrowings
|
|||||||||||
Interest rate
contracts
|
|||||||||||||
Financial
Products
|
Other income
(expense)
|
$
|
(60
|
)
|
$
|
79
|
|||||||
$
|
(60
|
)
|
$
|
79
|
|||||||||
Cash
Flow Hedges
(Millions
of dollars)
|
||||||||||||||||||
Three
Months Ended March 31, 2009
|
||||||||||||||||||
Recognized
in Earnings
|
||||||||||||||||||
Classification
|
Recognized
in AOCI (Effective Portion)
|
Classification
of
Gains
(Losses)
|
Reclassified
from
AOCI
(Effective
Portion)
|
Recognized
in Earnings
(Ineffective
Portion)
|
||||||||||||||
Foreign
exchange contracts
|
||||||||||||||||||
Machinery and
Engines
|
AOCI
|
$
|
58
|
Other income
(expense)
|
$
|
8
|
$
|
(6
|
)
|
|||||||||
Interest rate
contracts
|
||||||||||||||||||
Machinery and
Engines
|
AOCI
|
(29
|
)
|
Other income
(expense)
|
(1
|
)
|
—
|
|||||||||||
Financial
Products
|
AOCI
|
(13
|
)
|
Interest
expense of Financial Products
|
(20
|
)
|
1
|
1
|
||||||||||
$
|
16
|
$
|
(13
|
)
|
$
|
(5
|
)
|
|
1
|
The
classification of the ineffective portion recognized in earnings is
included in Other income (expense).
|
The effect of
derivatives not designated as hedging instruments on the Statement of
Results of Operations is as
follows:
|
(Millions
of dollars)
|
||||||||
Classification
of Gains
or
(Losses)
|
Three
Months Ended
March
31, 2009
|
|||||||
Foreign
exchange contracts
|
||||||||
Machinery and
Engines
|
Other income
(expense)
|
$
|
21
|
|||||
Financial
Products
|
Other income
(expense)
|
15
|
||||||
Interest rate
contracts
|
||||||||
Machinery and
Engines
|
Other income
(expense)
|
(2
|
)
|
|||||
Financial
Products
|
Other income
(expense)
|
(3
|
)
|
|||||
$
|
31
|
|||||||
Stock Repurchase
Risk
Payments for
stock repurchase derivatives are accounted for as a reduction in
stockholders’ equity. In February 2007, the Board of Directors
authorized a $7.5 billion stock repurchase program, expiring on December
31, 2011. The amount of Caterpillar stock that can be
repurchased under the authorization is impacted by movements in the price
of the stock. In August 2007, the Board of Directors authorized
the use of derivative contracts to reduce stock repurchase price
volatility.
In connection
with our stock repurchase program, we entered into capped call
transactions (“call”) with a major bank for an aggregate 6.0 million
shares. Through March 31, 2008, we paid the bank $94 million for the
establishment of the calls (of which $38 million was paid in the first
quarter 2008 for 2.5 million shares), which was accounted for as a
reduction to stockholders’ equity. A call permits us to reduce share
repurchase price volatility by providing a floor and cap on the price at
which the 6.0 million shares can be repurchased. The floor, cap
and strike prices for the calls were based upon the average purchase price
paid by the bank to purchase our common stock to hedge these
transactions. Each call matured and was exercisable within one
year after the call was established. If we exercised a call, we
could elect to settle the transaction with the bank by physical settlement
(paying cash and receiving shares), cash settlement (receiving a net
amount of cash) or net share settlement (receiving a net amount of
shares).
During the
three months ended March 31, 2009 and 2008, no shares were repurchased
pursuant to calls exercised under this program. All outstanding
calls under this program expired in
2008.
|
5.
|
Inventories
Inventories
(principally using the "last-in, first-out" method) are comprised of the
following:
|
(Millions
of dollars)
|
March
31,
|
December
31,
|
||||||
2009
|
2008
|
|||||||
Raw
materials
|
$
|
2,572
|
$
|
2,678
|
||||
Work-in-process
|
1,174
|
1,508
|
||||||
Finished
goods
|
3,981
|
4,316
|
||||||
Supplies
|
265
|
279
|
||||||
Total
inventories
|
$
|
7,992
|
$
|
8,781
|
||||
6.
|
Investments
in Unconsolidated Affiliated Companies
|
Our
investments in affiliated companies accounted for by the equity method
have historically consisted primarily of a 50 percent interest in Shin
Caterpillar Mitsubishi Ltd. (SCM) located in Japan. On August
1, 2008, SCM redeemed half of Mitsubishi Heavy Industries Ltd.’s (MHI’s)
shares in SCM. As a result, Caterpillar now owns 67 percent of
the renamed entity, Caterpillar Japan Ltd. (Cat Japan) and consolidates
its financial statements. In February 2008, we sold our 23
percent equity investment in A.S.V. Inc. (ASV) resulting in a $60 million
pretax gain. Accordingly, the March 31, 2009 and December 31,
2008 financial position and equity investment amounts noted below do not
include ASV or Cat Japan.
Combined
financial information of the unconsolidated affiliated companies accounted
for by the equity method (generally on a lag of 3 months or less) was as
follows:
|
Results of Operations of
unconsolidated affiliated companies:
|
Three
Months Ended
|
|||||||
(Millions
of dollars)
|
March
31,
|
|||||||
2009
|
2008
|
|||||||
Sales
|
$
|
123
|
$
|
1,088
|
||||
Cost of
sales
|
91
|
900
|
||||||
Gross
profit
|
$
|
32
|
$
|
188
|
||||
Profit
(loss)
|
$
|
2
|
$
|
17
|
||||
Sales from SCM
to Caterpillar for the three months ended March 31, 2008 of approximately
$443 million are included in the affiliated company sales. In
addition, SCM purchased $73 million of products from Caterpillar during
the three months ended March 31,
2008.
|
Financial
Position of unconsolidated affiliated companies:
|
March
31,
|
December
31,
|
|||||||
(Millions of
dollars)
|
2009
|
2008
|
|||||||
Assets:
|
|||||||||
Current
assets
|
$
|
197
|
$
|
209
|
|||||
Property,
plant and equipment – net
|
226
|
227
|
|||||||
Other
assets
|
23
|
26
|
|||||||
446
|
462
|
||||||||
Liabilities:
|
|||||||||
Current
liabilities
|
246
|
173
|
|||||||
Long-term debt
due after one year
|
40
|
110
|
|||||||
Other
liabilities
|
35
|
35
|
|||||||
321
|
318
|
||||||||
Ownership
|
$
|
125
|
$
|
144
|
|||||
Caterpillar's
investments in unconsolidated affiliated companies:
|
|||||||||
(Millions of
dollars)
|
|||||||||
Investments in
equity method companies
|
$
|
65
|
$
|
66
|
|||||
Plus:
Investments in cost method companies
|
27
|
28
|
|||||||
Total
investments in unconsolidated affiliated companies
|
$
|
92
|
$
|
94
|
|||||
7.
|
Intangible
Assets and Goodwill
|
A.
Intangible assets
Intangible
assets are comprised of the
following:
|
(Dollars
in millions)
|
Weighted
Amortizable Life (Years)
|
March
31,
2009
|
December
31,
2008
|
|||||||
Customer
relationships
|
19
|
$
|
396
|
$
|
397
|
|||||
Intellectual
property
|
10
|
209
|
211
|
|||||||
Other
|
11
|
111
|
112
|
|||||||
Total
finite-lived intangible assets – gross
|
15
|
716
|
720
|
|||||||
Less:
Accumulated amortization
|
(224
|
)
|
(209
|
)
|
||||||
Intangible
assets – net
|
$
|
492
|
$
|
511
|
||||||
Amortization
expense for the three months ended March 31, 2009 and March 31, 2008 was
$18 million and $20 million, respectively. Amortization expense
related to intangible assets is expected to
be:
|
(Millions
of dollars)
|
|||||||||||||||||||||||
2009
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
||||||||||||||||||
$
|
63
|
$
|
58
|
$
|
50
|
$
|
43
|
$
|
34
|
$
|
262
|
||||||||||||
B. Goodwill
|
|
On an annual
basis, we test goodwill for impairment in accordance with Statement of
Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets." Goodwill is tested for impairment between annual tests
whenever events or circumstances make it more likely than not that an
impairment may have occurred.
No goodwill
was acquired, impaired or disposed of during the first quarter of 2009 or
2008. The carrying amount of the goodwill by reportable segment
as of March 31, 2009 and December 31, 2008 was as
follows:
|
(Millions
of dollars)
|
|||||||||
March
31, 2009
|
December
31, 2008
|
||||||||
Building
Construction Products
|
$
|
26
|
$
|
26
|
|||||
Cat
Japan 1
|
228
|
233
|
|||||||
Earthmoving
|
43
|
43
|
|||||||
Excavation
|
39
|
39
|
|||||||
Electric
Power
|
203
|
203
|
|||||||
Large Power
Systems
|
569
|
569
|
|||||||
Marine &
Power Petroleum
|
60
|
60
|
|||||||
Mining
|
27
|
27
|
|||||||
All
Other 2
|
1,061
|
1,061
|
|||||||
Consolidated
Total
|
$
|
2,256
|
$
|
2,261
|
1
|
Change from
December 31, 2008 due to foreign currency translation.
|
|||||||
2
|
Includes all
other operating segments (See Note 13).
|
|||||||
As discussed
in Note 13, our reportable segments were changed in the first quarter
2009. As a result of these changes, goodwill of $43 million,
$39 million and $27 million was reallocated to the newly formed
Earthmoving, Excavation and Mining reportable segments,
respectively. The goodwill was reallocated primarily from the
former reportable segments of EAME Operations, Heavy Construction &
Mining and Infrastructure Development. Additionally, goodwill
of $22 million was reallocated to Building Construction Products from the
All Other category, while goodwill of $478 million was reallocated to the
All Other category from the former Industrial Power Systems reportable
segment. The newly formed Cat Japan reportable segment with
goodwill of $228 million was previously included in the All Other
category.
|
8.
|
Available-For-Sale
Securities
|
Financial
Products, primarily Cat Insurance, has investments in certain debt and
equity securities that have been classified as available-for-sale in
accordance with Statement of Financial Accounting Standards No. 115 (SFAS
115), “Accounting for Certain Investments in Debt and Equity Securities”
and recorded at fair value based upon quoted market prices. These fair
values are included in Other assets in the Consolidated Statement of
Financial Position. Unrealized gains and losses arising from the
revaluation of available-for-sale securities are included, net of
applicable deferred income taxes, in equity (Accumulated other
comprehensive income (loss) in the Consolidated Statement of Financial
Position). Realized gains and losses on sales of investments
are generally determined using the FIFO ("first-in, first-out") method for
debt instruments and the specific identification method for equity
securities. Realized gains and losses are included in Other
income (expense) in the Consolidated Statement of Results of
Operations.
|
March
31, 2009
|
December
31, 2008
|
|||||||||||||||||||||||
Unrealized
|
Unrealized
|
|||||||||||||||||||||||
Pretax
Net
|
Pretax
Net
|
|||||||||||||||||||||||
(Millions
of dollars)
|
Cost
Basis
|
Gains
(Losses)
|
Fair
Value
|
Cost
Basis
|
Gains
(Losses)
|
Fair
Value
|
||||||||||||||||||
Government
debt
|
$
|
325
|
$
|
11
|
$
|
336
|
$
|
333
|
$
|
6
|
$
|
339
|
||||||||||||
Corporate
bonds
|
777
|
(118
|
)
|
659
|
778
|
(116
|
)
|
662
|
||||||||||||||||
Equity
securities
|
109
|
(12
|
)
|
97
|
146
|
(15
|
)
|
131
|
||||||||||||||||
Total
|
$
|
1,211
|
$
|
(119
|
)
|
$
|
1,092
|
$
|
1,257
|
$
|
(125
|
)
|
$
|
1,132
|
||||||||||
During the
three months ended March 31, 2009, we recognized a pretax charge in
accordance with the application of SFAS 115 for “other than temporary”
declines in the market values of securities in the Cat Insurance
investment portfolios of $11 million. This charge was accounted
for as a realized loss and was included in Other income (expense) in the
Consolidated Statement of Results of Operations. The cost basis
of the impacted securities was adjusted to reflect this
charge. During the three months ended March 31, 2008, there
were no charges for “other-than-temporary” declines in the market value of
securities.
|
Investments
in an unrealized loss position that are not other-than-temporarily
impaired:
|
||||||||||||||||||||||||
March
31, 2009
|
||||||||||||||||||||||||
Less
than 12 months 1
|
12
months or more 1
|
Total
|
||||||||||||||||||||||
(Millions
of dollars)
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||||||||
Government
debt
|
$
|
1
|
$
|
—
|
$
|
6
|
$
|
—
|
$
|
7
|
$
|
—
|
||||||||||||
Corporate
bonds
|
226
|
20
|
294
|
102
|
520
|
122
|
||||||||||||||||||
Equity
securities
|
56
|
13
|
3
|
1
|
59
|
14
|
||||||||||||||||||
Total
|
$
|
283
|
$
|
33
|
$
|
303
|
$
|
103
|
$
|
586
|
$
|
136
|
1
|
Indicates
length of time that individual securities have been in a continuous
unrealized loss position.
|
|
Investments
in an unrealized loss position that are not other-than-temporarily
impaired:
|
||||||||||||||||||||||||
December
31, 2008
|
||||||||||||||||||||||||
Less
than 12 months 1
|
12
months or more 1
|
Total
|
||||||||||||||||||||||
(Millions
of dollars)
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||||||||
Government
debt
|
$
|
7
|
$
|
—
|
$
|
19
|
$
|
1
|
$
|
26
|
$
|
1
|
||||||||||||
Corporate
bonds
|
380
|
55
|
157
|
63
|
537
|
118
|
||||||||||||||||||
Equity
securities
|
67
|
15
|
5
|
2
|
72
|
17
|
||||||||||||||||||
Total
|
$
|
454
|
$
|
70
|
$
|
181
|
$
|
66
|
$
|
635
|
$
|
136
|
1
|
Indicates
length of time that individual securities have been in a continuous
unrealized loss position.
|
|
The fair value
of the available-for-sale debt securities at March 31, 2009, by
contractual maturity, is shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to prepay and
creditors may have the right to call
obligations.
|
(Millions
of dollars)
|
Fair
Value
|
|||
Due in one
year or less
|
$
|
38
|
||
Due after one
year through five years
|
$
|
262
|
||
Due after five
years through ten years
|
$
|
191
|
||
Due after ten
years
|
$
|
504
|
||
Proceeds from
sales of investments in debt and equity securities during the three months
ended March 31, 2009 and March 31, 2008 were $87 million and $104
million, respectively. Gross gains of $1 million and $8 million were
included in current earnings for the three months ended March 31, 2009 and
March 31, 2008, respectively. Gross losses of $7 million and $6
million were included in current earnings for the three months ended March
31, 2009 and March 31, 2008,
respectively.
|
9.
|
Postretirement
Benefits
|
A. Pension
and postretirement benefit costs
|
As discussed
in Note 17, first quarter 2009 voluntary and involuntary separation
programs impacted employees participating in certain U.S. and
non-U.S. pension and other postretirement benefit plans. Due to
the significance of these events, certain plans were re-measured as of
January 31, 2009 and March 31, 2009 as follows:
|
||
U.S. Voluntary Separation
Program – plan re-measurements as of January 31, 2009 resulted in
curtailment losses to the U.S. support and management pension and other
postretirement benefit plans of $80 million and $45 million,
respectively.
|
||
Other U.S. Separation
Programs – certain plans were re-measured as of March 31,
2009, resulting in net curtailment losses of $44 million to pension and
$16 million to other postretirement benefit plans. Early
retirement pension benefit costs of $6 million were also
recognized.
|
||
Non-U.S. Separation Programs –
certain plans were re-measured as of March 31, 2009, resulting in
settlement losses of $9 million to pension and curtailment losses of $1
million to other postretirement benefit plans.
|
||
In March 2009,
we amended our U.S. support and management other postretirement benefit
plan. Beginning in 2010, certain retirees age 65 and older will
enroll in individual health plans that work with Medicare and will no
longer participate in a Caterpillar-sponsored group health
plan. In addition, Caterpillar will fund a tax-advantaged
Health Reimbursement Account (HRA) to assist the retirees with medical
expenses. The plan amendment required a plan re-measurement as
of March 31, 2009, which resulted in a decrease in our Liability for
postretirement benefits of $432 million and an increase in Accumulated
other comprehensive income of $272 million after-tax. The
amendment did not impact first quarter other postretirement benefits
expense.
The
re-measurements did not have a material impact on our benefit obligations,
plan assets or funded status.
|
(Millions
of dollars)
|
U.S.
Pension
Benefits
|
Non-U.S.
Pension
Benefits
|
Other
Postretirement
Benefits
|
||||||||||||||||||||||||
March
31,
|
March
31,
|
March
31,
|
|||||||||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
||||||||||||||||||||||
For the three months
ended:
|
|||||||||||||||||||||||||||
Components
of net periodic benefit cost:
|
|||||||||||||||||||||||||||
Service
cost
|
$
|
49
|
$
|
50
|
$
|
24
|
$
|
21
|
$
|
18
|
$
|
22
|
|||||||||||||||
Interest
cost
|
170
|
157
|
36
|
39
|
74
|
77
|
|||||||||||||||||||||
Expected
return on plan assets
|
(198
|
)
|
(220
|
)
|
(43
|
)
|
(50
|
)
|
(32
|
)
|
(34
|
)
|
|||||||||||||||
Amortization
of:
|
|||||||||||||||||||||||||||
Prior service
cost /(credit) 1
|
7
|
8
|
—
|
1
|
1
|
(9
|
)
|
||||||||||||||||||||
Net actuarial
loss /(gain)
|
60
|
33
|
13
|
8
|
5
|
16
|
|||||||||||||||||||||
Net periodic
benefit cost
|
88
|
28
|
30
|
19
|
66
|
72
|
|||||||||||||||||||||
Curtailments,
settlements and special termination benefits 2
|
130
|
—
|
9
|
—
|
62
|
—
|
|||||||||||||||||||||
Total cost
included in operating profit
|
$
|
218
|
$
|
28
|
$
|
39
|
$
|
19
|
$
|
128
|
$
|
72
|
|||||||||||||||
Weighted-average
assumptions used to
determine
net cost:
|
|||||||||||||||||||||||||||
Discount
rate 3
|
6.2
|
%
|
5.8
|
%
|
4.5
|
%
|
5.3
|
%
|
6.1
|
%
|
5.8
|
%
|
|||||||||||||||
Expected
return on plan assets
|
8.5
|
%
|
9.0
|
%
|
6.6
|
%
|
7.6
|
%
|
8.5
|
%
|
9.0
|
%
|
|||||||||||||||
Rate of
compensation increase
|
4.5
|
%
|
4.5
|
%
|
3.7
|
%
|
4.0
|
%
|
4.4
|
%
|
4.4
|
%
|
1
|
Prior service
costs for both pension and other postretirement benefits are generally
amortized using the straight-line method over the average remaining
service period to the full retirement eligibility date of employees
expected to receive benefits from the plan amendment. For other
postretirement benefit plans in which all or almost all of the plan's
participants are fully eligible for benefits under the plan, prior service
costs are amortized using the straight-line method over the remaining life
expectancy of those participants.
|
|
2
|
Curtailments,
settlements and special termination benefits were recognized in Other
operating expenses in the Statement of Results of
Operations.
|
|
3
|
For U.S. plans
impacted by January 31, 2009 re-measurements, a 6.3% discount rate was
utilized.
|
We made $58
million of contributions to our U.S. and non-U.S. pension plans during the
three months ended March 31, 2009 and we currently anticipate additional
contributions of approximately $950 million during the remainder of the
year. Included in the additional $950 million of contributions
is a voluntary contribution to our U.S. plans of an estimated $650 million
of Caterpillar stock, held as treasury stock.
As discussed
in Note 2, we adopted the year-end measurement date provisions of SFAS 158
as of January 1, 2008.
|
B. Defined
contribution benefit costs
|
|
Total company
costs related to U.S. and non-U.S. defined contribution plans were as
follows:
|
Three Months
Ended
March
31,
|
||||||||
(Millions of
dollars)
|
2009
|
2008
|
||||||
U.S. Plans
|
$
|
39
|
$
|
47
|
||||
Non-U.S.
Plans
|
9
|
8
|
||||||
$
|
48
|
$
|
55
|
|||||
10.
|
Guarantees
and Product Warranty
|
We have
provided an indemnity to a third-party insurance company for potential
losses related to performance bonds issued on behalf of Caterpillar
dealers. The bonds are issued to insure governmental agencies
against nonperformance by certain Caterpillar
dealers.
|
We provide
loan guarantees to third-party lenders for financing associated with
machinery purchased by customers. These guarantees have varying
terms and are secured by the machinery. In addition, Cat Financial
participates in standby letters of credit issued to third parties on
behalf of their customers. These standby letters of credit have varying
terms and beneficiaries and are secured by customer assets.
Cat Financial
has provided a limited indemnity to a third-party bank for $24 million
resulting from the assignment of certain leases to that bank. The
indemnity is for the possibility that the insurers of these leases would
become insolvent. The indemnity expires December 15, 2012 and is
unsecured.
No loss has
been experienced or is anticipated under any of the guarantees noted
above. At March 31, 2009 and December 31, 2008, the related liability
was $15 million and $14 million, respectively. The maximum potential
amount of future payments (undiscounted and without reduction for any
amounts that may possibly be recovered under recourse or collateralized
provisions) we could be required to make under the guarantees are as
follows:
|
(Millions
of dollars)
|
March
31,
|
December
31,
|
||||||
2009
|
2008
|
|||||||
Guarantees
with Caterpillar
dealers
|
$
|
94
|
$
|
100
|
||||
Guarantees
with
customers
|
135
|
136
|
||||||
Limited
indemnity
|
24
|
25
|
||||||
Guarantees –
other
|
42
|
43
|
||||||
Total
guarantees
|
$
|
295
|
$
|
304
|
||||
We provide guarantees to
repurchase certain loans of Caterpillar dealers from a financial trust
(“Trust”) that qualifies as a variable interest entity under FIN 46R,
“Consolidation of Variable Interest Entities – An Interpretation of ARB
No. 51 (Revised 2003).” The purpose of the Trust is to provide
short-term working capital loans to Caterpillar dealers. This
Trust issues commercial paper and uses the proceeds to fund its loan
program. We have a loan purchase agreement with the Trust that
obligates us to purchase certain loans that are not paid at
maturity. We receive a fee for providing this guarantee,
which provides a source of
liquidity for the Trust. At December 31, 2008, we determined
that we were the primary beneficiary of the Trust as our guarantee would
require us to absorb a majority of the entity’s expected losses, and
therefore consolidated the financial position of the Trust in the
Consolidated Statement of Financial Position. As of March 31,
2009, the Trust’s assets of $455 million are primarily comprised of loans
to dealers and the liabilities of $455 million are primarily comprised of
commercial paper. No loss has been experienced or is
anticipated under this loan purchase agreement. Our assets are not
available to pay creditors of the Trust, except to the extent we may be
obligated to perform under the guarantee, and assets of the Trust are not
available to pay our
creditors.
|
Our product
warranty liability is determined by applying historical claim rate
experience to the current field population and dealer
inventory. Generally, historical claim rates are based on
actual warranty experience for each product by machine model/engine
size. Specific rates are developed for each product build month
and are updated monthly based on actual warranty claim
experience. During the first quarter of 2009, the liability
related to pre-existing warranties increased $117 million based on higher
than expected actual warranty claim
experience.
|
(Millions
of dollars)
|
2009
|
|||
|
Warranty
liability, January
1
|
$
|
1,201
|
|
Reduction in
liability
(payments)
|
(294
|
)
|
||
Changes in
estimates for pre-existing
warranties
|
117
|
|||
Increase in
liability (new
warranties)
|
203
|
|||
Warranty
liability, March
31
|
$
|
1,227
|
||
(Millions
of dollars)
|
2008
|
|||
Warranty
liability, January
1
|
$
|
1,045
|
||
Reduction in
liability
(payments)
|
(1,074
|
)
|
||
Increase in
liability (new
warranties)
|
1,230
|
|||
Warranty
liability, December
31
|
$
|
1,201
|
||
11.
|
Computations
of Profit Per Share
|
(Dollars in millions except per
share data)
|
Three Months
Ended
March
31,
|
||||||||
2009
|
2008
|
||||||||
I.
|
Profit (loss) for the period
(A)1:
|
$
|
(112
|
)
|
$
|
922
|
|||
II.
|
Determination of shares (in
millions):
|
||||||||
Weighted-average number of common
shares outstanding (B)
|
602.1
|
617.5
|
|||||||
Shares issuable on exercise of
stock awards, net of shares assumed
to be purchased out of proceeds at
average market price
|
—
|
20.4
|
|||||||
Average common shares outstanding
for fully diluted computation (C)
|
602.1
|
637.9
|
|||||||
III.
|
Profit (loss) per share of common
stock:
|
||||||||
Assuming no dilution
(A/B)
|
$
|
(0.19
|
)
|
$
|
1.49
|
||||
Assuming full dilution
(A/C)
|
$
|
(0.19
|
)
|
$
|
1.45
|
1
|
Profit (loss)
attributable to common stockholders.
|
|
SARs and stock
options to purchase 4,476,095 common shares were outstanding for the three
months ended March 31, 2008, but were not included in the computation of
diluted earnings per share because the effect would have been
anti-dilutive. In 2009, the assumed exercise of stock-based
compensation awards was not considered because the impact would be
anti-dilutive.
|
12.
|
Environmental,
Legal and Tax Matters
|
The company is
regulated by federal, state and international environmental laws governing
our use, transport and disposal of substances and control of emissions. In
addition to governing our manufacturing and other operations, these laws
often impact the development of our products, including, but not limited
to, required compliance with air emissions standards applicable to
internal combustion engines. Compliance with these existing laws has not
had a material impact on our capital expenditures, earnings or global
competitive position.
We are engaged
in remedial activities at a number of locations, often with other
companies, pursuant to federal and state laws. When it is
probable we will pay remedial costs at a site and those costs can be
reasonably estimated, the costs are charged against our
earnings. In formulating that estimate, we do not consider
amounts expected to be recovered from insurance companies or
others. The amount recorded for environmental remediation is
not material and is included in Accrued expenses in the Consolidated
Statement of Financial Position.
We cannot
reasonably estimate costs at sites in the very early stages of
remediation. Currently, we have a few sites in the very early
stages of remediation, and there is no more than a remote chance that a
material amount for remedial activities at any individual site, or at all
sites in the aggregate, will be required.
On May 14, 2007, the U.S.
Environmental Protection Agency (EPA) issued a Notice of Violation to
Caterpillar Inc., alleging various violations of Clean Air Act Sections
203, 206 and 207. EPA claims that Caterpillar violated such
sections by shipping engines and catalytic converter after-treatment
devices separately, introducing into commerce a number of uncertified
and/or misbuilt engines, and failing to timely report emissions-related
defects. Caterpillar is currently engaging in negotiations with
EPA to resolve these issues, but it is too early in the process to place
precise estimates on the potential exposure to
penalties. However, Caterpillar is cooperating with EPA and,
based upon initial discussions, and although penalties could potentially
exceed $100,000, management does not believe that this issue will have a
material adverse impact on our consolidated results of operations,
financial position or liquidity.
On February 8, 2009, an incident
at Caterpillar's Joliet, Illinois facility resulted in the release of
approximately 3,000 gallons of wastewater into the Des Plaines River. In
coordination with state and federal authorities, appropriate remediation
measures have been taken. On February 23, the Illinois Attorney General
filed a Complaint in Will County Circuit Court containing seven Counts of
violations of state environmental laws and regulations. Each
Count seeks injunctive relief, as well as statutory penalties of $50,000
per violation and $10,000 per day of violation. In addition, on March 5,
the U.S. EPA served Caterpillar with a Notice of Intent to file a Civil
Administrative Action, indicating EPA’s intent to seek civil penalties for
violations of the Clean Water Act and Oil Pollution Act. The
Notice of Intent seeks up to $16,000 per day of
violation. Neither the Complaint nor the Notice of Intent
quantifies the total number of violations or total number of days during
which violations are alleged to have occurred. At this time, we
do not believe these proceedings will have a material impact on our
consolidated results of operations, financial position or
liquidity.
|
We have
disclosed certain individual legal proceedings in this
filing. Additionally, we are involved in other unresolved legal
actions that arise in the normal course of business. The most prevalent of
these unresolved actions involve disputes related to product design,
manufacture and performance liability (including claimed asbestos and
welding fumes exposure), contracts, employment issues or intellectual
property rights. Although it is not possible to predict with
certainty the outcome of these unresolved legal actions, we believe that
these actions will not individually or in the aggregate have a material
adverse effect on our consolidated results of operations, financial
position or liquidity.
The benefit
for income taxes in the first quarter reflects an actual effective tax
rate of 37.5 percent compared to an estimated annual tax rate of 31.3
percent for first quarter 2008 and actual tax rate for full-year 2008 of
31.3 percent excluding discrete items. A discrete calculation
was used to report the first quarter tax benefit rather than an estimated
annual tax rate as the estimated range of annual profit/(loss) before tax
produces significant variability and makes it difficult to reasonably
estimate the annual effective tax rate. The tax rate applied to
the first quarter loss exceeded the U.S. rate of 35 percent primarily due
to the favorable impact of the U.S. research and development tax credit
offsetting an unfavorable geographic mix of profits and losses from a tax
perspective. If global recessionary conditions continue, it is
reasonably possible that increases in valuation allowances against
deferred tax assets of certain non-U.S. entities may be required in the
next year.
|
13.
|
Segment
Information
|
A.
|
Basis
for segment information
Caterpillar is
organized based on a decentralized structure that has established
responsibilities to continually improve business focus and increase our
ability to react quickly to changes in the global business cycle, customer
needs and competitors' actions. Our current structure uses a matrix
organization comprised of multiple profit and cost center
divisions.
|
In the first
quarter of 2009, our organizational responsibilities were changed
significantly to align the machine product, manufacturing and marketing
organizations. The new divisional structure and revised set of
responsibilities are as follows:
|
§
|
Machine
business divisions are profit centers primarily responsible for product
management, development, marketing, sales and product
support. Machine business divisions also have select
manufacturing responsibilities. These activities were
previously included within product and component divisions, manufacturing
divisions and machinery marketing divisions. Inter-segment
sales of components may also be a source of revenue for these
divisions.
|
|
§
|
Engine
business divisions are profit centers primarily responsible for product
management, development, manufacturing, marketing, sales and product
support. Inter-segment sales of engines and/or components may
also be a source of revenue for these divisions.
|
|
§
|
Component
business divisions are profit centers primarily responsible for product
management, development, manufacturing, marketing and product support for
internal and external customers. Some of these activities were
previously included within product and manufacturing
divisions. Inter-segment sales of components are a source of
revenue for these divisions.
|
|
§
|
Service
business divisions are profit centers primarily responsible for various
services and service-related products to customers including financial,
logistics, remanufacturing and rail services. Inter-segment
sales of services and service-related products are a source of revenue for
some of these divisions.
|
|
§
|
Manufacturing
services divisions are cost centers primarily responsible for the
manufacture of products and/or components within the geographic regions of
the Americas and EAME. Previously manufacturing divisions were profit
centers with inter-segment sales of components, machines and/or engines to
product divisions as the primary sources of revenue.
|
|
§
|
Corporate
services divisions are cost centers primarily responsible for the
performance of certain support functions globally (e.g., Finance, Human
Resources, Information Technology, Legal and Purchasing) and to provide
centralized services.
|
|
§
|
Regional
distribution services divisions are cost centers primarily responsible for
the total portfolio of business with each dealer, the dealer relationship,
dealer development and ensuring the most efficient and effective
distribution of machines, engines and parts. Previously these
functions were primarily performed by machinery marketing
divisions.
|
|
§
|
Centers of
excellence divisions are cost centers primarily responsible for
Caterpillar’s most critical/differentiating processes in the areas of
Marketing and Product Support, Production and Product
Development. Previously these organizations were considered
service divisions.
|
The segment
information for 2008 has been retrospectively adjusted to conform to the
2009 presentation.
|
Our measurement system is complex
and is designed to evaluate performance and to drive continuous
improvement. We have chosen to disclose financial results by
our three principal lines of business (Machinery, Engines and Financial
Products) in our Management’s Discussion and Analysis rather than by
reportable segment based on the following:
|
||
§
|
Our Machinery and Engines
businesses are vertically integrated and there are a significant amount of
inter-segment transactions that make information for individual segments
less meaningful.
|
§
|
A significant
amount of corporate and other costs ($371 million for the first quarter of
2009) are allocated to Machinery and Engines business divisions based on
budgeted external and inter-segment sales. It would be
difficult to provide meaningful information by reportable segment for
these costs as the allocation method does not directly reflect the
benefited segment and the allocation is done in total, not by financial
statement line item. In addition, the budgeted amount is
allocated to segments; any differences from budget are treated as a
reconciling item between reportable segment and consolidated
results.
|
|
§
|
As discussed
below, there are various methodology differences between our segment
reporting and U.S. GAAP. This results in numerous reconciling
items between reportable segment and consolidated results.
|
|
§
|
We have
nineteen operating segments, of which eleven are reportable
segments. Reporting financial information for this number of
businesses, especially considering our level of vertical integration,
would not be meaningful to our financial statement
users.
|
In summary,
due to Caterpillar's high level of integration and our concern that
segment disclosures based on SFAS 131, “Disclosures about Segments of an
Enterprise and Related Information” has limited value for our external
readers, we are continuing to disclose financial results for our three
principal lines of business (Machinery, Engines and Financial Products) in
our Management's Discussion and Analysis beginning on page
35.
|
B.
|
Description
of segments
|
Profit center
divisions meet the SFAS 131 definition of “operating segments”;
however, the cost center divisions do not. Following is a brief
description of our eleven reportable segments and the business activities
included in all other operating segments:
Building Construction
Products: A machine business
division primarily responsible for product management, development,
manufacture, marketing, sales and product support of light construction
machines, forestry machines and select work tools.
|
|
Cat Japan: A business
division primarily responsible for the development of small, medium
and large hydraulic excavators, manufacturing of select machinery and
components, marketing, sales and product support of machinery, engines and
components in Japan.
Earthmoving: A machine business division
primarily responsible for product management, development, marketing,
sales and product support of medium wheel loaders, medium track-type
tractors, track-type loaders, motor graders and
pipelayers. Also responsible for manufacturing of select
machines in Asia.
Electric Power: An
engine business division primarily responsible for product management,
development, manufacture, marketing, sales and product support of
reciprocating engine powered generator sets as well as integrated systems
used in the electric power generation industry.
Excavation: A machine business
division primarily
responsible for product management, development, marketing, sales and
product support of small, medium and large excavators, wheeled excavators
and articulated trucks. Also responsible for manufacturing of
select machines in Asia and articulated trucks.
Large Power
Systems: An engine business division primarily responsible
for product management, development, manufacture and product support of
reciprocating engines supplied to Caterpillar machinery and the electric
power, on-highway vehicle, petroleum, marine and industrial
industries. Also responsible for engine component manufacturing
and the marketing and sales of on-highway vehicle engines.
Logistics: A service business
division primarily responsible for logistics services for Caterpillar
and other companies.
Marine &
Petroleum Power: An engine business
division primarily responsible for product management, development,
marketing, sales and product support of reciprocating engines supplied to
the marine and petroleum industries. Also responsible for
manufacturing of certain reciprocating engines for marine, petroleum and
electric power applications.
|
Mining: A machine business division
primarily responsible for product management, development, marketing,
sales and product support of large track-type tractors, large mining
trucks, underground mining equipment and tunnel boring
equipment. Also responsible for manufacturing of underground
mining equipment and tunnel boring equipment.
Turbines: An engine business
division primarily responsible for product management, development,
manufacture, marketing, sales and product support of turbines and
turbine-related services.
Financing & Insurance
Services: Provides financing to customers and dealers for the
purchase and lease of Caterpillar and other equipment, as well as some
financing for Caterpillar sales to dealers. Financing plans
include operating and finance leases, installment sale contracts, working
capital loans and wholesale financing plans. The division also provides
various forms of insurance to customers and dealers to help support the
purchase and lease of our
equipment.
|
All
Other: Primarily includes activities such as: the
product management, development, marketing, sales and product support of
large wheel loaders, quarry and construction trucks, wheel tractor
scrapers, wheel dozers, compactors and select work tools. Also
responsible for manufacturing of select machines in Asia; the product
management, development, manufacture, marketing, sales and product support
of reciprocating engines used in industrial applications; the product
management, development, manufacture, marketing, sales and product support
of machinery and engine components, electronics and control systems; the
product management, development, manufacture, remanufacture, maintenance
and service of rail-related products and services; remanufacturing of
Caterpillar engines and components and remanufacturing services for other
companies; the product management, development, manufacture, marketing,
sales and product support of paving products. Results for All other
operating segments are included as reconciling items between reportable
segments and consolidated, external
reporting.
|
C.
|
Segment
measurement and reconciliations
|
|
Effective the
first quarter of 2009, we made the following changes to our segment
reporting methodology:
|
||
§
|
Machine
business divisions include actual manufacturing costs and assets from
manufacturing service divisions. Previously these costs were
valued on a manufacturing fee or transfer price basis and manufacturing
assets were included in manufacturing divisions.
|
|
§
|
Business
divisions receive actual costs and assets from corporate services
divisions, regional distribution services divisions and centers of
excellence. Previously these costs were either charged to or
excluded from profit center accountable profit while assets were included
in service divisions. Costs for regional distribution
services divisions and Marketing and Product Support Center of Excellence
are allocated to business divisions based on budgeted external and
inter-segment sales.
|
|
§
|
The majority
of other income and expense items are excluded from segment
results. Previously they had been included.
|
|
§
|
Certain
corporate and other costs are allocated and included in the business
division’s accountable profit at budgeted levels. Any
differences from budget are treated as reconciling
items. Previously all these costs were excluded from
accountable profit. The allocation is based on budgeted
external and inter-segment sales and costs are not assigned to individual
financial statement line items.
|
|
§
|
Interest
expense is not included in Machinery and Engines segment
results. Previously interest expense was imputed (i.e, charged)
to profit centers based on their level of accountable assets.
|
|
§
|
Certain
corporate assets are allocated and included in the business division’s
assets. Previously they were reconciling items between segment
and consolidated reporting.
|
There are
several methodology differences between our segment reporting and our
external reporting. The following is a list of the more
significant methodology differences:
|
||
§
|
Generally,
liabilities are managed at the corporate level and are not included in
segment operations. Segment accountable assets generally include
inventories, receivables and property, plant and equipment.
|
|
§
|
Segment
inventories and cost of sales are valued using a current cost
methodology.
|
§
|
Currency
exposures are generally managed at the corporate level and the effects of
changes in exchange rates on results of operations within the year are not
included in segment results. The net difference created in the
translation of revenues and costs between exchange rates used for U.S.
GAAP reporting and exchange rates used for segment reporting are recorded
as a methodology difference.
|
|
§
|
Postretirement
benefits are split; service and prior service costs are included in
segment results based on plan participation. The remaining
elements of net periodic benefit costs (at budget levels) are allocated to
business divisions based on budgeted external and inter-segment sales (as
part of the corporate cost allocation). Any differences from
budget for the remaining elements are treated as reconciling
items.
|
|
§
|
Interest
expense is not included in Machinery and Engines segment
results.
|
|
§
|
Accountable
profit is determined on a pretax
basis.
|
Reconciling
items are created based on accounting differences between segment
reporting and our consolidated, external reporting. Please refer to
pages 25 to 28 for financial information regarding significant reconciling
items. Most of our reconciling items are self-explanatory given
the above explanations. For the reconciliation of profit
(loss), we have grouped the reconciling items as follows:
|
||
§
|
Corporate costs:
Certain corporate costs are allocated and included in the business
division’s accountable profit at budgeted levels. Any
differences are treated as reconciling items. Previously all
these costs were excluded from accountable profit. These costs
are related to corporate requirements and strategies that are considered
to be for the benefit of the entire organization.
|
|
§
|
Redundancy
costs: Redundancy costs include pension and other
postretirement benefit plan curtailments, settlements and special
termination benefits as well as employee separation charges and are a
reconciling item between accountable profit and consolidated profit before
tax. Table “Reconciliation of Redundancy Costs” on page 27 has been
included to illustrate how segment accountable profit would have been
impacted by the redundancy costs. See Notes 9 and 17 for more
information.
|
|
§
|
Methodology
differences: See previous discussion of significant
accounting differences between segment reporting and consolidated external
reporting.
|
|
§
|
Timing: Timing
differences in the recognition of costs between segment reporting and
consolidated external
reporting.
|
Reportable Segments
Three
Months Ended March 31,
(Millions
of dollars)
|
|||||||||||||||||||||||||||||
2009
|
|||||||||||||||||||||||||||||
External
sales
and
revenues
|
Inter-segment
sales
&
revenues
|
Total
sales and
revenues
|
Depreciation
and
amortization
|
Accountable
profit
(loss)
|
Accountable
assets
at
Mar.
31
|
Capital
expenditures
|
|||||||||||||||||||||||
Building
Construction Products
|
$
|
313
|
$
|
4
|
$
|
317
|
$
|
8
|
$
|
(76
|
)
|
$
|
878
|
$
|
3
|
||||||||||||||
Cat
Japan
|
330
|
377
|
707
|
45
|
(90
|
)
|
2,772
|
45
|
|||||||||||||||||||||
Earthmoving
|
1,083
|
21
|
1,104
|
22
|
(72
|
)
|
2,420
|
20
|
|||||||||||||||||||||
Electric
Power
|
735
|
5
|
740
|
7
|
90
|
947
|
3
|
||||||||||||||||||||||
Excavation
|
703
|
26
|
729
|
15
|
(108
|
)
|
1,518
|
9
|
|||||||||||||||||||||
Large Power
Systems
|
553
|
1,094
|
1,647
|
47
|
80
|
3,012
|
15
|
||||||||||||||||||||||
Logistics
|
177
|
325
|
502
|
27
|
89
|
868
|
13
|
||||||||||||||||||||||
Marine &
Petroleum Power
|
875
|
16
|
891
|
4
|
99
|
812
|
8
|
||||||||||||||||||||||
Mining
|
875
|
37
|
912
|
20
|
93
|
1,562
|
9
|
||||||||||||||||||||||
Turbines
|
811
|
3
|
814
|
15
|
178
|
825
|
9
|
||||||||||||||||||||||
Total
Machinery & Engines
|
$
|
6,455
|
$
|
1,908
|
$
|
8,363
|
$
|
210
|
$
|
283
|
$
|
15,614
|
$
|
134
|
|||||||||||||||
Financing
& Insurance Services
|
823
|
1
|
824
|
180
|
89
|
30,538
|
225
|
||||||||||||||||||||||
Total
|
$
|
7,278
|
$
|
1,909
|
$
|
9,187
|
$
|
390
|
$
|
372
|
$
|
46,152
|
$
|
359
|
|||||||||||||||
2008
|
|||||||||||||||||||||||||||||
External
sales
and
revenues
|
Inter-segment
sales
&
revenues
|
Total
sales and
revenues
|
Depreciation
and
amortization
|
Accountable
profit
(loss)
|
Accountable
assets
at
Dec.
31
|
Capital
expenditures
|
|||||||||||||||||||||||
Building
Construction Products
|
$
|
858
|
$
|
17
|
$
|
875
|
$
|
9
|
$
|
11
|
$
|
878
|
$
|
8
|
|||||||||||||||
Earthmoving
|
1,762
|
37
|
1,799
|
19
|
150
|
2,477
|
40
|
||||||||||||||||||||||
Electric
Power
|
715
|
4
|
719
|
6
|
45
|
1,068
|
7
|
||||||||||||||||||||||
Excavation
|
1,492
|
22
|
1,514
|
13
|
48
|
1,646
|
15
|
||||||||||||||||||||||
Large Power
Systems
|
825
|
1,143
|
1,968
|
43
|
200
|
3,055
|
88
|
||||||||||||||||||||||
Logistics
|
220
|
359
|
579
|
33
|
108
|
971
|
8
|
||||||||||||||||||||||
Marine &
Petroleum Power
|
818
|
11
|
829
|
3
|
67
|
758
|
13
|
||||||||||||||||||||||
Mining
|
896
|
45
|
941
|
7
|
136
|
1,339
|
11
|
||||||||||||||||||||||
Turbines
|
602
|
3
|
605
|
13
|
88
|
943
|
9
|
||||||||||||||||||||||
Total
Machinery & Engines
|
$
|
8,188
|
$
|
1,641
|
$
|
9,829
|
$
|
146
|
$
|
853
|
$
|
13,135
|
$
|
199
|
|||||||||||||||
Financing
& Insurance Services
|
979
|
—
|
979
|
189
|
212
|
33,090
|
309
|
||||||||||||||||||||||
Total
|
$
|
9,167
|
$
|
1,641
|
$
|
10,808
|
$
|
335
|
$
|
1,065
|
$
|
46,225
|
$
|
508
|
|||||||||||||||
Reconciliation
of Sales and revenues:
|
||||||||||||||||
(Millions
of dollars)
|
Machinery
and
Engines
|
Financing
&
Insurance
Services
|
Consolidating
Adjustments
|
Consolidated
Total
|
||||||||||||
Three
Months Ended March 31, 2009:
|
||||||||||||||||
Total external
sales and revenues from reportable
segments
|
$
|
6,455
|
$
|
823
|
$
|
—
|
$
|
7,278
|
||||||||
All other
operating segments
|
2,026
|
—
|
—
|
2,026
|
||||||||||||
Other
|
29
|
(27
|
)
|
(81
|
)
|
1
|
(79
|
)
|
||||||||
Total sales
and revenues
|
$
|
8,510
|
$
|
796
|
$
|
(81
|
)
|
$
|
9,225
|
|||||||
Three
Months Ended March 31, 2008:
|
||||||||||||||||
Total external
sales and revenues from reportable
segments
|
$
|
8,188
|
$
|
979
|
$
|
—
|
$
|
9,167
|
||||||||
All other
operating segments
|
2,734
|
—
|
—
|
2,734
|
||||||||||||
Other
|
57
|
(67
|
)
|
(95
|
)
|
1
|
(105
|
)
|
||||||||
Total sales
and revenues
|
$
|
10,979
|
$
|
912
|
$
|
(95
|
)
|
$
|
11,796
|
1
|
Elimination of
Financial Products revenues from Machinery and
Engines.
|
Reconciliation
of Consolidated profit (loss) before taxes:
|
||||||||||||
(Millions
of dollars)
|
Machinery
and
Engines
|
Financing
&
Insurance
Services
|
Consolidated
Total
|
|||||||||
Three
Months Ended March 31, 2009:
|
||||||||||||
Total
accountable profit from reportable segments
|
$
|
283
|
$
|
89
|
$
|
372
|
||||||
All other
operating segments
|
35
|
—
|
35
|
|||||||||
Cost
centers
|
29
|
—
|
29
|
|||||||||
Corporate
costs
|
102
|
—
|
102
|
|||||||||
Timing
|
(11
|
)
|
—
|
(11
|
)
|
|||||||
Redundancy
costs
|
(547
|
)
|
(11
|
)
|
(558
|
)
|
||||||
Methodology
differences:
|
||||||||||||
Inventory/cost
of sales
|
(46
|
)
|
—
|
(46
|
)
|
|||||||
Postretirement
benefit expense
|
16
|
—
|
16
|
|||||||||
Financing
costs
|
(142
|
)
|
—
|
(142
|
)
|
|||||||
Equity in
profit of unconsolidated affiliated companies
|
(1
|
)
|
—
|
(1
|
)
|
|||||||
Currency
|
(14
|
)
|
—
|
(14
|
)
|
|||||||
Other
methodology differences
|
5
|
1
|
6
|
|||||||||
Total profit
(loss) before taxes
|
$
|
(291
|
)
|
$
|
79
|
$
|
(212
|
)
|
||||
Three
Months Ended March 31, 2008:
|
||||||||||||
Total
accountable profit from reportable segments
|
$
|
853
|
$
|
212
|
$
|
1,065
|
||||||
All other
operating segments
|
411
|
—
|
411
|
|||||||||
Cost
centers
|
(45
|
)
|
—
|
(45
|
)
|
|||||||
Corporate
costs
|
11
|
—
|
11
|
|||||||||
Timing
|
(2
|
)
|
—
|
(2
|
)
|
|||||||
Methodology
differences:
|
||||||||||||
Inventory/cost
of sales
|
29
|
—
|
29
|
|||||||||
Postretirement
benefit expense
|
(23
|
)
|
—
|
(23
|
)
|
|||||||
Financing
costs
|
(73
|
)
|
—
|
(73
|
)
|
|||||||
Equity in
profit of unconsolidated affiliated companies
|
(11
|
)
|
—
|
(11
|
)
|
|||||||
Currency
|
(20
|
)
|
—
|
(20
|
)
|
|||||||
Other
methodology differences
|
(3
|
)
|
2
|
(1
|
)
|
|||||||
Total profit
(loss) before taxes
|
$
|
1,127
|
$
|
214
|
$
|
1,341
|
||||||
Reconciliation
of Redundancy costs:
|
|||||||||||||
As noted
above, redundancy costs are a reconciling item between Accountable profit
(loss) and Consolidated profit (loss) before tax. Had we
included these costs in the segments’ results, costs would have been split
as shown below.
|
|||||||||||||
(Millions
of dollars)
|
Accountable
profit
(loss)
|
Redundancy
costs
|
Accountable
profit
(loss)
with
redundancy
costs
|
||||||||||
Three
Months Ended March 31, 2009:
|
|||||||||||||
Building
Construction Products
|
$
|
(76
|
)
|
$
|
(39
|
)
|
$
|
(115
|
)
|
||||
Cat
Japan
|
(90
|
)
|
(3
|
)
|
(93
|
)
|
|||||||
Earthmoving
|
(72
|
)
|
(55
|
)
|
(127
|
)
|
|||||||
Electric
Power
|
90
|
(21
|
)
|
69
|
|||||||||
Excavation
|
(108
|
)
|
(45
|
)
|
(153
|
)
|
|||||||
Large Power
Systems
|
80
|
(89
|
)
|
(9
|
)
|
||||||||
Logistics
|
89
|
(28
|
)
|
61
|
|||||||||
Marine &
Petroleum Power
|
99
|
(10
|
)
|
89
|
|||||||||
Mining
|
93
|
(50
|
)
|
43
|
|||||||||
Turbines
|
178
|
—
|
178
|
||||||||||
Financing
& Insurance Services
|
89
|
(11
|
)
|
78
|
|||||||||
All other
operating segments
|
35
|
(207
|
)
|
(172
|
)
|
||||||||
Consolidated
Total
|
$
|
407
|
$
|
(558
|
)
|
$
|
(151
|
)
|
|||||
Reconciliation
of Assets:
|
||||||||||||||||
(Millions
of dollars)
|
Machinery
and
Engines
|
Financing
&
Insurance
Services
|
Consolidating
Adjustments
|
Consolidated
Total
|
||||||||||||
March
31, 2009:
|
||||||||||||||||
Total
accountable assets from reportable segments
|
$
|
15,614
|
$
|
30,538
|
$
|
—
|
$
|
46,152
|
||||||||
All other
operating segments
|
8,995
|
—
|
—
|
8,995
|
||||||||||||
Items not
included in segment assets:
|
||||||||||||||||
Cash and
short-term investments
|
2,118
|
1,448
|
—
|
3,566
|
||||||||||||
Intercompany
receivables
|
151
|
1,553
|
(1,704
|
)
|
—
|
|||||||||||
Investment in
Financial Products
|
3,782
|
—
|
(3,782
|
)
|
—
|
|||||||||||
Deferred
income taxes and prepaids
|
4,688
|
290
|
(492
|
)
|
4,486
|
|||||||||||
Intangible
assets and other assets
|
1,264
|
219
|
—
|
1,483
|
||||||||||||
Liabilities
included in segment assets
|
2,766
|
—
|
|
—
|
2,766
|
|||||||||||
Inventory
methodology differences
|
(2,870
|
)
|
—
|
—
|
(2,870
|
)
|
||||||||||
Other
|
143
|
(281
|
)
|
—
|
(138
|
)
|
||||||||||
Total
assets
|
$
|
36,651
|
$
|
33,767
|
$
|
(5,978
|
)
|
$
|
64,440
|
|||||||
December
31, 2008:
|
||||||||||||||||
Total
accountable assets from reportable segments
|
$
|
13,135
|
$
|
33,090
|
$
|
—
|
$
|
46,225
|
||||||||
All other
operating segments
|
12,220
|
—
|
—
|
12,220
|
||||||||||||
Items not
included in segment assets:
|
||||||||||||||||
Cash and
short-term investments
|
1,517
|
1,219
|
—
|
2,736
|
||||||||||||
Intercompany
receivables
|
540
|
76
|
(616
|
)
|
—
|
|||||||||||
Investment in
Financial Products
|
3,788
|
—
|
(3,788
|
)
|
—
|
|||||||||||
Deferred
income taxes and prepaids
|
4,759
|
244
|
(474
|
)
|
4,529
|
|||||||||||
Intangible
assets and other assets
|
1,224
|
29
|
—
|
1,253
|
||||||||||||
Liabilities
included in segment assets
|
2,967
|
—
|
—
|
2,967
|
||||||||||||
Inventory
methodology differences
|
(2,747
|
)
|
—
|
—
|
(2,747
|
)
|
||||||||||
Other
|
876
|
(277
|
)
|
—
|
599
|
|||||||||||
Total
assets
|
$
|
38,279
|
$
|
34,381
|
$
|
(4,878
|
)
|
$
|
67,782
|
|||||||
Reconciliations
of Depreciation and amortization:
|
||||||||||||||||
(Millions
of dollars)
|
Machinery
and
Engines
|
Financing
&
Insurance
Services
|
Consolidating
Adjustments
|
Consolidated
Total
|
||||||||||||
Three
Months Ended March 31, 2009:
|
||||||||||||||||
Total
accountable depreciation and amortization from reportable
segments
|
$
|
210
|
$
|
180
|
$
|
—
|
$
|
390
|
||||||||
Items not
included in segment depreciation and amortization:
|
||||||||||||||||
All other
operating segments
|
110
|
—
|
—
|
110
|
||||||||||||
Cost
centers
|
40
|
—
|
—
|
40
|
||||||||||||
Other
|
(6
|
)
|
—
|
—
|
(6
|
)
|
||||||||||
Total
depreciation and amortization
|
$
|
354
|
$
|
180
|
$
|
—
|
$
|
534
|
||||||||
Three
Months Ended March 31, 2008:
|
||||||||||||||||
Total
accountable depreciation and amortization from reportable
segments
|
$
|
146
|
$
|
189
|
$
|
—
|
$
|
335
|
||||||||
Items not
included in segment depreciation and amortization:
|
||||||||||||||||
All other
operating segments
|
100
|
—
|
—
|
100
|
||||||||||||
Cost
centers
|
42
|
—
|
—
|
42
|
||||||||||||
Other
|
(5
|
)
|
—
|
—
|
(5
|
)
|
||||||||||
Total
depreciation and amortization
|
$
|
283
|
$
|
189
|
$
|
—
|
$
|
472
|
||||||||
Reconciliations
of Capital expenditures:
|
||||||||||||||||
(Millions
of dollars)
|
Machinery
and
Engines
|
Financing
&
Insurance
Services
|
Consolidating
Adjustments
|
Consolidated
Total
|
||||||||||||
Three
Months Ended March 31, 2009:
|
||||||||||||||||
Total
accountable capital expenditures from reportable
segments
|
$
|
134
|
$
|
225
|
$
|
—
|
$
|
359
|
||||||||
Items not
included in segment capital expenditures:
|
||||||||||||||||
All other
operating segments
|
57
|
—
|
—
|
57
|
||||||||||||
Cost
centers
|
35
|
—
|
—
|
35
|
||||||||||||
Other
|
(2
|
)
|
(3
|
)
|
(1
|
)
|
(6
|
)
|
||||||||
Total capital
expenditures
|
$
|
224
|
$
|
222
|
$
|
(1
|
)
|
$
|
445
|
|||||||
Three
Months Ended March 31, 2008:
|
||||||||||||||||
Total
accountable capital expenditures from reportable
segments
|
$
|
199
|
$
|
309
|
$
|
—
|
$
|
508
|
||||||||
Items not
included in segment capital expenditures:
|
||||||||||||||||
All other
operating segments
|
108
|
—
|
—
|
108
|
||||||||||||
Cost
centers
|
34
|
—
|
—
|
34
|
||||||||||||
Other
|
(1
|
)
|
(3
|
)
|
(1
|
)
|
(5
|
)
|
||||||||
Total capital
expenditures
|
$
|
340
|
$
|
306
|
$
|
(1
|
)
|
$
|
645
|
|||||||
14.
|
Fair
Value Measurements
|
We adopted
SFAS 157, “Fair Value Measurements” as of January 1, 2008. See
Note 2 for additional information. SFAS 157 defines fair value
as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants. SFAS 157 also specifies a fair value hierarchy
based upon the observability of inputs used in valuation
techniques. Observable inputs (highest level) reflect market
data obtained from independent sources, while unobservable inputs (lowest
level) reflect internally developed market assumptions. In
accordance with SFAS 157, fair value measurements are classified under the
following hierarchy:
|
||
§
|
Level 1 – Quoted prices for
identical instruments in active markets.
|
|
§
|
Level 2 – Quoted prices
for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived
valuations in which all significant inputs or significant value-drivers
are observable in active markets.
|
|
§
|
Level 3 – Model-derived
valuations in which one or more significant inputs or significant
value-drivers are unobservable.
|
|
When
available, we use quoted market prices to determine fair value, and we
classify such measurements within Level 1. In some cases where
market prices are not available, we make use of observable market based
inputs to calculate fair value, in which case the measurements are
classified within Level 2. If quoted or observable market
prices are not available, fair value is based upon internally developed
models that use, where possible, current market-based parameters such as
interest rates, yield curves and currency rates. These
measurements are classified within Level 3.
Fair value
measurements are classified according to the lowest level input or
value-driver that is significant to the valuation. A
measurement may therefore be classified within Level 3 even though there
may be significant inputs that are readily
observable.
|
SFAS 157
expanded the definition of fair value to include the consideration of
nonperformance risk. Nonperformance risk refers to the risk
that an obligation (either by a counterparty or Caterpillar) will not be
fulfilled. For our financial assets traded in an active market
(Level 1 and certain Level 2), the nonperformance risk is included in the
market price. For certain other financial assets and
liabilities (Level 2 and 3), our fair value calculations have been
adjusted accordingly.
|
Available-for-sale
securities
Our
available-for-sale securities, primarily at Cat Insurance, include a mix
of equity and debt instruments (see Note 8 for additional
information). Fair values for our government debt and equity
securities are based upon valuations for identical instruments in active
markets. Fair values for corporate bonds are based upon models
that take into consideration such market-based factors as recent sales,
risk-free yield curves and prices of similarly rated bonds.
Derivative financial
instruments
The fair value
of interest rate swap derivatives is primarily based on models that
utilize the appropriate market-based forward swap curves and zero-coupon
interest rates to determine discounted cash flows. The fair
value of foreign currency forward and option contracts is based on a
valuation model that discounts cash flows resulting from the differential
between the contract price and the market-based forward rate.
Securitized retained
interests
The fair value
of securitized retained interests is based upon a valuation model that
calculates the present value of future expected cash flows using key
assumptions for credit losses, prepayment rates and discount
rates. These assumptions are based on our historical
experience, market trends and anticipated performance relative to the
particular assets securitized.
Guarantees
The fair value
of guarantees is based upon the premium we would require to issue the same
guarantee in a stand-alone arms-length transaction with an unrelated
party. If quoted or observable market prices are not available, fair value
is based upon internally developed models that utilize current
market-based assumptions.
|
Assets and
liabilities measured at fair value, primarily related to Financial
Products, included in our Consolidated Statement of Financial Position as
of March 31, 2009 and December 31, 2008 are summarized
below:
|
(Millions
of dollars)
|
March
31, 2009
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
Assets
/ Liabilities,
at
Fair Value
|
||||||||||||||
Assets
|
|||||||||||||||||
Available-for-sale
securities (long-term investments)
|
$
|
106
|
$
|
986
|
$
|
—
|
$
|
1,092
|
|||||||||
Derivative
financial instruments, net
|
—
|
423
|
—
|
423
|
|||||||||||||
Securitized
retained interests
|
—
|
—
|
44
|
44
|
|||||||||||||
Total
Assets
|
$
|
106
|
$
|
1,409
|
$
|
44
|
$
|
1,559
|
|||||||||
Liabilities
|
|||||||||||||||||
Guarantees
|
$
|
—
|
$
|
—
|
$
|
15
|
$
|
15
|
|||||||||
Total
Liabilities
|
$
|
—
|
$
|
—
|
$
|
15
|
$
|
15
|
|||||||||
|
|||||||||||||||||
(Millions
of dollars)
|
December
31, 2008
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
Assets
/ Liabilities,
at
Fair Value
|
||||||||||||||
Assets
|
|||||||||||||||||
Available-for-sale
securities (long-term investments)
|
$
|
140
|
$
|
992
|
$
|
—
|
$
|
1,132
|
|||||||||
Derivative
financial instruments, net
|
—
|
625
|
—
|
625
|
|||||||||||||
Securitized
retained interests
|
—
|
—
|
52
|
52
|
|||||||||||||
Total
Assets
|
$
|
140
|
$
|
1,617
|
$
|
52
|
$
|
1,809
|
|||||||||
Liabilities
|
|||||||||||||||||
Guarantees
|
$
|
—
|
$
|
—
|
$
|
14
|
$
|
14
|
|||||||||
Total
Liabilities
|
$
|
—
|
$
|
—
|
$
|
14
|
$
|
14
|
|||||||||
Below are
roll-forwards of assets and liabilities measured at fair value using Level
3 inputs for the three months ended March 31, 2009 and
2008. These instruments, primarily related to Cat Financial,
were valued using pricing models that, in management’s judgment, reflect
the assumptions a marketplace participant would
use.
|
(Millions
of dollars)
|
Securitized
Retained
Interests
|
Guarantees
|
|||||||
Balance at
December 31, 2008
|
$
|
52
|
$
|
14
|
|||||
Gains or
losses included in earnings (realized / unrealized)
|
(21
|
)
|
—
|
||||||
Changes in
Accumulated other comprehensive income (loss)
|
7
|
—
|
|||||||
Purchases,
issuances, and settlements
|
6
|
1
|
|||||||
Balance at
March 31, 2009
|
$
|
44
|
$
|
15
|
|||||
(Millions
of dollars)
|
Securitized
Retained
Interests
|
Guarantees
|
|||||||
Balance at
December 31, 2007
|
$
|
49
|
$
|
12
|
|||||
Gains or
losses included in earnings (realized / unrealized)
|
2
|
—
|
|||||||
Changes in
Accumulated other comprehensive income (loss)
|
(2
|
)
|
—
|
||||||
Purchases,
issuances, and settlements
|
(1
|
)
|
1
|
||||||
Balance at
March 31, 2008
|
$
|
48
|
$
|
13
|
|||||
The amount of
unrealized losses on securitized retained interests included in earnings
for the three months ended March 31, 2009 related to assets still held at
March 31, 2009 was $21 million. The amount of unrealized gains
on securitized retained interests included in earnings for the three
months ended March 31, 2008 related to assets still held at March 31, 2008
was $1 million. These gains and losses were reported in
Revenues of Financial Products in the Consolidated Statement of Results of
Operations.
In addition to the amounts above,
we had impaired loans of $131 million and $108 million as of March 31,
2009 and December 31, 2008, respectively. A loan is considered
impaired when management determines that collection of contractual amounts
due is not probable. In these cases, an allowance for loan
losses is established based primarily on the fair value of associated
collateral. As the collateral’s fair value is based on observable
market prices and/or current appraised values, the impaired loans are
classified as Level 2
measurements.
|
15.
|
Redeemable
Noncontrolling Interest – Caterpillar Japan
Ltd.
|
On August 1, 2008, Shin
Caterpillar Mitsubishi Ltd. (SCM) completed the first phase of a
share redemption plan whereby SCM redeemed half of MHI’s shares in
SCM. This resulted in Caterpillar owning 67 percent of the
outstanding shares of SCM and MHI owning the remaining 33
percent. As part of the share redemption, SCM was renamed
Caterpillar Japan Ltd. (Cat Japan). Both Cat Japan and MHI have
options, exercisable after five years, to require the redemption of the
remaining shares owned by MHI, which if exercised, would make Caterpillar
the sole owner of Cat Japan.
The remaining 33 percent of Cat
Japan owned by MHI has been reported as redeemable noncontrolling interest
and classified as mezzanine equity (temporary equity) in the Consolidated
Statement of Financial Position. The redeemable noncontrolling interest is
reported at its estimated redemption value. Any adjustment to
the redemption value impacts Profit employed in the business, but does not
impact Profit. If the fair value of the redeemable
noncontrolling interest falls below the redemption value, profit available
to common stockholders would be reduced by the difference between the
redemption value and the fair value. This would result in lower
profit in the profit per common share computation in that
period. Reductions impacting the profit per common share
computation may be partially or fully reversed in subsequent periods if
the fair value of the redeemable noncontrolling interest increases
relative to the redemption value. Such increases in profit per
common share would be limited to cumulative prior
reductions. As of March 31, 2009, there has been no change to
the estimated future redemption value, and the fair value of the
redeemable noncontrolling interest has remained greater than the
redemption value.
If worldwide economic conditions
deteriorate further and Cat Japan’s business is negatively impacted, it is
reasonably possible that the fair value of the redeemable noncontrolling
interest may fall below the estimated redemption value in the near
term. Should this occur, profit would be reduced in the profit
per common share computation by the difference between the redemption
value and the fair value. Lower long-term growth rates, reduced
long-term profitability, lower valuation multiples as well as changes in
interest rates, costs, pricing, capital expenditures and general market
conditions may reduce the fair value of the redeemable noncontrolling
interest.
With the
consolidation of Cat Japan’s results of operations, 33 percent of Cat
Japan’s comprehensive income or loss is attributed to the redeemable
noncontrolling interest, impacting its carrying value. Because
the redeemable noncontrolling interest must be reported at its estimated
future redemption value, the impact from attributing the comprehensive
income or loss is offset by adjusting the carrying value to the redemption
value. This adjustment impacts Profit employed in the business,
but not Profit. For the three months ended March 31, 2009, the
carrying value had decreased by $20 million due to Cat Japan’s
comprehensive loss. This resulted in an offsetting $20 million adjustment
to increase the carrying value to the redemption value and a corresponding
reduction to Profit employed in the business. As Cat Japan’s
functional currency is the Japanese Yen, changes in exchange rates affect
the reported amount of the redeemable noncontrolling
interest. At March 31, 2009, the redeemable noncontrolling
interest was $513 million.
|
16.
|
Securitizations
|
Cat Financial
sells certain finance receivables relating to our retail installment sale
contracts and finance leases as part of our asset-backed securitization
program. In addition, Cat Financial has sold interests in
wholesale receivables to third-party commercial paper
conduits. These transactions provide a source of liquidity and
allow for better management of our balance sheet
capacity.
|
Securitized Retail
Installment Sale Contracts and Finance Leases
Cat Financial
periodically sells certain finance receivables relating to retail
installment sale contracts and finance leases to special purpose entities
(SPEs) as part of their asset-backed securitization
program. The SPEs have limited purposes and generally are only
permitted to purchase the finance receivables, issue asset-backed
securities and make payments on the securities. The SPEs only
issue a single series of securities and generally are dissolved when those
securities have been paid in full. The SPEs, typically trusts,
are considered to be qualifying special-purpose entities (QSPEs) and thus,
in accordance with SFAS 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities,"
(SFAS 140) are not consolidated. The QSPEs issue debt to pay
for the finance receivables they acquire from Cat
Financial. The primary source for repayment of the debt is the
cash flows generated from the finance receivables owned by the
QSPEs. The assets of the QSPEs are legally isolated and are not
available to pay the creditors of Cat Financial or any other of their
affiliates. For bankruptcy analysis purposes, Cat Financial has
sold the finance receivables to the QSPEs in a true sale and the QSPEs are
separate legal entities. The investors and the securitization
trusts have no recourse to any of Cat Financial’s other assets for failure
of debtors to pay when due.
Cat Financial
retains interests in the retail finance receivables that are sold through
their asset-backed securitization program. Retained interests
include subordinated certificates, an interest in future cash flows
(excess) and reserve accounts. Retained interests in
securitized assets are classified as available-for-sale securities and are
included in Other assets in the Consolidated Statement of Financial
Position at fair value in accordance with SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Cat
Financial estimates fair value based on the present value of future
expected cash flows using key assumptions for credit losses, prepayment
rates and discount rates. These assumptions are based on historical
experience, market trends and anticipated performance relative to the
particular assets securitized. Cat Financial periodically
reviews the key assumptions and estimates used in determining the fair
value of their retained interests with unrealized gains and losses
recorded in the Consolidated Statement of Financial Position as part of
Accumulated other comprehensive income. If based on current
information and events, it is probable that there has been an adverse
change in estimated cash flows, an "other-than-temporary" impairment is
recorded and included in profit to write down the retained interest to
estimated fair value. Cat Financial retains credit risk in the
retail finance receivables that are sold through Cat Financial’s
asset-backed securitizations because Cat Financial’s retained interests
are subordinate to the investors’ interests. Any credit losses
in the pool of securitized assets would be limited to Cat Financial’s
retained interests.
|
Cat Financial
also retains servicing responsibilities and receives a servicing fee of
approximately one percent of the remaining value of the finance
receivables for their servicing responsibilities.
The fair value
of the retained interests in all securitizations of retail finance
receivables outstanding totaled $44 million and $52 million at March 31,
2009 and December 31, 2008, respectively. Key assumptions used to
determine the fair value of the retained interests as of such dates
were:
|
March
31, 2009
|
December
31, 2008
|
|||||||
Cash flow
weighted-average discount rates on retained
interests
|
13.8 to
21.2
|
%
|
16.7 to
23.3
|
%
|
||||
Weighted-average
maturity
|
26
months
|
28
months
|
||||||
Expected
prepayment rate
|
19.0
|
%
|
19.0
|
%
|
||||
Expected
credit losses
|
1.9 to
4.2
|
%
|
1.7 to
3.1
|
%
|
||||
To estimate the impact on income
due to changes to the key economic assumptions used to estimate the fair
value of residual cash flows in retained interests from retail finance
receivable securitizations, Cat Financial performs a sensitivity analysis
of the fair value of the retained interests by applying a 10 percent and
20 percent adverse change to the individual assumptions. This estimate
does not adjust for other variations that may occur should one of the
assumptions actually change. Accordingly, no assurance can be
given that actual results would be consistent with the results of our
estimate. The effect of a variation in a particular assumption on the fair
value of residual interest in securitization transactions was calculated
without changing any other assumptions and changes in one factor may
result in changes in another. Cat Financial’s sensitivity
analysis indicated that the impact of a 20 percent adverse change in
individual assumptions used to calculate the fair value of all Cat
Financial’s retained interests as of March 31, 2009 and December 31, 2008
would be $11 million or less and $8 million or less,
respectively.
|
During the
three months ended March 31, 2009, the assumptions used to determine the
fair value of Cat Financial’s retained interests in the securitization
transactions were reviewed. The most significant change was an
increase in the credit loss assumption due to the adverse economic
conditions in the U.S. economy. This resulted in a $22 million
impairment charge to the retained interests for the three months ended
March 31, 2009. The impairment charge was recorded in Revenues
of Financial Products on the Consolidated Statement of Results of
Operations.
To maintain
competitiveness in the capital markets and to have effective and efficient
use of alternative funding sources, Cat Financial may from time to time
provide additional reserve support to previously issued asset-backed
securitizations.
|
Sales and Servicing of
Trade Receivables
Our Machinery
and Engines operations generate trade receivables from the sale of
inventory to dealers and customers. Certain of these receivables are sold
to Cat Financial.
Cat Financial
has sold interests in a certain pool of trade receivables through a
revolving structure to third-party commercial paper conduits, asset-backed
commercial paper issuers that are SPEs of the sponsor bank and are not
consolidated by Cat Financial. In accordance with SFAS 140, the transfers
to the conduits are accounted for as sales. Cat Financial services the
sold trade receivables and receives an annual servicing fee of
approximately 0.5% of the average outstanding principal balance.
Consolidated expenses of $2 million and $3 million related to the sale of
trade receivables were recognized for the three months ended March 31,
2009 and 2008, respectively, and are included in Other income (expense) in
the Consolidated Statement of Results of Operations. As of March 31, 2009
and December 31, 2008, the outstanding principal balance of the sold trade
receivables was $240 million.
Cat
Financial’s remaining interest in that pool of trade receivables as of
March 31, 2009 and December 31, 2008 of $990 million and $1,432 million,
respectively, is included in “Receivables-trade and other” in the
Consolidated Statement of Financial Position. The carrying
amount approximated fair value due to the short-term nature of these
receivables.
The cash
collections from these receivables held by Cat Financial, including those
attributable to the third-party conduits, are first applied to satisfy any
obligations of Cat Financial to the third-party conduits. The third-party
conduits have no recourse to Cat Financial’s assets, other than the
remaining interest, for failure of debtors to pay when
due.
|
Cash
flows from sale of trade receivables:
|
||||||||
Three Months
Ended March 31,
|
||||||||
(Millions
of dollars)
|
2009
|
2008
|
||||||
Cash proceeds
from sales of receivables to the conduit
|
$
|
393
|
$
|
396
|
||||
Cash flows
received on the interests that continue to be held
|
2,514
|
2,771
|
||||||
17.
|
Employee
separation charges
|
During the
fourth quarter 2008, we recognized employee separation charges of $30
million in Other operating expenses in the Consolidated Statement of
Results of Operations related to various voluntary and involuntary
separation programs. These programs, impacting 3,085 production
and support and management employees worldwide, were in response to a
sharp decline in sales volume due to the global recession.
During the
first quarter 2009, continued cost reduction efforts in various locations
around the world resulted in additional separation charges of $357
million, recognized in Other operating expenses in the Consolidated
Statement of Results of Operations, related to the following separation
programs:
|
||
U.S. Voluntary Separation
Program - During December 2008, we announced a voluntary separation
program for certain support and management employees based in the United
States. Eligible employees had until January 12, 2009 to
sign-up for the program, and generally until January 31, 2009 to make a
final decision. Participating employees receive severance pay
based on current salary level and years of service. During
first quarter 2009, 2,213 employees accepted the program, the
majority of which separated from Caterpillar by March 31,
2009.
|
Other U.S. Separation Programs
- During the first quarter 2009, we initiated plans to reduce U.S.
based production and support and management positions through a variety of
programs. For support and management employees, these include
involuntary separation programs. For production employees,
these include both voluntary and involuntary separation
programs. During the first quarter 2009, 6,870
employees accepted or were subject to these
programs.
|
Non-U.S. Separation Programs
- During the first quarter 2009, we initiated several other
separation programs outside the U.S. These programs, designed
specific to the laws and regulations of the individual countries,
represent voluntary and involuntary plans for production and support and
management employees. During the first quarter 2009, 3,957
employees accepted or were subject to the various programs.
|
||
Our accounting
for separations is dependent upon how the particular program is
designed. For voluntary programs, eligible separation costs are
recognized at the time of employee acceptance. For involuntary
programs, eligible costs are recognized when management has approved the
program, the affected employees have been properly identified and the
costs are estimable.
The following
table summarizes the 2008 and three months ended March 31, 2009 separation
charges by geographic
region:
|
Machinery
and Engines
|
Financial
Products
|
|||||||||||||||||||||||
(Millions
of dollars)
|
North
America
|
EAME
|
Latin
America
|
Asia
Pacific
|
Total
|
|||||||||||||||||||
2008
Separation charges
|
$
|
4
|
$
|
17
|
$
|
9
|
$
|
—
|
$
|
—
|
$
|
30
|
||||||||||||
2008 Benefit
payments and other adjustments
|
—
|
(12
|
)
|
(7
|
)
|
—
|
—
|
(19
|
)
|
|||||||||||||||
Liability
balance at December 31, 2008
|
$
|
4
|
$
|
5
|
$
|
2
|
$
|
—
|
$
|
—
|
$
|
11
|
||||||||||||
2009
Separation charges
|
$
|
304
|
$
|
24
|
$
|
9
|
$
|
9
|
$
|
11
|
$
|
357
|
||||||||||||
2009 Benefit
payments and other adjustments
|
(205
|
)
|
(22
|
)
|
(9
|
)
|
(6
|
)
|
(7
|
)
|
(249
|
)
|
||||||||||||
Liability
balance at March 31, 2009
|
$
|
103
|
$
|
7
|
$
|
2
|
$
|
3
|
$
|
4
|
$
|
119
|
||||||||||||
The remaining
balances as of March 31, 2009 represent costs for employees that have
either not yet separated from the Company or their full severance has not
yet been paid. The majority of these remaining costs will be
paid by the end of 2009.
The following
table summarizes the number of employees that accepted or were subject
to the programs:
|
First
Quarter
2009
|
2008
|
|||||||
Impacted
employees at beginning of period
|
1,505
|
—
|
||||||
Impacted
employees during the period
|
13,040
|
3,085
|
||||||
Employee
separations during the period
|
(8,749
|
)
|
(1,580
|
)
|
||||
Impacted
employees remaining at the end of period
|
5,796
|
1,505
|
||||||
The majority
of the employees that accepted or were subject to the programs but that
were still employeed as of March 31, 2009 will be separated by the
end of the second quarter 2009.
In addition to the first quarter
2009 separation charges noted above, we recognized $201 million of costs
associated with certain pension and other postretirement benefit plans,
which were also recognized in Other operating expenses in the Consolidated
Statement of Results of Operations. See Note 9 for additional
information.
The separation
charges, made up primarily of cash severance payments, and pension and
other postretirement benefit costs noted above were not assigned to
operating segments. They are included in the reconciliation of
total accountable profit from reportable segments to total profit
before taxes. See Note 13 for additional details surrounding
this reconciliation.
|
|
- Information
on non-GAAP financial measures, including the treatment of redundancy
costs in the first quarter and in the outlook, is included on page
60.
|
|
- Glossary of
terms included on pages 42-43; first occurrence of terms shown in bold
italics.
|
|
||
The chart
above graphically illustrates reasons for the change in Consolidated Sales
and Revenues between first quarter 2008 (at left) and first quarter 2009
(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. The bar entitled Machinery
Volume includes the impact of consolidation of Caterpillar
Japan Ltd. (Cat Japan) sales. Caterpillar management
utilizes these charts internally to visually communicate with the
company’s Board of Directors and employees.
|
Sales
and Revenues by Geographic Region
|
|||||||||||||||||||||||||||||
(Millions of
dollars)
|
Total
|
%
Change
|
North
America
|
%
Change
|
EAME
|
%
Change
|
Asia/
Pacific
|
%
Change
|
Latin
America
|
%
Change
|
|||||||||||||||||||
First
Quarter 2009
|
|||||||||||||||||||||||||||||
Machinery
|
$
|
5,342
|
(29
|
)%
|
$
|
2,216
|
(30
|
)%
|
$
|
1,258
|
(46
|
)%
|
$
|
1,178
|
(2
|
)%
|
$
|
690
|
(16
|
)%
|
|||||||||
Engines 1
|
3,168
|
(8
|
)%
|
1,053
|
(13
|
)%
|
1,235
|
(7
|
)%
|
614
|
10
|
%
|
266
|
(20
|
)%
|
||||||||||||||
Financial
Products 2
|
715
|
(12
|
)%
|
445
|
(13
|
)%
|
120
|
(14
|
)%
|
96
|
17
|
%
|
54
|
(34
|
)%
|
||||||||||||||
$
|
9,225
|
(22
|
)%
|
$
|
3,714
|
(24
|
)%
|
$
|
2,613
|
(31
|
)%
|
$
|
1,888
|
2
|
%
|
$
|
1,010
|
(18
|
)%
|
||||||||||
First
Quarter 2008
|
|||||||||||||||||||||||||||||
Machinery
|
$
|
7,548
|
$
|
3,180
|
$
|
2,344
|
$
|
1,206
|
$
|
818
|
|||||||||||||||||||
Engines 1
|
3,431
|
1,208
|
1,331
|
559
|
333
|
||||||||||||||||||||||||
Financial
Products 2
|
817
|
514
|
139
|
82
|
82
|
||||||||||||||||||||||||
$
|
11,796
|
$
|
4,902
|
$
|
3,814
|
$
|
1,847
|
$
|
1,233
|
1
|
Does not include internal engines
transfers of $436 million and $690 million in first quarter 2009 and 2008,
respectively. Internal engines transfers are valued at prices
comparable to those for unrelated parties.
|
2
|
Does not include internal revenues
earned from Machinery
and Engines of $81
million and $95 million in first quarter 2009 and 2008,
respectively.
|
|
§
|
Excluding the
consolidation of Cat Japan, sales volume decreased $2.450 billion, the
result of the worst worldwide recession in the postwar
period.
|
|
§
|
Price
realization increased $91 million.
|
|
§
|
Currency
decreased sales by $138 million.
|
|
§
|
Geographic mix
between regions (included in price realization) was $2 million
unfavorable.
|
|
§
|
The
consolidation of Cat Japan sales added $291 million to
sales.
|
|
§
|
Recessionary
conditions throughout much of the world caused machine demand to
drop. We allowed dealers to cancel orders to bring their
inventories more in line with reduced demand. Dealers reported
inventory reductions of about $300 million during the first
quarter. During the first quarter of 2008, dealers increased
inventories about $700 million.
|
|
§
|
Absence of the
dealer inventory build that occurred in the first quarter of 2008 combined
with the reduction of $300 million in the first quarter of 2009 accounted
for about $1 billion of the overall decline in
volume.
|
|
§
|
Economic
output in the developed economies of Europe, Japan and the United States
declined substantially. Housing construction collapsed, and
nonresidential construction
declined.
|
|
§
|
Developing
economies, while faring better, weakened. Lower commodity
prices and severe recessions in the developed countries led to large
declines in exports. In addition, policy tightening last year
has started to curtail domestic spending. Output slowed sharply
in many countries and declined in Brazil, Mexico and
Russia.
|
|
§
|
Credit spreads
on emerging market debt were very high, and international banks sharply
curtailed lending to these countries. Those actions caused some
delays and cancellations in major construction projects. As a
result, sales volume declined in the developing regions of Latin
America, Africa/Middle East, Commonwealth of Independent States
(CIS) and Asia/Pacific.
|
|
§
|
Key commodity
prices held near or above investment thresholds, but producers in many
countries cut production. As a result, sales of machines used
in mining declined.
|
|
§
|
Sales volume
decreased $1.027 billion.
|
|
§
|
Price
realization increased $64 million.
|
|
§
|
Currency
decreased sales by $1 million.
|
|
§
|
Sales volume
declined as a result of the severe recession in the United
States.
|
|
§
|
Dealer-reported
inventories were about even with the year-earlier amount in dollars, but
months of supply increased.
|
|
§
|
The U.S.
housing industry has declined for three years. New home prices
declined 15 percent over the past year, and builders held a more than
one-year supply of unsold homes.
|
|
§
|
Orders for
nonresidential building construction declined 47 percent from a year
earlier. Factors depressing construction included weaker
business profits, reduced access to credit, lower occupancy rates and
declining property prices.
|
|
§
|
Infrastructure-related
construction declined 10 percent. State and local governments
have trimmed capital spending in response to rising budget deficits and
increased difficulties in issuing
bonds.
|
|
§
|
Lower
construction contributed to a 26-percent reduction in nonmetals mining and
quarry production. The industry worked at a record-low capacity
utilization, which reduced the need for machine
replacements.
|
|
§
|
Metals mines
increased output 1 percent in response to favorable gold
prices.
|
|
§
|
Coal
production declined about 1 percent, which appeared to result from lower
utility burn, increased utility stockpiles and some slowing in
exports. Spot coal prices were lower than a year
earlier.
|
|
§
|
Oil prices
were down 56 percent from last year, which caused Canadian producers of
nonconventional oil, which includes oil sands, to reduce planned capital
expenditures.
|
|
§
|
Sales volume
declined $998 million.
|
|
§
|
Price
realization increased $6 million.
|
|
§
|
Currency
decreased sales by $94 million.
|
|
§
|
Sales volume
declined sharply due to the severe recession in Europe, the economic
crisis in the CIS and the impact of lower commodity prices on sales in
Africa and the Middle East.
|
|
§
|
Dealers
reported inventory reductions during the quarter, bringing dollar
inventories about even with a year earlier. However,
inventories in months of supply were much
higher.
|
|
§
|
The European
economies continued to decline sharply in the first
quarter. Poor economic conditions led to double-digit sales
declines in most countries.
|
|
§
|
Housing
permits in the euro-zone declined through the end of last year, and U.K.
housing orders dropped 52 percent in the first
quarter. Mortgage interest rates remain relatively high,
unemployment is rising and home prices are declining in several
countries.
|
|
§
|
Nonresidential
construction decreased in both the euro-zone and the United
Kingdom. Corporate bond spreads were higher than normal,
business capacity utilization rates dropped and banks tightened lending
standards for businesses.
|
|
§
|
Machine sales
declined in many countries in Africa and the Middle
East. Problems included lower commodity prices, reduced access
to international bank loans and lower oil
production.
|
|
§
|
Both Turkey
and South Africa raised interest rates in 2008 to reduce inflationary
pressures. As a result, both economies have
weakened. Poor economic conditions caused machine sales to drop
significantly.
|
|
§
|
Sales volume
in the CIS dropped by about half, the result of severe economic crises
gripping Russia and Ukraine. Interest rates were higher than a
year earlier, and both economies declined
rapidly.
|
|
§
|
Sales volume
decreased $309 million.
|
|
§
|
Price
realization increased $12 million.
|
|
§
|
Currency
decreased sales by $22 million.
|
|
§
|
The
consolidation of Cat Japan sales added $291 million to
sales.
|
|
§
|
Dealers
reported inventory reductions from year-end, but inventories at the end of
the quarter were much higher than a year earlier in both dollars and
months of supply.
|
|
§
|
The regional
economy slowed sharply, also contributing to reduced machine
demand. Machine sales declined in most
countries.
|
|
§
|
Many economies
in the region are highly dependent upon exports. Severe
recessions in developed economies caused exports to decline sharply;
exports fell 35 percent in Indonesia, 33 percent in China and 19 percent
in India.
|
|
§
|
In China,
lower exports and the impact of last year’s policy tightening caused the
economy to slow. Industrial production increased only 3.8
percent, down from a 16-percent increase in mid 2008. New
construction slowed, and prices of commercial properties
moderated. Those factors caused machine sales to
decline.
|
|
§
|
Permits for
both housing and nonresidential construction dropped in Australia, with
various indicators down 20 to 40
percent.
|
|
§
|
The Japanese
economy is in a severe recession. In the first quarter, motor
vehicle production dropped 49 percent, exports fell 48 percent and
industrial production decreased 35 percent. Machine sales
declined by more than half as the dismal economy caused businesses to cut
capital goods orders 40 percent.
|
|
§
|
Sales volume
decreased $118 million.
|
|
§
|
Price
realization increased $11 million.
|
|
§
|
Currency
decreased sales by $21 million.
|
|
§
|
While dealers
reported inventory reductions from year-end, inventories remained above
the end of the first quarter 2008 and were up in both dollars and months
of supply.
|
|
§
|
The decline in
dealer inventories accounted for most of the decline in our sales
volume.
|
|
§
|
Sales volume
decreased $254 million.
|
|
§
|
Price
realization increased $134 million.
|
|
§
|
Currency
decreased sales by $143 million.
|
|
§
|
Geographic mix
between regions (included in price realization) was $6 million
unfavorable.
|
|
§
|
Dealer-reported
inventories were up, and months of supply increased as dealer deliveries
started to decline.
|
|
§
|
Sales volume
decreased $212 million.
|
|
§
|
Price
realization increased $58 million.
|
|
§
|
Currency
decreased sales by $1 million.
|
|
§
|
Sales for
on-highway truck applications decreased 46 percent as a result of the
decision to exit the on-highway truck
business.
|
|
§
|
Sales for
petroleum engine applications increased 29 percent due to strong shipments
into gas compression and drilling
applications.
|
|
§
|
Sales for
industrial applications decreased 30 percent as a result of lower demand
from construction and agricultural
customers.
|
|
§
|
Sales volume
decreased $29 million.
|
|
§
|
Price
realization increased $55 million.
|
|
§
|
Currency
decreased sales by $122 million.
|
|
§
|
Sales for
industrial applications decreased 40 percent as a result of lower demand
from construction and agricultural
customers.
|
|
§
|
Sales for
petroleum applications increased 18 percent based on strong shipments of
engines used in offshore drill rigs and for production
applications. Turbine sales and turbine-related services
revenues increased to support oil and gas production
applications.
|
|
§
|
Sales for
electric power applications increased 9 percent, which was the result of
turbine sales to support large power plant
projects.
|
|
§
|
Sales for
marine applications decreased 7 percent due to decreased demand in
workboat and commercial vessels.
|
|
§
|
Sales volume
increased $56 million.
|
|
§
|
Price
realization increased $16 million.
|
|
§
|
Currency
decreased sales by $17 million.
|
|
§
|
Sales for
petroleum applications increased 31 percent as turbine sales increased for
oil and gas production
applications.
|
|
§
|
Sales of
electric power engines increased 37 percent due to continued success of
large gas generator sets sold in India, Australia and New
Zealand. In addition, generator set sales increased in Sri
Lanka, Philippines and Australia.
|
|
§
|
Sales for
industrial applications decreased 36 percent, due to significantly lower
demand from construction and mining
customers.
|
|
§
|
Sales for
marine applications increased 13 percent, with strong demand for workboat
and general-cargo vessels.
|
|
§
|
Sales volume
decreased $75 million.
|
|
§
|
Price
realization increased $11 million.
|
|
§
|
Currency
decreased sales by $3 million.
|
|
§
|
Sales for
on-highway truck applications decreased 67 percent as a result of the
decision to exit the on-highway truck
business.
|
|
§
|
Sales of
electric power engines decreased 28 percent as a result of worsening
economic conditions and reduced availability of
credit.
|
|
§
|
Sales for
petroleum applications were about the same as the first quarter of
2008.
|
|
§
|
A decrease of
$69 million due to the impact of lower interest rates on new and existing
finance receivables was partially offset by growth in average earning
assets of $17 million.
|
|
§
|
Other revenues
at Cat Financial decreased $37 million. The decrease was
primarily due to a $22 million write-down on retained interests related to
the securitized asset portfolio and a $14 million impact from returned or
repossessed equipment.
|
|
||
The chart above graphically
illustrates reasons for the change in Consolidated Operating Profit
between first quarter 2008 (at left) and first quarter 2009 (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/M&E Redundancy includes
the operating profit impact of consolidating adjustments, consolidation of
Cat Japan and Machinery
and Engines other operating expenses which include Machinery and
Engines redundancy costs.
|
Operating
Profit (Loss) by Principal Line of Business
|
||||||||||||||
(Millions of
dollars)
|
First Quarter
2009
|
First Quarter
2008
|
$
Change
|
%
Change
|
||||||||||
Machinery 1
|
$
|
(508
|
)
|
$
|
626
|
$
|
(1,134
|
)
|
(181
|
)%
|
||||
Engines 1
|
297
|
554
|
(257
|
)
|
(46
|
)%
|
||||||||
Financial
Products
|
99
|
195
|
(96
|
)
|
(49
|
)%
|
||||||||
Consolidating
Adjustments
|
(63
|
)
|
(82
|
)
|
19
|
|||||||||
Consolidated Operating Profit
(Loss)
|
$
|
(175
|
)
|
$
|
1,293
|
$
|
(1,468
|
)
|
(114
|
)%
|
1
|
Caterpillar operations are highly
integrated; therefore, the company uses a number of allocations to
determine lines of business operating profit for Machinery and
Engines.
|
|
§
|
Machinery
operating loss was
$508 million compared to an operating profit of $626 million in the first
quarter of 2008. Sharply lower sales volume, $355 million of
redundancy costs and higher manufacturing costs were partially offset by
lower SG&A expenses and improved price
realization.
|
|
§
|
Engines
operating profit of
$297 million was down $257 million, or 46 percent, from first quarter
2008. Redundancy costs of $193 million, higher manufacturing
costs and lower sales volume were partially offset by improved price
realization and lower SG&A expenses. Although total engine
operating profit declined in the first quarter, operating profit for
turbines improved primarily due to higher sales volume and was a
significantly higher proportion of total engine operating
profit.
|
|
§
|
Financial
Products operating
profit of $99 million was down $96 million, or 49 percent, from first
quarter 2008. The decrease was primarily attributable to a $67
million impact from decreased net yield on average earning assets, a $22
million write-down on retained interests related to the securitized asset
portfolio, a $14 million unfavorable impact from returned or repossessed
equipment and an $11 million increase in other operating expenses
primarily due to redundancy costs, partially offset by a $10 million
favorable impact from higher average earning assets and a $10 million
decrease in SG&A
expenses.
|
|
§
|
Interest expense excluding
Financial Products increased $27 million as a result of higher
debt. We have intentionally held more cash than usual as a result of
capital market volatility.
|
|
§
|
Other income/expense was
income of $64 million compared with income of $122 million in first
quarter 2008. The absence of a $60 million gain on the sale of
our equity investment in ASV Inc. in first quarter 2008 and $17 million of
losses related to Cat Insurance’s investment portfolio were partially
offset by a favorable currency impact of $34
million.
|
|
§
|
The benefit for income taxes
in the first quarter reflects an actual effective tax rate of 37.5
percent compared to an estimated annual tax rate of 31.3 percent for first
quarter 2008 and actual tax rate for full-year 2008 of 31.3 percent
excluding discrete items. A discrete calculation was used to
report the first quarter tax benefit rather than an estimated annual tax
rate as the estimated range of annual profit/(loss) before tax produces
significant variability and makes it difficult to reasonably estimate the
annual effective tax rate. The tax rate applied to the first
quarter loss exceeded the U.S. rate of 35 percent primarily due to the
favorable impact of the U.S. research and development tax credit
offsetting an unfavorable geographic mix of profits and losses from a tax
perspective.
|
|
§
|
Equity in profit (loss) of
unconsolidated affiliated companies was income of $1 million
compared with income of $11 million in first quarter 2008. The decrease is
primarily related to the absence of equity profit after the consolidation
of Cat Japan.
|
|
§
|
Profit (loss) attributable to
noncontrolling interests (formerly minority interest) favorably
impacted earnings $29 million from first quarter 2008, primarily due to
adding back 33 percent of Cat Japan’s losses attributable to Mitsubishi
Heavy Industries.
|
1.
|
Caterpillar Japan Ltd. (Cat
Japan) – A Caterpillar subsidiary formerly known as Shin
Caterpillar Mitsubishi Ltd. (SCM). SCM was a 50/50 joint
venture between Caterpillar and Mitsubishi Heavy Industries Ltd. (MHI)
until SCM redeemed one-half of MHI's shares on August 1,
2008. Caterpillar now owns 67 percent of the renamed
entity.
|
2.
|
Caterpillar Production System
(CPS) – The Caterpillar Production System is the common
Order-to-Delivery process being implemented enterprise-wide to achieve our
safety, quality, velocity, earnings and growth goals for 2010 and
beyond.
|
3.
|
Consolidating
Adjustments – Eliminations of transactions between Machinery and
Engines and Financial Products.
|
4.
|
Currency – With respect to sales and
revenues, currency represents the translation impact on sales resulting
from changes in foreign currency exchange rates versus the U.S.
dollar. With respect to operating profit, currency represents
the net translation impact on sales and operating costs resulting from
changes in foreign currency exchange rates versus the U.S.
dollar. Currency includes the impacts on sales and operating
profit for the Machinery and Engines lines of business only; currency
impacts on Financial Products revenues and operating profit are included
in the Financial Products portions of the respective
analyses. With respect to other income/expense, currency
represents the effects of forward and option contracts entered into by the
company to reduce the risk of fluctuations in exchange rates and
the net effect of changes in foreign currency exchange rates on our
foreign currency assets and liabilities for consolidated
results.
|
5.
|
Debt-to-Capital
Ratio – A key measure of financial
strength used by both management and our credit rating
agencies. The metric is a ratio of Machinery and Engines debt
(short-term borrowings plus long-term debt) and redeemable noncontrolling
interest to the sum of Machinery and Engines debt, redeemable
noncontrolling interest and stockholders' equity.
|
6.
|
EAME – Geographic region including
Europe, Africa, the Middle East and the Commonwealth of Independent States
(CIS).
|
7.
|
Earning
Assets – Assets
consisting primarily of total finance receivables net of unearned income,
plus equipment on operating leases, less accumulated depreciation at Cat
Financial.
|
8.
|
Engines – A principal line of
business including the design, manufacture, marketing and sales of engines
for Caterpillar machinery; electric power generation systems; on-highway
vehicles and locomotives; marine, petroleum, construction, industrial,
agricultural and other applications and related parts. Also includes
remanufacturing of Caterpillar engines and a variety of Caterpillar
machinery and engine components and remanufacturing services for other
companies. Reciprocating engines meet power needs ranging from
10 to 21,700 horsepower (8
to more than 16 000 kilowatts). Turbines range from
1,600 to 30,000 horsepower (1 200 to 22 000 kilowatts).
|
9.
|
Financial
Products – A
principal line of business consisting primarily of Caterpillar Financial
Services Corporation (Cat Financial), Caterpillar Insurance Holdings, Inc.
(Cat Insurance) and their respective subsidiaries. Cat
Financial provides a wide range of financing alternatives to customers and
dealers for Caterpillar machinery and engines, Solar gas turbines as well
as other equipment and marine vessels. Cat Financial also
extends loans to customers and dealers. Cat Insurance provides
various forms of insurance to customers and dealers to help support the
purchase and lease of our equipment.
|
10.
|
Latin
America – Geographic
region including Central and South American countries and
Mexico.
|
11.
|
Machinery – A principal line of business
which includes the design, manufacture, marketing and sales of
construction, mining and forestry machinery—track and wheel tractors,
track and wheel loaders, pipelayers, motor graders, wheel
tractor-scrapers, track and wheel excavators, backhoe loaders, log
skidders, log loaders, off-highway trucks, articulated trucks, paving
products, skid steer loaders and related parts. Also includes logistics
services for other companies and the design, manufacture, remanufacture,
maintenance and service of rail-related products.
|
12.
|
Machinery and
Engines (M&E) – Due to the highly integrated
nature of operations, it represents the aggregate total of the Machinery
and Engines lines of business and includes primarily our manufacturing,
marketing and parts distribution operations.
|
13.
|
Manufacturing
Costs – Manufacturing
costs exclude the impacts of currency and represent the volume-adjusted
change for variable costs and the absolute dollar change for period
manufacturing costs. Variable manufacturing costs are defined
as having a direct relationship with the volume of
production. This includes material costs, direct labor and
other costs that vary directly with production volume such as freight,
power to operate machines and supplies that are consumed in the
manufacturing process. Period manufacturing costs support
production but are defined as generally not having a direct relationship
to short-term changes in volume. Examples include machinery and
equipment repair, depreciation on manufacturing assets, facility support,
procurement, factory scheduling, manufacturing planning and operations
management.
|
14.
|
Machinery and
Engines Other Operating Expenses – Comprised primarily of gains
(losses) on disposal of long-lived assets, long-lived asset impairment
charges and employee redundancy costs.
|
15.
|
Price
Realization – The
impact of net price changes excluding currency and new product
introductions. Consolidated price realization includes the
impact of changes in the relative weighting of sales between geographic
regions.
|
16.
|
Sales
Volume – With respect
to sales and revenues, sales volume represents the impact of changes in
the quantities sold for machinery and engines as well as the incremental
revenue impact of new product introductions. With respect to
operating profit, sales volume represents the impact of changes in the
quantities sold for machinery and engines combined with product mix—the
net operating profit impact of changes in the relative weighting of
machinery and engines sales with respect to total
sales.
|
17.
|
6
Sigma – On a technical level, 6 Sigma
represents a measure of variation that achieves 3.4 defects per million
opportunities. At Caterpillar, 6 Sigma represents a much
broader cultural philosophy to drive continuous improvement throughout the
value chain. It is a fact-based, data-driven methodology that
we are using to improve processes, enhance quality, cut costs, grow our
business and deliver greater value to our customers through Black Belt-led
project teams. At Caterpillar, 6 Sigma goes beyond mere process
improvement—it has become the way we work as teams to process business
information, solve problems and manage our business
successfully.
|
|
·
|
The five-year facility of $1.62
billion expires in September
2012.
|
|
·
|
The five-year facility of $2.98
billion expires in September
2011.
|
|
·
|
A 364-day facility of $2.25
billion expires in September
2009.
|
(Millions
of dollars)
|
Consolidated
|
Machinery
and
Engines
|
Financial
Products
|
|||||||||
Credit lines
available:
|
||||||||||||
Global credit
facilities
|
$
|
8,153
|
$
|
2,300
|
1
|
$
|
5,853
|
|||||
Other
external
|
3,913
|
1,085
|
2,828
|
|||||||||
Total credit
lines available
|
12,066
|
3,385
|
8,681
|
|||||||||
Less: Global
credit facilities supporting commercial paper
|
(3,998
|
)
|
(658
|
)
|
(3,340
|
)
|
||||||
Less: Utilized
credit
|
(1,853
|
)
|
(295
|
)
|
(1,558
|
)
|
||||||
Available
credit
|
$
|
6,215
|
$
|
2,432
|
$
|
3,783
|
1
|
Includes $1.3
billion from Credit Facility 2.
|
Strong
financial position - A key measure of Machinery and
Engines financial strength used by both management and our credit rating
agencies is Machinery and Engines’ debt-to-capital
ratio.
Debt-to-capital is defined as short-term borrowings, long-term debt due
within one year, redeemable noncontrolling interest and long-term debt due
after one year (debt) divided by the sum of debt (including redeemable
noncontrolling interest) and stockholders’ equity. Debt also
includes borrowings from Financial Products. The
debt-to-capital ratio for Machinery and Engines was 59.7 percent at March
31, 2009 compared to 57.5 percent at the end of 2008, above our target
range of 35 to 45 percent. In addition to the debt-to-capital
ratios, certain rating agencies have increased their focus on the extent
to which Caterpillar and Cat Financial have cash and cash equivalents and
unused credit lines available to meet short-term debt
requirements. Caterpillar and Cat Financial have been taking
this focus into account when planning for 2009 liquidity
needs. This focus has resulted in higher cash balances and
corresponding increases in the net cost of funds for Caterpillar and Cat
Financial.
|
|
Capital
to support growth - Capital expenditures during the
first quarter of 2009 were $224 million, a decrease of $116 million
compared to the first quarter 2008. We are focusing on
completing in-flight projects and starting only the highest priority new
projects such as Tier 4 emissions, expanding our manufacturing presence in
China and other strategically important investments. We expect
capital expenditures to be about $1.5 billion in 2009, a decline of about
38 percent from 2008.
|
|
Appropriately
funded employee benefit plans - To
proactively address funding obligations, we expect to contribute
approximately $1 billion to our pension plans (in the U.S. and abroad) in
2009. To provide greater financial flexibility, we are planning
to make voluntary contributions of approximately $650 million in
Caterpillar common stock, held as treasury stock. Any company
stock contribution will be made to the U.S. pension plans and is not
expected to exceed 25 million shares. A contribution of 25
million shares would represent a 4.2 percent increase in the total number
of shares outstanding from the 602 million shares outstanding at the end
of first quarter.
|
|
Funding the
U.S. pension plans partially with company stock will have a positive
impact on the funded status of the plans and the company’s cash flow and
improve the company’s debt-to-capital ratio. To the extent that
the plan fiduciaries decide to retain the stock, the plans will benefit
from future dividends and any stock price appreciation.
|
|
Paying
dividends -
Dividends paid totaled $253 million in the first quarter 2009,
representing 42 cents per share. Each quarter, our Board of
Directors reviews the company’s dividend and determines whether to
increase, maintain or decrease the dividend for the applicable
quarter. On a quarterly basis, the Board will evaluate the
financial condition of the company and consider the economic outlook,
corporate cash flow, the company’s liquidity needs, and the health and
stability of global credit markets to determine whether to maintain or
change the quarterly dividend. Decreasing or suspending the
quarterly dividend are potential actions which could be triggered to
improve liquidity and will be reviewed and analyzed as the company focuses
on “trough” management to weather the global economic
recession.
|
|
Common
stock repurchases -
Pursuant to the February 2007 Board-authorized stock repurchase
program, which expires on December 31, 2011, $3.8 billion of the $7.5
billion authorized has been spent through March 31, 2009. As a
result of current economic conditions, we have suspended our stock
repurchase program. Basic shares outstanding as of March 31,
2009 were 602 million.
|
|
·
|
Historical
annualized sector returns over a two-year period are analyzed to estimate
the securities’ fair value over the next two
years.
|
|
·
|
The volatility
factor for the security is applied to the sector historical returns to
further estimate the fair value of the security over the next two
years.
|
|
·
|
Volatility is
a measure of the amount by which the stock price is expected to fluctuate
each year during the expected life of the award and is based on historical
and current implied volatilities from traded options on Caterpillar stock.
The implied volatilities from traded options are impacted by changes in
market conditions. An increase in the volatility would result
in an increase in our expense.
|
|
·
|
The expected
term represents the period of time that awards granted are expected to be
outstanding and is an output of the lattice-based option-pricing model. In
determining the expected term of the award, future exercise and forfeiture
patterns are estimated from Caterpillar employee historical exercise
behavior. These patterns are also affected by the vesting
conditions of the award. Changes in the future exercise
behavior of employees or in the vesting period of the award could result
in a change in the expected term. An increase in the expected
term would result in an increase to our
expense.
|
|
·
|
The
weighted-average dividend yield is based on Caterpillar's historical
dividend yields. As holders of stock-based awards do not
receive dividend payments, this could result in employees retaining the
award for a longer period of time if dividend yields decrease or
exercising the award sooner if dividend yields increase. A
decrease in the dividend yield would result in an increase in our
expense.
|
|
·
|
The risk-free
interest rate is based on the U.S. Treasury yield curve in effect at time
of grant. As the risk-free interest rate increases, the
expected term increases, resulting in an increase in our
expense.
|
|
·
|
The U.S.
expected long-term rate of return on plan assets is based on our estimate
of long-term passive returns for equities and fixed income securities
weighted by the allocation of our plan assets. Based on historical
performance, we increase the passive returns due to our active management
of the plan assets. A similar process is used to determine the rate for
our non-U.S. pension plans. This rate is impacted by changes in general
market conditions, but because it represents a long-term rate, it is not
significantly impacted by short-term market swings. Changes in our
allocation of plan assets would also impact this rate. For example, a
shift to more fixed income securities would lower the rate. A decrease in
the rate would increase our
expense.
|
|
·
|
The assumed
discount rate is used to discount future benefit obligations back to
today's dollars. The U.S. discount rate is based on a benefit
cash flow-matching approach and represents the rate at which our benefit
obligations could effectively be settled as of our measurement date,
December 31. The benefit cash flow-matching approach involves
analyzing Caterpillar's projected cash flows against a high quality bond
yield curve, calculated using a wide population of corporate Aa bonds
available on the measurement date. The very highest and lowest
yielding bonds (top and bottom 10%) are excluded from the
analysis. Prior to 2008, we used the Moody's Aa bond yield as
of our measurement date, November 30, and validated the discount rate
using the benefit cash flow-matching approach. A similar change
was made to determine the assumed discount rate for our most significant
non-U.S. plans. This rate is sensitive to changes in interest rates.
A decrease in the discount rate would increase our obligation and
future expense.
|
|
·
|
The expected
rate of compensation increase is used to develop benefit obligations using
projected pay at retirement. It represents average long-term salary
increases. This rate is influenced by our long-term compensation policies.
An increase in the rate would increase our obligation and
expense.
|
|
·
|
The assumed
health care trend rate represents the rate at which health care costs are
assumed to increase and is based on historical and expected experience.
Changes in our projections of future health care costs due to general
economic conditions and those specific to health care (e.g., technology
driven cost changes) will impact this trend rate. An increase in the trend
rate would increase our obligation and
expense.
|
U.S. Voluntary Separation
Program - During December 2008, we announced a voluntary separation
program for certain support and management employees based in the United
States. Eligible employees had until January 12, 2009 to
sign-up for the plan, and generally until January 31, 2009 to make a final
decision. Participating employees receive severance pay based
on current salary level and years of service. During first
quarter 2009, 2,213 employees accepted the program, the majority of which
separated from Caterpillar by March 31, 2009.
|
|
Other U.S. Separation Programs
- During the first quarter 2009, we initiated plans to reduce U.S.
based production and support and management positions through a variety of
programs. For support and management employees, these included
involuntary separation programs. For production employees,
these included both voluntary and involuntary separation
programs. During the first quarter 2009, 6,870 employees
accepted or were subject to these programs.
|
|
Non-U.S. Separation Programs
- During the first quarter 2009, we initiated several other
separation programs outside the U.S. These programs, designed
specific to the laws and regulations of the individual countries,
represent voluntary and involuntary plans for production and support and
management employees. During the first quarter 2009, 3,957
employees had accepted or were subject to the various
programs.
|
Machinery
and Engines
|
Financial
Products
|
||||||||||||||||||||||
(Millions
of dollars)
|
North
America
|
EAME
|
Latin
America
|
Asia
Pacific
|
Total
|
||||||||||||||||||
2008
Separation charges
|
$
|
4
|
$
|
17
|
$
|
9
|
$
|
—
|
$
|
—
|
$
|
30
|
|||||||||||
2008 Benefit
payments and other adjustments
|
—
|
(12
|
)
|
(7
|
)
|
—
|
—
|
(19
|
)
|
||||||||||||||
Liability
balance at December 31, 2008
|
$
|
4
|
$
|
5
|
$
|
2
|
$
|
—
|
$
|
—
|
$
|
11
|
|||||||||||
2009
Separation charges
|
$
|
304
|
$
|
24
|
$
|
9
|
$
|
9
|
$
|
11
|
$
|
357
|
|||||||||||
2009 Benefit
payments and other adjustments
|
(205
|
)
|
(22
|
)
|
(9
|
)
|
(6
|
)
|
(7
|
)
|
(249
|
)
|
|||||||||||
Liability
balance at March 31, 2009
|
$
|
103
|
$
|
7
|
$
|
2
|
$
|
3
|
$
|
4
|
$
|
119
|
|||||||||||
First
Quarter
2009
|
2008
|
||||||
Impacted
employees at beginning of period
|
1,505
|
—
|
|||||
Impacted
employees during the period
|
13,040
|
3,085
|
|||||
Employee
separations during the period
|
(8,749
|
)
|
(1,580
|
)
|
|||
Impacted
employees remaining at the end of period
|
5,796
|
1,505
|
|||||
|
First
Quarter
2009
|
2009
Outlook
Midpoint 1
|
|||||
Profit (Loss)
per share
|
$
|
(0.19
|
)
|
$
|
0.50
|
||
Per share
redundancy costs
|
$
|
0.58
|
$
|
0.75
|
|||
Profit per
share excluding redundancy costs
|
$
|
0.39
|
$
|
1.25
|
1 |
2009 Sales and
Revenues of $35 billion
|
Caterpillar
Inc.
Supplemental Data for Results of
Operations
For The Three Months Ended March
31, 2009
(Unaudited)
(Millions of
dollars)
|
|||||||||||||||||
Supplemental Consolidating
Data
|
|||||||||||||||||
Machinery
and
|
Financial
|
Consolidating
|
|||||||||||||||
Consolidated
|
Engines 1
|
Products
|
Adjustments
|
||||||||||||||
Sales and
revenues:
|
|||||||||||||||||
Sales of Machinery and
Engines
|
$
|
8,510
|
$
|
8,510
|
$
|
—
|
$
|
—
|
|||||||||
Revenues of Financial
Products
|
715
|
—
|
796
|
(81
|
)
|
2
|
|||||||||||
Total sales and
revenues
|
9,225
|
8,510
|
796
|
(81
|
)
|
||||||||||||
Operating
costs:
|
|||||||||||||||||
Cost of goods
sold
|
7,027
|
7,027
|
—
|
—
|
|||||||||||||
Selling, general and
administrative expenses
|
882
|
760
|
125
|
(3
|
)
|
3
|
|||||||||||
Research and development
expenses
|
388
|
388
|
—
|
—
|
|||||||||||||
Interest expense of Financial
Products
|
279
|
—
|
282
|
(3
|
)
|
4
|
|||||||||||
Other operating (income)
expenses
|
824
|
546
|
290
|
(12
|
)
|
3
|
|||||||||||
Total operating
costs
|
9,400
|
8,721
|
697
|
(18
|
)
|
||||||||||||
Operating profit
(loss)
|
(175
|
)
|
(211
|
)
|
99
|
(63
|
)
|
||||||||||
Interest expense excluding
Financial Products
|
101
|
114
|
—
|
(13
|
)
|
4
|
|||||||||||
Other income
(expense)
|
64
|
34
|
(20
|
)
|
50
|
5
|
|||||||||||
Consolidated profit (loss) before
taxes
|
(212
|
)
|
(291
|
)
|
79
|
—
|
|||||||||||
Provision (benefit) for income
taxes
|
(80
|
)
|
(99
|
)
|
19
|
—
|
|||||||||||
Profit (loss) of consolidated
companies
|
(132
|
)
|
(192
|
)
|
60
|
—
|
|||||||||||
Equity in profit (loss) of
unconsolidated
affiliated
companies
|
1
|
1
|
—
|
—
|
|||||||||||||
Equity in
profit of Financial Products' subsidiaries
|
—
|
56
|
—
|
(56
|
)
|
6
|
|||||||||||
Profit (loss) of consolidated and
affiliated companies
|
(131
|
)
|
(135
|
)
|
60
|
(56
|
)
|
||||||||||
Less: Profit (loss)
attributable to noncontrolling interests
|
(19
|
)
|
(23
|
)
|
4
|
—
|
|||||||||||
Profit (loss) 7
|
$
|
(112
|
)
|
$
|
(112
|
)
|
$
|
56
|
$
|
(56
|
)
|
1
|
Represents
Caterpillar Inc. and its subsidiaries with Financial Products accounted
for on the equity basis.
|
2
|
Elimination of
Financial Products’ revenues earned from Machinery and
Engines.
|
3
|
Elimination of
net expenses recorded by Machinery and Engines paid to Financial
Products.
|
4
|
Elimination of
interest expense recorded between Financial Products and Machinery and
Engines.
|
5
|
Elimination of
discount recorded by Machinery and Engines on receivables sold to
Financial Products and of interest earned between Machinery and Engines
and Financial Products.
|
6
|
Elimination of
Financial Products’ profit due to equity method of
accounting.
|
7
|
Profit (loss)
attributable to common
stockholders.
|
Caterpillar
Inc.
Supplemental Data for Results of
Operations
For The Three Months Ended March
31, 2008
(Unaudited)
(Millions of
dollars)
|
|||||||||||||||||
Supplemental Consolidating
Data
|
|||||||||||||||||
Machinery
and
|
Financial
|
Consolidating
|
|||||||||||||||
Consolidated
|
Engines 1
|
Products
|
Adjustments
|
||||||||||||||
Sales and
revenues:
|
|||||||||||||||||
Sales of Machinery and
Engines
|
$
|
10,979
|
$
|
10,979
|
$
|
—
|
$
|
—
|
|||||||||
Revenues of Financial
Products
|
817
|
—
|
912
|
(95
|
)
|
2
|
|||||||||||
Total sales and
revenues
|
11,796
|
10,979
|
912
|
(95
|
)
|
||||||||||||
Operating
costs:
|
|||||||||||||||||
Cost of goods
sold
|
8,609
|
8,609
|
—
|
—
|
|||||||||||||
Selling, general and
administrative expenses
|
959
|
832
|
134
|
(7
|
)
|
3
|
|||||||||||
Research and development
expenses
|
369
|
369
|
—
|
—
|
|||||||||||||
Interest expense of Financial
Products
|
284
|
—
|
286
|
(2
|
)
|
4
|
|||||||||||
Other operating (income)
expenses
|
282
|
(11
|
)
|
297
|
(4
|
)
|
3
|
||||||||||
Total operating
costs
|
10,503
|
9,799
|
717
|
(13
|
)
|
||||||||||||
Operating
profit
|
1,293
|
1,180
|
195
|
(82
|
)
|
||||||||||||
Interest expense excluding
Financial Products
|
74
|
74
|
—
|
—
|
4
|
||||||||||||
Other income
(expense)
|
122
|
21
|
19
|
82
|
5
|
||||||||||||
Consolidated profit (loss) before
taxes
|
1,341
|
1,127
|
214
|
—
|
|||||||||||||
Provision (benefit) for income
taxes
|
420
|
350
|
70
|
—
|
|||||||||||||
Profit (loss) of consolidated
companies
|
921
|
777
|
144
|
—
|
|||||||||||||
Equity in profit (loss) of
unconsolidated
affiliated
companies
|
11
|
11
|
—
|
—
|
|||||||||||||
Equity in
profit of Financial Products' subsidiaries
|
—
|
139
|
—
|
(139
|
)
|
6
|
|||||||||||
Profit (loss) of consolidated and
affiliated companies
|
932
|
927
|
144
|
(139
|
)
|
||||||||||||
Less: Profit (loss)
attributable to noncontrolling interests
|
10
|
5
|
5
|
—
|
|||||||||||||
Profit (loss) 7
|
$
|
922
|
$
|
922
|
$
|
139
|
$
|
(139
|
)
|
1
|
Represents
Caterpillar Inc. and its subsidiaries with Financial Products accounted
for on the equity basis.
|
2
|
Elimination of
Financial Products’ revenues earned from Machinery and
Engines.
|
3
|
Elimination of
net expenses recorded by Machinery and Engines paid to Financial
Products.
|
4
|
Elimination of
interest expense recorded between Financial Products and Machinery and
Engines.
|
5
|
Elimination of
discount recorded by Machinery and Engines on receivables sold to
Financial Products and of interest earned between Machinery and Engines
and Financial Products.
|
6
|
Elimination of
Financial Products’ profit due to equity method of
accounting.
|
7
|
Profit (loss)
attributable to common
stockholders.
|
Caterpillar
Inc.
Supplemental Data for Financial
Position
At March 31,
2009
(Unaudited)
(Millions of
dollars)
|
||||||||||||||||||
Supplemental Consolidating
Data
|
||||||||||||||||||
Machinery
and
|
Financial
|
Consolidating
|
||||||||||||||||
Consolidated
|
Engines 1
|
Products
|
Adjustments
|
|||||||||||||||
Assets
|
||||||||||||||||||
Current
assets:
|
||||||||||||||||||
Cash and short-term
investments
|
$
|
3,566
|
$
|
2,118
|
$
|
1,448
|
$
|
—
|
||||||||||
Receivables – trade and
other
|
7,779
|
4,799
|
1,903
|
1,077
|
2,3
|
|||||||||||||
Receivables –
finance
|
8,287
|
—
|
11,039
|
(2,752
|
)
|
3
|
||||||||||||
Deferred and refundable income
taxes
|
1,300
|
1,118
|
182
|
—
|
||||||||||||||
Prepaid expenses and other current
assets
|
748
|
477
|
296
|
(25
|
)
|
4
|
||||||||||||
Inventories
|
7,992
|
7,992
|
—
|
—
|
||||||||||||||
Total current
assets
|
29,672
|
16,504
|
14,868
|
(1,700
|
)
|
|||||||||||||
Property, plant and equipment –
net
|
12,342
|
9,298
|
3,044
|
—
|
||||||||||||||
Long-term receivables – trade and
other
|
1,035
|
323
|
285
|
427
|
2,3
|
|||||||||||||
Long-term receivables –
finance
|
13,597
|
—
|
14,053
|
(456
|
)
|
3
|
||||||||||||
Investments in unconsolidated
affiliated companies
|
92
|
92
|
—
|
—
|
|
|||||||||||||
Investments in Financial Products
subsidiaries
|
—
|
3,782
|
—
|
(3,782
|
)
|
5
|
||||||||||||
Noncurrent deferred and refundable
income taxes
|
3,219
|
3,607
|
79
|
(467
|
)
|
6
|
||||||||||||
Intangible
assets
|
492
|
491
|
1
|
—
|
||||||||||||||
Goodwill
|
2,256
|
2,256
|
—
|
—
|
||||||||||||||
Other
assets
|
1,735
|
298
|
1,437
|
—
|
||||||||||||||
Total
assets
|
$
|
64,440
|
$
|
36,651
|
$
|
33,767
|
$
|
(5,978
|
)
|
|||||||||
Liabilities
|
||||||||||||||||||
Current
liabilities:
|
||||||||||||||||||
Short-term
borrowings
|
$
|
6,061
|
$
|
2,674
|
$
|
4,924
|
$
|
(1,537
|
)
|
7
|
||||||||
Accounts
payable
|
3,340
|
3,197
|
281
|
(138
|
)
|
8
|
||||||||||||
Accrued
expenses
|
3,799
|
2,349
|
1,475
|
(25
|
)
|
9
|
||||||||||||
Accrued wages, salaries and
employee benefits
|
827
|
817
|
10
|
—
|
||||||||||||||
Customer
advances
|
1,700
|
1,700
|
—
|
—
|
||||||||||||||
Other current
liabilities
|
998
|
938
|
70
|
(10
|
)
|
6
|
||||||||||||
Long-term debt due within one
year
|
5,364
|
469
|
4,895
|
—
|
||||||||||||||
Total current
liabilities
|
22,089
|
12,144
|
11,655
|
(1,710
|
)
|
|||||||||||||
Long-term debt due after one
year
|
23,466
|
5,735
|
17,761
|
(30
|
)
|
7
|
||||||||||||
Liability for postemployment
benefits
|
9,755
|
9,754
|
1
|
—
|
||||||||||||||
Other
liabilities
|
2,281
|
2,169
|
568
|
(456
|
)
|
6
|
||||||||||||
Total
liabilities
|
57,591
|
29,802
|
29,985
|
(2,196
|
)
|
|||||||||||||
Commitments and
contingencies
|
||||||||||||||||||
Redeemable noncontrolling
interest
|
513
|
513
|
—
|
—
|
||||||||||||||
Stockholders'
equity
|
||||||||||||||||||
Common
stock
|
3,086
|
3,086
|
880
|
(880
|
)
|
5
|
||||||||||||
Treasury
stock
|
(11,214
|
)
|
(11,214
|
)
|
—
|
—
|
||||||||||||
Profit employed in the
business
|
19,694
|
19,694
|
3,031
|
(3,031
|
)
|
5
|
||||||||||||
Accumulated other comprehensive
income (loss)
|
(5,332
|
)
|
(5,332
|
)
|
(193
|
)
|
193
|
5
|
||||||||||
Noncontrolling
interests
|
102
|
102
|
64
|
(64
|
)
|
5
|
||||||||||||
Total stockholders'
equity
|
6,336
|
6,336
|
3,782
|
(3,782
|
)
|
|||||||||||||
Total liabilities, redeemable
noncontrolling
|
||||||||||||||||||
interest and stockholders'
equity
|
$
|
64,440
|
$
|
36,651
|
$
|
33,767
|
$
|
(5,978
|
)
|
1
|
Represents
Caterpillar Inc. and its subsidiaries with Financial Products accounted
for on the equity basis.
|
2
|
Elimination of
receivables between Machinery and Engines and Financial
Products.
|
3
|
Reclassification
of Machinery and Engines’ trade receivables purchased by Cat Financial and
Cat Financial's wholesale inventory receivables.
|
4
|
Elimination of
Machinery and Engines’ insurance premiums that are prepaid to Financial
Products.
|
5
|
Elimination of
Financial Products’ equity which is accounted for by Machinery and Engines
on the equity basis.
|
6
|
Reclassification
reflecting required netting of deferred tax assets / liabilities by taxing
jurisdiction.
|
7
|
Elimination of
debt between Machinery and Engines and Financial
Products.
|
8
|
Elimination of
payables between Machinery and Engines and Financial
Products.
|
9
|
Elimination of
prepaid insurance in Financial Products' accrued
expenses.
|
Caterpillar
Inc.
Supplemental Data for Financial
Position
At December 31,
2008
(Unaudited)
(Millions of
dollars)
|
|||||||||||||||||||
Supplemental Consolidating
Data
|
|||||||||||||||||||
Machinery
and
|
Financial
|
Consolidating
|
|||||||||||||||||
Consolidated
|
Engines 1
|
Products
|
Adjustments
|
||||||||||||||||
Assets
|
|||||||||||||||||||
Current
assets:
|
|||||||||||||||||||
Cash and short-term
investments
|
$
|
2,736
|
$
|
1,517
|
$
|
1,219
|
$
|
—
|
|||||||||||
Receivables – trade and
other
|
9,397
|
6,032
|
545
|
2,820
|
2,3
|
||||||||||||||
Receivables –
finance
|
8,731
|
—
|
12,137
|
(3,406
|
)
|
3
|
|||||||||||||
Deferred and refundable income
taxes
|
1,223
|
1,014
|
209
|
—
|
|||||||||||||||
Prepaid expenses and other current
assets
|
765
|
510
|
280
|
(25
|
)
|
4
|
|||||||||||||
Inventories
|
8,781
|
8,781
|
—
|
—
|
|||||||||||||||
Total current
assets
|
31,633
|
17,854
|
14,390
|
(611
|
)
|
||||||||||||||
Property, plant and equipment –
net
|
12,524
|
9,380
|
3,144
|
—
|
|||||||||||||||
Long-term receivables
– trade and other
|
1,479
|
357
|
549
|
573
|
2,3
|
||||||||||||||
Long-term receivables –
finance
|
14,264
|
—
|
14,867
|
(603
|
)
|
3
|
|||||||||||||
Investments in unconsolidated
affiliated companies
|
94
|
94
|
—
|
—
|
|
||||||||||||||
Investments in Financial Products
subsidiaries
|
—
|
3,788
|
—
|
(3,788
|
)
|
5
|
|||||||||||||
Noncurrent deferred and refundable
income taxes
|
3,311
|
3,725
|
35
|
(449
|
)
|
6
|
|||||||||||||
Intangible
assets
|
511
|
510
|
1
|
—
|
|||||||||||||||
Goodwill
|
2,261
|
2,261
|
—
|
—
|
|||||||||||||||
Other
assets
|
1,705
|
310
|
1,395
|
—
|
|||||||||||||||
Total
assets
|
$
|
67,782
|
$
|
38,279
|
$
|
34,381
|
$
|
(4,878
|
)
|
||||||||||
Liabilities
|
|||||||||||||||||||
Current
liabilities:
|
|||||||||||||||||||
Short-term
borrowings
|
$
|
7,209
|
$
|
1,632
|
$
|
6,012
|
$
|
(435
|
)
|
7
|
|||||||||
Accounts
payable
|
4,827
|
4,654
|
323
|
(150
|
)
|
8
|
|||||||||||||
Accrued
expenses
|
4,121
|
2,621
|
1,526
|
(26
|
)
|
9
|
|||||||||||||
Accrued wages, salaries and
employee benefits
|
1,242
|
1,228
|
14
|
—
|
|||||||||||||||
Customer
advances
|
1,898
|
1,898
|
—
|
—
|
|||||||||||||||
Dividends
payable
|
253
|
253
|
—
|
—
|
|||||||||||||||
Other current
liabilities
|
1,027
|
1,002
|
29
|
(4
|
)
|
6
|
|||||||||||||
Long-term debt due within one
year
|
5,492
|
456
|
5,036
|
—
|
|||||||||||||||
Total current
liabilities
|
26,069
|
13,744
|
12,940
|
(615
|
)
|
||||||||||||||
Long-term debt due after one
year
|
22,834
|
5,766
|
17,098
|
(30
|
)
|
7
|
|||||||||||||
Liability for postemployment
benefits
|
9,975
|
9,975
|
—
|
—
|
|||||||||||||||
Other
liabilities
|
2,190
|
2,080
|
555
|
(445
|
)
|
6
|
|||||||||||||
Total
liabilities
|
61,068
|
31,565
|
30,593
|
(1,090
|
)
|
||||||||||||||
Commitments
and contingencies
|
|||||||||||||||||||
Redeemable noncontrolling
interest
|
524
|
524
|
—
|
—
|
|||||||||||||||
Stockholders'
equity
|
|||||||||||||||||||
Common
stock
|
3,057
|
3,057
|
860
|
(860
|
)
|
5
|
|||||||||||||
Treasury
stock
|
(11,217
|
)
|
(11,217
|
)
|
—
|
—
|
|||||||||||||
Profit employed in the
business
|
19,826
|
19,826
|
2,975
|
(2,975
|
)
|
5
|
|||||||||||||
Accumulated other comprehensive
income (loss)
|
(5,579
|
)
|
(5,579
|
)
|
(108
|
)
|
108
|
5
|
|||||||||||
Noncontrolling
interests
|
103
|
103
|
61
|
(61
|
)
|
5
|
|||||||||||||
Total stockholders'
equity
|
6,190
|
6,190
|
3,788
|
(3,788
|
)
|
||||||||||||||
Total liabilities, redeemable
noncontrolling
|
|||||||||||||||||||
interest and stockholders'
equity
|
$
|
67,782
|
$
|
38,279
|
$
|
34,381
|
$
|
(4,878
|
)
|
1
|
Represents
Caterpillar Inc. and its subsidiaries with Financial Products accounted
for on the equity basis.
|
2
|
Elimination of
receivables between Machinery and Engines and Financial
Products.
|
3
|
Reclassification
of Machinery and Engines’ trade receivables purchased by Cat Financial and
Cat Financial's wholesale inventory receivables.
|
4
|
Elimination of
Machinery and Engines’ insurance premiums that are prepaid to Financial
Products.
|
5
|
Elimination of
Financial Products’ equity which is accounted for by Machinery and Engines
on the equity basis.
|
6
|
Reclassification
reflecting required netting of deferred tax assets / liabilities by taxing
jurisdiction.
|
7
|
Elimination of
debt between Machinery and Engines and Financial
Products.
|
8
|
Elimination of
payables between Machinery and Engines and Financial
Products.
|
9
|
Elimination of
prepaid insurance in Financial Products' accrued
expenses.
|
Caterpillar
Inc.
Supplemental Data for Cash
Flow
For The Three Months Ended March
31, 2009
(Unaudited)
(Millions of
dollars)
|
||||||||||||||||||
Supplemental Consolidating
Data
|
||||||||||||||||||
Machinery
and
|
Financial
|
Consolidating
|
||||||||||||||||
Consolidated
|
Engines 1
|
Products
|
Adjustments
|
|||||||||||||||
Cash flow from operating
activities:
|
||||||||||||||||||
Profit
(loss)
|
$
|
(112
|
)
|
$
|
(112
|
)
|
$
|
56
|
$
|
(56
|
)
|
2
|
||||||
Adjustments for non-cash
items:
|
||||||||||||||||||
Depreciation and
amortization
|
534
|
354
|
180
|
—
|
||||||||||||||
Undistributed profit of Financial
Products
|
—
|
(56
|
)
|
—
|
56
|
3
|
||||||||||||
Other
|
87
|
170
|
(88
|
)
|
5
|
4
|
||||||||||||
Changes in assets and
liabilities:
|
||||||||||||||||||
Receivables - trade and
other
|
1,622
|
718
|
104
|
800
|
4,5
|
|||||||||||||
Inventories
|
764
|
764
|
—
|
—
|
||||||||||||||
Accounts payable and accrued
expenses
|
(1,727
|
)
|
(1,703
|
)
|
(38
|
)
|
14
|
4
|
||||||||||
Customer
advances
|
(179
|
)
|
(179
|
)
|
—
|
—
|
||||||||||||
Other assets – net
|
48
|
(143
|
)
|
170
|
21
|
4
|
||||||||||||
Other liabilities – net
|
(142
|
)
|
(133
|
)
|
8
|
(17
|
)
|
4
|
||||||||||
Net cash provided by (used for)
operating activities
|
895
|
(320
|
)
|
392
|
823
|
|||||||||||||
Cash flow from investing
activities:
|
||||||||||||||||||
Capital expenditures - excluding
equipment leased to others
|
(224
|
)
|
(224
|
)
|
—
|
—
|
||||||||||||
Expenditures for equipment leased
to others
|
(221
|
)
|
—
|
(222
|
)
|
1
|
4
|
|||||||||||
Proceeds from disposals of
property, plant and equipment
|
208
|
24
|
184
|
—
|
||||||||||||||
Additions to finance
receivables
|
(1,789
|
)
|
—
|
(5,795
|
)
|
4,006
|
5
|
|||||||||||
Collections of finance
receivables
|
2,450
|
—
|
6,887
|
(4,437
|
)
|
5
|
||||||||||||
Proceeds from sales of finance
receivables
|
27
|
—
|
420
|
(393
|
)
|
5
|
||||||||||||
Net intercompany
borrowings
|
—
|
401
|
(1,465
|
)
|
1,064
|
6
|
||||||||||||
Investments and acquisitions (net
of cash acquired)
|
—
|
—
|
—
|
—
|
7
|
|||||||||||||
Proceeds from sale of
available-for-sale securities
|
87
|
2
|
85
|
—
|
||||||||||||||
Investments in available-for-sale
securities
|
(58
|
)
|
(2
|
)
|
(56
|
)
|
—
|
|||||||||||
Other – net
|
23
|
15
|
(12
|
)
|
20
|
7
|
||||||||||||
Net cash provided by (used for)
investing activities
|
503
|
216
|
26
|
261
|
||||||||||||||
Cash flow from financing
activities:
|
||||||||||||||||||
Dividends
paid
|
(253
|
)
|
(253
|
)
|
—
|
—
|
||||||||||||
Common stock issued, including
treasury shares reissued
|
—
|
—
|
20
|
(20
|
)
|
7
|
||||||||||||
Payment for stock repurchase
derivative contracts
|
—
|
—
|
—
|
—
|
||||||||||||||
Treasury shares
purchased
|
—
|
—
|
—
|
—
|
||||||||||||||
Excess tax benefit from
stock-based compensation
|
—
|
—
|
—
|
—
|
||||||||||||||
Net intercompany
borrowings
|
—
|
1,465
|
(401
|
)
|
(1,064
|
)
|
6
|
|||||||||||
Proceeds from debt issued
(original maturities greater than three months)
|
4,818
|
121
|
4,697
|
—
|
||||||||||||||
Payments on debt (original
maturities greater than three months)
|
(3,321
|
)
|
(205
|
)
|
(3,116
|
)
|
—
|
|||||||||||
Short-term borrowings – net (original
maturities three months or less)
|
(1,779
|
)
|
(393
|
)
|
(1,386
|
)
|
—
|
|||||||||||
Net cash provided by (used for)
financing activities
|
(535
|
)
|
735
|
(186
|
)
|
(1,084
|
)
|
|||||||||||
Effect of exchange rate changes on
cash
|
(33
|
)
|
(30
|
)
|
(3
|
)
|
—
|
|||||||||||
Increase (decrease) in cash and
short-term investments
|
830
|
601
|
229
|
—
|
||||||||||||||
Cash and short-term investments at
beginning of period
|
2,736
|
1,517
|
1,219
|
—
|
||||||||||||||
Cash and short-term investments at
end of period
|
$
|
3,566
|
$
|
2,118
|
$
|
1,448
|
$
|
—
|
1
|
Represents
Caterpillar Inc. and its subsidiaries with Financial Products accounted
for on the equity basis.
|
2
|
Elimination of
Financial Products profit after tax due to equity method of
accounting.
|
3
|
Non-cash
adjustment for the undistributed earnings from Financial
Products.
|
4
|
Elimination of
non-cash adjustments and changes in assets and liabilities related to
consolidated reporting.
|
5
|
Reclassification
of Cat Financial's cash flow activity from investing to operating for
receivables that arose from the sale of inventory.
|
6
|
Net proceeds
and payments to/from Machinery and Engines and Financial
Products.
|
7
|
Change in
investment and common stock related to Financial
Products.
|
Caterpillar
Inc.
Supplemental Data for Cash
Flow
For The Three Months Ended March
31, 2008
(Unaudited)
(Millions of
dollars)
|
||||||||||||||||||
Supplemental Consolidating
Data
|
||||||||||||||||||
Machinery
and
|
Financial
|
Consolidating
|
||||||||||||||||
Consolidated
|
Engines 1
|
Products
|
Adjustments
|
|||||||||||||||
Cash flow from operating
activities:
|
||||||||||||||||||
Profit
(loss)
|
$
|
922
|
$
|
922
|
$
|
139
|
$
|
(139
|
)
|
2
|
||||||||
Adjustments for non-cash
items:
|
||||||||||||||||||
Depreciation and
amortization
|
472
|
283
|
189
|
—
|
||||||||||||||
Undistributed profit of Financial
Products
|
—
|
(139
|
)
|
—
|
139
|
3
|
||||||||||||
Other
|
128
|
100
|
(70
|
)
|
98
|
4
|
||||||||||||
Changes in assets and
liabilities:
|
||||||||||||||||||
Receivables - trade and
other
|
(455
|
)
|
(289
|
)
|
44
|
(210
|
)
|
4,5
|
||||||||||
Inventories
|
(864
|
)
|
(864
|
)
|
—
|
—
|
||||||||||||
Accounts payable and accrued
expenses
|
463
|
342
|
34
|
87
|
4
|
|||||||||||||
Customer
advances
|
165
|
165
|
—
|
—
|
||||||||||||||
Other assets – net
|
78
|
128
|
(13
|
)
|
(37
|
)
|
4
|
|||||||||||
Other liabilities – net
|
(203
|
)
|
(240
|
)
|
5
|
32
|
4
|
|||||||||||
Net cash provided by (used for)
operating activities
|
706
|
408
|
328
|
(30
|
)
|
|||||||||||||
Cash flow from investing
activities:
|
||||||||||||||||||
Capital expenditures - excluding
equipment leased to others
|
(343
|
)
|
(340
|
)
|
(3
|
)
|
—
|
|||||||||||
Expenditures for equipment leased
to others
|
(302
|
)
|
—
|
(303
|
)
|
1
|
4
|
|||||||||||
Proceeds from disposals of
property, plant and equipment
|
122
|
9
|
113
|
—
|
||||||||||||||
Additions to finance
receivables
|
(3,062
|
)
|
—
|
(8,846
|
)
|
5,784
|
5
|
|||||||||||
Collections of finance
receivables
|
2,301
|
—
|
7,664
|
(5,363
|
)
|
5
|
||||||||||||
Proceeds from sales of finance
receivables
|
46
|
—
|
442
|
(396
|
)
|
5
|
||||||||||||
Net intercompany
borrowings
|
—
|
190
|
2
|
(192
|
)
|
6
|
||||||||||||
Investments and acquisitions (net
of cash acquired)
|
(19
|
)
|
(23
|
)
|
—
|
4
|
7
|
|||||||||||
Proceeds from sale of
available-for-sale securities
|
104
|
7
|
97
|
—
|
||||||||||||||
Investments in available-for-sale
securities
|
(160
|
)
|
(5
|
)
|
(155
|
)
|
—
|
|||||||||||
Other – net
|
192
|
118
|
74
|
—
|
7
|
|||||||||||||
Net cash provided by (used for)
investing activities
|
(1,121
|
)
|
(44
|
)
|
(915
|
)
|
(162
|
)
|
||||||||||
Cash flow from financing
activities:
|
||||||||||||||||||
Dividends
paid
|
(223
|
)
|
(223
|
)
|
—
|
—
|
||||||||||||
Common stock issued, including
treasury shares reissued
|
27
|
27
|
—
|
—
|
7
|
|||||||||||||
Payment for stock repurchase
derivative contracts
|
(38
|
)
|
(38
|
)
|
—
|
—
|
||||||||||||
Treasury shares
purchased
|
(692
|
)
|
(692
|
)
|
—
|
—
|
||||||||||||
Excess tax benefit from
stock-based compensation
|
13
|
13
|
—
|
—
|
||||||||||||||
Net intercompany
borrowings
|
—
|
(2
|
)
|
(190
|
)
|
192
|
6
|
|||||||||||
Proceeds from debt issued
(original maturities greater than three months)
|
3,920
|
62
|
3,858
|
—
|
||||||||||||||
Payments on debt (original
maturities greater than three months)
|
(3,520
|
)
|
(98
|
)
|
(3,422
|
)
|
—
|
|||||||||||
Short-term borrowings – net (original
maturities three months or less)
|
554
|
164
|
390
|
—
|
||||||||||||||
Net cash provided by (used for)
financing activities
|
41
|
(787
|
)
|
636
|
192
|
|||||||||||||
Effect of exchange rate changes on
cash
|
29
|
25
|
4
|
—
|
||||||||||||||
Increase (decrease) in cash and
short-term investments
|
(345
|
)
|
(398
|
)
|
53
|
—
|
||||||||||||
Cash and short-term investments at
beginning of period
|
1,122
|
862
|
260
|
—
|
||||||||||||||
Cash and short-term investments at
end of period
|
$
|
777
|
$
|
464
|
$
|
313
|
$
|
—
|
1
|
Represents
Caterpillar Inc. and its subsidiaries with Financial Products accounted
for on the equity basis.
|
2
|
Elimination of
Financial Products profit after tax due to equity method of
accounting.
|
3
|
Non-cash
adjustment for the undistributed earnings from Financial
Products.
|
4
|
Elimination of
non-cash adjustments and changes in assets and liabilities related to
consolidated reporting.
|
5
|
Reclassification
of Cat Financial's cash flow activity from investing to operating for
receivables that arose from the sale of inventory.
|
6
|
Net proceeds
and payments to/from Machinery and Engines and Financial
Products.
|
7
|
Change in
investment and common stock related to Financial
Products.
|
§
|
Economic
activity has dropped over the past six months. While the rate
of decline seems to be moderating, world economic output is likely to fall
further.
|
§
|
Governments
have responded with almost $4 trillion in spending programs, with about
$1.8 trillion slated for infrastructure construction. These
programs should help construction spending later this year. In
addition, we expect that governments are likely to announce additional
programs.
|
§
|
Economic
problems started in August 2007 when credit spreads widened and some
financial markets deteriorated. Higher credit spreads and
tighter lending standards worked to shrink the world economy to match
available credit. While credit markets have improved, credit
spreads remain elevated and banks continue to tighten lending
standards.
|
§
|
Recovery will
require a halt in asset price deflation and increasing available credit,
which means continued easing of monetary policies. Central
banks have dropped interest rates to record lows in many countries, often
near zero, and some have taken the next step of increasing money
growth.
|
§
|
Developing
countries outperformed developed countries throughout this cycle, and some
of these countries could be the first to recover. In
particular, China aggressively eased economic policies and has enacted
infrastructure stimulus, with better growth expected in coming
quarters.
|
§
|
Commodity
prices have recently strengthened and could allow producing countries,
particularly those earning surpluses, to rebound
quickly.
|
§
|
Developed
countries are in severe recessions and have cautiously eased
policies. The United States was the first to enter recession
and should be the first developed country to recover, probably late this
year.
|
§
|
North American
economies are expected to decline by at least 2.5 percent in 2009, with
the United States beginning to improve late in the
year.
|
§
|
The European
economy should decline nearly 2 percent this year. Recessions
in both the euro-zone and United Kingdom will likely last most of the
year, making these recessions the worst in the postwar
period.
|
§
|
The Japanese
economy should decline at least 3.5 percent this year, making the
recession the worst in the postwar
period.
|
§
|
Economic
growth in the developing economies should average about 1.5 percent in
2009, the slowest since at least 1970, and an abrupt change from more than
5-percent growth in 2008.
|
§
|
Lower
production to levels below expected end-user demand to help dealers lower
their inventories.
|
§
|
Reduce cost
levels and improve cash flow.
|
§
|
Strengthen our
financial position, significantly reduce inventory and improve
liquidity.
|
§
|
Continue to
invest for the future in research and development and select new
facilities.
|
§
|
We expect to
lower inventory by about $3 billion in 2009 and reduced it by $789 million
in the first quarter. Inventory management is a key element of
the Caterpillar Production System using 6 Sigma, and we are pleased with
the traction we are gaining.
|
§
|
We expect
dealers to reduce their new machine inventory about $2 billion. Dealers
reduced their new machine inventory by about $300 million during the first
quarter.
|
§
|
Significant
reduction in capital expenditures for
2009.
|
§
|
Suspension of
Caterpillar stock repurchases.
|
§
|
Authorization
by the Caterpillar Board of Directors to make voluntary contributions of
approximately $650 million in Caterpillar common stock to U.S. pension
plans to improve the funded status of the
plans.
|
§
|
Maintenance of
a high level of cash as a result of volatile credit
markets.
|
§
|
We are
forecasting improved price realization for 2009 and realized $225 million
in the first quarter.
|
§
|
Overall
material costs for 2009 are expected to be about the same as
2008.
|
§
|
Sharp declines
in overtime work. Factory overtime is a key element of volume
flexibility, and many facilities were working high levels of overtime
throughout most of 2008.
|
§
|
Thousands of
employees at facilities around the world are being affected by temporary
layoffs and full- and partial-plant
shutdowns.
|
§
|
Suspension of
salary increases for most support and management
employees.
|
§
|
Elimination of
short-term incentive compensation based on the current profit outlook
range.
|
§
|
Significant
reductions in total compensation for executives/senior
managers.
|
§
|
Excluding Cat
Japan, Machinery and Engines SG&A expenses are expected to decline
more than 20 percent. Research and development expenses are
forecast to decline about 15 percent with spending in 2009 primarily
focused on new products to meet Tier 4 regulatory emissions requirements
and other key product development
programs.
|
§
|
Financial
Products profit before tax is expected to decline by about 40 percent in
2009 as a result of higher liquidity costs and the resulting tighter
spreads between the cost of borrowing and Cat Financial’s lending
rates.
|
Period
|
Total
Number
of
Shares
Purchased 1
|
Average
Price
Paid
per Share
|
Total
Number
of
Shares Purchased Under the Program
|
Approximate
Dollar Value of Shares that may yet be Purchased under the
Program
|
|||||||
January 1-31,
2009
|
37,559
|
$
|
46.42
|
NA
|
NA
|
||||||
February 1-28,
2009
|
52,294
|
$
|
30.22
|
NA
|
NA
|
||||||
March 1-31,
2009
|
10,488
|
$
|
23.09
|
NA
|
NA
|
||||||
Total
|
100,341
|
$
|
35.54
|
|
1
|
Represents
shares delivered back to issuer for the payment of taxes resulting from
the exercise of stock options by employees and
Directors.
|
Item
6. Exhibits
|
|
3.1
|
Restated
Certificate of Incorporation (incorporated by reference from Exhibit 3(i)
to the Form 10-Q filed for the quarter ended March 31,
1998).
|
3.2
|
Bylaws amended and restated as of
February 11, 2004 (incorporated by reference from Exhibit 3.3 to
the Form 10-Q filed for the quarter ended March 31,
2004).
|
4.1
|
Indenture
dated as of May 1, 1987, between the Registrant and The First
National Bank of Chicago, as Trustee (incorporated by reference from
Exhibit 4.1 to Form S-3 (Registration No. 333-22041) filed
February 19, 1997).
|
4.2
|
First
Supplemental Indenture, dated as of June 1, 1989, between Caterpillar
Inc. and The First National Bank of Chicago, as Trustee (incorporated by
reference from Exhibit 4.2 to Form S-3 (Registration
No. 333-22041) filed February 19, 1997).
|
4.3
|
Appointment of
Citibank, N.A. as Successor Trustee, dated October 1, 1991, under the
Indenture, as supplemented, dated as of May 1, 1987 (incorporated by
reference from Exhibit 4.3 to Form S-3 (Registration
No. 333-22041) filed February 19, 1997).
|
4.4
|
Second
Supplemental Indenture, dated as of May 15, 1992, between Caterpillar
Inc. and Citibank, N.A., as Successor Trustee (incorporated by reference
from Exhibit 4.4 to Form S-3 (Registration No. 333-22041)
filed February 19, 1997).
|
4.5
|
Third
Supplemental Indenture, dated as of December 16, 1996, between
Caterpillar Inc. and Citibank, N.A., as Successor Trustee (incorporated by
reference from Exhibit 4.5 to Form S-3 (Registration
No. 333-22041) filed February 19, 1997).
|
4.6
|
Tri-Party
Agreement, dated as of November 2, 2006, between Caterpillar Inc.,
Citibank, N.A. and U.S. Bank National Association appointing U.S. Bank as
Successor Trustee under the Indenture dated as of May 1, 1987, as
amended and supplemented (incorporated by reference from Exhibit 4.6 to
the 2006 Form 10-K).
|
4.7
|
Form of Global
Note used in connection with Caterpillar's issuance and sale of 7.000
percent Notes due 2013 and 7.900 percent Notes due 2018 in December, 2008
(incorporated by reference from Exhibit 4.1 to Form 8-K filed December 5,
2008).
|
4.8
|
Form of Global
Debenture used in connection with Caterpillar's issuance and sale of 8.250
percent Debentures due 2038 in December, 2008 (incorporated by reference
from Exhibit 4.2 to Form 8-K filed December 5, 2008).
|
10.1
|
Caterpillar
Inc. 1996 Stock Option and Long-Term Incentive Plan amended and restated
through fourth amendment (incorporated by reference from Exhibit 10.1 to
the 2008 Form 10-K).
|
10.2
|
Caterpillar
Inc. 2006 Long-Term Incentive Plan as amended and restated through fifth
amendment (incorporated by reference from Exhibit 10.2 to the 2008 Form
10-K).
|
10.3
|
Supplemental
Pension Benefit Plan, as amended and restated January 2003 (incorporated
by reference from Exhibit 10.3 to the 2004 Form 10-K).
|
10.4
|
Supplemental
Employees' Investment Plan, as amended and restated through December 1,
2002 (incorporated by
reference from Exhibit 10.4 to the 2002 Form
10-K).
|
10.5
|
Caterpillar
Inc. Executive Incentive Compensation Plan, effective as of January 1,
2002 (incorporated by
reference from Exhibit 10.5 to the 2002 Form
10-K).
|
10.6
|
Directors'
Deferred Compensation Plan, as amended and restated through January 1,
2005 (incorporated by reference from Exhibit 10.6 to the 2006 Form
10-K).
|
10.7
|
Directors'
Charitable Award Program, as amended and restated through April 1, 2008
(incorporated by reference from Exhibit 10.7 to the 2008 Form
10-K).
|
10.8
|
Deferred
Employees' Investment Plan, as amended and restated through February 16,
2005 (incorporated by reference as Exhibit 10.8 to the 2005 Form
10-K).
|
10.9
|
Five-Year
Credit Agreement dated September 21, 2006 (2006 Five-Year Credit
Agreement) among Caterpillar Inc., Caterpillar Financial Services
Corporation, Caterpillar International Finance p.l.c. and Caterpillar
Finance Corporation, the Banks named therein, Citibank, N.A., The Bank of
Tokyo-Mitsubishi UFJ, Ltd., Citibank International plc, ABN AMRO Bank
N.V., Bank of America, N.A., Barclays Bank PLC, J.P. Morgan Securities,
Inc., Société Générale and Citigroup Global Markets Inc. (incorporated by
reference from Exhibit 99.1 to Form 8-K filed September 26,
2006).
|
10.10
|
Japan Local
Currency Addendum to the 2006 Five-Year Credit Agreement among Caterpillar
Financial Services Corporation, Caterpillar Finance Corporation, the Japan
Local Currency Banks named therein, Citibank, N.A. and The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (incorporated by reference from Exhibit 99.2 to
Form 8-K filed September 26, 2006).
|
10.11
|
Local Currency
Addendum to the 2006 Five-Year Credit Agreement among Caterpillar
Financial Services Corporation, Caterpillar International Finance p.l.c.,
the Local Currency Banks named therein, Citibank, N.A., and
Citibank International plc (incorporated by reference from Exhibit 99.3 to
Form 8-K filed September 26, 2006).
|
10.12
|
Amendment No.
1 to the 2006 Five-Year Credit Agreement among Caterpillar Inc.,
Caterpillar Financial Services Corporation, Caterpillar Finance
Corporation and Caterpillar International Finance p.l.c., the Banks, Japan
Local Currency Banks and Local Currency Banks named therein, The Bank of
Tokyo-Mitsubishi UFJ, Ltd., Citibank International plc and Citibank, N.A.
(incorporated by reference from Exhibit 10.12 to Form 10-Q filed October
31, 2008).
|
10.13
|
Omnibus
Amendment and Waiver Agreement (Amendment No. 2) to the 2006 Five-Year
Credit Agreement among Caterpillar Inc., Caterpillar Financial Services
Corporation, Caterpillar Finance Corporation, Caterpillar International
Finance p.l.c., the Banks and Local Currency Banks named therein, Citibank
International plc and Citibank, N.A. (incorporated by reference from
Exhibit 10.13 to Form 10-Q filed October 31,
2008).
|
10.14
|
Amendment No.
3 to the 2006 Five-Year Credit Agreement among Caterpillar Inc.,
Caterpillar Financial Services Corporation, Caterpillar Finance
Corporation and Caterpillar International Finance Limited (f/k/a
Caterpillar International Finance p.l.c.), the Banks, Japan Local Currency
Banks and Local Currency Banks named therein, The Bank of Tokyo-Mitsubishi
UFJ, Ltd., Citibank International plc and Citibank, N.A. (incorporated by
reference from Exhibit 99.4 to Form 8-K filed September 23,
2008).
|
10.15
|
Five-Year
Credit Agreement dated September 20, 2007 (2007 Five-Year Credit
Agreement) among Caterpillar Inc., Caterpillar Financial Services
Corporation and Caterpillar Finance Corporation, certain financial
institutions named therein, Citibank, N.A., The Bank of Tokyo-Mitsubishi
UFJ, Ltd., ABN AMRO Bank N.V., Bank of America, N.A., Barclays Bank PLC,
J.P. Morgan Securities, Inc., Société Générale and Citigroup Global
Markets Inc. (incorporated by reference from Exhibit 99.1 to Form 8-K
filed September 25, 2007).
|
10.16
|
Japan Local
Currency Addendum to the 2007 Five-Year Credit Agreement among Caterpillar
Financial Services Corporation, Caterpillar Finance Corporation, the Japan
Local Currency Banks named therein, Citibank, N.A. and The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (incorporated by reference from Exhibit 99.2 to
Form 8-K filed September 25, 2007).
|
10.17
|
Amendment No.
1 to the 2007 Five-Year Credit Agreement among Caterpillar Inc.,
Caterpillar Financial Services Corporation and Caterpillar Finance
Corporation, the Banks and Japan Local Currency Banks named therein, The
Bank of Tokyo-Mitsubishi UFJ, Ltd. and Citibank, N.A. (incorporated by
reference from Exhibit 99.3 to Form 8-K filed September 23,
2008).
|
10.18
|
364-Day Credit
Agreement dated September 18, 2008 (2008 364-Day Credit Agreement) among
Caterpillar Inc., Caterpillar Financial Services Corporation, Caterpillar
Finance Corporation, the Banks named therein, Citibank, N.A., The Bank of
Tokyo-Mitsubishi UFJ, Ltd., ABN AMRO Bank N.V., Bank of America, N.A.,
Barclays Bank PLC, J.P. Morgan Securities, Inc., Société Générale and
Citigroup Global Markets Inc. (incorporated by reference from Exhibit 99.1
to Form 8-K filed September 23, 2008).
|
10.19
|
Japan Local
Currency Addendum to the 2008 364-Day Credit Agreement among Caterpillar
Financial Services Corporation, Caterpillar Finance Corporation, the Japan
Local Currency Banks named therein, Citibank, N.A. and The Bank of
Tokyo-Mitsubishi UFJ, Ltd. (incorporated by reference from Exhibit 99.2 to
Form 8-K filed September 23, 2008).
|
10.20
|
Amendment No.
1 to the 2008 364-Day Credit Agreement among Caterpillar Inc., Caterpillar
Financial Services Corporation, Caterpillar Finance Corporation, the Banks
and Japan Local Currency Banks named therein, The Bank of Tokyo-Mitsubishi
UFJ, Ltd. and Citibank, N.A. (incorporated by reference from Exhibit 99.1
to Form 8-K filed January 26, 2009).
|
10.21
|
Amendment No.
2 to the 2007 Five-Year Credit Agreement among Caterpillar Inc.,
Caterpillar Financial Services Corporation, Caterpillar Finance
Corporation, the Banks and Japan Local Currency Banks named therein, The
Bank of Tokyo-Mitsubishi UFJ, Ltd. and Citibank, N.A. (incorporated by
reference from Exhibit 99.2 to Form 8-K filed January 26,
2009).
|
10.22
|
Amendment No.
4 to the 2006 Five-Year Credit Agreement among Caterpillar Inc.,
Caterpillar Financial Services Corporation, Caterpillar Finance
Corporation, Caterpillar International Finance Limited (f/k/a Caterpillar
International Finance p.l.c.), the Banks, Japan Local Currency Banks and
Local Currency Banks named therein, The Bank of Tokyo-Mitsubishi UFJ,
Ltd., Citibank International plc and Citibank, N.A. (incorporated by
reference from Exhibit 99.3 to Form 8-K filed January 26,
2009).
|
10.23
|
Amendment No.
1 to 2007 Japan Local Currency Addendum among Caterpillar Financial
Services Corporation, Caterpillar International Finance Limited (f/k/a
Caterpillar international Finance p.l.c.), the Local Currency Banks named
therein, Citibank International plc and Citibank, N.A. (incorporated by
reference from Exhibit 99.4 to Form 8-K filed January 26,
2009).
|
10.24
|
Amendment No.
1 to 2006 Japan Local Currency Addendum among Caterpillar Financial
Services Corporation, Caterpillar Finance Corporation, The Bank of
Tokyo-Mitsubishi UFJ, Ltd. and Citibank, N.A. (incorporated by reference
from Exhibit 99.5 to Form 8-K filed January 26, 2009).
|
10.25
|
Amendment No.
1 to 2006 Local Currency Addendum among Caterpillar Financial Services
Corporation, Caterpillar Finance Corporation, The Bank of Tokyo-Mitsubishi
UFJ, Ltd. and Citibank, N.A. (incorporated by reference from Exhibit 99.6
to Form 8-K filed January 26, 2009).
|
10.26
|
364-Day Credit
Agreement dated March 31, 2009 (2009 364-Day Backup Facility) among
Caterpillar Inc., Caterpillar Financial Services Corporation, the Banks
named therein and Citibank, N.A. (incorporated by reference from Exhibit
99.1 to Form 8-K/A filed April 8, 2009) and Notice of Bank Addition and
Assumption and Acceptance dated April 7, 2009 (incorporated by reference
from Exhibit 99.2 to Form 8-K/A filed April 8, 2009).
|
11
|
Computations
of Earnings per Share (included in Note 11 of this Form 10-Q filed for the
quarter ended March 31, 2009).
|
31.1
|
Certification
of James W. Owens, Chairman and Chief Executive Officer of Caterpillar
Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
31.2
|
Certification
of David B. Burritt, Vice President and Chief Financial Officer of
Caterpillar Inc., as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32
|
Certification
of James W. Owens, Chairman and Chief Executive Officer of Caterpillar
Inc. and David B. Burritt, Vice President and Chief Financial Officer of
Caterpillar Inc., as required pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
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
thereunto duly authorized.
|
|||
CATERPILLAR
INC.
|
|||
May 1, 2009
|
/s/ James W.
Owens
|
Chairman of the Board and Chief
Executive Officer
|
|
(James W.
Owens)
|
|||
May 1, 2009
|
/s/ David B.
Burritt
|
Vice President and Chief Financial
Officer
|
|
(David B.
Burritt)
|
|||
May 1, 2009
|
/s/ Bradley M.
Halverson
|
Controller
|
|
(Bradley M.
Halverson)
|
|||
May 1, 2009
|
/s/ James B.
Buda
|
Vice President, General Counsel
and Secretary
|
|
(James B.
Buda)
|
|||
May 1, 2009
|
/s/ Jananne A.
Copeland
|
Chief Accounting
Officer
|
|
(Jananne A.
Copeland)
|