SECOND-QUARTER 2017 FINANCIAL REVIEW...Certain statements in this financial review relate to future...
Transcript of SECOND-QUARTER 2017 FINANCIAL REVIEW...Certain statements in this financial review relate to future...
July 25, 2017
SECOND-QUARTER 2017 FINANCIAL REVIEW
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
FORWARD-LOOKING STATEMENTS
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Forward-looking StatementsCertain statements in this financial review relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.
Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) our ability to develop, produce and market quality products that meet our customers’ needs; (vi) the impact of the highly competitive environment in which we operate on our sales and pricing; (vii) information technology security threats and computer crime; (viii) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost reduction actions; (ix) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (x) inventory management decisions and sourcing practices of our dealers and our OEM customers; (xi) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) union disputes or other employee relations issues; (xiii) adverse effects of unexpected events including natural disasters; (xiv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xvi) our Financial Products segment’s risks associated with the financial services industry; (xvii) changes in interest rates or market liquidity conditions; (xviii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xix) currency fluctuations; (xx) our or Cat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xxi) increased pension plan funding obligations; (xxii) alleged or actual violations of trade or anti-corruption laws and regulations; (xxiii) international trade policies and their impact on demand for our products and our competitive position; (xxiv) additional tax expense or exposure; (xxv) significant legal proceedings, claims, lawsuits or government investigations; (xxvi) new regulations or changes in financial services regulations; (xxvii) compliance with environmental laws and regulations; and (xxviii) other factors described in more detail in Caterpillar’s Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.
A reconciliation of non-GAAP financial information referenced in this presentation can be found in our press release describing 2017 second-quarter financial results which is available on our website at www.caterpillar.com/earnings.
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
SECOND-QUARTER 2017
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Strong Second Quarter
• Sales and revenues up $1.0 billion from a year ago• Strong operational performance and operating cash flow• Raised full-year 2017 sales and revenues and profit outlook
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
SECOND-QUARTER 2017 FINANCIAL RESULTS
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Sales and Revenues(in billions of dollars)
$11.3
Profit Per Share(in dollars)
AdjustedProfit Per Share
(in dollars)
$1.35 $1.49$10.3
$11.3
Q2 2016 Q2 2017
$0.93
$1.35
Q2 2016 Q2 2017
$1.09
$1.49
Q2 2016 Q2 2017
1
2
2
1 Excluding restructuring costs2 Excluding restructuring costs and gain on sale of equity investment in IronPlanet
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
CONSOLIDATED OPERATING PROFIT
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Results• Higher sales volume, including
favorable mix of products
• Improved price realization
• Excluding an increase in short-term incentive compensation of $320 million, period costs were lower
Second-Quarter 2017 vs. Second-Quarter 2016
785
495
183 44 (237)
8 13 (30) (10) 1,251
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2nd Qtr 2016Operating Profit
Sales Volume Price Realization VariableManufacturing
Costs
PeriodCosts
Currency FinancialProducts
RestructuringCosts
Other 2nd Qtr 2017Operating Profit
($ in
Milli
ons)
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
CONSTRUCTION INDUSTRIES
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Sales(in billions of dollars)
$4.9
2nd Quarter Highlights• Sales up in Asia/Pacific
• Favorable price realization
• North America about flat$4.4
$4.9
Q2 2016 Q2 2017
0
20000
40000
60000
80000
100000
120000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Units
Shi
pped
China Excavator Industry Annual Shipments to Customers
(10 ton and above)
U.S. Construction Put in Place (SAAR, Bil. $)Residential
Nonresidential BuildingInfrastructure
Source: Association of Equipment Manufacturers*
* Full year forecast
* 2017 June year to date
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
CONSTRUCTION INDUSTRIES
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Segment Profit(in millions of dollars)
$9012nd Quarter Highlights• Favorable price realization
• Higher sales volume, including a favorable mix of products
• Period costs about flat
$550
$901
Q2 2016 Q2 2017
Profit as a percent of sales*
12.4%
18.2%
Q2 2016 Q2 2017
* Includes inter-segment sales
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
RESOURCE INDUSTRIES
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Sales(in billions of dollars)
$1.8
2nd Quarter Highlights• Sales increased for
aftermarket parts
• Dealer inventories about flat in the second quarter of 2017
• Dealer deliveries for equipment were about flat
$1.5$1.8
Q2 2016 Q2 2017
Source: Caterpillar Internal Data
Service Meter Hours5 year Average
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
RESOURCE INDUSTRIES
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Segment Profit / (Loss)(in millions of dollars)
$97
($163)
$97
Q2 2016 Q2 2017
2nd Quarter Highlights• Higher sales volume, including
a favorable mix of products
• Lower period costs
Profit as a percent of sales*
(10.8%)
5.3%
Q2 2016 Q2 2017
* Includes inter-segment sales
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
ENERGY & TRANSPORTATION
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Sales(in billions of dollars)
$3.9
2nd Quarter Highlights• Oil and Gas sales higher
• Industrial sales increased
• Power Gen sales about flat
• Transportation sales lower $3.7 $3.9
Q2 2016 Q2 2017
Rig Count and WTI
Source: Baker Hughes
0
300
600
900
1,200
1,500
1,800
$0
$20
$40
$60
$80
$100
$120
Jan 0
1, 20
14Ap
r 01,
2014
Jul 0
1, 20
14Oc
t 01,
2014
Jan 0
1, 20
15Ap
r 01,
2015
Jul 0
1, 20
15Oc
t 01,
2015
Jan 0
1, 20
16Ap
r 01,
2016
Jul 0
1, 20
16Oc
t 01,
2016
Jan 0
1, 20
17Ap
r 01,
2017
Jul 0
1, 20
17
US
Oil
Rig
Cou
nt
WTI
Oil
Dol
lars
per
Bar
rel
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
ENERGY & TRANSPORTATION
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Segment Profit(in millions of dollars)
$7002nd Quarter Highlights• Higher sales volume
• Favorable variable manufacturing costs due to cost absorption and improved material costs
• Period costs about flat excluding higher short-term incentive compensation expense
$602$700
Q2 2016 Q2 2017
* Includes inter-segment sales
Profit as a percent of sales*
13.7% 14.7%
Q2 2016 Q2 2017
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
FULL-YEAR 2017 OUTLOOK
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2016 Previous Outlook1 Current Outlook2
Sales and Revenues $38.5 billion $38 to $41 billion $42 to $44 billion
Profit/(Loss) Per Share3 $(0.11) $2.10 $3.50
Restructuring Costs $1.019 billion $1.25 billion $1.20 billion
Adjusted Profit Per Share3,4,5 $3.42 $3.75 $5.00
Sales and revenues Midpoint: $39.5 billion
Sales and revenues Midpoint: $43.0 billion
1 As of April 25, 20172 As of July 25, 20173 At midpoint of 2017 sales and revenues outlook range4 2017 adjusted profit per share outlook excludes restructuring costs, gain on sale of equity investment in IronPlanet5 2016 excludes restructuring costs, mark-to-market losses related to pension and OPEB, goodwill impairment, deferred tax valuation allowance
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
10 -15%
2017 FULL-YEAR SALES & REVENUES OUTLOOK COMPARED TO 2016
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ConstructionIndustries
ResourceIndustries
Energy &Transportation
20 -25% 5 -10%
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
FULL-YEAR 2017 OUTLOOK
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2016 Previous Outlook1 Current Outlook2
Sales and Revenues $38.5 billion $38 to $41 billion $42 to $44 billion
Profit/(Loss) Per Share3 $(0.11) $2.10 $3.50
Restructuring Costs $1.019 billion $1.25 billion $1.20 billion
Adjusted Profit Per Share3,4,5 $3.42 $3.75 $5.00
Sales and revenues Midpoint: $39.5 billion
Sales and revenues Midpoint: $43.0 billion
1 As of April 25, 20172 As of July 25, 20173 At midpoint of 2017 sales and revenues outlook range4 2017 adjusted profit per share outlook excludes restructuring costs, gain on sale of equity investment in IronPlanet5 2016 excludes restructuring costs, mark-to-market losses related to pension and OPEB, goodwill impairment, deferred tax valuation allowance
C U S T O M E R S . P E O P L E . S H A R E H O L D E R S .
KEY TAKEAWAYS
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• Great quarter – Higher year-over-year sales and revenues of about $1.0 billion
• Strong operating profit pull through
• Delivered strong operating cash flow and increased the quarterly cash dividend
• Raised the 2017 full-year outlook
July 25, 2017
Q & A