This summary is based on the fourth quarter fiscal 2006 earnings call conducted by Caterpillar, Inc. (CAT) on January 26, 2007.
Key Investors Issues
- EPS were $1.32 a share compared to $1.20 a share last year.
- Net income was $882 million, up from the year-ago $846 million a year ago.
- Sales rose $11 billion from the year-ago $9.66 billion.
Fourth Quarter Highlights
On January 26th, 2005, the company reviewed its 2005 results and provided an outlook for 2006.
The company estimated that sales and revenues would be about $40 billion and profit per share would be in a range of $4.65 to $5. Actual sales and revenues were $41.5 billion.
When the outlook was issued, the acquisition of Progress Rail wasn’t anticipated. That added $766 million to sales and revenues, but had a little impact on profit per share. Excluding Progress Rail, sales and revenues were about $40.8 billion, about $800 million higher than original outlook. At $5.17, actual profit was 17 cents per share higher than the top end of the outlook range, and 7% higher than the midpoint.
In the outlook issued on October 20th of 2006 sales and revenues were expected of about $41 billion, with profit in a range of $5.05 on the low side to $5.30 on the high side.
- The middle of that range was five dollars seventeen and a half cents per share.
- Actual sales and revenues were about $500 million higher, and profit per share was about on the midpoint of the range.
Costs were higher expected, but not for production material.
Material costs rose versus last year, but were about where it was thought they would be for the quarter. The factors that contributed to the increase in core operating costs were the $500 million increase in sales volume, disruption related to production holds at factory that produces backhoe loaders in North America, and higher period costs at most of business units. There weren’t any individual major surprises. The increase was widespread across the company.
While costs were higher than expected, the increase was actually similar to the quarter-over-quarter increases seen all year. The company was up $322 million fourth-to-fourth in this quarter, and the full-year average per quarter was about $315 million.
On the positive side, in addition to the higher sales volume, the tax rate was lower than expected.
Geographic profit mix and the extension of the R&D tax credit were the main contributors. Sales volume was positive, the tax rate was a positive, costs were higher, and price realization lower, there certainly were puts and takes, but overall on balance, the company was about on the midpoint of the range
Price realization was positive and contributed $190 million to operating profit.
It was negatively impacted by geographic sales mix. Compared with the fourth quarter of 2005, looking at machine sales in North America and exclude Progress Rail, the company was down about 10%, while machine sales in Europe, Africa/Middle East were up 42%.
Sales volume was positive, but product mix was unfavorable.
The high volume of truck engines was a part of the story on the positive for volume, but was negative for product mix. Core operating costs were unfavorable, $322 million, similar to the average of the year at $315 million per quarter.
- Machine and Engine business operating cash flow was $4.6 billion.
The company raised quarterly dividend another 20% in June.
