This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Caterpillar Inc. (CAT) on January 25, 2008.
Management:
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Chairman and Chief Executive Officer: Jim Owens
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CFO, VP: David B. Burritt
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Group President: Douglas R. Oberhelman
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Group President: Edward J. Rapp
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Director, IR: Mike DeWalt
Key Investors Issues
- Revenue was up 10% to $12.14 billion from $11 billion in 2006.
- Net income rose $93 million or 14% to $975 million or $1.50 a share from $886 million or $1.36 a share in 2006.
- Core operating costs rose $296 million driven by higher manufacturing costs.
Full Year Highlights:
- The company reported an 8% increase in sales and revenues to $45 billion or $41.5 billion in the prior year.
- Net income rose marginally to $3.541 billion or $5.55 a share from $3.537 billion or $5.37 a share in 2006.
- The firm raised the quarterly dividend and repurchased over 33 million shares of its stock.
Fourth Quarter Highlights
Sales and revenues were $12,14 billion an increase of 10% from $11 billion in the prior year, with $392 million from improved price realization, $334 million from currency and $306 million from higher sales volume.
- Machinery sales were up 9% as strong growth outside North America and a full year of Progress Rail more than offset a weak U.S. construction market.
- Machinery volume was up $1.289 billion and excluding Progress Rail, machinery volume was up $514 million.
- North American machinery sales were down 11% and machinery sales outside of North America were up 33%.
- Engines sales increased 6% despite the 59% decline in North American on-highway truck engines.
Sales volume were reported to be down slightly as growth in engines sales to industries like oil and gas, electric power, industrial and marine nearly offset the volume decline in on-highway truck engines.
- Price realization was more than 2% despite an unfavorable geographic mix and currency had a positive impact on sales of $890 million driven primarily by the stronger euro.
- United States housing was down significantly, nonresidential construction was weak, and on-highway truck engines were down substantially from last year''s very huge fourth quarter.
- Dealer inventory changes were up a little in an order of magnitude of about $200 million but did not have much of an impact on the fourth quarter of 2007.
Profit rose $93 million or 14% to $975 million or $1.50 a share from $886 million or $1.36 a share in 2006 as a result of the $392 million of price realization, higher physical sales volume, and higher core operating costs of $296 million.
- Operating profit increased $109 million, or 10%from 2006, driven by higher price realization and sales volume, partially offset by increased core operating costs.
- Core operating costs rose $296 million driven by higher manufacturing costs as a result of operating inefficiencies, higher material costs and increased depreciation.
- Operating inefficiencies were the result of supply chain challenges, capacity increases, factory repair and maintenance and costs to enhance customer delivered quality.
- SG&A and R&D were down $59 million from the prior year as lower spending more than offset the impact of higher wage and benefits.
- Currency had a $24 million unfavorable impact on operating profit, as the benefit to sales was more than offset by the negative impact on costs.
Segment Highlights:
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In Machinery sales were $7.460 billion, an increase of $857 million, or 13% from the prior year, as sales volume increased $429 million, price realization increased $205 million, and currency benefited sales by $223 million.
- Geographic mix between regions (included in price realization) was $28 million unfavorable.
- Reported changes in dealer inventories were overall a slight negative for sales volume as dealers in most regions increased inventories but not as much as in 2006.
Unfavorable economic factors caused a sizable decline in sales volume in North America, the result of weaknesses in housing and nonresidential construction.
- Coal mining showed some improvement in the fourth quarter, and metals, oil and natural gas industries continued to be positive.
- Operating profit of $619 million was up $40 million, or 7% from 2006 as price realization and higher sales volume were partially offset by higher core operating costs.
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Engine sales were $3.9 billion, an increase of $175 million, or 5% from 2006 following a $123 million decrease in sales volume a $187 million increase in price realization and $111 million currency benefit.
- Operating profit of $571 million was up $69 million, or 14% from the prior year as the favorable impacts of improved price realization and positive mix of product were partially offset by higher core operating costs and lower sales volume.
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Financial Products revenues were $784 million, an increase of $109 million, or 16% from the prior year as growth in average earning assets increased revenues $85 million and revenues from earned premiums at Cat Insurance increased $26 million.
- Operating profit of $161 million decreased $11 million, or 6% from the prior year as a result of an $18 million increase in the provision for credit losses and a $6 million decrease in miscellaneous revenue items, partially offset by a $14 million impact from higher average earning assets at Cat Financial.
Fiscal 2008 Outlook
