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FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

OR


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 1-768

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 an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes [  X  ] No [    ]

At September 30, 2003, 347,240,332 shares of common stock of the Registrant were outstanding.

This summary page highlights selected information and may not contain all of the information that is important to you. For a detailed analysis of the company's results for the third quarter, you should read the entire document.


SUMMARY OF RESULTS

On October 16, 2003 Caterpillar Inc. (NYSE: CAT) reported third-quarter 2003 sales and revenues of $5.55 billion and profit of $222 million or $0.62 per share. Profit excluding a bond retirement charge was up 23 percent compared to third-quarter 2002 at $262 million* or $0.73* per share. The bond retirement resulted in a non-recurring charge of $40 million after-tax ($0.11 per share). Through the third quarter, sales and revenues were $16.3 billion and profit was $750 million or $2.15 per share.

Sales and revenues of $5.55 billion were up 9 percent compared to $5.08 billion in the third quarter 2002. The increase was primarily due to higher Machinery volume of $226 million, a favorable currency impact on sales of $128 million (due mainly to the stronger euro) and higher Financial Products revenues for the third quarter of $58 million or about 15 percent compared to third quarter 2002.

"Our sales benefited from key market recoveries, as generally lower interest rates continued to spark construction spending and replacement buying. We also benefited from a recognized need for reliable energy which fueled electric power demand," said Chairman and CEO Glen Barton. "During the quarter we continued to demonstrate our ability to respond to market fluctuations."

Profit of $222 million or $0.62 per share was slightly above $213 million or $0.61 per share in the third quarter 2002. Profit excluding a bond retirement charge was up 23 percent compared to third quarter 2002 at $262 million* or $0.73* per share. The bond retirement resulted in a non-recurring charge of $40 million after-tax ($0.11 per share). The profit increase was due to lower core operating costs of $59 million and improved price realization of $34 million. The favorable impact of higher sales volume/mix was only $15 million as higher sales volume was partially offset by negative sales mix compared to third quarter 2002. The positive factors were partially offset by $71 million of higher retiree pension, healthcare and related benefit costs.

"Overall, this quarter's results, particularly lower core operating costs, show that 6 Sigma is driving a continuous improvement culture in which employees look for efficiency gains in all aspects of our business. Through these efforts, sales and revenues per employee continued to show improvement over last year. These efforts will multiply as we increase the number of active 6 Sigma Black Belts and embed veteran Black Belts into other management positions to apply their experience and improve processes throughout the company," Barton said.


* A complete definition and discussion of Caterpillar's use of non-GAAP measures, identified by an asterisk (*), is included on page 45.

 

OUTLOOK

"We still expect 2003 sales and revenues to be up about 10 percent but have raised our full-year profit to be about $3.00 per share as a result of continued focus on cost control," Barton said. Based on our preliminary outlook, 2004 company sales and revenues are expected to be up about 10 percent from 2003. (Complete outlook begins on page 31.)


Note: Glossary of terms included on pages 32-33; first occurrence of terms shown in bold italics.

Page 1

Part I. FINANCIAL INFORMATION

 Item 1. Financial Statements

Caterpillar Inc.
Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)

 

Three Months Ended
 

September 30,

 

2003

 

2002

Sales and revenues:

 

 

 

 

  

 

Sales of Machinery and Engines

$

5,112 

 

$

4,700 

 

Revenues of Financial Products

 

433 

 

 

375 

 

Total sales and revenues

 

5,545 

 

 

5,075 

 

 

 

  

 

 

  

Operating costs:

 

  

 

 

  

 

Cost of goods sold

 

4,143 

 

 

3,798 

 

Selling, general and administrative expenses

 

627 

 

 

538 

 

Research and development expenses

 

173 

 

 

167 

 

Interest expense of Financial Products

 

116 

 

 

135 

 

Other operating expenses

 

101 

 

  

113 

 

Total operating costs

 

5,160 

 

 

4,751 

 

 

 

  

 

 

  

Operating profit

 

385 

 

 

324 

 

 

 

  

 

 

  

 

Interest expense excluding Financial Products

 

61 

 

 

66 

 

Other income (expense)

 

(40)

 

 

25 

 

 

 

  

 

 

  

Consolidated profit before taxes

 

284 

 

 

283 

 

 

 

  

 

 

  

 

Provision for income taxes

 

69 

 

 

71 

 

Profit of consolidated companies

 

215 

 

 

212 

 

 

 

  

 

 

  

 

Equity in profit (loss) of unconsolidated affiliated companies

 

7 

 

 

1 

 

 

  

 

 

 

Profit

$

222 

 

$

213 

 

 

 

  

 

 

  

Profit per common share

$

0.64 

 

$

0.62 

 

 

 

 

 

Profit per common share - diluted 1

$

0.62 

  

$

0.61 

 

 

 

 

Weighted average common shares (millions)

 

  

 

 

  

- Basic

 

346.3 

 

 

344.2 

- Diluted 1

 

356.1 

 

 

346.2 

 

 

  

 

 

  

Cash dividends paid per common share

$

0.35 

 

$

0.35 

1 Diluted by assumed exercise of stock options, using the treasury stock method.

See accompanying notes to Consolidated Financial Statements.

Page 2

Caterpillar Inc.
Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)

 

Nine Months Ended
 

September 30,

 

2003

 

2002

Sales and revenues:

 

 

 

 

  

 

Sales of Machinery and Engines

$

15,037 

 

$

13,659 

 

Revenues of Financial Products

 

1,261 

 

 

1,116 

 

Total sales and revenues

 

16,298 

 

 

14,775 

 

 

 

  

 

 

  

Operating costs:

 

  

 

 

  

 

Cost of goods sold

 

12,102 

 

 

11,079 

 

Selling, general and administrative expenses

 

1,801 

 

 

1,587 

 

Research and development expenses

 

494 

 

 

524 

 

Interest expense of Financial Products

 

354 

 

 

393 

 

Other operating expenses

 

358 

 

  

305 
   
 

 

Total operating costs

 

15,109 

 

 

13,888 

 

 

 

  

 

 

  

Operating profit

 

1,189 

 

 

887 

 

 

 

  

 

 

  

 

Interest expense excluding Financial Products

 

192 

 

 

206 

 

Other income (expense)

 

15 

 

 

18 

   
 

 

 

 

  

 

 

  

Consolidated profit before taxes

 

1,012 

 

 

699 

 

 

 

  

 

 

  

 

Provision for income taxes

 

273 

 

 

196 
   
 

 

Profit of consolidated companies

 

739 

 

 

503 

 

 

 

  

 

 

  

 

Equity in profit (loss) of unconsolidated affiliated companies

 

11 

 

 

(10)
   
 

 

 

  

 

 

 

Profit

$

750 

 

$

493 

 

 

 

  

 

 

  

Profit per common share

$

2.17 

 

$

1.43 

 

 

 

 

 

Profit per common share - diluted 1

$

2.15 

  

$

1.42 

 

 

 

 

Weighted average common shares (millions)

 

  

 

 

  

- Basic

 

345.1 

 

 

343.9 

- Diluted 1

 

349.0 

 

 

347.2 

 

 

  

 

 

  

Cash dividends paid per common share

$

1.05 

 

$

1.05 

1 Diluted by assumed exercise of stock options, using the treasury stock method.

See accompanying notes to Consolidated Financial Statements.

Page 3

Caterpillar Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended
(Unaudited)
(Millions of dollars)

   

September 30,

  

September 30,
 

2003

 

2002

Common stock:
 

Balance at beginning of period

$

1,034 

        

$

1043 

      
 

Common shares issued from treasury stock

 

2 

          

(8)

      
 

Balance at end of period

  

1,036 

          

1,035 

      
   
       
     

Treasury stock:

                      
 

Balance at beginning of period

  

(2,669)

          

(2,696)

      
 

Shares issued: 09/30/03 - 2,985,265; 09/30/02 - 805,228

  

98 

          

24 

      

Balance at end of period

(2,571)

(2,672)

   
       
     

Profit employed in the business:

                      
 

Balance at beginning of period

  

7,849 

          

7,533 

      
 

Profit

  

750 

  

$

750 

    

493 

  

$

493 

 

Dividends declared

  

(242)

          

(241)

      
   
       
     
 

Balance at end of period

  

8,357 

          

7,785 

      

Accumulated other comprehensive income:

                      
 

Foreign currency translation adjustment:

                      
   

Balance at beginning of period

  

86 

          

(17)

      
   

Aggregate adjustment for period

  

149 

    

149 

    

79 

    

79 
   

Balance at end of period

  

235 

          

62 

      
   
       
     

 

Minimum pension liability adjustment - consolidated companies:

                      
   

Balance at beginning of period (net of tax of: 09/30/03-$383; 09/30/02-$82)

  

(771)

          

(161)

      
   

Aggregate adjustment for period

  

- 

    

- 

    

- 

    

- 
   

Balance at end of period (net of tax of: 09/30/03-$383; 09/30/02-$82)

  

(771)

          

(161)

      
   
       
     

 

Minimum pension liability adjustment - unconsolidated companies:

                      
   

Balance at beginning of period

  

(37)

          

(41)

      
   

Aggregate adjustment for period

  

(1)

    

(1)

    

(1)

    

(1)
   

Balance at end of period

  

(38)

          

(42)

      
   
       
     

 

Derivative financial instruments:

                      
   

Balance at beginning of period (net of tax of: 09/30/03-$5; 09/30/02-$17)

  

11 

          

(26)

      
   

Gains/(losses) deferred during period (net of tax of: 09/30/03-$5; 09/30/02-$3)

  

(11)

    

(11)

    

3 

    

3 
   

(Gains)/losses reclassified to earnings (net of tax of: 09/30/03-$19; 09/30/02-$13)

  

39 

    

39 

    

27 

    

27 
   
       
     
   

Balance at end of period (net of tax of: 09/30/03-$19; 09/30/02-$1)

  

39 

          

4 

      

 

Available-for-sale securities:

                      
   

Balance at beginning of period (net of tax of: 09/30/03-$17; 09/30/02-$13)

  

(31)

          

(24)

      
   

Gains/(losses) deferred during period (net of tax of: 09/30/03-$6; 09/30/02-$5)

  

31 

    

31 

    

(10)

    

(10)
   

(Gains)/losses reclassified to earnings (net of tax of 09/30/03-$9; 09/30/02-$0)

  

5 

    

5 

    

1 

    

1 
   

Balance at end of period (net of tax of: 09/30/03-$2; 09/30/02-$18)

  

5 

          

(33)

      
   
       
     

Total accumulated other comprehensive income

  

(530)

          

(170)

      

 

Comprehensive income

      

$

962 

        

$

592 

Stockholders' equity at end of period

$

6,292 

        

$

5,978