With a strong focus on executing its corporate strategy, Caterpillar Inc. reported record third quarter 2006 sales and revenues of $10.517 billion and a record third-quarter profit of $769 million, or $1.14 per share. Sales and revenues increased 17 percent, and profit per share was up 21 percent compared with the third quarter of 2005. Sales and revenues for the first nine months of 2006 of $30.514 billion and profit of $2.655 billion, or $3.86 per share, were also records.
“We achieved this quarter’s results due in great part to the efforts of Caterpillar’s employees, dealers and suppliers who continue to work to remove bottlenecks and increase production for a number of products,” said Caterpillar Chairman and Chief Executive Officer Jim Owens. “Team Caterpillar remains focused on achieving our 2010 goals and executing our corporate strategy with a 6 Sigma—especially in the areas of quality, safety and velocity.”
Sales and revenues increased $1.54 billion—-$1.063 billion from higher sales volume, $290 million from improved price realization, and $97 million from the effects of currency and $90 million from higher Financial Products revenues.
Third-quarter profit increased $102 million from third quarter 2005. The increase was largely due to improved price realization and higher sales volume, partially offset by higher costs, including approximately $80 million of expense related to various legal disputes, principally a settlement with Navistar.
Caterpillar expects sales and revenues for 2006 to be about $41 billion, up about 13 percent from 2005, and profit per share to be in a range of $5.05 to $5.30. The previous outlook reflected sales and revenues up 12 to 15 percent and profit per share of $5.25 to $5.50. The decline from the previous outlook was a result of charges related to third-quarter legal disputes, higher core operating costs and slightly lower sales volume.
The preliminary outlook for 2007 and revenues is flat to up 5 percent from 2006, and profit per share is expected to be flat to up 10 percent from the midpoint of the 2006 outlook range.
Cat Financial
Caterpillar Financial Services Corporation (Cat Financial) reported record revenues of $723 million for the third quarter of 2006, an increase of $127 million, or 21 percent, compared with the same quarter in 2005. Profit after tax (net profit) was $132 million, a $45 million increase, or 52 percent, over the third quarter of 2005.
Of the increase in revenue over the 2005 third quarter, $59 million resulted from the impact of the growth in average earning assets (finance receivables and operating leases) and $56 million from the impact of higher interest rates on new and existing finance receivables. A $12 million increase in other revenue was primarily due to the absence of a $7 million write-down of a repossessed marine vessel in the third quarter.
On a pre-tax basis, profit was up $62 million, or 48 percent, compared with the third quarter of 2005, principally due to an increase of $44 million in margin (wholesale, retail finance, operating lease and the associated fee revenues included in other revenues less interest expense and depreciation on assets leased to others) resulting from a $2.5 billion increase in average earnings assets and an improvement in the net yield on average earning assets. In addition, profits increased due to the absence of the $7 million write-down of the repossessed marine vessel and a $7 million reversal of an investment-related income accrual in the third quarter of 2005.
New retail financing grew to $2.96 billion in the third quarter of 2006. The increase of $32 million, or 1 percent, over the third quarter of 2005 occurred primarily due to increased new retail financing in Europe.
Past dues over 30 days as of September 30, 2005, were 1.89 percent compared to 1.65 percent on September 30, 2005. Writeoffs, net of recoveries, were $11 million during the quarter compared with $14 million for the third quarter of 2005.
Caterpillar Inc. Vice President and Cat Financial President Kent M. Adams said, “We are pleased to announce this record quarter for revenues resulting from the continued growth of average earning assets and a higher yield on new and existing finance receivables. The results reflect the continued coordination efforts of the Caterpillar dealers, Caterpillar marketing organizations and our employees.” IBI
