Caterpillar, Inc. reported a 41 percent increase in profit per share on a 13 percent increase in sales and revenues compared with the second quarter 2005. Sales and revenues in the quarter were $10.605 billion, and profit was $1.046 billion, or $1.52 per share—the highest for any quarter in Caterpillar’s history.
“We had a spectacular second quarter with the strongest financial performance we’ve reported since the 1960s. I couldn’t be prouder of Team Caterpillar,” said Caterpillar Chairman and CEO Jim Owens. “The fundamentals remained strong in the industries we serve. We are hitting on all cylinders and are again raising our full-year outlook. Customers have confidence in our products, and sales continued to increase. Our performance in the quarter was made possible by the hard work of our employees, dealers, and suppliers who are focused on meeting the needs of our customers.”
Sales and revenues increased $1.245 billion from second quarter 2005. The increase was a result of $809 million of higher sales volume, $384 million of improved price realization, and a $73 million increase in Financial Products revenues.
Second-quarter profit increased $286 million, or $0.44 per share, from second quarter 2005. The increase was largely due to improved price realization and higher sales volume, partially offset by higher core operating costs to support its growth.
First-half 2006 sales and revenues of $19.997 billion and profit of $1.886 billion, or $2.72 per share, were also records. Operating cash flow in the first half of 2006 was $1.948 billion, up $952 million from the first half of 2005. This strong cash flow allowed Caterpillar, Inc. to increase capital expenditure to $552 million, acquire Progress Rail, keep benefit plans well-funded, announce a 20 percent dividend increase, and repurchase 33.3 million shares.
“I am delighted with what has been accomplished, but we still have work to do. From an operational perspective, record demand has resulted in longer delivery times for many of our products than we, or our customers, would like,” Owens said. “We’re continuing to work with suppliers and within our factories to remove bottlenecks and increase production for a number of our products. The entire Caterpillar supply chain has responded over the past three years to support our unprecedented growth. 6 Sigma has been a significant positive factor for ramping up production, managing our cost structure and delivering record profitability.”
Caterpillar Financial Services Corporation (Cat Financial) reported record revenues of $676 million for the second quarter of 2006, an increase of $89 million, or 15 percent, compared to the same quarter in 2005. Profit after tax was $106 million, a $16 million, or 18 percent, increase over the second quarter in 2005.
Of the increase in revenue over the second quarter of 2005, $67 million resulted from the impact of the continued growth of finance receivables and operating leases (earning assets), and $50 million resulted from the impact of higher interest rates on new and existing finance receivables. These increases were offset by a $16 million write-down of a repossessed marine vessel, lower net gains on the sales of receivables of $8 million, and a $4 million decrease in other miscellaneous revenue.
On a pre-tax basis, profit was up $17 million, or 12 percent, compared with the second quarter of 2005, principally due to an increase of $42 million in margin (wholesale, retail finance, operating lease, and associated fee revenues less interest expense and depreciation on assets leased to others) from a $2.9 billion increase in average earning assets and continuing improvement in the net yield on earning assets. The increase in margin was partially offset by the repossessed marine vessel write-down and the lower net gains on the sales of receivables.
New retail financing grew to a record $3.2 billion. The increase of $111 million, or 4 percent, over the second quarter of 2005 occurred primarily due to increased new retail financing in North America. Past dues over 30 days as of June 30 were 1.7 percent compared to 2.03 percent as of June 30, 2005. Write-offs, net of recoveries, were $12 million during the quarter, compared with $3 million for the second quarter of 2005. IBI