Industry News

Cat Reports First Quarterly Loss In 17 Years

April 21, 2009

If a rising tide raises all boats, so an ebb tide can pull down even the largest of vessels - even massive ones called Caterpillar. Thanks to the global economic downturn, the Peoria earthmoving and engine giant has reported its first quarterly loss since 1992 and cut its earnings outlook for the remainder of the year.

Sales and revenues were $9.225 billion, down 22% from $11.796 billion in the first quarter 2008. The decrease was largely a result of lower sales and revenues and $558 million of redundancy costs generated by its layoff of approximately 25,000 employees worldwide. On a per-share basis, the first quarter loss was $0.19, down $1.64 per share from the first quarter of 2008. Excluding redundancy costs, first quarter profit was $0.39 per share.

"These results demonstrate significant reduction in our cost structure as a result of swift deployment of the economic trough strategy we introduced in 2005," said Cat Chairman and Chief Executive Officer Jim Owens. "Our business units are making the tough decisions necessary to respond to this widespread and sharp global recession. By taking aggressive and decisive actions now, we're positioning the company not only for success in the short-term, but to be even more competitive in the long-term when the global economy recovers. We were also pleased with the improvement in price realization during the quarter. It's a testament to the value customers place on our products.

"In addition to cost control, we're very focused on maintaining our financial strength. We expect to lower inventory by about $3 billion in 2009 and reduced it by $789 million in the first quarter. In this environment liquidity is a major focus, and as a result we've decided to hold more cash than usual. While we do not anticipate the need to issue additional term debt during the remainder of the year, we may do so to maintain our liquidity position."

The company is updating its outlook for 2009 as a result of weaker economic conditions. It now expects 2009 sales and revenues to be in a range of plus or minus 10% around a midpoint of $35 billion. The high degree of uncertainty in the global economy, the timing and impact of stimulus measures and the extent of dealer inventory reductions make it very difficult to forecast sales and revenues, making the outlook range wide, Cat said.

The company expects to be profitable in 2009 throughout the sales and revenues outlook range excluding redundancy costs, and at the midpoint, expects profit of about $1.25 per share excluding redundancy costs.