REG-Caterpillar Inc: Final Results <Origin Href="QuoteRef">CAT.N</Origin> - Part 1
01/04/2016 13:46
Caterpillar Reports 2015 Fourth-Quarter and Full-Year Financial Results;
Provides Outlook for 2016
PEORIA, Ill., Jan. 28, 2016 --
FOURTH QUARTER FULL YEAR
($ in billions except per share data) 2014 2015 2014 2015
Sales and Revenues $14.244 $11.030 $55.184 $47.011
Profit (Loss) Per Share $1.23 ($0.15) $5.88 $3.50
Profit Per Share $1.35 $0.74 $6.38 $4.64
(excluding restructuring costs)
Caterpillar Inc. (NYSE: CAT) today announced 2015 fourth-quarter sales and
revenues of $11.0 billion, down from $14.2 billion in the fourth quarter of
2014. Fourth-quarter 2015 was a loss of $0.15 per share, down from a profit of
$1.23 per share in the fourth quarter of 2014. Excluding restructuring costs,
profit per share was $0.74, compared with $1.35 per share in the fourth quarter
of 2014.
"Cost management, restructuring actions and operational execution are helping
the company while sales and revenues remain under pressure from weak commodity
prices and slowing economic growth in developing countries. We took tough but
necessary restructuring actions in 2015 - and they were significant. I am
proud that our team stayed focused on our customers in this difficult
environment. Our balance sheet is strong; our product quality remained at high
levels; we gained market position for machines for the fifth year in a row;
inventory levels have declined and are well positioned as we look forward to
2016; and our safety levels are world class. We are benefiting now and expect
to even more in the future when markets rebound," said Caterpillar Chairman and
Chief Executive Officer Doug Oberhelman.
Full-Year 2015
This past year was a difficult one for many of the industries and customers we
serve. Sales and revenues for 2015 were nearly 15 percent lower than 2014 and
29 percent off the 2012 peak. The two most significant reasons for the decline
from 2014 were weakening economic growth and substantially lower commodity
prices. The impact of weak economic growth was most pronounced in developing
countries, such as China and Brazil. Lower oil prices had a substantial
negative impact on the portion of Energy & Transportation that supports oil
drilling and well servicing, where new order rates in 2015 were down close to
90 percent from 2014.
"We anticipated about $5 billion of the $8 billion sales and revenues decline
in our January 2015 outlook as we started the year. Actual sales and revenues
were about $3 billion below that $50 billion outlook because of steeper than
expected declines in oil prices, a stronger U.S. dollar, weaker construction
equipment sales and lower than expected mining-related sales in Resource
Industries," added Oberhelman.
In 2015, we took substantial additional restructuring actions to lower our cost
structure. As a result, restructuring costs of $908 million were higher than
anticipated when we started the year. Additional restructuring costs were the
most significant reason profit per share of $3.50 was below our January 2015
outlook of $4.60 per share. Excluding restructuring costs, 2015 profit per
share was much closer to our expectations, despite about $3 billion of lower
sales and revenues. For 2015, profit excluding restructuring costs was $4.64
per share, $0.11 per share lower than the $4.75 per share excluding
restructuring costs expected in our outlook as we started the year last
January.
Financial Position / Cash Flow / Cash Deployment
An important element of our strategy is maintaining a strong balance sheet to
weather the ups and downs of the cyclical industries we serve and to support
growth when business improves. We finished 2015 with $6.5 billion of cash and
a strong balance sheet with a Machinery, Energy & Transportation (ME&T)
debt-to-capital ratio of 39.1 percent, well within our target range of 30 to 45
percent and only slightly higher than 37.4 percent at year-end 2014.
ME&T operating cash flow was $5.2 billion in 2015, and with modest need for
capital expenditures, helped enable a 10-percent increase in the quarterly
dividend and about $2 billion of share repurchases in 2015.
"Fundamentally, we stayed focused in the right areas: we delivered solid cash
flow, maintained a strong balance sheet and our credit rating and increased the
dividend. Maintaining our current dividend and our credit rating is important
even in these tough times - it is a high priority for the company," said
Oberhelman.
We have a substantial captive finance company, Caterpillar Financial Services,
which serves thousands of customers around the world. Key portfolio metrics,
such as past dues and credit losses, were near historic averages despite
weakness in the industries we serve and are an indication of how well the
finance business is managed.
"I am particularly encouraged that our Cat Financial portfolio is performing so
well because it is core to our business and important for our customers. In
fact, past dues were slightly lower at year-end 2015 than they were at the end
of 2014," Oberhelman added.
2016 Outlook
The outlook for 2016 sales and revenues does not anticipate improvement in
world economic growth or commodity prices. Sales and revenues are expected to
be in a range of $40 to $44 billion - a mid-point of $42 billion. The
mid-point of the range reflects a decline of about $3.5 billion from last
October's preliminary outlook for 2016 sales and revenues and a year-over-year
decline of about 10 percent. The decrease from last October's preliminary
outlook is largely a result of continued declines in commodity prices and
economic weakness in developing countries.
The profit outlook for 2016 is $3.50 per share at the mid-point of the sales
and revenues range. To provide a better understanding of our expectations for
2016 profit, we are providing our outlook with and without anticipated
restructuring costs. Over the past few years, we have undertaken restructuring
activities designed to lower our long-term cost structure. Additional
restructuring actions are anticipated in our 2016 outlook. We expect the cost
of these restructuring actions in 2016 to be about $400 million or about $0.50
per share. Excluding restructuring costs, our profit outlook for 2016 is about
$4.00 per share at the mid-point of the sales and revenues range.
Sales in Energy & Transportation are expected to decline about 10 to 15 percent
from 2015. Much of the decline is a result of low oil prices. During the
first half of 2015, sales remained at relatively high levels for equipment used
in drilling and well servicing because we started the year with a substantial
order backlog. Sales declined during the second half of 2015 as orders from
the backlog were shipped and new order levels were weak. That impact, along
with the further decline in oil prices, are the primary reasons for the
expected decline in Energy & Transportation's 2016 sales. In addition,
continuing weakness in economic conditions in much of the world is expected to
be negative for sales of power generation equipment, industrial engines, marine
and rail.
Sales in Resource Industries are expected to be down about 15 to 20 percent
from 2015 as a result of continuing reductions in mining-related commodity
prices and difficult financial conditions for many mining customers around the
world.
Sales in Construction Industries are expected to decline about 5 to 10 percent
from 2015. In the United States, improving labor market conditions and
relatively stable economic growth should continue to support the wider economy
and construction. However, we expect weakness in developing countries and
lower activity in oil-producing regions to persist.
Positively impacting the profit outlook is substantially lower pension and
other postemployment benefit (OPEB) costs. The most significant reason for
lower pension and OPEB costs is from a change in accounting principle so
expense reflects the effects of economic and interest changes in the year in
which the gains and losses are incurred. The impact of this change is expected
to have a positive impact on 2016 profit of about $425 million. A more
complete review of the change is included in Q&A 10 on page 19. In addition,
we are expecting substantial additional cost reduction in 2016, much of it from
the restructuring actions taken in 2015. The positive impacts on profit from
lower costs and lower pension and OPEB expense are expected to be more than
offset by the impact of lower sales and revenues.
"Our outlook reflects struggling oil and other commodity markets, and continued
economic weakness in developing countries. While the U.S. and European
economies are showing signs of stability, the global economy remains under
pressure. While we manage through these difficult economic times with
substantial restructuring actions to lower costs, we are also preparing for the
long term. We are continuing substantial investments in R&D and our digital
capabilities. These investments will be positive for Caterpillar and our
customers through connected fleets and jobsites and access to data and
predictive analytics. Investing in the future is important to improving
productivity and the bottom line - for Caterpillar and our customers over the
long term. While it is tough to predict when an economic recovery will happen,
the investments we are making and the actions we are taking to lower our cost
structure and improve quality and our market position will help deliver better
results when a recovery comes," said Oberhelman.
Notes:
* Glossary of terms is included on pages 21-22; first occurrence of terms
shown in bold italics.
* Information on non-GAAP financial measures is included on page 23.
* Caterpillar will conduct a teleconference and live webcast, with a slide
presentation, beginning at 10 a.m. Central Time on Thursday, January 28,
2016, to discuss its 2015 fourth-quarter and full-year financial results.
The slides accompanying the webcast will be available before the webcast on
the Caterpillar website at caterpillar.com/investors/
events-and-presentations.
About Caterpillar:
For 90 years, Caterpillar Inc. has been making sustainable progress possible
and driving positive change on every continent. Customers turn to Caterpillar
to help them develop infrastructure, energy and natural resource assets. With
2015 sales and revenues of $47.011 billion, Caterpillar is the world's leading
manufacturer of construction and mining equipment, diesel and natural gas
engines, industrial gas turbines and diesel-electric locomotives. The company
principally operates through its three product segments - Construction
Industries, Resource Industries and Energy & Transportation - and also provides
financing and related services through its Financial Products segment. For
more information, visit caterpillar.com. To connect with us on social media,
visit caterpillar.com/social-media.
Forward-Looking Statements
Certain statements in this Release relate to future events and expectations and
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be,"
"will," "would," "expect," "anticipate," "plan," "project," "intend," "could,"
"should" or other similar words or expressions often identify forward-looking
statements. All statements other than statements of historical fact are
forward-looking statements, including, without limitation, statements regarding
our outlook, projections, forecasts or trend descriptions. These statements do
not guarantee future performance, and we do not undertake to update our
forward-looking statements.
Caterpillar's actual results may differ materially from those described or
implied in our forward-looking statements based on a number of factors,
including, but not limited to: (i) global and regional economic conditions and
economic conditions in the industries we serve; (ii) government monetary or
fiscal policies and infrastructure spending; (iii) commodity price changes,
component price increases, fluctuations in demand for our products or
significant shortages of component products; (iv) disruptions or volatility in
global financial markets limiting our sources of liquidity or the liquidity of
our customers, dealers and suppliers; (v) political and economic risks,
commercial instability and events beyond our control in the countries in which
we operate; (vi) failure to maintain our credit ratings and potential resulting
increases to our cost of borrowing and adverse effects on our cost of funds,
liquidity, competitive position and access to capital markets; (vii) our
Financial Products segment's risks associated with the financial services
industry; (viii) changes in interest rates or market liquidity conditions; (ix)
an increase in delinquencies, repossessions or net losses of Cat Financial's
customers; (x) new regulations or changes in financial services regulations;
(xi) a failure to realize, or a delay in realizing, all of the anticipated
benefits of our acquisitions, joint ventures or divestitures; (xii)
international trade policies and their impact on demand for our products and
our competitive position; (xiii) our ability to develop, produce and market
quality products that meet our customers' needs; (xiv) the impact of the highly
competitive environment in which we operate on our sales and pricing; (xv)
failure to realize all of the anticipated benefits from initiatives to increase
our productivity, efficiency and cash flow and to reduce costs; (xvi)
additional restructuring costs or a failure to realize anticipated savings or
benefits from past or future cost reduction actions; (xvii) inventory
management decisions and sourcing practices of our dealers and our OEM
customers; (xviii) compliance with environmental laws and regulations; (xix)
alleged or actual violations of trade or anti-corruption laws and regulations;
(xx) additional tax expense or exposure; (xxi) currency fluctuations; (xxii)
our or Cat Financial's compliance with financial covenants; (xxiii) increased
pension plan funding obligations; (xxiv) union disputes or other employee
relations issues; (xxv) significant legal proceedings, claims, lawsuits or
government investigations; (xxvi) changes in accounting standards; (xxvii)
failure or breach of IT security; (xxviii) adverse effects of unexpected events
including natural disasters; and (xxix) other factors described in more detail
under "Item 1A. Risk Factors" in our Form 10-K filed with the SEC on February
17, 2015 for the year ended December 31, 2014.
Key Points
Fourth Quarter 2015
(Dollars in millions except per share data)
Fourth Fourth $ Change % Change
Quarter Quarter
2015 2014
Machinery, Energy & Transportation $ 10,318 $ 13,500 $ (3,182) (24) %
Sales
Financial Products Revenues 712 744 (32) (4) %
Total Sales and Revenues $ 11,030 $ 14,244 $ (3,214) (23) %
Profit (Loss) $ (87) $ 757 $ (844) (111) %
Profit (Loss) per common share - $ (0.15) $ 1.23 $ (1.38) (112) %
diluted
Profit per common share - diluted $ 0.74 $ 1.35 $ (0.61) (45) %
(excluding restructuring costs)
Full Year 2015
(Dollars in millions except per share data)
Full Year Full Year $ Change % Change
2015 2014
Machinery, Energy & Transportation $ 44,147 $ 52,142 $ (7,995) (15) %
Sales
Financial Products Revenues 2,864 3,042 (178) (6) %
Total Sales and Revenues $ 47,011 $ 55,184 $ (8,173) (15) %
Profit $ 2,102 $ 3,695 $ (1,593) (43) %
Profit per common share - diluted $ 3.50 $ 5.88 $ (2.38) (40) %
Profit per common share - diluted $ 4.64 $ 6.38 $ (1.74) (27) %
(excluding restructuring costs)
Fourth-Quarter 2015 Highlights
* Fourth-quarter sales and revenues were $11.030 billion, down 23 percent
from the fourth quarter of 2014.
* Restructuring costs were $682 million in the fourth quarter of 2015, with
an after-tax impact of $0.89 per share.
* In the fourth quarter of 2015, there was a loss of $0.15 per share;
excluding restructuring costs, there was a profit of $0.74 per share.
Profit in the fourth quarter of 2014 was $1.23 per share, or $1.35 per
share excluding restructuring costs.
Full-Year 2015 Highlights
* 2015 sales and revenues were $47.011 billion, down 15 percent from 2014.
Sales declined in all regions and in all segments.
* Restructuring costs were $908 million in 2015 with an after-tax impact of
$1.14 per share.
* Profit per share was $3.50 in 2015, or $4.64 per share excluding
restructuring costs. Profit in 2014 was $5.88 per share, or $6.38 per share
excluding restructuring costs.
Cash Flow/Financial Position
* Inventory declined about $1.45 billion during the fourth quarter of 2015.
For the full year, inventory decreased about $2.5 billion.
* ME&T operating cash flow for 2015 was about $5.2 billion.
* ME&T debt-to-capital ratio was 39.1 percent at the end of 2015, compared
with 37.4 percent at the end of 2014. We ended the year with about $6.5
billion of enterprise cash.
* During the year, we repurchased about $2 billion of Caterpillar stock and
increased the quarterly dividend by 10 percent.
2016 Outlook
* The company expects 2016 sales and revenues to be about $40 to $44 billion
- a mid-point of $42 billion.
* With sales and revenues at $42 billion, the profit outlook is about $3.50
per share, or $4.00 per share excluding restructuring costs.
* The outlook includes a reduction in pension and OPEB costs as a result of
accounting changes. (See Q&A 10 on page 19 for more information.)
* The company expects restructuring costs of about $400 million in 2016.
* We expect ME&T capital expenditures in 2016 to be lower than 2015.
CONSOLIDATED RESULTS
Consolidated Sales and Revenues
Consolidated Sales and Revenues Comparison
Fourth Quarter 2015 vs. Fourth Quarter 2014
To access this chart, go to http://www.caterpillar.com/en/investors/
quarterly-results.html for the
downloadable version of Caterpillar 4Q 2015 earnings.
The chart above graphically illustrates reasons for the change in Consolidated
Sales and Revenues between the fourth quarter of 2014 (at left) and the fourth
quarter of 2015 (at right). Items favorably impacting sales and revenues
appear as upward stair steps with the corresponding dollar amounts above each
bar, while items negatively impacting sales and revenues appear as downward
stair steps with dollar amounts reflected in parentheses above each bar.
Caterpillar management utilizes these charts internally to visually communicate
with the company's Board of Directors and employees.
Sales and Revenues
Total sales and revenues were $11.030 billion in the fourth quarter of 2015,
compared with $14.244 billion in the fourth quarter of 2014, a decline of
$3.214 billion, or 23 percent. The decrease was primarily due to lower sales
volume andthe unfavorable impact of currency due to continued strengthening of
the U.S. dollar against most currencies, with about half of the impact from the
euro. The two most significant reasons for the decline in sales in 2015 were
weakening economic growth primarily in developing countries and substantially
lower commodity prices, most notably oil. While sales for both new equipment
and aftermarket parts declined in all segments, most of the decrease was for
new equipment.
Sales declined in all regions. In North America, sales decreased 26 percent
due to lower end-user demand, primarily in Energy & Transportation, and
unfavorable changes in dealer inventories, mostly in Construction Industries.
In EAME, sales declined 20 percent, mostly due to lower end-user demand for
products used in Energy & Transportation applications and the unfavorable
impact of currency, as sales in euros translated into fewer U.S. dollars.
Sales decreased 36 percent in Latin America, primarily due to widespread
economic weakness across the region, which had a negative impact on
construction and mining activity and demand for products used in oil and gas
applications. The most significant decrease was in Brazil. Asia/Pacific sales
declined 16 percent, primarily due to lower end-user demand for Energy &
Transportation applications and products used in mining. In addition, the
impact of currency was unfavorable as sales, mostly in Australian dollars and
Japanese yen, translated into fewer U.S. dollars. These unfavorable items were
partially offset by favorable changes in dealer inventories as dealers reduced
inventories more significantly in the fourth quarter of 2014 compared to the
fourth quarter of 2015.
Sales decreased in all segments. Energy & Transportation's sales declined 29
percent as sales decreased due to lower end-user demand and the unfavorable
impact of currency. Construction Industries' sales decreased 18 percent,
primarily due to the unfavorable impact of changes in dealer inventories as
dealers decreased inventories more significantly in the fourth quarter of 2015
compared to the fourth quarter of 2014. Additionally, dealer deliveries to end
users, the impact of currency and price realization were unfavorable. Resource
Industries' sales declined 23 percent, mostly due to continued low end-user
demand. Financial Products' segment revenues were down 8 percent, primarily
due to lower average earning assets and lower average financing rates.
Consolidated Operating Profit
Consolidated Operating Profit (Loss) Comparison
Fourth Quarter 2015 vs. Fourth Quarter 2014
To access this chart, go to http://www.caterpillar.com/en/investors/
quarterly-results.html for the
downloadable version of Caterpillar 4Q 2015 earnings.
The chart above graphically illustrates reasons for the change in Consolidated
Operating Profit (Loss) between the fourth quarter of 2014 (at left) and the
fourth quarter of 2015 (at right). Items favorably impacting operating
profitappear as upward stair steps with the corresponding dollar amounts above
each bar, while items negatively impacting operating profit appear as downward
stair steps with dollar amounts reflected in parentheses above each bar.
Caterpillar management utilizes these charts internally to visually communicate
with the company's Board of Directors and employees. The bar entitled Other
includes consolidating adjustments and Machinery, Energy & Transportation other
operating (income) expenses.
Operating loss for the fourth quarter of 2015 was $114 million, compared with
operating profit of $1.063 billion in the fourth quarter of 2014. The decrease
of $1.177 billion was primarily due to lower sales volume reflecting weak
market conditions in most of the industries we serve, higher restructuring
costs and unfavorable price realization. These items were partially offset by
favorable manufacturing costs and lower SG&A and R&D expenses.
The unfavorable price realization resulted from competitive market conditions
and an unfavorable geographic mix of sales.
Manufacturing costs were favorable due to lower incentive compensation expense,
lower spending due to cost reduction efforts and improved material costs
partially offset by the unfavorable impact of cost absorption as inventory
decreased more significantly in the fourth quarter of 2015 than in the fourth
quarter of 2014.
SG&A and R&D expenses were favorable due to lower incentive compensation
expense and lower spending due to cost reduction efforts.
Although the strong U.S. dollar had a negative impact to our sales, our sizable
manufacturing presence outside of the United States resulted in a favorable
impact to costs and operating profit.
Restructuring costs of $682 million in the fourth quarter of 2015 were
primarily related to a reduction in workforce. In the fourth quarter of 2014,
restructuring costs were $97 million.
Other Profit/Loss Items
Other income/expense in the fourth quarter of 2015 was income of $30 million,
compared with income of $3 million in the fourth quarter of 2014. The
favorable change of $27 million was primarily due to gains on the sale of
securities in the fourth quarter of 2015. The net impact from currency
translation and hedging gains and losses was about flat.
The provision for income taxes for the fourth quarter of 2015 reflects an
effective tax rate of 24.5 percent, compared with 28 percent for the fourth
quarter of 2014 excluding the items discussed below. The decrease is primarily
due to a more favorable geographic mix of profits from a tax perspective in
2015, including the impact of restructuring costs primarily at higher U.S. tax
rates.
The provision for income taxes for the fourth quarter of 2015 also includes a
benefit of $77 million related to the decrease from the third-quarter estimated
annual tax rate of 27 percent, primarily due to the renewal in the fourth
quarter of the U.S. research and development tax credit. The provision for
income taxes for the fourth quarter of 2014 also included benefits of $85
million related to a decrease from the third-quarter estimated annual effective
tax rate and the release of a valuation allowance against the deferred tax
assets of a non-U.S. subsidiary.
Global Workforce
Caterpillar worldwide, full-time employment was about 105,700 at the end of
2015, compared with about 114,200 at the end of 2014, a decrease of about 8,500
full-time employees. The flexible workforce decreased by about 3,500 for a
total decrease in the global workforce of about 12,000. The decrease was
primarily the result of restructuring programs and lower production volumes.
Full-time employment at the end of 2015 includes approximately 2,100 employees
who participated in the U.S. voluntary retirement enhancement program and left
the company effective January 1, 2016.
December 31
2015 2014 Increase /
(Decrease)
Full-time employment 105,700 114,200 (8,500)
Flexible workforce 13,000 16,500 (3,500)
Total 118,700 130,700 (12,000)
Geographic summary of change
U.S. workforce (5,600)
Non-U.S. workforce (6,400)
Total (12,000)
SEGMENT RESULTS
Sales and Revenues by Geographic Region
% North % Latin % % Asia/ %
(Millions of Total Change America Change America Change EAME Change Pacific Change
dollars)
Fourth Quarter
2015
Construction $ (18) % $ (17) % $ (49) % $ (2) % $ 783 (17) %
Industries¹ 3,640 1,664 280 913
Resource 1,836 (23) % 586 (31) % 274 (32) % 449 (21) % 527 (7) %
Industries²
Energy & 4,419 (29) % 1,852 (32) % 408 (25) % 1,406 (29) % 753 (20) %
Transportation³
All Other 468 (12) % 338 (5) % 28 (54) % 64 (17) % 38 (3) %
Segments?
Corporate Items (45) (47) - 1 1
and Eliminations
Machinery, Energy $10,318 (24) % $ (26) % $ (36) % $2,833 (20) % $2,102 (16) %
& Transportation 4,393 990
Financial $ (8) % $ - % $ (13) % $ (16) % $ 100 (25) %
Products Segment 746 452 97 97
Corporate Items (34) (6) (13) (5) (10)
and Eliminations
Financial $ (4) % $ 8 % $ (15) % $ (16) % $ (26) %
Products Revenues 712 446 84 92 90
Consolidated $11,030 (23) % $ (23) % $ (35) % $2,925 (20) % $2,192 (16) %
Sales and 4,839 1,074
Revenues
Fourth Quarter
2014
Construction $ $ $ $ $ 941
Industries¹ 4,420 1,996 549 934
Resource 2,385 850 401 566 568
Industries²
Energy & 6,191 2,730 541 1,980 940
Transportation³
All Other 531 354 61 77 39
Segments?
Corporate Items (27) (26) - (3) 2
and Eliminations
Machinery, Energy $13,500 $ $ $3,554 $2,490
& Transportation 5,904 1,552
Financial $ $ $ $ $ 133
Products Segment 811 451 112 115
Corporate Items (67) (37) (13) (6) (11)
and Eliminations
Financial $ $ $ $ $ 122
Products Revenues 744 414 99 109
Consolidated $14,244 $ $ $3,663 $2,612
Sales and 6,318 1,651
Revenues
1 Does not include inter-segment sales of $63 million and $52 million
in fourth quarter 2015 and 2014, respectively.
2 Does not include inter-segment sales of $85 million and $113 million
in fourth quarter 2015 and 2014, respectively.
3 Does not include inter-segment sales of $382 million and $542
million in fourth quarter 2015 and 2014, respectively.
4 Does not include inter-segment sales of $729 million and $843
million in fourth quarter 2015 and 2014, respectively.
Sales and Revenues by Segment
Fourth Sales Price Fourth $ %
(Millions of Quarter 2014 Volume Realization Currency Other Quarter 2015 Change Change
dollars)
Construction $ 4,420 $ (522) $ (110) $ (148) $ - $ 3,640 $ (780) (18) %
Industries
Resource 2,385 (474) (20) (55) - 1,836 (549) (23) %
Industries
Energy & 6,191 (1,600) (3) (169) - 4,419 (1,772) (29) %
Transportation
All Other 531 (60) 9 (12) - 468 (63) (12) %
Segments
Corporate (27) (16) - (2) - (45) (18)
Items and
Eliminations
Machinery, $ 13,500 $(2,672) $ (124) $ (386) $ - $ 10,318 $(3,182) (24) %
Energy &
Transportation
Financial 811 - - - (65) 746 (65) (8) %
Products
Segment
Corporate (67) - - - 33 (34) 33
Items and
Eliminations
Financial $ 744 $ - $ - $ - $ (32) $ 712 $ (32) (4) %
Products
Revenues
Consolidated $ 14,244 $(2,672) $ (124) $ (386) $ (32) $ 11,030 $(3,214) (23) %
Sales and
Revenues
Operating Profit (Loss) by Segment
Fourth Fourth $ %
(Millions of dollars) Quarter Quarter Change Change
2015 2014
Construction $ 220 $ 362 $ (142) (39) %
Industries
Resource Industries (105) 25 (130) (520) %
Energy & 712 1,123 (411) (37) %
Transportation
All Other Segments 141 164 (23) (14) %
Corporate Items and (1,195) (753) (442)
Eliminations
Machinery, Energy & $ (227) $ 921 $ (1,148) (125) %
Transportation
Financial Products 191 197 (6) (3) %
Segment
Corporate Items and (15) 12 (27)
Eliminations
Financial Products $ 176 $ 209 $ (33) (16) %
Consolidating (63) (67) 4
Adjustments
Consolidated $ (114) $ 1,063 $ (1,177) (111) %
Operating Profit
(Loss)
CONSTRUCTION INDUSTRIES
(Millions
of dollars)
Sales Comparison
Fourth Sales Price Currency Fourth $ %
Quarter Volume Realization Quarter Change Change
2014 2015
Sales $4,420 ($522) ($110) ($148) $3,640 ($780) (18) %
Comparison1
Sales by Geographic
Region
Fourth Fourth $ %
Quarter Quarter Change Change
2015 2014
North $1,664 $1,996 ($332) (17) %
America
Latin 280 549 (269) (49) %
America
EAME 913 934 (21) (2) %
Asia/ 783 941 (158) (17) %
Pacific
Total1 $3,640 $4,420 ($780) (18) %
Operating
Profit
Fourth Fourth $ %
Quarter Quarter Change Change
2015 2014
Operating $220 $362 ($142) (39) %
Profit
1 Does not include inter-segment sales of $63 million and $52 million in fourth
quarter 2015 and 2014, respectively.
Construction Industries' sales were $3.640 billion in the fourth quarter of
2015, a decrease of $780 million, or 18 percent, from the fourth quarter of
2014. The decrease in sales was mostly due to lower volume and the unfavorable
impact of currency. While sales declined for both new equipment and
aftermarket parts, most of the decrease was for new equipment.
* Sales volume declined primarily due to the unfavorable impact of changes in
dealer inventories as dealers decreased inventories more significantly in
the fourth quarter of 2015 compared to the fourth quarter of 2014. In
addition, deliveries to end users decreased.
* The unfavorable impact of currency was largely due to the euro, Japanese
yen and Brazilian real.
Sales decreased in North America, Latin America and Asia/Pacific, while sales
in EAME were about flat.
* In North America, sales declined mostly due to dealers substantially
reducing inventories in the fourth quarter of 2015, compared to maintaining
inventory levels in the fourth quarter of 2014. Although residential and
nonresidential construction activity is improving, sales to end users were
lower than the fourth quarter of 2014. We believe declines in construction
activity related to oil and gas has resulted in availability of existing
construction equipment for other purposes.
* In Latin America, dealer deliveries were down across the region, with the
most significant decline in Brazil due to continued weak construction
activity resulting from depressed economic conditions. In addition, sales
declined due to the unfavorable impact of changes in dealer inventories as
dealers lowered inventories in the fourth quarter of 2015, compared to
relatively flat inventories in the fourth quarter of 2014.
* In Asia/Pacific, the sales decline was primarily due to lower sales in
China and India and the unfavorable impact of currency. The most
significant decline was in China, a result of continued weak residential
and nonresidential construction activity. The unfavorable impact of
currency was primarily due to the weaker Japanese yen and Australian
dollar.
* Sales in EAME were about flat as lower end-user demand and the unfavorable
impact of currency were about offset by the favorable impact of changes in
dealer inventories. Dealers lowered inventories more in the fourth quarter
of 2014 than in the fourth quarter of 2015.
Construction Industries' profit was $220 million in the fourth quarter of 2015,
compared with $362 million in the fourth quarter of 2014. The decrease in
profit was primarily due to lower sales volume, unfavorable price realization
resulting from competitive market conditions and an unfavorable geographic mix
of sales, and an unfavorable impact from litigation. The decline was partially
offset by favorable manufacturing costs and lower SG&A and R&D expenses. The
reduction in manufacturing costs and SG&A and R&D expenses was primarily due to
lower incentive compensation expense and cost reduction efforts.
RESOURCE INDUSTRIES
(Millions
of dollars)
Sales Comparison
Fourth Sales Price Currency Fourth $ %
Quarter Volume Realization Quarter Change Change
2014 2015
Sales $2,385 ($474) ($20) ($55) $1,836 ($549) (23) %
Comparison1
Sales by Geographic
Region
Fourth Fourth $ %
Quarter Quarter Change Change
2015 2014
North $586 $850 ($264) (31) %
America
Latin 274 401 (127) (32) %
America
EAME 449 566 (117) (21) %
Asia/ 527 568 (41) (7) %
Pacific
Total1 $1,836 $2,385 ($549) (23) %
Operating Profit
(Loss)
Fourth Fourth $ %
Quarter Quarter Change Change
2015 2014
Operating ($105) $25 ($130) (520) %
Profit
(Loss)
1 Does not include inter-segment sales of $85 million and $113 million in
fourth quarter 2015 and 2014, respectively.
Resource Industries' sales were $1.836 billion in the fourth quarter of 2015, a
decrease of $549 million, or 23 percent, from the fourth quarter of 2014. The
decline was primarily due to lower sales volume. Sales were lower for both new
equipment and aftermarket parts. We believe mining companies are continuing to
curtail maintenance and rebuild activities.
The sales decrease was primarily due to lower end-user demand across all
regions. This was partially offset by the favorable impact of changes in
dealer inventories, primarily in Asia/Pacific, as dealer inventories were about
flat in the fourth quarter of 2015, compared to a decline in the fourth quarter
of 2014.
Commodity prices remained weak and mining customers continued to focus on
improving productivity in existing mines and reducing their total capital
expenditures, as they have for several years. As a result, sales and new
orders in Resource Industries continue to be weak.
Resource Industries incurred a loss of $105 million in the fourth quarter of
2015, compared with profit of $25 million in the fourth quarter of 2014. The
unfavorable change was primarily the result of lower sales volume partially
offset by improved manufacturing costs.
Manufacturing costs were favorable due to lower period costs resulting from
cost reduction efforts and improved material costs.
SG&A and R&D expenses were about flat, as higher spending for new product
introductions was about offset by lower SG&A expenses.
ENERGY & TRANSPORTATION
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