Caterpillar Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual filing, not a standalone fourth-quarter report. Caterpillar manufactures construction and mining equipment, engines, turbines and locomotives, and provides financing through Cat Financial.
Key financial and operating metrics
- 2013 sales and revenues were $55.656 billion. The supplied filing text does not provide a clear comparable 2012 total or the consolidated profit, cash-flow, margin, debt or liquidity figures; those statements are incorporated by reference from Exhibit 13, which is not included here.
- Research and development spending was $2.046 billion (3.7% of sales and revenues), compared with $2.466 billion in 2012 and $2.297 billion in 2011.
- Firm order backlog was approximately $18.0 billion at year-end, versus $20.2 billion in 2012 and $29.8 billion in 2011. About $3.0 billion was not expected to be filled in 2014.
- Sales outside the United States represented 67% of 2013 sales and revenues, compared with 69% in 2012 and 70% in 2011.
- Common shares outstanding at December 31, 2013: approximately 637.8 million. No shares were repurchased during the fourth quarter; 9,235 shares were delivered to the company for employee and director tax obligations.
Changes versus prior periods
- Construction Industries: Sales declined slightly from 2012. Currency—primarily a weaker Japanese yen—and lower volume, including dealer inventory changes, contributed. North America and Latin America were approximately flat; EAME and Asia/Pacific declined.
- Resource Industries: Sales fell significantly, mainly due to lower dealer inventories and weaker end-user demand as mining customers reduced capital spending. The company cut production, costs and employment.
- Power Systems: Engine sales decreased, primarily on lower volume in electric power, petroleum and rail applications.
- Backlog continued to contract, with the largest year-over-year declines in mining-related products; a substantial increase in Construction Industries partly offset declines elsewhere.
Outlook, commentary, risks and unusual items
- Management expected research and development expense to increase about 7% in 2014. The supplied text does not state a clear consolidated sales or earnings forecast.
- Caterpillar began production at facilities in Rayong, Thailand, and Athens, Georgia, while slowing other capacity increases and reducing production at several facilities amid global uncertainty. It also used targeted programs to reduce inventory in certain markets, including China.
- A December 2013 restructuring plan for Gosselies, Belgium, was expected to result in significant separation-related charges during 2014. Further 2014 restructuring actions and related charges were also anticipated.
- In September 2013, Caterpillar acquired Johan Walter Berg AB, adding marine propulsion systems and controls. The company also continued transitioning the former Bucyrus distribution business to independent dealers.
- Key risks include cyclical global demand, mining and commodity conditions, dealer inventory adjustments, foreign-exchange movements, competition and pricing, input costs and supply disruptions, access to financing, Cat Financial credit losses and funding, regulation, pension obligations, and execution of restructuring and acquisition integration.
- Progress Rail received a grand jury subpoena in October 2013 concerning alleged railcar inspection, repair and disposal practices. The company said it was cooperating, could not estimate a potential loss, and did not then believe the matter would materially affect consolidated results, financial position or liquidity.
- Management reported effective disclosure controls and internal control over financial reporting as of year-end. Environmental remediation accruals were described as not material; the company also stated that material losses from other unresolved legal actions were remote.
Important facts for investors to verify
- Review Exhibit 13 for the complete 2013 and comparative income statements, balance sheets, cash flows, segment results, margins, debt, liquidity and management’s full outlook.
- Assess whether mining demand and dealer inventory reductions stabilize, and how the $18.0 billion backlog converts into shipments and revenue.
- Check the amount and timing of Gosselies and other restructuring charges, and whether expected cost savings are realized.
- Monitor Cat Financial funding access, delinquency and credit-loss trends, and applicable debt covenant headroom.
- Follow developments in the Progress Rail investigation and any resulting financial or operational consequences.