Caterpillar Announces Record Q3, Revises 2005 Outlook

PEORIA, Ill. – Continuing to meet strong customer demand worldwide, Caterpillar today reported third-quarter sales and revenues of $8.977 billion and profit of $667 million, or $0.94 per share. Both sales and revenues and profit per share are the highest in the company's history for a third quarter.

"Thanks to the hard work of our people around the world and the discipline of 6 Sigma, Team Caterpillar has again effectively responded to our customers' needs," said Caterpillar Chairman and Chief Executive Officer Jim Owens. "We met the challenges stemming from recent hurricanes with minimum disruption to our business and maximum responsiveness to the cleanup needs in the Gulf region and delivered the best third-quarter financial results in company history."

Sales and revenues of $8.977 billion were up $1.318 billion, or 17 percent, compared to $7.659 billion for the third quarter of 2004. The higher sales and revenues were driven by continued strong global demand and improved price realization.

Profit of $667 million, or $0.94 a share, was up 34 percent compared to profit of $498 million in the third quarter of 2004. Machinery and Engines operating profit as a percent of sales increased substantially – 7.9 percent in the third quarter of 2004 to 10.5 percent in the third quarter of 2005. The increase was the result of improved price realization, higher sales volume and effective management of our period cost structure, somewhat offset by continued pressure on variable manufacturing costs.

"While we posted the best third quarter in our history, we still have opportunity to improve our operations,” Owens said. “In particular, we have to work through capacity bottlenecks and need more focus on production processes to improve order fulfillment and supply chain efficiencies. To help move us faster along this path, we announced last week a new division to drive improvements in our production processes and order fulfillment capability."

OUTLOOK: 2005 & 2006. Caterpillar’s outlook for 2005 has been revised from previously reported levels. Sales and revenues are now expected to be up about 20 percent from 2004, and the profit outlook has been adjusted to reflect an estimated profit range of $3.85 to $4.00 per share.

The previous outlook reflected sales and revenues up 18 to 20 percent and profit per share of $4.00 to $4.20.

The revised profit outlook includes potential charges of approximately $100 million before tax that are likely to be incurred in the fourth quarter and an increase in the estimated annual tax rate from 29 percent to 30 percent. Potential charges of $100 million are related to changes in the company’s dealer distribution software and a product realignment that are under consideration.

Sales and revenues in 2006 are expected to be up about 10 percent from 2005. The profit outlook for 2006 is an increase of 15 to 25 percent from 2005 from the middle of the profit range in the 2005 outlook.

"The company is well-positioned for continued profitable growth, with selected increases in capacity, a comprehensive rollout of new products and strong growth in our service businesses,” Owens said. “Further, we will intensify our focus on order fulfillment and cost management. Caterpillar is ready for the challenges ahead."