Caterpillar Boasts Record Third-Quarter Sales and Revenues

Citing continued strength in markets outside of the United States, Caterpillar Inc. announced third-quarter sales and revenues of $11.442 billion, an all-time quarterly high. The company also reported profit of $927 million, or $1.40 per share, for the quarter ended September 30, 2007. Profit and profit per share are the highest ever for a third quarter.

“These results clearly demonstrate our global reach and the stability and strength of our growing integrated service businesses. We delivered strong returns for our stockholders despite continuing severe weakness in key U.S. markets,” said Chairman and Chief Executive Officer Jim Owens. “I am particularly pleased by the bottom line results of our engines business. With our extensive product offering and the continuing strength in most end markets, we were able to more than offset the impact of the dramatic drop in on-highway truck engines and report record operating profit for engines. Overall, profit per share climbed 23 percent compared to last year’s third quarter, and moving forward I am confident that our deployment of the Cat Production System (CPS) will help us reach our 2010 goals for improving safety, quality, velocity, earnings and growth,” said Owens.

Sales and revenues increased $925 million compared to the third quarter of last year, $385 million from higher sales volume, $267 million from improved price realization, $174 million from the effects of currency and $99 million from higher Financial Products revenues.

Third-quarter profit increased $158 million, or $0.26 per share, from third quarter 2006. The increase in profit was due to improved price realization and higher sales volume, partially offset by higher manufacturing costs, including material costs.

“Despite weakness in U.S. markets, our sales and revenues increased nine percent. We continue to see remarkable growth outside of the United States with particular strength in key industries like mining, oil and gas, electric power and marine engines. The industries we serve are becoming increasingly global, and the investments we are making to achieve our 2010 goals have us well positioned to meet their needs,” said Owens.

Outlook

The full-year outlook for 2007 is for sales and revenues of about $44 billion and profit per share in the range of $5.20 to $5.60, compared to $5.17 per share in 2006. The previous outlook for 2007 sales and revenues was about $44 billion, and profit per share was $5.30 to $5.80.

Caterpillar’s preliminary outlook for 2008 reflects a sales and revenues increase of five to 10 percent and profit per share up five to 15 percent from the midpoint of the 2007 outlook range.

“I am pleased with our progress on improving safety and quality. While we continue to face capacity-related inefficiencies due to the unprecedented surge in global demand, I am confident that CPS with Six Sigma will deliver the velocity and efficiency improvements needed to achieve our 2010 goals—sales and revenues more than $50 billion and compound annual growth in profit per share of 15 to 20 percent from our 2005 base,” said Owens.

Cat Financial

Caterpillar Financial Services Corporation (Cat Financial) reported record revenues of $758 million, an increase of $35 million, or five percent, compared with the third quarter of 2006. Third-quarter profit after tax was a record $133 million, a $1 million, or one percent, increase over the third quarter of 2006.

Of the increase in revenues, $19 million resulted from the impact of higher interest rates on new and existing finance receivables, and $24 million resulted from the impact of continued growth of finance receivables and operating leases (earning assets). In addition, other revenues decreased $8 million, primarily due to net decreases in various other revenue items.

On a pre-tax basis, profit was down $5 million, or three percent, compared with the third quarter of 2006. The decrease was principally due to the $8 million decrease in other revenue items and a $6 million increase in provision expense, offset by an increase of $9 million in margin (wholesale, retail finance, operating lease and associated fee revenues less interest expense and depreciation on assets leased to others). The increase in margin principally resulted from the growth in average earning assets over 2006 of $908 million.

Provision for income taxes decreased $6 million, or 10 percent, compared with the third quarter of 2006. The decrease was primarily attributable to net tax benefits related to changes in tax rates in certain non-US jurisdictions.

New retail financing was a record $3.58 billion, an increase of $619 million, or 21 percent, from the third quarter of 2006. The increase was the result of increased new retail financing primarily in our Europe, North America and Asia-Pacific operating segments.

Past dues over 30 days at September 30, 2007 were 2.52 percent compared to 1.89 percent at September 30, 2006, due primarily to the softening of the U.S. housing industry. Write-offs, net of recoveries, at September 30, 2007 were $15 million compared to $11 million at September 30, 2006. Although these indicators reflect increases over the prior year, they are below historical averages.

Caterpillar Vice President and Cat Financial President Kent M. Adams said, “Continued growth in our global business has compensated for the weaker U.S. housing industry. Our growth outside the United States reflects our continued focus to offer a wide range of financial services to help customers buy Caterpillar products and services worldwide.” IBI

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