Caterpillar Performance Analyzing Report

m UNIVERSITY [AGERIAL ACCOUNTING [CLASS-2014[pic 2]

Caterpillar Performance Analyzing Report

CATERPILLAR®[pic 3]

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TEAM MEMBERS:

LINYANGWANG XIAOXIZHU LETIAN CUI

CAT Performance Analysis

CATALOG

1. Performance        2

1. Overview in 2013        2

1. Caterpillar and Competitor Analysis        7

1. Comparison of business strategies        8
2. Comparison for products and product sales        10
3. Comparison for Income Statement and Balance Sheet        11

1. Strategy        11

1. Goodwill        11
2. Reduce Inventory        12
3. Develop Relationship with Chinese government        13
4. Pursuit lower labor cost        13
5. Train local talent        15
6. Research investment        15
7. Loan and investment        16

1. Balance Sheet and Income Statement        17

1. Income Statement (2013 VS Revised 2013)        17
2. Balance Sheet (2013 VS Revised 2013)        18

Reference        19

1

CAT Performance Analysis

1. Performance

1. Overview in 2013

Caterpillar Inc. has announced that its fourth-quarter 2013 sales and revenues of $ 14.402 billion, compared with $ 16.075 billion in the fourth quarter of 2012 fell 10%. Compared with earnings per share of $ 1.04 in the fourth quarter of 2012, fourth quarter 2013 earnings per share of $ 1.54. 2012 fourth quarter earnings per share were affected by two important things: a goodwill impairment of 580, equivalent to $ 0.87 per share lower and, simultaneously, the tax settlement values 300 million increase profits, equivalent to an increase of $ 0.45 per share. Apart from those two, $ 0.08 earnings per share growth over the fourth quarter of 2012, reflecting the strong operating performance.

2013 annual sales and revenue was $ 55.656 billion, and $ 65.875 billion in 2012 compared to a drop of 16%. Declining sales and revenues was mainly due to a sharp decline in the supply of new mining machinery sales. Despite the tough market environment, the company reported a record operating cash flow in 2013 machines and power systems best record, reaching $ 9 billion.

Reducing cost is the critical method of Caterpillar maintaining profits in 2013. According to 10-K9 there are multiple ways Caterpillar using to reduce cost. Those strategies has decreased expenses of $ 1.2 billion.

CAT Performance Analysis

Total        -9703

Caterpillar worldwide full-time employment was 118,501 at the end of 2013 compared with 125,341 at the end of 2012, a decrease of 6,840 full-time employees. The flexible workforce decreased 2,863 for a total decrease in the global workforce of 9,703. The decrease was primarily the result of restructuring programs and lower production volumes. So, we think that firing employee is not a good idea for reducing the labor cost.

1. Quarter Analysis

The main reason for profit drop in 2013 is the inaccurate forecast of market condition, which leads to an ineffective sales combination. Though some changes were made to the annual outlook during 2013, the result was still undesirable.

1.2.1 First Quarter

Caterpillar has already made the forecast that the first quarter of 2013 would be challenging. In order to deal with that condition, they cut inventory by about a half billion dollars. Also, the stock repurchase plan made in 2011 could come along because of the affluent cash flow.

Under the condition of relatively stable world economy, Caterpillar expected a slow growth. The greatest two markets, the United States and China, gave the positive feedback. And the mining segments had decreased significantly and beyond the expectation.

First Quarter 2013

Machinery and Power Systems Sales Financial Products Revenues Total Sales and Revenues

CAT Performance Analysis

Profit        88〇        1586        ^706        -45%

Profit per common share - diluted        1.31        2.37        -1.06        -45%

Sales decreased in all segments. Resource Industries^[1] sales were down 23 percent, Construction Industries’ sales decreased 17 percent, and Power Systems’ sales were 12 percent lower. Operating profit for the first quarter of 2013 was $1,218 billion, a decline of $1,105 billion from the first quarter of 2012. The decrease was primarily the result of lower sales volume, increased manufacturing costs and the unfavorable impact from acquisitions and divestitures. Manufacturing costs increased $317 million. The increase was primarily due to unfavorable changes in cost absorption resulting from a decrease in inventory during the first quarter of 2013 and an increase in inventory during the first quarter of 2012, as well as inefficiencies driven by lower production in the first quarter of 2013.