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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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FORM
8-K
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Current
Report
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Pursuant
to
Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date
of
Report (Date of earliest event reported):
April 24, 2006
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CATERPILLAR
INC.
(Exact
name
of registrant as specified in its charter)
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Delaware
(State
or
other jurisdiction of incorporation)
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1-768
(Commission
File Number)
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37-0602744
(IRS
Employer
Identification No.)
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100
NE Adams Street, Peoria, Illinois
(Address
of
principal executive offices)
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61629
(Zip
Code)
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Registrant's
telephone number, including area code:
(309) 675-1000
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Former
name
or former address, if changed since last report: N/A
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the
following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
230.425)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
7.01.
Regulation FD Disclosure.
The
following is
Caterpillar Inc.'s prepared statements from the results webcast held on April
24, 2006. The furnishing of these materials is not intended to constitute a
representation that such furnishing is required by Regulation FD or that the
materials include material investor information that is not otherwise publicly
available. In addition, the Registrant does not assume any obligation to update
such information in the future.
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1Q06
Caterpillar Results Conference Call Prepared Remarks
First
quarter
2006 Conference Call Prepared Remark
Q1-2006
Conference Call Prepared Remarks
Good
morning and
welcome to Caterpillar's first quarter conference call. I'm Mike DeWalt, the
Director of Investor Relations.
With
me on the call
today are Caterpillar Group President Doug Oberhelman, and CFO- Dave
Burritt.
This
call is
copyrighted by Caterpillar Inc. Any use, recording or transmission of any
portion of this call without the express written consent of Caterpillar Inc.
is
strictly prohibited. If you’d like a printed copy of my prepared remarks, you
can go to the SEC filings in the Investor section of our website where they
are
filed as an 8-K, they’re also available on the SEC’s website.
In
addition, certain information we’ll be discussing today is forward looking and
involves material uncertainties that could impact expected results. A discussion
of those uncertainties is included in the Safe Harbor statement included in
a
Form 8-K filed with the SEC today.
This
morning we
reported a great first quarter and announced an improvement in the profit
outlook for the full-year.
The
first quarter
was an excellent start to the year, and compared with the first quarter a year
ago :
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Sales
and
Revenues were up 13% at $9.4 billion, and profit per share was $1.20
up
48% from a year ago.
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Of
the
increase in sales and revenues, price realization was $587 million,
physical sales volume increased $511 million, and financial products
revenues were $99 million higher. The effect of currency was negative
$144
million, primarily due to a weaker Euro vs. a year
ago.
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As
you look
at the $511 million volume increase, $324 million was Machinery and
$187
million was Engines.
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While
profit
per share was up 48%, consolidated operating profit was up 61% vs.
a year
ago. I think it’s worth a reminder at this point that this quarter’s
results include a $34 million of expense for stock based compensation.
That’s new for 2006, and a breakdown of our expectations for the year
is
included in the Q&A section of our
release.
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In
addition
to higher profit, the rate of profitability improved.
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Our
consolidated return on sales was 8.9%, up from 7.0% a year
ago.
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I
know many
of you follow our Machinery and Engines operating profit as a percent
of
sales, and it climbed to 12.9% in the first quarter. That’s up from 8.7% a
year ago and is 1.8 percentage points higher than fourth quarter
of 2005.
In fact, you would have to go back to the 2nd
quarter of
1997 to find a better rate.
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And
the
Machinery and Engines profit pull through was 47% that’s the change in
operating profit from the first quarter a year ago, divided by the
change
in sales.
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It
was a great quarter, but that doesn’t mean we don’t have work to
do:
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Delivery
times for many of the machines and engines we sell are longer than
we, and
our customers, would like, and we’re working to increase
production.
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Core
operating costs increased $303 million in the first quarter, and
I’m sure
you have questions about the cost increase, so I’ll address it
now.
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Over
the past
couple of years we’ve talked a lot about factory efficiency and the job
we’ve had to ramp up production in our own factories. In fact, if you
go
back just three years to the first quarter of 2003, you’d see that Sales
and Revenues in the current quarter are up 95%. It’s been a big challenge
ramping up production and we’re proud of the way our employees and
suppliers have responded, and 6 Sigma has been a key driver in making
it
happen.
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Of
the
increase in core operating costs in the quarter, about $170 million
was
manufacturing cost. The increase was due to higher period and variable
labor and overhead costs. Material costs were not a significant factor,
and were about flat quarter over quarter.
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The
increase
in period manufacturing costs was to support the higher sales, spending
in
our factories to help increase our production capacity, support for
new
product programs, labor inflation, higher depreciation, and higher
energy
costs.
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The
increase
in variable costs was a result of inefficiencies related to operating
at
or near capacity in a number of facilities, and cost inflation.
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SG&A
costs were up $71 million and increased at a lower rate than
sales.
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R&D
expenses were up substantially compared with the first quarter a
year ago.
We have significant product programs in the pipeline and, as we expected
and mentioned in the last conference call, R&D expenses are expected
to be up for the year.
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Let’s
turn to cash
flow for a minute.
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Machinery
and
Engines Operating Cash flow was $527 million in the quarter, which
was
$348 million better than the first quarter a year ago.
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On
the plus
side, the increase in profit was a big positive for cash flow and
the
primary reason for the improvement compared with the first quarter
of
2005.
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Cash
flow in
both quarters was affected by higher inventory, which was up over
$600
million in the first quarter of 2006. It’s not unusual to build some
inventory in the first quarter in preparation for the second quarter,
which historically is a seasonally strong quarter for end-user deliveries.
In addition, some of inventory build in this quarter was a result
of a
high level of new product introductions we had the material in our
factories, but were slow in ramping up delivery on some of the new
products.
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Bottom
line,
operating cash flow was better than a year ago and we expect it will
continue to improve as 2006
unfolds.
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O.K.
let’s touch on
the outlook before we move on to Q & A.
We’re
raising the
profit outlook for 2006. We expect profit for the year to be in the range of
$4.85 to $5.20 per share. That’s an increase of 20 cents per share at both ends
of the range.
We
have a positive view of the overall world economy, and for the industries we
serve, and continue to expect sales and revenues of about $40 billion for the
full year, up about 10% from 2005.
Inflation
remains
low in most countries and should help keep interest rates worldwide at
relatively low levels, and should support continued growth in the world economy
with overall world growth in 2006 similar to 2005.
We
expect continued strength from most of the industries we serve notably, mining,
road building and paving, infrastructure development, non-residential
construction, and engines for petroleum, electric power, marine, and on-highway
applications.
Overall,
the
fundamentals for the industries we serve look good. That said, we know there
are
a number of risks that face Caterpillar, and the economy as a whole.
Internally
in 2006, we’re focused on execution:
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Improving
operating consistency and excellence throughout our factories to
drive
better quality, better asset utilization, shorter lead times for
our
dealers and customers, and lower costs.
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We
need to
continue to increase production at a number of our factories particularly
those producing large machines and
engines.
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And,
we’re
introducing a number of new products in 2006, and we’re preparing now for
new machine and engine introductions in 2007 & 2008, including the
next generation of ACERT engines.
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Today
we have a
great quarter to talk about and celebrate tomorrow we have a lot of work to
do
because as good as the quarter was, we have plenty of room to improve our
execution and we’re “all about” improvement through 6 Sigma.
OK,
let’s move to
the Q&A portion of the call. In the interest of time and fairness to others,
please limit yourself to one question and one follow up.
If
we could have the first question please.
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Pursuant
to
the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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CATERPILLAR
INC.
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April
24,
2006
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By:
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/s/James
B. Buda
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James
B.
Buda
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Vice
President
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