CATERPILLAR PROJECTS FOURTH QUARTER LOSS
CATERPILLAR PROJECTS FOURTH QUARTER LOSS PEORIA, Ill., Nov. 14 /PRNewswire/ -- Caterpillar Inc. (NYSE: CAT)
today announced it will report a sizable loss for the fourth quarter of 1991. Although a precise estimate cannot be made, the loss for the quarter will likely exceed the $86 million loss incurred for the first nine months of 1991. The expected loss is principally due to unfavorable business conditions, the current work stoppage, and nonrecurring charges.
Weak economic conditions throughout much of the world continue to keep sales activity at depressed levels. While leading economic indicators are signaling the beginning of a recovery in the United States, improvements in the markets Caterpillar serves are expected to lag any upturn in the economy. The outlook is further clouded by the status of UAW labor negotiations covering about 16,000 employees in the United States. The UAW struck two facilities on Nov. 3. In response to the strike, on Nov. 7 the company stopped work at some other facilities. About 8,000 employees have been idled. Prospects for 1992 are still heavily dependent on the level of economic activity in the United States. Current analysis suggests that markets in the United States are expected to improve continuously during the year while conditions outside the United States are likely to remain difficult. In line with normal practice, the company will issue a complete 1992 outlook statement on Jan. 22 in conjunction with its release of 1991 year-end financial results. Included in Form 10-Q being filed today with the Securities and Exchange Commission is the following detailed statement, which updates the previous outlook for 1991 issued Oct. 18: "The selective strike mentioned about will negatively affect results for the fourth quarter. Fourth quarter results will also be adversely affected by nonrecurring charges relating to planned employment reductions and adjustments to plant closing reserves. The company anticipates that it will record charges for redundancy costs related to planned employment reductions at several non-U.S. locations, principally at the Gosselies, Belgium, facility. The adjustments to plant closing reserves will be made to recognize lower market values of previously closed facilities held for sale. In addition, the company expects to record an adjustment to increase loss reserves related to product liability. "As a result of all of these factors, plus continuing market weakness, the company expects to incur a sizable loss in the fourth quarter. A precise estimate cannot be made; however, the loss for the fourth quarter will likely exceed the $86 million loss incurred for the first nine months of 1991. The company continues to explore other measures to reduce future costs." The company also disclosed in its 10-Q that it has completed a preliminary valuation of its obligation for post-retirement benefits other than pensions in accordance with the new Statement of Financial Accounting Standards 106. This standard requires companies to recognize the cost of providing post-retirement health care and life insurance benefits over the employee service period. Caterpillar, like most U.S. companies, currently charges the cost of providing these benefits against operations as claims are incurred. The new standard does not affect cash flows, but merely accelerates recognition of costs. SFAS 106 must be adopted no later than 1993. The preliminary estimate of the liability for employee past service (the transition obligation) at Jan. 1, 1993, ranges from $1.7 billion to $2.4 billion, net of tax at current marginal federal tax rates. The company has the option of recognizing the transition obligation as an expense immediately or amortizing the obligation over a 20-year period. Based on the preliminary valuation, the company's incremental expense over the current pay-as-you-go basis upon adoption of SFAS 106, net of tax, would range from $100 million a year to $300 million a year. The company's ability to recognize declared tax benefits on these amounts is dependent upon, among other things, the Financial Accounting Standards Board's adoption of proposed changes to current rules concerning accounting for income taxes. Determination of the precise amount of the transition obligation at the date of adoption and of the effect on future operating results will depend on a number of factors, including potential modifications of plan benefits, changes in employment levels and refinements in actuarial assumptions. The company has not determined when the statement will be adopted or how the transition obligation will be recognized. -0- 11/14/91 /CONTACT: Dick Stober of Caterpillar, 309-675-5548/ (CAT) CO: Caterpillar Inc. ST: Illinois IN: MAC SU: ERP TS -- NY037 -- 4351 11/14/91 10:48 EST
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|Date:||Nov 14, 1991|
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