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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):
May
16, 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 and Item 8.01. Other Events
The
following
statement was released by Caterpillar Inc. on May 16, 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.
May
16,
2006
FOR
IMMEDIATE RELEASE
Caterpillar
To Acquire Progress Rail,
One
Of
the Largest Suppliers of Aftermarket Services to the North American Railroad
Industry
Continued
growth in services is an important part of Caterpillar’s Vision 2020
Strategy
PEORIA,
Ill. -
Caterpillar Inc. (NYSE: CAT) has reached an agreement to acquire Progress Rail
Services, Inc. (Progress Rail) for $1.0 billion in cash, stock and assumption
of
debt. Progress Rail is majority owned by One Equity Partners, a private equity
affiliate of JP Morgan Chase & Company, Inc.
Based
in
Albertville, Alabama, Progress Rail is a leading provider of remanufactured
locomotive and railcar products and services to the North American railroad
industry. With 2005 sales of $1.2 billion, the company has one of the most
extensive rail service and supply networks in North America. It operates more
than 90 facilities in 29 states in the United States, Canada and Mexico, with
about 3,700 employees.
“This
is an
important acquisition due to its size and scope. The rail aftermarket services
business is a strong fit with our strategic direction and will leverage our
remanufacturing capability,” said Caterpillar Chairman and Chief Executive
Officer Jim Owens. “Progress Rail provides excellent diversified growth to
Caterpillar, enhancing our ability to deliver attractive profitability
throughout the business cycles.”
“I
am extremely
pleased that Progress Rail is becoming part of the Caterpillar family,”
commented William P. Ainsworth, president and chief executive officer of
Progress Rail. “Progress Rail’s success has been attributable to our dedicated
employees and commitment to our valued customers, and Caterpillar shares these
same values with our company. By leveraging the world-class capabilities of
Caterpillar within Progress Rail, the future is bright for our employees, our
customers and our business.”
Progress
Rail
offers a full range of reconditioned and remanufactured railcar components,
rail
and track products, railcar and locomotive repair, rail welding, maintenance
of
way equipment and railcar dismantling.
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2
“Progress
Rail is a
leading aftermarket services provider to the rail industry, and this is a
premier opportunity for Caterpillar to continue to grow its services portfolio,”
said Steve Fisher, Caterpillar vice president with responsibility for
remanufacturing. “They provide highly integrated solutions, have developed
important long-term customer relationships with the railroads and have earned
an
excellent reputation throughout the industry. We are especially pleased that
Billy Ainsworth and the senior management team will join Caterpillar and
continue to lead Progress Rail. Together, we will be very well positioned to
better serve the rapidly growing railroad maintenance and repair business.”
“There
are
significant benefits as Progress Rail becomes part of Caterpillar,” said Steve
Wunning, Caterpillar group president. “Progress Rail is very customer focused
and brings an extensive network of aftermarket operations in the United States,
Canada and Mexico. Together, we will be able to provide a broader array of
services to the rail industry and expand outside of North America to the rest
of
the world. Progress Rail will use Caterpillar’s extensive remanufacturing
technology and processes to build upon their already superior capability. We
expect this transaction to be accretive to our 2006 earnings and exceed our
internal targets for investments.”
Under
the terms of
the agreement, Caterpillar will acquire Progress Rail for approximately $800
million in cash and Caterpillar stock, and $200 million through the assumption
of long-term debt. Of the approximately $800 million, 53 percent is expected
to
be paid
in cash and 47
percent in Caterpillar stock. The transaction closing is subject to obtaining
regulatory approvals and should take place around the end of second quarter
2006.
Monroe
Securities
and Lehman Brothers provided the financial advisory services, and Mayer Brown
Rowe & Maw provided legal services to Caterpillar. Credit Suisse, JP Morgan
and Morgan Stanley provided advisory services, and Morgan Lewis & Bockius
provided legal services to Progress Rail.
Announcement
Conference Call
Caterpillar
Group
President Steve Wunning, Caterpillar Vice President Steve Fisher and Caterpillar
Investor Relations Director Mike DeWalt will discuss the acquisition of Progress
Rail with financial analysts and institutional stockholders on a one-hour
conference call beginning at 8 a.m. Central Daylight Time on Friday, May 19,
2006.
Webcast
access: A
real-time,
listen-only webcast of the conference call with analysts and institutional
investors will be available. The call can be accessed through
www.cat.com/IRwebcast. Listeners should go to the web site at least 15 minutes
before the live event to download and install any necessary audio software.
The
transcript from the webcast presentation will be filed with the U.S. Securities
and Exchange Commission at the time of the conference call. For those unable
to
participate in the live broadcast, the replay will be available through
www.cat.com/IRwebcast shortly after the live event. There is no charge to access
the webcast. Those without access to the Internet may request a fax of
Caterpillar’s transcript shortly after the live event, by calling 800-228-7717
(U.S. and Canada) or 858-244-2080 (for all other regions).
About
Caterpillar
For
more than 80
years, Caterpillar Inc. has been making progress possible and driving positive
and sustainable change on every continent. With 2005 sales and revenues of
$36.339 billion, Caterpillar is the world’s leading manufacturer of construction
and mining equipment, diesel and natural gas engines and industrial gas
turbines. More information is available at http://www.CAT.com/.
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3
About
Progress Rail
Progress
Rail is
one of the largest diversified providers of outsourced maintenance and repair
services to the railroad industry in North America. Progress Rail had revenue
of
approximately $1.2 billion in 2005 and the company employs approximately 3,700
people. Progress Rail offers a broad array of products and services for the
maintenance and repair of railcars, locomotives and track infrastructure. Its
customers include all of the major North American, or “Class 1” railroads, as
well as regional railroads, short lines, public transit authorities, private
car
owners and railcar builders and lessors. With more than 90 facilities located
throughout the United States, Canada and Mexico, Progress Rail is strategically
located and well equipped to meet its growing customer demands. Company
headquarters are in Albertville, Alabama. More information is available at
http://www.progressrail.com/.
About
One Equity Partners
One
Equity Partners
(OEP) manages $5 billion of investments and commitments for JP Morgan Chase
& Co. in direct private equity transactions. Partnering with management, OEP
invests in transactions that initiate strategic and operational changes in
businesses to create long-term value. OEP’s investment professionals are located
across North America and Europe, with offices in New York, Chicago and
Frankfurt. More information is available at
http://www.oneequity.com/.
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4
QUESTION
AND
ANSWER
Q1: How
will
this acquisition impact Caterpillar’s 2006 profit?
A: We
don’t disclose
financial information for individual operating units. That said, Progress Rail
has a history of solid profitability, and we expect to build on that. In terms
of the effect on 2006, we still have work to do on purchase price allocations,
and we’ll only have it in our results for the last half of 2006. However, we
expect it to be accretive to 2006 profit per share.
Q2: Are
you
going to restate prior period results for the deal?
A: No.
It’s not
material based on reporting rules so we don’t intend to restate.
Q3
: What
kind
of financial return are you expecting on this acquisition?
A: The
projected
return we’re expecting is in excess of our internal hurdle rate. Excellent
strategy alignment and synergistic opportunities are important elements for
us
when we evaluate potential acquisitions.
Q4: Are
you
paying more than asset value? If so, how much of an increase will this be to
intangible assets?
A: We
still have work
to do on purchase price allocations, but we expect total intangibles (including
goodwill) to be around $500 million.
Q5: How
will
this acquisition impact your share buyback plans?
A: Pursuing
strategic
growth opportunities is high on our priority list for use of cash, and the
acquisition of Progress Rail is a great example. In terms of share buyback,
we
have authorization to bring shares outstanding down to 640 million by 2008,
and
are continuing to work towards that goal. For reference, at the end of the
first
quarter of 2006, shares outstanding were 670 million.
Q6. Why
are you
getting into this business? Is there more to come in this
space?
A: This
acquisition
fits very well with our long-term strategy-Vision 2020. It’s an excellent fit
with our existing services portfolio and adds to our transportation portfolio-we
serve marine and on-highway customers today. Progress Rail brings our kind
of
iron, our kind of customers and our kind of people.
This
addition will clearly
leverage our capabilities in remanufacturing and aftermarket services-areas
in
which we have demonstrated leadership. Service after the sale defines
Caterpillar in our traditional business, and we believe this know-how and
capability can be further leveraged to the rail industry through Progress
Rail.
The
rail service business
provides an excellent avenue for diversified revenue growth and earnings
stability-critical elements of our Vision 2020. We are continually looking
for
opportunities that fit our strategic profile and that help us achieve Vision
2020.
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5
Q7: I
understand that this is a “service business.” How does it fit with
Cat?
A: With
its unique
integration, Progress Rail’s business model serves customers who value safety,
quality, reliability and durability in their products. This business is
customer-centric, meeting their needs with end-to-end integrated solutions
through a full network in North America. This fits well with Caterpillar’s
long-established involvement in transportation infrastructure. Caterpillar
has
established world-class excellence in remanufacturing, and technological
capabilities in salvage processes that are an essential part of Progress Rail’s
work. With Caterpillar’s global reach and Progress Rail’s business model, we see
substantial growth opportunities.
Q8: How
do you
plan to manage the business…how much will it integrate with other parts of Cat?
A. Progress
Rail has
grown and flourished because of its entrepreneurial nature. Employees are proud
to work for Progress Rail, and we are extremely excited about the knowledge
and
skills that they will bring to Caterpillar. Our intent is to preserve the
entrepreneurial nature of Progress Rail and maintain its identity as it becomes
a Caterpillar company. We will contribute global scale, process capability,
and
access to technology. Progress Rail will be very autonomous. The level of
integration will be similar to other acquisitions that brought a strong
identity, such as Solar Turbines.
Q9: Will
you
change the name of the company? How will it operate differently after you
acquire it?
A: Customers
identify
with the Progress Rail name and it has significant value in the marketplace.
We
don’t plan to change it. Progress Rail has a commitment to safety and continuous
improvement that fits well into Caterpillar’s culture. We don’t expect radical
changes in how they operate.
Q10: How
good a competitor is Progress Rail? Does the company have a big market
share?
A: Rail
customers have
needs very similar to our machine and engine customers—low life cycle cost, high
uptime and availability, and an expert service provider they can count on.
Because Progress Rail is vertically and horizontally integrated, it is an
excellent competitor. It’s a leader in many of the areas it serves and enjoys a
leading position in many of them.
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SAFE
HARBOR
Certain
statements
in this release relate to future events and expectations and as such constitute
forward-looking statements involving known and unknown factors that may cause
actual results of Caterpillar Inc. to be different from those expressed or
implied in the forward-looking statements. In this context, words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “will,” or
other similar words and phrases often identify forward-looking statements made
on behalf of Caterpillar. It is important to note that actual results of the
company may differ materially from those described or implied in such forward
looking statements based on a number of factors and uncertainties, including,
but not limited to, changes in economic conditions, currency exchange rates
or
political stability; market acceptance of the company’s products and services;
significant changes in the competitive environment; changes in law, regulations
and tax rates; and other general economic, business and financing conditions
and
factors described in more detail in the company’s filings with the Securities
and Exchange Commission, including the financial release on Form 8-K filed
with
the Securities and Exchange Commission on April 24, 2006. We do not undertake
to
update our forward-looking statements.
Caterpillar
contact: Progress
Rail contact:
Rusty
L.
Dunn Susie
Hilsman
Corporate
Public
Affairs
Public
Relations
Caterpillar
Inc. Progress
Rail
Services, Inc.
309/675-4803 256/840-2615
dunn_rusty_l@cat.com shilsman@progressrail.com
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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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May
16,
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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