Cat profits down in Q2; outlook unchanged

Two things can be taken from Caterpillar Inc.’s second quarter financial results announced on Thursday.

First is that the global economy and the markets Caterpillar serves are still struggling, causing lower sales volumes and a decrease in profits.

Second, because of moves the company has made the past few years to improve efficiency in down cycles, it could be a feasting scenario when the up cycle returns to the construction and mining industries.

After all, company officials said, Caterpillar has gained market share in those industries despite sales being down $16 billion over the last three years and it has strong cash flow. “Without question, it’s a mixed bag for us,” Group President Brad Halverson said in a meeting with reporters.

The company announced it has a profit of $710 million, or $1.16 a share, during the second quarter, down 29 percent from the profit of $999 million, or $1.57 a share, reported during the second quarter of 2014. Excluding restructuring costs made necessary to bring production into line with demand, the second quarter profit this year was $1.27 a share, compared with $1.69 a share a year earlier.

Sales and revenues were $12.3 billion in the second quarter, down 13 percent from a year earlier, the company reported.

For the first six months of the year the number were more in line. Profit was $1.8 billion, or $2.98 a share, through the first half of this year, compared with $1.9 billion, or $3 a share, through the first six months of 2014.

But company officials cautioned that the short-term global forecast makes it likely the second half of 2015 will be down, as well. That’s why the company kept its outlook for the remainder of the year basically unchanged from the first quarter; a profit of $4.70 a share (or $5 excluding restructuring costs) with sales and revenues of about $49 billion, down from $50 billion in the previous outlook.

However, the second quarter profit was well off the estimates of industry analysts of $1.27 a share if you figure in restructuring costs. That and the forecast that the second half of the year will likely be down didn’t sit well with investors.

Caterpillar stock ended trading on the New York Stock Exchange with a value of $76.88 a share, down $2.88, on a day the Dow Jones Industrial Average was down 119.12. Caterpillar is a component of the Dow.   

In announcing the results, Caterpillar Chairman Doug Oberhelman said, “Our Caterpillar team continues its track record of solid operational performance in the face of difficult conditions in several of the key industries we serve. Because we serve cyclical industries, we focus intently on operational execution and cost control. This is particularly important when sales decline; our goal when sales decline is to manage costs so the decline in operating profit is less than 30 percent of the decline in sales and revenues.  We did much better than that in the second quarter. We’ve achieved that by closely watching costs, the restructuring we’ve done over the past two years and the work done by Caterpillar employees across the world who are proving we can excel in this challenging economic environment.”

He said the company focused on “operational execution and customer success through efforts like lean management and our Across the Table initiative with dealers, while also investing in tomorrow through new technologies, innovation and data analytics – both within Caterpillar, and by partnering with and investing in other companies.”   

The economic and industry conditions that were expected at the beginning of the year are occurring. World economic growth is about as the company expected: severe weakness in mining continues, construction-related sales in China and Brazil are lower and new orders for oil-related applications declined.  

“While economic conditions in the United States are modestly positive, the global economy remains relatively stagnant. Many of the key industries we serve remain weak, and we haven’t seen sustained signs of improvement. Continuing economic weakness in China and Brazil, as well as uncertainty in the Eurozone and over Greece, haven’t helped confidence. Prices for commodities like coal, iron ore and oil are not signaling an improvement in the short term. We are committed to controlling costs as we manage through this downturn, and that will position Caterpillar for better results when conditions improve,” Oberhelman said.

Halverson, who is also chief financial officer, echoed that latter statement. He pointed out that despite the fact Caterpillar’s sales will likely end the year down $16 billion from 2012, the company has gained market share, improved its balance sheet, improved safety and have been hitting their financial targets while improving efficiency.

“The down side, of course, is that we have had to reduce the number of employees. It is always hard to let employees go,” he said. The company’s global workforce is at 126,800, down nearly 5,000 from a year ago.

Halverson said there are many positives on the horizon, including the company’s belief a comprehensive federal highway bill will get approved in Congress, the prospects for sales to Cuba once embargoes are lifted and the strength of its market share in the industries it serves. “We are always going to have strong competitors, so we work on staying close to our customers and delivering the best product. It comes down to what goes on without our own walls and we have the right structure and the right team in place,” he said.

Highlights from the second quarter report include:

• Caterpillar said it will repurchase approximately $1.5 billion of its common stock during the third quarter. That would be in addition to the approximately $500 million of stock that was repurchased in the first half of 2015, and $4.2 billion repurchased in 2014.
•  Financial Product revenues were $734 million in the second quarter, down 3 percent from revenues of $759 in the second quarter last year.
• Restructuring costs were $89 million in the second quarter.
• Machinery, energy and transportation sales were down in every segment and in every region compared with the second quarter of 2015. Construction sales were down 18 percent.

The full report can be read at www.caterpillar.com.

AARP: Seniors want better sleep trackers

AARP today released the results of a study of popular activity and sleep tracker usage by the 50-plus population, showing that – while consumers are excited about new technology and the potential benefits of sleep and activity trackers – the devices' design and utility are lacking in features that would encourage long-term use or adoption.

The gap between expectations and reality indicates a significant opportunity to better serve the 50-plus market. 

Georgia Tech Research Institute's HomeLab in partnership with the recently launched Project Catalyst: The Power of We initiative, a program that encourages tech developers to design toward the 50-plus demographics' desire for longevity and wellness, gave 92 older consumers one of seven popular devices to use at home for six weeks in their daily lives.

At the end of the six-week trial:

• 71 percent of participants reported increased awareness of activity, sleep or eating habits;
• 45 percent reported increased motivation;
• 46 percent said they changed their behavior; and   
• 67 percent of participants reported the activity and sleep tracker to be beneficial or of value.

"Despite what some people may think, the study showed that consumers in the 50-plus age group enjoy interacting with technology when it provides them with constructive and usable feedback on their goals," said Dr. Brad Fain, a director of Georgia Tech's HomeLab and principal research scientist at the Georgia Tech Research Institute (GTRI). "They are motivated to use new products that help them achieve good health and avoid illness – important findings as we seek to improve technology and make life easier for this underserved population."

The study, "Building a Better Tracker: Older Consumers Weigh in On Activity and Sleep Monitoring Devices" is the first of several health technology studies under the Project Catalyst initiative that AARP will conduct and report on as part of its effort to accelerate innovation for aging Americans. With the support of MedStar Health, Pfizer Inc. and UnitedHealthcare, this initiative seeks to identify ways to improve products and services for the 50-plus population  ̶  the largest consumers of healthcare.

With regard to how future activity and sleep trackers can be improved for consumers in the 50-plus age range, the study confirmed that the success of the next generation of trackers is directly correlated to their ease of use and their effectiveness. The results align with the mission of AARP – to identify challenges and determine solutions to improve the quality of life for people as they age.

"The recommendations that came out of the study are to make trackers better able to share information on health goals important to 50-plus consumers, simplify set up, make them unobtrusive to wear and easier to maintain, and provide more features like timely alerts and instantaneous access to information," said Jody Holtzman, AARP Senior Vice President of Thought Leadership. "If these qualities are prioritized, the potential in the 50-plus market for activity and sleep trackers is likely to grow."

Other specific recommendations from the study's participants included:

• Providing detailed, easy-to-understand instructions
• Providing an explanation of how activity and sleep trackers collect data
• Ensuring robust syncing capabilities
• Ensuring comfort while wearing the tracker
• Enabling timely notifications targeted to 50-plus consumers
• Providing a display for instant information access
• Incorporating additional sensors related to health-specific conditions

Project Catalyst is the latest in a series of efforts led by AARP to encourage the development of products that can improve the quality of life for Americans as they age by raising awareness of the economic power of consumers who are 50-plus and conducting research about their wants and needs regarding innovative products. This influential demographic is comprised of over 100 million people responsible for at least $7.1 trillion in annual economic activity – a figure that is expected to reach well over $13.5 trillion in real terms by 2032, according to Oxford Economics.

The next Project Catalyst study is already underway at the Georgia Tech's HomeLab and looks at medication management tools designed to help people take their medicine on time and as prescribed. 

For a complete copy of the sleep and activity trackers study please visit:http://www.aarp.org/content/dam/aarp/home-and-family/personal-technology/2015-07/innovation-50-project-catalyst-tracker-study-AARP.pdf

For more information about Project Catalyst please visit www.aarp.org/projectcatalyst

Night Out in the Heights aims to draw more shoppers

Peoria Heights is keeping its retail doors open a little later one night a week as it tries to bring more awareness to what the village has to offer.

And so far, Night Out in the Heights, which is every Thursday night when stores stay open until 7 p.m., is starting to make a difference to some participating business owners.

“I think it’s a nice thing for people who like to shop in the Heights but can’t make it before 5 p.m., when most of the stores close. And we’re starting to see people come in that have never been here before. It’s a good experience for everybody,” said Betty Rohman, owner of Harp and Thistle Imports.

“I’m glad to be part of it. I think it’s fun,” said Rohman, whose store is open 9 to 5 the rest of the week.

This is the second year for Night Out in the Heights, which began June 4 and continues every Thursday  through Sept. 24, and the list of participating stores and restaurants is growing, said Carolyn Catton, president of the Peoria Heights Chamber of Commerce.

“It’s a good way to let people make a nice evening of it in the Heights. They can come and shop, then stay and have dinner. It helps build awareness as well as revenue for the Heights,” Catton said.

This summer there are 10 stores participating. They are:

• A Perfect Pear Boutique
• Exhibit A Gallery
• Global Village
• Harp and Thistle Imports Ltd.
• I Know You Like a Book
• Lost and Found Again
• Olio & Vino
• Pettet Jewelry Design
• Smith Drug Store
• Wishing Star Boutique by Tabitha

Restaurants participating this summer are Hearth, Lucky’s Modern Dive and Salt.

Catton said the Night Out idea came from Chamber member merchants during meetings a year ago to brainstorm ways to improve awareness of the businesses in the village. She said she believed the idea made sense because she knows many communities have nights where shops stay open later.

“Some businesses are seeing a difference,” she said. “The restaurants are open later anyway, and now some merchants are seeing people come in to their stores while waiting for their dinner reservations,” Catton said.

This year, restaurants are helping by agreeing to highlight a special menu item each Thursday night as part of a Taste of Peoria Heights initiative.

Coming up one night in August and twice in September, there will be artists displaying their work in the village as well as strolling musicians from the Peoria Symphony Orchestra, Catton said. “We want to expand on the existing Thursday night events. We hope this will help bring in even more people on those nights,” she said. The dates for the artists and musicians have not yet been set.

One who found some success last year with a little added incentive was Mary Beth Nebel, owner of I Know You Like a Book. She has a wine bar in her bookstore and last summer, she had people outside the store recite poetry they or somebody else had written. “It was pretty well received. People seemed to have fun with it. I haven’t done that this year, yet,” she said.

Nebel believes staying open later one night a week is worth it. “We all need to promote it a little more. We need more participation from businesses. But Carolyn Catton has done a phenomenal job getting more businesses to join the chamber so I think we will see more participation as it goes,” she said.

At the same time, neither Nebel or Harp and Thistles’ Rohman begrudge those business owners who prefer not to stay open two more hours each Thursday. “A lot of these businesses only have one person. The business owner and that’s it. And it’s enough just to be open the normal hours,” Nebel said.

Said Rohman, “One of the reasons some people open stores in the Heights if because they can be independent, set their own hours rather than feel the need to be open as long as all the other stores are, such as in a shopping center. So if they choose not to, that’s fine.”

Hugh Higgins, owner of Hearth and soon to be the next chamber president, supports the effort. “Anything we can do to give people another reason to come to the Heights, to stimulate commerce in the Heights, helps all of us,” he said. “In the evenings people come to the village for the food. We want to capitalize on that. “

Thursday is a good night for Night Out in the Heights because it is close enough to the weekend people want to get out for a nice meal. On Fridays and Saturdays they often are meeting others or have any items on their agenda, he said.

Higgins said Night Out in the Heights won’t work without the commitment of participating stores and restaurants. “Customers know the stores up here typically close at 5, some of them at 6, and it is a challenge to re-educate customers. People need to see the stores are open. I think it’s important we in the restaurant scene try to move it forward by letting our customers know about it,” he said.

Skills gap concern growing, study shows

For years, employers have struggled with finding qualified workers. However, new findings from the 2015 Emerging Workforce Study (EWS) commissioned by Spherion Staffing reveal workers feel they are sorely lagging behind in their job skills.

These results underscore a new skills gap story from the worker's perspective that will affect the future of the workforce. The study was conducted online by Harris Poll among 225 U.S. human resource managers and 2,027 employed U.S. adults (aged 18+).

"What's unique about the Emerging Workforce Study is that we capture and examine the perspectives of the workplace from both the employer and worker points of view," said Spherion Division President Sandy Mazur. "We've known that employers have been dealing with the skills gap issue for a long time. But, with this new data capturing the average worker's perspective, we know this issue is on track to become a critical threat to economic success."

According to this year's EWS, nearly half of all employers (48 percent) see finding qualified/skilled workers as a top human resource concern in the next few years, and 62 percent of employers are more worried about a talent shortage today, compared with one year ago. But the study also reveals workers' insecurities and lack of confidence when it comes to their job skills. More than one-third of workers (35 percent) find it hard to find time to keep their skills up-to-date, and 29 percent feel their current level of job skills are outdated and leave them at risk in terms of furthering their career.

Because of this uncertainty, workers also feel their current skill sets will hinder their career advancement. One-third (33 percent) of workers believe their current job skills fall short of what will be required for future positions, and 36 percent of workers don't feel their current job skills will help them attain a promotion today.

So who's to blame for the skills shortage among workers? It depends on who you ask. Thirty-five percent of workers agree that they worry a lot about falling behind in acquiring new skills that will be needed in the future. Thirty-one percent of workers don't feel they have been trained adequately enough by their employer, and only 33 percent of them say that the training and career development opportunities in their organization are excellent/good. Additionally, 76 percent of workers agree that an employer should be responsible for providing a clear career development path for its employees.

But if you ask employers, they think they are taking the steps needed to ensure their workers are well-equipped to do their jobs. According to this year's EWS, 77 percent of employers have put more training and development programs in place to increase retention. Only 24 percent of employers find the cost to keep workers trained for future skill needs and requirements extremely or very challenging.

Worth noting is that workers and employers largely agree on the top skills that will be required for employment in the next five years. Workers believe problem-solving skills (51 percent), strategic thinking skills (31 percent) and evolving technology expertise (30 percent) are essential. Similarly, many employers agree with problem-solving skills (47 percent) and strategic thinking skills (34 percent); however, they cite team-building skills, the ability to understand and interpret data and evolving technology expertise as equally important skills that should be required in a job (all at 25 percent).

"It's obvious that there's a disconnect between workers and employers in the workplace when it comes to the skills gap," said Mazur. "Workers and employers must take joint responsibility for closing the skills gap. Workers should understand where businesses are headed and what skills they'll need to help close the gap, while employers should examine their workers' skill levels to focus on training that will be helpful and useful for them. This type of training also has long-lasting impacts on the workforce, including greater retention, engagement and a more positive impact on business success."

For more than 18 years, the Emerging Workforce Study has tracked the shifting opinions and attitudes of workers and their employers in the context of ongoing social and economic events. The 2015 Emerging Workforce Study examined the state of the workplace and perspectives from workers and employers on themes such as recruitment, attraction, employee engagement, retention, social media use, customer service, work/life balance trends, the multi-generational workforce and HR concerns. 

The 2015 EWS was conducted online within the United States by Harris Poll on behalf of Spherion from March 20-April 13, 2015 among 225 human resource managers. Results were weighted as needed to reflect the composition of U.S. companies, based on company revenue.

An online survey of 2,027 employed adults, ages 18 and older, was also conducted by Harris Poll on behalf of Spherion from March 17-April 7, 2015. Results were weighted as needed for age, sex, race/ethnicity, education, region and household income to represent the target population. No estimates of theoretical sampling error can be calculated; a full methodology is available.

Spherion Staffing Services is a leading recruiting and staffing provider that specializes in placing administrative, clerical, customer service and light industrial candidates in temporary and full-time opportunities. As an industry pioneer for more than 68 years, Spherion has sourced, screened and placed millions of individuals in virtually every industry through a network of offices across the country.