Caterpillar profit lower; company revises outlook

As it had predicted three months ago, Caterpillar Inc. said Monday that its first quarter was a challenge and, with a weak mining industry as the culprit, it expects that the remainder of 2013 will be, as well.

That said, the company did report a profit in the first quarter, albeit just above half that recorded a year earlier, and it expects to finish the year well into black ink despite the slow economic recovery.

Caterpillar recorded a profit of $880 million, or $1.31 a share, in the first quarter, compared with a profit of $1.59 billion, or $2.37 a share, in the first three years of 2012. That was a difference of 45 percent.

Sales and revenues were off from $15.98 billion in the first quarter of 2012 to $13.21 billion, the company reported.

A chief factor for the declines were a dealer reduction in inventory, which started in the fourth quarter of 2012 and continued into the first part of this year as dealers continued to bring inventory into line with expected demand. Whereas the company added $2 billion in inventory during the first quarter last year, it cut it by $500 million; last year dealers increased machine inventory by $875 million in the first quarter and this year reduced it by about $700 million.

"Those are significant year-to-year swings, and coupled with moderating end-user demand, resulted in sales and revenues being down 17 percent," said Caterpillar Chairman and CEO Doug Oberhelman.

"Considering the magnitude of the decline in sales and production, I am very pleased with our performance in the first quarter. We did a good job managing costs and made even more progress on inventory reduction. Operating cash flow was a highlight in the quarter and improved nearly $900 million from the first quarter of 2012. Better cash flow and the strength of our balance sheet are enabling us to resume stock repurchases," he said.

The expectation that economic growth with remain slow through the rest of the year prompted Caterpillar to revise downward and tighten its outlook for the year. The new outlook expects sales and revenues of $57 billion to $61 billion, with profit of about $7 a share at the middle of the sales and revenues outlook range. At the end of 2012 Caterpillar gave a 2013 outlook of sales and revenue from $60 billion to $68 billion and a profit of $7 to $9 a share.

"What's happening in our business and in the economy overall is a mixed picture. Conditions in the world economy seem relatively stable, and we continue to expect slow growth in 2013," Oberhelman said. "As we began 2013, we were concerned about economic growth in the United States and China and are pleased with the relative stability we have seen so far this year. In the United States, we are encouraged by progress so far and are becoming more optimistic on the housing sector in particular. In China, first quarter economic growth was slightly less than many expected, but in our view remains consistent with slow growth in the world economy. In fact, our sales in China were higher in the first quarter of 2013 than they were in the first quarter of 2012, and machine inventories in China have declined substantially from a year ago."

He noted, however, that Caterpillar's expectations for the mining industry "have decreased significantly. Our revised 2013 outlook reflects a sales decline of about 50 percent from 2012 for traditional Cat machines used in mining and a decline of about 15 percent for sales of machines from our Bucyrus acquisition."

"From an operational standpoint, we have taken action to align production, costs and capital expenditures with the sales and revenues outlook." Oberhelman added, referring mostly to rolling temporary layoffs planned for this quarter, including in Decatur where mining trucks are manufactured, and at the Bucyrus plant in Milwaukee. Indeed, Caterpillar worldwide full-time employment was 124,874 at the end of the first quarter, down by more than 2,300 since a year earlier. Much of that is because of cutbacks in the number of flexible employees.

"While 2013 will be a challenging year, we are confident about the long-term prospects for our business, and when conditions improve, the steps we have taken will position us well to serve our customers and deliver better financial results," added Oberhelman.

Wall Street has taken note of those actions, including the revision of the company's outlook, and Caterpillar stock rose during Monday's trading on the New York Stock Exchange despite the fact the profit missed the estimates of analysts who follow the company. Those analysts estimated a first quarter profit of $1.40 a share.

However, some of those analysts lauded Caterpillar's actions in their own reports and Caterpillar stock ended the day at $82.71 a share, up $2.28. Nearly 18 million shares, or nearly triple the daily average, were traded.

Analysts also labeled as positive Caterpillar's decision to resume repurchasing stock in this quarter. The company's board of directors first authorized the repurchase of $7.5 billion in stock in February 2007, about half of which has been repurchased to date, but none since the end of 2008 as the stock value climbed considerably.

However, Group President and Chief Financial Officer Brad Halverson told reporters that with the decline in the stock price, the continued strength of the company's balance sheet and cash flow, "We believed this was a very opportune time to resume the repurchase program." The company said it plans to repurchase another $1 billion.

Halverson said the repurchase would help protect Caterpillar's credit rating while the economic recovery continue and help fund its growth while giving something back to shareholders.

Halverson said the company believes its inventory levels, outside of mining equipment, are "about where they need to be" and said the company believes demand for commodities will continue to exist and come back.

Mike DeWalt, director of investor relations, said Caterpillar knew the first quarter was going to be tough but that it is confident moving into the spring and summer selling season that sales will begin to recover.

He added, however, that Caterpillar still believes there is some risk if the central banks of the United States and other countries where it does business aren't careful about the actions they take in coming months. Those banks were premature in tightening economic policies and raising interest rates during the recovery from the 2009 financial crisis and that resulted in a slow recovery and continued high unemployment throughout the world.

Now, DeWalt said, central banks throughout the world are easing back on policies and rates to try and keep and induce momentum, "and that is a good thing. But if they start raising rates again and declaring victory, there is a risk."

OSF Healthcare joins Mayo Clinic network

OSF Healthcare System, already one of the nation's largest and strongest health care networks, got even stronger Friday when it became part of the Mayo Clinic Care Network.

Becoming only the 16th member of the network will enable physicians in the OSF system, including OSF Saint Francis Medical Center, to work with the expert physicians at the world-renowned Mayo Clinic to bring patients the best possible care and treatment for whatever ails them, officials said during a news conference at St. Francis on Friday.

"Through this innovative program, our patients can have the comfort of knowing they are getting the best care," said Kevin Schoeplein, CEO of Peoria-based OSF HealthCare. "We are transforming health care to improve the lives of those we serve."

As part of the Mayo Clinic Network, OSF physicians, when treating complex cases, will be able to access Mayo's clinical resources and collaborate with Mayo specialists in determining treatment. That treatment then can be delivered to the patients as close to home as possible.

OSF Healthcare went through a rigorous review process to get accepted into the Mayo Clinic Care Network, OSF officials said.

Dr. David Hayes, medical director of the Mayo Clinic Network, said OSF had been on Mayo's radar from the time the Clinic Network, which started only 18 months ago, completed in strategic metric that laid out the type of systems it wanted to be part of the Mayo network.

"We are excited to be here, talking about how we can be working together. We all are acutely aware on how important that is and with OSF we have the mutal goal to promote physician collaboration to improve the delivery of health care," Hayes said.

He said Mayo's mantra is that the patient comes first. "That has always been the center of the organization and forever will be," he said. Noting OSF's 14,000 employees that serve nearly 4 million people in the communities it serves in Illinois and Michigan, Hayes said Mayo found in OSF a "patient-centger culture that thrives on improving outcomes and increasing value."

Dr. Kathleen Forbes, chief clinical officer for OSF Healthcare System, said not only will OSF patients benefit from the expertise of two top health care systems but they won't have to pay more for the privilege. The eConsults between OSF and Mayo physicians will be done at no additional cost to the patient but will add value to the treatment provided, she said.

The eConsults tool will be available to specialties on the active staffs at any OSF facilities and it will be phased in. In the first phase will be available to specialists in the fields of oncology, neurology and neurosurgery, GI (including medical and colorectal surgery) and cardiovascular. The second phase will be announced later.

"By working together over time, OSF and Mayo Clinic hope to build new and innovative ways to provide the best possible care to patients and their families," Forbes said.

Another tool available through the Mayo network is AskMayoExpert, an online tool created and used by the Mayo Clinic. It makes available Mayo-vetted knowledge in disease management, clinical care guidelines and other information. It became available immediately to OSF.

Keith Steffen, CEO of Saint Francis Medical Center the last 17 years and an OSF employee for 33 years, said the Sisters of the Third Order of St. Francis have long been willing to pursue innovative and even risky strategies in order to improve health care. He recalled asking the Sisters "to buy this thing they called a CAT Scan in 1980. It would be the first in the state of Illinois and one of only a few in use in the United States. They said yes and from there the list gets quite long. They have never backed off with risking project that fit with the level of health care they wanted to provide."

"What an incredible partnership this is going to be," Steffen said. "I stand here today very proud."

Use Social Media for Urgent Announcements about Flooding

If you run a business in the Peoria riverfront area, or any flooded section of a town, you owe it to your customers, employees, and vendors to make timely announcements about the dangers of your area and whether or not you'll be closed for an amount of time, until the flood waters subside.

Post these notices on your website News page, in your email newsletter or a special message to everyone on your contact and subscriber lists, and on your Facebook, Twitter, GooglePlus, Pinterest (post a photo of the flooding), and other social platforms where you maintain a presence.

Many businesses are NOT doing this.

Please take this suggestion and fulfill your obligation as a good member of your community. This is a terrific chance to build good will, to provide value to customers, to show concern for employees, and to position your company as caring and alert to the needs and concerns of others.

Social media is for communicating with your constituents -- and this historic, record flooding represents an ideal and vital opportunity to take advantage of these online messaging tools.

Thanks for your wise and altruistic cooperation

.

'Dreamgirls' at Eastlight Theatre

When Anthony Jumaane Hendricks got the opportunity to direct one of his all-time favorite musicals at Eastlight Theatre, he jumped at the opportunity.

"Dreamgirls" was a show he'd appeared in several times in the past and he'd directed a concert version of the show once before. Now he was going to get to direct it on stage.

Well, circumstances being as they sometimes are in community theatre, Hendricks found himself doing both: directing the show while also appearing in it, as the character C.C. White. "It certainly wasn't planned, but I had to step in when we lost someone. It's all good, though; I'm having a good time and we're going to have a good show," Hendricks said after a recent rehearsal.

"Dreamgirls" opens a seven-show run Friday at 7:30 p.m. at Byron Moore Auditorium at East Peoria High School. The show continues at 7:30 p.m. on Saturday and on April 24, 25, 26 and 27 and at 2 p.m. on April 21.

Tickets are $19 and can be purchased online at www.eastlighttheatre.com or by calling 699-7469.

"Dreamgirls" tells the story of the time when rhythm and blues blended with other styles to create a new American sound in the 1960s and 70s. But it goes beyond the music to show the behind-the-scenes life of the music industry, centering on a Supremes-type trio of singers known as The Dreams.

Hendricks said he first heard the music when he was a child and has loved it since. He knew, therefore, the kind of singers he wanted to put on the stage as his Dreams "and I am very pleased with the talent I have here. We have some very talented people surrounding the whole show."

(Photo by Paul Gordon) Jamika Russell. shown here during a recent rehearsal, portrays Effie White in the Eastlight Theatre production of "Dreamgirrls."His cast includes Jamika Russell of Peoria in the role of Effie White, a member of the Dreams who becomes a sensation on her own. Jennifer Cirillo portrays Deena Jones, Gabrielle Lott-Rogers plays Lorrell Robinson and Dominique Allison is Michelle Morris. Also, Justin Graham portrays Curtis Taylor Jr., Cleo Dailey III is James "Thunder" Early, and Harreld Webster Jr. is Marty Madison.

Hendricks was asked to direct "Dreamgirls" at Eastlight after he directed the concert version at The Apollo Theatre. "I was confident I could direct the full show so I was very happy to get the opportunity," he said.

One of the reasons Hendricks enjoys the show is because of its message, one he hopes the audience will understand, as well. "The message of this show is to keep believing in yourself. Don't give up, no matter how difficult things might get. Just keep working it and it will happen," he said.

There is very little dialogue in "Dreamgirls," which Hendricks said he enjoys but also apprehensive in a long run for performers who aren't used to singing as much as is required in this musical. "I've been in the show a few times — in fact, to my knowledge I've been in every performance of 'Dreamgirls' that has been done in Peoria — and some directors will have some of the lyrics spoken. But we're not doing that, though we do need to worry about conserving voices so we're ready for opening night," he said.

At the same time, he noted, he isn't really that worried. "With this cast? They'll be ready, I'm confident of that," he said.

The set for the show is simple, designed and executed by Steve Cordle, the technical and artistic director of Eastlight. It consists of three large, rotating panels of LED lights that can be changed together of separately to convey a mood on stage. "It's a simple, really cool set. I love it," Hendricks said.