Caterpillar (CAT) Redeems Debt

Caterpillar Inc. (CAT) has redeemed notes issued earlier by Caterpillar Financial Services, for a total amount of $22.622 million. The company decided to redeem 100% of the remaining amount by exercising the call option. The notes that the company redeemed have coupon rate of 6.05%. The notes are maturing on October 15, 2027.

Caterpillar has decided to return shareholders value, driven by its huge cash balance and strong cash flow.

Caterpillar has a long history of returning shareholders value. During the first quarter of fiscal 2011, the company bought back shares for $17.815 million and $8.624 million, maturing on February 15, 2016 and March 15, 2016, respectively.

Caterpillar posted a robust increase of 44% in profit to $1.02 billion in the second quarter of the year from $707 million in the year-earlier quarter. Excluding $204 million of expenses related to the acquisition of Bucyrus, earnings per share surged 58% to $1.72 from $1.09 a year ago. However, the company failed to meet the Zacks Consensus Estimate of $1.77.

Sales in the quarter rose 37% to $14.23 billion from $10.41 billion a year ago driven by higher customer demand. However, it was lower than the Zacks Consensus Estimate of $13.48 billion.

The sales growth was attributable to continued economic growth and improvement from the low levels of machine demand in the second quarter of 2010. However, the disaster in Japan had a negative impact of $200 million on sales.

Peoria, Illinois-based Caterpillar Inc. is the producer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base.

The company operates three divisions – Machines, Engines and Financial Products. Caterpillar competes with the likes of CNH Global NV (CNH), Komatsu Ltd. (KMTUY) and Volvo AB (VOLVY).

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