Caterpillar Reports Third-Quarter 2020 Results

October 27, 2020 6:30 AM

DEERFIELD Ill., Oct. 27, 2020 /PRNewswire/ --

  • Third-quarter sales and revenues decreased 23%; profit per share declined 54%
  • Strong balance sheet; $9.3 billion of enterprise cash

Third Quarter

($ in billions except profit per share)

2020

2019

Sales and Revenues

$9.9

$12.8

Profit Per Share

$1.22

$2.66

Caterpillar Inc. (NYSE: CAT) today announced third-quarter 2020 sales and revenues of $9.9 billion, a 23% decrease compared with $12.8 billion in the third quarter of 2019. The decline was primarily due to lower sales volume driven by lower end-user demand for equipment and services.

Third-quarter 2020 profit per share was $1.22, compared with $2.66 profit per share in the third quarter of 2019. Profit per share in the third quarter of 2020 included pre-tax remeasurement losses of $77 million, or $0.12 per share, resulting from the settlements of pension obligations. Profit per share benefited from lower than expected taxes in the quarter.

Operating profit margin was 10.0% for the third quarter of 2020, compared with 15.8% for the third quarter of 2019.

For the nine months ended September 30, 2020, enterprise operating cash flow was $4.3 billion. Caterpillar ended the third quarter with $9.3 billion of enterprise cash and more than $14 billion of available liquidity sources.

"I'm proud of our global team's performance as we continue to safely navigate the pandemic while remaining firmly committed to serving our customers," said Caterpillar Chairman and CEO Jim Umpleby. "Our third-quarter results largely aligned with our expectations, and we're encouraged by positive signs in certain industries and geographies. We're executing our strategy and are ready to respond quickly to changing market conditions."

CONSOLIDATED RESULTS

Consolidated Sales and RevenuesConsolidated Sales and Revenues Comparison

Third Quarter 2020 vs. Third Quarter 2019

To access this chart, go to https://investors.caterpillar.com/financials/quarterly-results/default.aspx for the downloadable version of Caterpillar third-quarter 2020 earnings.

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the third quarter of 2019 (at left) and the third quarter of 2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees.

Total sales and revenues for the third quarter of 2020 were $9.881 billion, a decrease of $2.877 billion, or 23%, compared with $12.758 billion in the third quarter of 2019. The decline was mostly due to lower sales volume driven by lower end-user demand for equipment and services and the impact from changes in dealer inventories. Dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2019.

Sales were lower across all regions and the three primary segments.

Sales and Revenues by Segment

(Millions of dollars)

Third

Quarter

2019

SalesVolume

PriceRealization

Currency

Inter-

Segment /

Other

Third

Quarter

2020

$Change

%Change

Construction Industries

$

5,289

$

(1,150)

$

(60)

$

(17)

$

(6)

$

4,056

$

(1,233)

(23%)

Resource Industries

2,310

(425)

(46)

(4)

(19)

1,816

(494)

(21%)

Energy & Transportation

5,452

(1,086)

(16)

15

(204)

4,161

(1,291)

(24%)

All Other Segment

111

(3)

1

(3)

106

(5)

(5%)

Corporate Items and Eliminations

(1,188)

45

232

(911)

277

Machinery, Energy & Transportation

11,974

(2,619)

(121)

(6)

9,228

(2,746)

(23%)

Financial Products Segment

865

(141)

724

(141)

(16%)

Corporate Items and Eliminations

(81)

10

(71)

10

Financial Products Revenues

784

(131)

653

(131)

(17%)

Consolidated Sales and Revenues

$

12,758

$

(2,619)

$

(121)

$

(6)

$

(131)

$

9,881

$

(2,877)

(23%)

Sales and Revenues by Geographic Region

North America

Latin America

EAME

Asia/Pacific

External Sales

and Revenues

Inter-Segment

Total Sales and

Revenues

(Millions of dollars)

$

% Chg

$

% Chg

$

% Chg

$

% Chg

$

% Chg

$

% Chg

$

% Chg

Third Quarter 2020

Construction Industries

$

1,781

(35%)

$

230

(44%)

$

796

(24%)

$

1,241

14%

$

4,048

(23%)

$

8

(43%)

$

4,056

(23%)

Resource Industries

487

(38%)

269

(23%)

384

(3%)

564

(13%)

1,704

(22%)

112

(15%)

1,816

(21%)

Energy & Transportation

1,584

(26%)

221

(42%)

1,113

(9%)

557

(33%)

3,475

(24%)

686

(23%)

4,161

(24%)

All Other Segment

10

900%

1

(83%)

1

(88%)

13

8%

25

(7%)

81

(4%)

106

(5%)

Corporate Items and Eliminations

(22)

(2)

(24)

(887)

(911)

Machinery, Energy & Transportation

3,840

(31%)

719

(37%)

2,294

(14%)

2,375

(8%)

9,228

(23%)

—%

9,228

(23%)

Financial Products Segment

448

(20%)

63

(20%)

100

(2%)

113

(9%)

724

(16%)

—%

724

(16%)

Corporate Items and Eliminations

(37)

(10)

(10)

(14)

(71)

(71)

Financial Products Revenues

411

(21%)

53

(17%)

90

(4%)

99

(9%)

653

(17%)

—%

653

(17%)

Consolidated Sales and Revenues

$

4,251

(30%)

$

772

(36%)

$

2,384

(14%)

$

2,474

(8%)

$

9,881

(23%)

$

—%

$

9,881

(23%)

Third Quarter 2019

Construction Industries

$

2,728

$

413

$

1,048

$

1,086

$

5,275

$

14

$

5,289

Resource Industries

789

349

396

645

2,179

131

2,310

Energy & Transportation

2,129

378

1,224

831

4,562

890

5,452

All Other Segment

1

6

8

12

27

84

111

Corporate Items and Eliminations

(62)

1

(7)

(1)

(69)

(1,119)

(1,188)

Machinery, Energy & Transportation

5,585

1,147

2,669

2,573

11,974

11,974

Financial Products Segment

560

79

102

124

865

865

Corporate Items and Eliminations

(43)

(15)

(8)

(15)

(81)

(81)

Financial Products Revenues

517

64

94

109

784

784

Consolidated Sales and Revenues

$

6,102

$

1,211

$

2,763

$

2,682

$

12,758

$

$

12,758

Consolidated Operating Profit

Consolidated Operating Profit ComparisonThird Quarter 2020 vs. Third Quarter 2019

To access this chart, go to https://investors.caterpillar.com/financials/quarterly-results/default.aspx for the downloadable version of Caterpillar third-quarter 2020 earnings.

The chart above graphically illustrates reasons for the change in consolidated operating profit between the third quarter of 2019 (at left) and the third quarter of 2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other operating (income) expenses.

Operating profit for the third quarter of 2020 was $985 million, a decrease of $1.035 billion, or 51%, compared with $2.020 billion in the third quarter of 2019. The decrease was primarily due to lower sales volume. Favorable selling, general and administrative (SG&A) and research and development (R&D) expenses were mostly offset by unfavorable price realization and lower profit from financial products.

SG&A/R&D expenses benefited from reduced short-term incentive compensation expense and other cost reductions related to lower sales volumes.

Profit (Loss) by Segment

(Millions of dollars)

Third Quarter

2020

Third Quarter

2019

$Change

%

Change

Construction Industries

$

585

$

940

$

(355)

(38%)

Resource Industries

167

311

(144)

(46%)

Energy & Transportation

492

1,021

(529)

(52%)

All Other Segment

27

(21)

48

n/a

Corporate Items and Eliminations

(346)

(363)

17

Machinery, Energy & Transportation

925

1,888

(963)

(51%)

Financial Products Segment

142

218

(76)

(35%)

Corporate Items and Eliminations

(15)

21

(36)

Financial Products

127

239

(112)

(47%)

Consolidating Adjustments

(67)

(107)

40

Consolidated Operating Profit

$

985

$

2,020

$

(1,035)

(51%)

Other Profit/Loss and Tax Items

  • Other income (expense) in the third quarter of 2020 was income of $14 million, compared with income of $88 million in the third quarter of 2019. The change was primarily due to the unfavorable impacts from foreign currency exchange gains (losses) and lower investment and interest income.
  • The provision for income taxes for the third quarter of 2020 reflected an estimated annual tax rate of 31%, excluding the discrete items discussed below, compared with 26% for the third quarter of 2019. The increase in the estimated annual tax rate was primarily related to changes in the expected geographic mix of profits from a tax perspective for 2020, including the impact of U.S. tax on non-U.S. earnings as a result of U.S. tax reform.

In the third quarter of 2020, the company recorded discrete tax benefits of $80 million to adjust prior year U.S. taxes and $13 million for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. In addition, the company recorded a $12 million tax benefit related to the $77 million of remeasurement losses resulting from the settlements of pension obligations.

CONSTRUCTION INDUSTRIES

(Millions of dollars)

Segment Sales

Third Quarter

2019

Sales Volume

Price

Realization

Currency

Inter-

Segment

Third Quarter

2020

$ Change

% Change

Total Sales

$

5,289

$

(1,150)

$

(60)

$

(17)

$

(6)

$

4,056

$

(1,233)

(23%)

Sales by Geographic Region

Third Quarter

2020

Third Quarter

2019

$Change

%Change

North America

$

1,781

$

2,728

$

(947)

(35%)

Latin America

230

413

(183)

(44%)

EAME

796

1,048

(252)

(24%)

Asia/Pacific

1,241

1,086

155

14%

External Sales

4,048

5,275

(1,227)

(23%)

Inter-segment

8

14

(6)

(43%)

Total Sales

$

4,056

$

5,289

$

(1,233)

(23%)

Segment Profit

Third Quarter

2020

Third Quarter

2019

Change

%Change

Segment Profit

$

585

$

940

$

(355)

(38%)

Segment Profit Margin

14.4%

17.8%

(3.4 pts)

Construction Industries' total sales were $4.056 billion in the third quarter of 2020, a decrease of $1.233 billion, or 23%, compared with $5.289 billion in the third quarter of 2019. The decrease was due to lower sales volume, driven by lower end-user demand and the impact from changes in dealer inventories. During the third quarter of 2020, dealers decreased inventories in all regions except for Asia/Pacific where dealers increased inventories, compared with the third quarter of 2019 when dealer inventories were about flat in all regions except for Asia/Pacific where dealers decreased inventories. Overall, dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2019.

  • In North America, sales decreased mostly due to lower sales volume driven by lower end-user demand and the impact from changes in dealer inventories. The lower end-user demand was driven primarily by pipeline and road construction.
  • Sales declined in Latin America primarily due to the impact from changes in dealer inventories and unfavorable currency impacts from a weaker Brazilian real.
  • In EAME, sales decreased mostly because of lower sales volume across the region, driven by lower end-user demand and the impact from changes in dealer inventories.
  • Sales increased in Asia/Pacific primarily due to the impact of changes in dealer inventories, partially offset by unfavorable price realization. The increase in sales was primarily driven by China demand, which was partially offset by lower sales in the rest of the region.

Construction Industries' profit was $585 million in the third quarter of 2020, a decrease of $355 million, or 38%, compared with $940 million in the third quarter of 2019. The decrease was mainly due to lower sales volume and unfavorable price realization, partially offset by favorable manufacturing costs and lower SG&A/R&D expenses. Favorable manufacturing costs were driven by lower period manufacturing costs and favorable variable labor and burden. SG&A/R&D expenses and period manufacturing costs both benefited from cost reductions related to lower sales volumes.

RESOURCE INDUSTRIES

(Millions of dollars)

Segment Sales

Third Quarter

2019

Sales Volume

Price

Realization

Currency

Inter-

Segment

Third Quarter

2020

$ Change

% Change

Total Sales

$

2,310

$

(425)

$

(46)

$

(4)

$

(19)

$

1,816

$

(494)

(21%)

Sales by Geographic Region

Third Quarter

2020

Third Quarter

2019

$Change

%Change

North America

$

487

$

789

$

(302)

(38%)

Latin America

269

349

(80)

(23%)

EAME

384

396

(12)

(3%)

Asia/Pacific

564

645

(81)

(13%)

External Sales

1,704

2,179

(475)

(22%)

Inter-segment

112

131

(19)

(15%)

Total Sales

$

1,816

$

2,310

$

(494)

(21%)

Segment Profit

Third Quarter

2020

Third Quarter

2019

Change

%Change

Segment Profit

$

167

$

311

$

(144)

(46%)

Segment Profit Margin

9.2%

13.5%

(4.3 pts)

Resource Industries' total sales were $1.816 billion in the third quarter of 2020, a decrease of $494 million, or 21%, compared with $2.310 billion in the third quarter of 2019. The decrease was due to lower sales volume driven by lower end-user demand for equipment and aftermarket parts, partially offset by the impact of changes in dealer inventories. Dealers decreased inventories more during the third quarter of 2019 than during the third quarter of 2020. End-user demand was lower across non-residential construction and quarry and aggregates and mining, primarily in North America.

Resource Industries' profit was $167 million in the third quarter of 2020, a decrease of $144 million, or 46%, compared with $311 million in the third quarter of 2019. The decrease was mainly because of lower sales volume and unfavorable price realization, partially offset by favorable manufacturing costs and lower SG&A/R&D expenses. Favorable manufacturing costs were driven by lower period manufacturing costs, favorable material costs and lower warranty expense, partially offset by unfavorable cost absorption. Cost absorption was unfavorable as inventory increased in the third quarter of 2019, compared with a decrease in the third quarter of 2020. SG&A/R&D expenses, along with period manufacturing costs, benefited from lower short-term incentive compensation expense, other cost-reduction actions implemented in response to lower sales volumes and benefits from prior restructuring programs.

ENERGY & TRANSPORTATION

(Millions of dollars)

Segment Sales

Third Quarter

2019

Sales Volume

Price

Realization

Currency

Inter-

Segment

Third Quarter

2020

$ Change

% Change

Total Sales

$

5,452

$

(1,086)

$

(16)

$

15

$

(204)

$

4,161

$

(1,291)

(24%)

Sales by Application

Third Quarter

2020

Third Quarter

2019

$Change

%Change

Oil and Gas

$

734

$

1,246

$

(512)

(41%)

Power Generation

1,034

1,123

(89)

(8%)

Industrial

730

980

(250)

(26%)

Transportation

977

1,213

(236)

(19%)

External Sales

3,475

4,562

(1,087)

(24%)

Inter-segment

686

890

(204)

(23%)

Total Sales

$

4,161

$

5,452

$

(1,291)

(24%)

Segment Profit

Third Quarter

2020

Third Quarter

2019

Change

%Change

Segment Profit

$

492

$

1,021

$

(529)

(52%)

Segment Profit Margin

11.8%

18.7%

(6.9 pts)

Energy & Transportation's total sales were $4.161 billion in the third quarter of 2020, a decrease of $1.291 billion, or 24%, compared with $5.452 billion in the third quarter of 2019. Sales declined across all applications and inter-segment engine sales.

  • Oil and Gas – Sales decreased mainly due to lower demand in North America for reciprocating engines used in gas compression and decreased sales of engine aftermarket parts. In addition, sales were lower for turbines and turbine-related services.
  • Power Generation – Sales decreased primarily due to lower sales volume in engine aftermarket parts, and small reciprocating engine applications, as well as turbines and turbine-related services. The sales decrease was partially offset by an increase in large reciprocating engine applications, mainly for data centers.
  • Industrial – Sales decreased due to lower demand across all regions.
  • Transportation – Sales declined in rail due to lower deliveries of locomotives and related services, primarily in North America, and in marine due to lower sales of engine aftermarket parts, primarily in EAME.

Energy & Transportation's profit was $492 million in the third quarter of 2020, a decrease of $529 million, or 52%, compared with $1.021 billion in the third quarter of 2019. The decrease was due to lower sales volume, partially offset by lower SG&A/R&D expenses and period manufacturing costs. SG&A/R&D expenses and period manufacturing costs were mostly impacted by a reduction in short-term incentive compensation expense and other cost-reduction actions implemented in response to lower sales volumes. In addition, segment profit was unfavorably impacted by other operating income/expense and higher inventory write-downs during the third quarter of 2020.

FINANCIAL PRODUCTS SEGMENT

(Millions of dollars)

Revenues by Geographic Region

Third Quarter

2020

Third Quarter

2019

$Change

%Change

North America

$

448

$

560

$

(112)

(20%)

Latin America

63

79

(16)

(20%)

EAME

100

102

(2)

(2%)

Asia/Pacific

113

124

(11)

(9%)

Total Revenues

$

724

$

865

$

(141)

(16%)

Segment Profit

Third Quarter

2020

Third Quarter

2019

Change

%Change

Segment Profit

$

142

$

218

$

(76)

(35%)

Financial Products' segment revenues were $724 million in the third quarter of 2020, a decrease of $141 million, or 16%, from the third quarter of 2019. The decrease was primarily because of lower average financing rates across all regions and lower average earning assets primarily in North America.

Financial Products' segment profit was $142 million in the third quarter of 2020, compared with $218 million in the third quarter of 2019. The decrease was due to higher provision for credit losses, lower net yield on average earning assets and lower average earning assets at Cat Financial. These unfavorable impacts were partially offset by a reduction in SG&A expenses primarily due to lower short-term incentive compensation and employee benefit expenses.

At the end of the third quarter of 2020, past dues at Cat Financial were 3.81%, compared with 3.19% at the end of the third quarter of 2019. Past dues increased primarily due to the impacts of the COVID-19 pandemic, offset by decreases in the Caterpillar Power Finance and Latin American portfolios. Write-offs, net of recoveries, were $125 million for the third quarter of 2020, compared with $103 million for the third quarter of 2019. As of September 30, 2020, Cat Financial's allowance for credit losses totaled $460 million, or 1.74% of finance receivables, compared with $515 million, or 1.92% of finance receivables at June 30, 2020. The decrease in the allowance for credit losses was primarily driven by write-offs of previously reserved accounts in the Caterpillar Power Finance portfolio. The allowance for credit losses at year-end 2019 was $424 million, or 1.50% of finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $361 million in the third quarter of 2020, an increase of $19 million from the third quarter of 2019, primarily due to higher restructuring costs and an unfavorable change in fair value adjustments related to deferred compensation plans, partially offset by lower corporate costs and segment reporting methodology differences.

Notesi. Glossary of terms is included on the Caterpillar website at https://investors.caterpillar.com/overview/default.aspx.ii. End-user demand is demonstrated by the company's Rolling 3 Month Retail Sales Statistics filed in a Form 8-K on Tuesday, October 27, 2020.iii. Information on non-GAAP financial measures is included in the appendix on page 11.iv. Some amounts within this report are rounded to the millions or billions and may not add.v. Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 7:30 a.m. Central Time on Tuesday, October 27, 2020, to discuss its 2020 third-quarter results. The accompanying slides will be available before the webcast on the Caterpillar website at https://investors.caterpillar.com/events-presentations/default.aspx.

About Caterpillar

Since 1925, Caterpillar Inc. has been helping our customers build a better world – making sustainable progress possible and driving positive change on every continent. With 2019 sales and revenues of $53.8 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Services offered throughout the product life cycle, cutting-edge technology and decades of product expertise set Caterpillar apart, providing exceptional value to help our customers succeed. The company principally operates through three primary segments – Construction Industries, Resource Industries and Energy & Transportation – and provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect on social media, visit caterpillar.com/social-media.

Caterpillar's latest financial results are also available online:

https://investors.caterpillar.com/overview/default.aspx

https://investors.caterpillar.com/financials/quarterly-results/default.aspx (live broadcast/replays of quarterly conference call)

Forward-Looking Statements

Certain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "forecast," "target," "guide," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers' needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment's risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (xviii) currency fluctuations; (xix) our or Cat Financial's compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) the duration and geographic spread of, business disruptions caused by, and the overall global economic impact of, the COVID-19 pandemic; and (xxvii) other factors described in more detail in Caterpillar's Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

APPENDIX

NON-GAAP FINANCIAL MEASURES

The following definitions are provided for the non-GAAP financial measures. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.

Adjusted Profit Per Share

The company believes it is important to separately quantify the profit impact of a significant item in order for the company's results to be meaningful to readers. This item is remeasurement losses resulting from the settlements of pension obligations in the third quarter of 2020. The company does not consider this item indicative of earnings from ongoing business activities and believes the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing the company's period-over-period results. The company intends to discuss adjusted profit per share for the fourth quarter and full-year 2020, excluding mark-to-market gains or losses for remeasurement of pension and other postemployment benefit plans along with any other discrete items.

Reconciliations of adjusted profit per share to the most directly comparable GAAP measure, diluted profit per share, are as follows:

Third Quarter

2020

2019

Profit per share

$

1.22

$

2.66

Per share remeasurement losses of pension obligations1

$

0.12

$

Adjusted profit per share

$

1.34

$

2.66

1 At statutory tax rates.

Note: On March 26, 2020, the company withdrew its previous financial outlook due to the continued global economic uncertainty related to the COVID-19 pandemic.

Supplemental Consolidating Data

The company is providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows:

Consolidated – Caterpillar Inc. and its subsidiaries.

Machinery, Energy & Transportation (ME&T) – The company defines ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T's information relates to the design, manufacturing and marketing of its products.

Financial Products – The company defines Financial Products as it is presented in the supplemental data as its finance and insurance subsidiaries, primarily Cat Financial and Insurance Services. Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

Consolidating Adjustments – Eliminations of transactions between ME&T and Financial Products.

The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. The company believes this presentation will assist readers in understanding its business.

Pages 12 to 22 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information.

Caterpillar Inc.

Condensed Consolidated Statement of Results of Operations

(Unaudited)

(Dollars in millions except per share data)

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Sales and revenues:

Sales of Machinery, Energy & Transportation

$

9,228

$

11,974

$

28,452

$

38,369

Revenues of Financial Products

653

784

2,061

2,287

Total sales and revenues

9,881

12,758

30,513

40,656

Operating costs:

Cost of goods sold

6,919

8,569

21,298

27,513

Selling, general and administrative expenses

1,126

1,251

3,426

3,879

Research and development expenses

344

431

1,041

1,307

Interest expense of Financial Products

137

189

461

571

Other operating (income) expenses

370

298

1,114

946

Total operating costs

8,896

10,738

27,340

34,216

Operating profit

985

2,020

3,173

6,440

Interest expense excluding Financial Products

136

103

384

309

Other income (expense)

14

88

265

316

Consolidated profit before taxes

863

2,005

3,054

6,447

Provision (benefit) for income taxes

187

518

839

1,470

Profit of consolidated companies

676

1,487

2,215

4,977

Equity in profit (loss) of unconsolidated affiliated companies

(5)

7

8

20

Profit of consolidated and affiliated companies

671

1,494

2,223

4,997

Less: Profit (loss) attributable to noncontrolling interests

3

5

2

Profit 1

$

668

$

1,494

$

2,218

$

4,995

Profit per common share

$

1.23

$

2.69

$

4.08

$

8.84

Profit per common share — diluted 2

$

1.22

$

2.66

$

4.05

$

8.75

Weighted-average common shares outstanding (millions)

– Basic

542.3

556.3

543.9

565.2

– Diluted 2

546.4

561.2

547.8

570.8

1

Profit attributable to common shareholders.

2

Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

Caterpillar Inc.

Condensed Consolidated Statement of Financial Position

(Unaudited)

(Millions of dollars)

September 30,2020

December 31,2019

Assets

Current assets:

Cash and short-term investments

$

9,315

$

8,284

Receivables – trade and other

6,969

8,568

Receivables – finance

8,966

9,336

Prepaid expenses and other current assets

1,831

1,739

Inventories

11,453

11,266

Total current assets

38,534

39,193

Property, plant and equipment – net

12,232

12,904

Long-term receivables – trade and other

1,149

1,193

Long-term receivables – finance

12,209

12,651

Noncurrent deferred and refundable income taxes

1,440

1,411

Intangible assets

1,363

1,565

Goodwill

6,304

6,196

Other assets

3,510

3,340

Total assets

$

76,741

$

78,453

Liabilities

Current liabilities:

Short-term borrowings:

-- Machinery, Energy & Transportation

$

$

5

-- Financial Products

2,660

5,161

Accounts payable

5,193

5,957

Accrued expenses

3,510

3,750

Accrued wages, salaries and employee benefits

1,069

1,629

Customer advances

1,209

1,187

Dividends payable

567

Other current liabilities

1,978

2,155

Long-term debt due within one year:

-- Machinery, Energy & Transportation

1,397

16

-- Financial Products

7,962

6,194

Total current liabilities

24,978

26,621

Long-term debt due after one year:

-- Machinery, Energy & Transportation

9,742

9,141

-- Financial Products

16,365

17,140

Liability for postemployment benefits

6,254

6,599

Other liabilities

4,408

4,323

Total liabilities

61,747

63,824

Shareholders' equity

Common stock

6,204

5,935

Treasury stock

(25,315)

(24,217)

Profit employed in the business

35,508

34,437

Accumulated other comprehensive income (loss)

(1,448)

(1,567)

Noncontrolling interests

45

41

Total shareholders' equity

14,994

14,629

Total liabilities and shareholders' equity

$

76,741

$

78,453

Caterpillar Inc.

Condensed Consolidated Statement of Cash Flow

(Unaudited)

(Millions of dollars)

Nine Months EndedSeptember 30,

2020

2019

Cash flow from operating activities:

Profit of consolidated and affiliated companies

$

2,223

$

4,997

Adjustments for non-cash items:

Depreciation and amortization

1,815

1,933

Net gain on remeasurement of pension obligations

(55)

Provision (benefit) for deferred income taxes

(38)

(13)

Other

919

627

Changes in assets and liabilities, net of acquisitions and divestitures:

Receivables – trade and other

1,473

427

Inventories

(139)

(676)

Accounts payable

(596)

(669)

Accrued expenses

(286)

114

Accrued wages, salaries and employee benefits

(547)

(858)

Customer advances

13

169

Other assets – net

(15)

19

Other liabilities – net

(512)

(1,592)

Net cash provided by (used for) operating activities

4,255

4,478

Cash flow from investing activities:

Capital expenditures – excluding equipment leased to others

(686)

(723)

Expenditures for equipment leased to others

(805)

(1,133)

Proceeds from disposals of leased assets and property, plant and equipment

550

812

Additions to finance receivables

(9,278)

(9,453)

Collections of finance receivables

9,656

9,144

Proceeds from sale of finance receivables

37

183

Investments and acquisitions (net of cash acquired)

(93)

(6)

Proceeds from sale of businesses and investments (net of cash sold)

13

3

Proceeds from sale of securities

239

281

Investments in securities

(512)

(425)

Other – net

(80)

(37)

Net cash provided by (used for) investing activities

(959)

(1,354)

Cash flow from financing activities:

Dividends paid

(1,683)

(1,564)

Common stock issued, including treasury shares reissued

110

59

Common shares repurchased

(1,130)

(3,283)

Proceeds from debt issued (original maturities greater than three months)

9,418

8,827

Payments on debt (original maturities greater than three months)

(6,789)

(6,062)

Short-term borrowings – net (original maturities three months or less)

(2,138)

(1,006)

Other – net

(1)

(2)

Net cash provided by (used for) financing activities

(2,213)

(3,031)

Effect of exchange rate changes on cash

(56)

(47)

Increase (decrease) in cash and short-term investments and restricted cash

1,027

46

Cash and short-term investments and restricted cash at beginning of period

8,292

7,890

Cash and short-term investments and restricted cash at end of period

$

9,319

$

7,936

All short-term investments, which consist primarily of highly liquid investments with original maturities of three months or less, are considered to be cash equivalents.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended September 30, 2020

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Sales and revenues:

Sales of Machinery, Energy & Transportation

$

9,228

$

9,228

$

$

Revenues of Financial Products

653

740

(87)

1

Total sales and revenues

9,881

9,228

740

(87)

Operating costs:

Cost of goods sold

6,919

6,921

(2)

2

Selling, general and administrative expenses

1,126

943

189

(6)

2

Research and development expenses

344

344

Interest expense of Financial Products

137

137

Other operating (income) expenses

370

95

287

(12)

2

Total operating costs

8,896

8,303

613

(20)

Operating profit

985

925

127

(67)

Interest expense excluding Financial Products

136

136

Other income (expense)

14

(62)

9

67

3

Consolidated profit before taxes

863

727

136

Provision (benefit) for income taxes

187

133

54

Profit of consolidated companies

676

594

82

Equity in profit (loss) of unconsolidated affiliated companies

(5)

(4)

(1)

4

Profit of consolidated and affiliated companies

671

590

82

(1)

Less: Profit (loss) attributable to noncontrolling interests

3

4

(1)

5

Profit 6

$

668

$

590

$

78

$

1

Elimination of Financial Products' revenues earned from ME&T.

2

Elimination of net expenses recorded by ME&T paid to Financial Products.

3

Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4

Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

5

Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

6

Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended September 30, 2019

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Sales and revenues:

Sales of Machinery, Energy & Transportation

$

11,974

$

11,974

$

$

Revenues of Financial Products

784

920

(136)

1

Total sales and revenues

12,758

11,974

920

(136)

Operating costs:

Cost of goods sold

8,569

8,569

Selling, general and administrative expenses

1,251

1,095

163

(7)

2

Research and development expenses

431

431

Interest expense of Financial Products

189

198

(9)

3

Other operating (income) expenses

298

(9)

320

(13)

2

Total operating costs

10,738

10,086

681

(29)

Operating profit

2,020

1,888

239

(107)

Interest expense excluding Financial Products

103

103

Other income (expense)

88

(27)

8

107

4

Consolidated profit before taxes

2,005

1,758

247

Provision (benefit) for income taxes

518

457

61

Profit of consolidated companies

1,487

1,301

186

Equity in profit (loss) of unconsolidated affiliated companies

7

12

(5)

5

Profit of consolidated and affiliated companies

1,494

1,313

186

(5)

Less: Profit (loss) attributable to noncontrolling interests

(1)

6

(5)

6

Profit 7

$

1,494

$

1,314

$

180

$

1

Elimination of Financial Products' revenues earned from ME&T.

2

Elimination of net expenses recorded by ME&T paid to Financial Products.

3

Elimination of interest expense recorded between Financial Products and ME&T.

4

Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

5

Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

6

Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

7

Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Nine Months Ended September 30, 2020

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Sales and revenues:

Sales of Machinery, Energy & Transportation

$

28,452

$

28,452

$

$

Revenues of Financial Products

2,061

2,350

(289)

1

Total sales and revenues

30,513

28,452

2,350

(289)

Operating costs:

Cost of goods sold

21,298

21,302

(4)

2

Selling, general and administrative expenses

3,426

2,867

572

(13)

2

Research and development expenses

1,041

1,041

Interest expense of Financial Products

461

462

(1)

3

Other operating (income) expenses

1,114

227

927

(40)

2

Total operating costs

27,340

25,437

1,961

(58)

Operating profit

3,173

3,015

389

(231)

Interest expense excluding Financial Products

384

383

1

3

Other income (expense)

265

60

(7)

212

4

Consolidated profit before taxes

3,054

2,692

382

(20)

Provision (benefit) for income taxes

839

720

119

Profit of consolidated companies

2,215

1,972

263

(20)

Equity in profit (loss) of unconsolidated affiliated companies

8

18

(10)

5

Profit of consolidated and affiliated companies

2,223

1,990

263

(30)

Less: Profit (loss) attributable to noncontrolling interests

5

2

13

(10)

6

Profit 7

$

2,218

$

1,988

$

250

$

(20)

1

Elimination of Financial Products' revenues earned from ME&T.

2

Elimination of net expenses recorded by ME&T paid to Financial Products.

3

Elimination of interest expense recorded between Financial Products and ME&T.

4

Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

5

Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

6

Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

7

Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Nine Months Ended September 30, 2019

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Sales and revenues:

Sales of Machinery, Energy & Transportation

$

38,369

$

38,369

$

$

Revenues of Financial Products

2,287

2,684

(397)

1

Total sales and revenues

40,656

38,369

2,684

(397)

Operating costs:

Cost of goods sold

27,513

27,515

(2)

2

Selling, general and administrative expenses

3,879

3,324

564

(9)

2

Research and development expenses

1,307

1,307

Interest expense of Financial Products

571

599

(28)

3

Other operating (income) expenses

946

2

974

(30)

2

Total operating costs

34,216

32,148

2,137

(69)

Operating profit

6,440

6,221

547

(328)

Interest expense excluding Financial Products

309

318

(9)

3

Other income (expense)

316

(71)

68

319

4

Consolidated profit before taxes

6,447

5,832

615

Provision (benefit) for income taxes

1,470

1,294

176

Profit of consolidated companies

4,977

4,538

439

Equity in profit (loss) of unconsolidated affiliated companies

20

36

(16)

5

Profit of consolidated and affiliated companies

4,997

4,574

439

(16)

Less: Profit (loss) attributable to noncontrolling interests

2

1

17

(16)

6

Profit 7

$

4,995

$

4,573

$

422

$

1

Elimination of Financial Products' revenues earned from ME&T.

2

Elimination of net expenses recorded by ME&T paid to Financial Products.

3

Elimination of interest expense recorded between Financial Products and ME&T.

4

Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

5

Elimination of equity profit (loss) earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

6

Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

7

Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Financial Position

At September 30, 2020

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Assets

Current assets:

Cash and short-term investments

$

9,315

$

8,512

$

803

$

Receivables – trade and other

6,969

2,484

497

3,988

1,2

Receivables – finance

8,966

13,120

(4,154)

2

Prepaid expenses and other current assets

1,831

1,372

634

(175)

3

Inventories

11,453

11,453

Total current assets

38,534

23,821

15,054

(341)

Property, plant and equipment – net

12,232

8,156

4,076

Long-term receivables – trade and other

1,149

294

181

674

1,2

Long-term receivables – finance

12,209

12,900

(691)

2

Noncurrent deferred and refundable income taxes

1,440

1,979

101

(640)

4

Intangible assets

1,363

1,363

Goodwill

6,304

6,304

Other assets

3,510

2,887

1,815

(1,192)

5

Total assets

$

76,741

$

44,804

$

34,127

$

(2,190)

Liabilities

Current liabilities:

Short-term borrowings

$

2,660

$

$

2,660

$

Short-term borrowings with consolidated companies

Accounts payable

5,193

5,174

187

(168)

6

Accrued expenses

3,510

3,131

379

Accrued wages, salaries and employee benefits

1,069

1,055

14

Customer advances

1,209

1,209

Dividends payable

Other current liabilities

1,978

1,509

666

(197)

4,7

Long-term debt due within one year

9,359

1,397

7,962

Total current liabilities

24,978

13,475

11,868

(365)

Long-term debt due after one year

26,107

9,757

16,365

(15)

8

Liability for postemployment benefits

6,254

6,253

1

Other liabilities

4,408

3,739

1,384

(715)

4

Total liabilities

61,747

33,224

29,618

(1,095)

Shareholders' equity

Common stock

6,204

6,204

919

(919)

9

Treasury stock

(25,315)

(25,315)

Profit employed in the business

35,508

31,285

4,214

9

9

Accumulated other comprehensive income (loss)

(1,448)

(636)

(812)

Noncontrolling interests

45

42

188

(185)

9

Total shareholders' equity

14,994

11,580

4,509

(1,095)

Total liabilities and shareholders' equity

$

76,741

$

44,804

$

34,127

$

(2,190)

1

Elimination of receivables between ME&T and Financial Products.

2

Reclassification of ME&T's trade receivables purchased by Financial Products and Financial Products' wholesale inventory receivables.

3

Elimination of ME&T's insurance premiums that are prepaid to Financial Products.

4

Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.

5

Elimination of other intercompany assets between ME&T and Financial Products.

6

Elimination of payables between ME&T and Financial Products.

7

Elimination of prepaid insurance in Financial Products' other liabilities.

8

Elimination of debt between ME&T and Financial Products.

9

Eliminations associated with ME&T's investments in Financial Products' subsidiaries.

Caterpillar Inc.

Supplemental Data for Financial Position

At December 31, 2019

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Assets

Current assets:

Cash and short-term investments

$

8,284

$

7,299

$

985

$

Receivables – trade and other

8,568

3,737

451

4,380

1,2

Receivables – finance

9,336

14,489

(5,153)

2

Prepaid expenses and other current assets

1,739

1,290

529

(80)

3

Inventories

11,266

11,266

Total current assets

39,193

23,592

16,454

(853)

Property, plant and equipment – net

12,904

8,606

4,298

Long-term receivables – trade and other

1,193

348

152

693

1,2

Long-term receivables – finance

12,651

13,354

(703)

2

Noncurrent deferred and refundable income taxes

1,411

2,002

117

(708)

4

Intangible assets

1,565

1,565

Goodwill

6,196

6,196

Other assets

3,340

2,953

1,572

(1,185)

5

Total assets

$

78,453

$

45,262

$

35,947

$

(2,756)

Liabilities

Current liabilities:

Short-term borrowings

$

5,166

$

5

$

5,161

$

Short-term borrowings with consolidated companies

600

(600)

6

Accounts payable

5,957

5,918

212

(173)

7

Accrued expenses

3,750

3,415

335

Accrued wages, salaries and employee benefits

1,629

1,580

49

Customer advances

1,187

1,187

Dividends payable

567

567

Other current liabilities

2,155

1,689

566

(100)

4,8

Long-term debt due within one year

6,210

16

6,194

Total current liabilities

26,621

14,377

13,117

(873)

Long-term debt due after one year

26,281

9,151

17,140

(10)

6

Liability for postemployment benefits

6,599

6,599

Other liabilities

4,323

3,681

1,430

(788)

4

Total liabilities

63,824

33,808

31,687

(1,671)

Shareholders' equity

Common stock

5,935

5,935

919

(919)

9

Treasury stock

(24,217)

(24,217)

Profit employed in the business

34,437

30,434

3,997

6

9

Accumulated other comprehensive income (loss)

(1,567)

(739)

(828)

Noncontrolling interests

41

41

172

(172)

9

Total shareholders' equity

14,629

11,454

4,260

(1,085)

Total liabilities and shareholders' equity

$

78,453

$

45,262

$

35,947

$

(2,756)

1

Elimination of receivables between ME&T and Financial Products.

2

Reclassification of ME&T's trade receivables purchased by Financial Products and Financial Products' wholesale inventory receivables.

3

Elimination of ME&T's insurance premiums that are prepaid to Financial Products.

4

Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.

5

Elimination of other intercompany assets between ME&T and Financial Products.

6

Elimination of debt between ME&T and Financial Products.

7

Elimination of payables between ME&T and Financial Products.

8

Elimination of prepaid insurance in Financial Products' other liabilities.

9

Eliminations associated with ME&T's investments in Financial Products' subsidiaries.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the Nine Months Ended September 30, 2020

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Cash flow from operating activities:

Profit of consolidated and affiliated companies

$

2,223

$

1,990

$

263

$

(30)

1, 5

Adjustments for non-cash items:

Depreciation and amortization

1,815

1,217

598

Net gain on remeasurement of pension obligations

(55)

(55)

Provision (benefit) for deferred income taxes

(38)

(5)

(33)

Other

919

494

167

258

2

Changes in assets and liabilities, net of acquisitions and divestitures:

Receivables – trade and other

1,473

616

(54)

911

2, 3

Inventories

(139)

(130)

(9)

2

Accounts payable

(596)

(599)

(6)

9

2

Accrued expenses

(286)

(314)

28

Accrued wages, salaries and employee benefits

(547)

(512)

(35)

Customer advances

13

13

Other assets – net

(15)

(136)

26

95

2

Other liabilities – net

(512)

(514)

83

(81)

2

Net cash provided by (used for) operating activities

4,255

2,065

1,037

1,153

Cash flow from investing activities:

Capital expenditures – excluding equipment leased to others

(686)

(687)

(11)

12

2

Expenditures for equipment leased to others

(805)

2

(823)

16

2

Proceeds from disposals of leased assets and property, plant and equipment

550

119

451

(20)

2

Additions to finance receivables

(9,278)

(10,234)

956

3

Collections of finance receivables

9,656

10,822

(1,166)

3

Net intercompany purchased receivables

971

(971)

3

Proceeds from sale of finance receivables

37

37

Net intercompany borrowings

599

6

(605)

4

Investments and acquisitions (net of cash acquired)

(93)

(93)

Proceeds from sale of businesses and investments (net of cash sold)

13

13

Proceeds from sale of securities

239

17

222

Investments in securities

(512)

(15)

(497)

Other – net

(80)

(21)

(59)

Net cash provided by (used for) investing activities

(959)

(66)

885

(1,778)

Cash flow from financing activities:

Dividends paid

(1,683)

(1,683)

(20)

20

5

Common stock issued, including treasury shares reissued

110

110

Common shares repurchased

(1,130)

(1,130)

Net intercompany borrowings

(6)

(599)

605

4

Proceeds from debt issued > 90 days

9,418

1,991

7,427

Payments on debt > 90 days

(6,789)

(18)

(6,771)

Short-term borrowings – net < 90 days

(2,138)

(5)

(2,133)

Other – net

(1)

(1)

Net cash provided by (used for) financing activities

(2,213)

(742)

(2,096)

625

Effect of exchange rate changes on cash

(56)

(47)

(9)

Increase (decrease) in cash and short-term investments and restricted cash

1,027

1,210

(183)

Cash and short-term investments and restricted cash at beginning of period

8,292

7,302

990

Cash and short-term investments and restricted cash at end of period

$

9,319

$

8,512

$

807

$

1

Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

2

Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

3

Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory.

4

Elimination of net proceeds and payments to/from ME&T and Financial Products.

5

Elimination of dividend activity between Financial Products and ME&T.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the Nine Months Ended September 30, 2019

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data

Consolidated

Machinery,Energy &Transportation

FinancialProducts

ConsolidatingAdjustments

Cash flow from operating activities:

Profit of consolidated and affiliated companies

$

4,997

$

4,574

$

439

$

(16)

1

Adjustments for non-cash items:

Depreciation and amortization

1,933

1,283

650

Provision (benefit) for deferred income taxes

(13)

9

(22)

Other

627

379

(111)

359

2

Changes in assets and liabilities, net of acquisitions and divestitures:

Receivables – trade and other

427

125

(16)

318

2, 3

Inventories

(676)

(702)

26

2

Accounts payable

(669)

(651)

6

(24)

2

Accrued expenses

114

105

11

(2)

2

Accrued wages, salaries and employee benefits

(858)

(865)

7

Customer advances

169

171

(2)

2

Other assets – net

19

(66)

63

22

2

Other liabilities – net

(1,592)

(1,730)

150

(12)

2

Net cash provided by (used for) operating activities

4,478

2,632

1,177

669

Cash flow from investing activities:

Capital expenditures – excluding equipment leased to others

(723)

(709)

(14)

Expenditures for equipment leased to others

(1,133)

(21)

(1,151)

39

2

Proceeds from disposals of leased assets and property, plant and equipment

812

149

766

(103)

2

Additions to finance receivables

(9,453)

(10,633)

1,180

3

Collections of finance receivables

9,144

10,166

(1,022)

3

Net intercompany purchased receivables

763

(763)

3

Proceeds from sale of finance receivables

183

183

Net intercompany borrowings

721

1

(722)

4

Investments and acquisitions (net of cash acquired)

(6)

(6)

Proceeds from sale of businesses and investments (net of cash sold)

3

3

Proceeds from sale of securities

281

16

265

Investments in securities

(425)

(16)

(409)

Other – net

(37)

1

(38)

Net cash provided by (used for) investing activities

(1,354)

138

(101)

(1,391)

Cash flow from financing activities:

Dividends paid

(1,564)

(1,564)

Common stock issued, including treasury shares reissued

59

59

Common shares repurchased

(3,283)

(3,283)

Net intercompany borrowings

(1)

(721)

722

4

Proceeds from debt issued > 90 days

8,827

1,479

7,348

Payments on debt > 90 days

(6,062)

(8)

(6,054)

Short-term borrowings – net < 90 days

(1,006)

(1,006)

Other – net

(2)

(2)

Net cash provided by (used for) financing activities

(3,031)

(3,320)

(433)

722

Effect of exchange rate changes on cash

(47)

(38)

(9)

Increase (decrease) in cash and short-term investments and restricted cash

46

(588)

634

Cash and short-term investments and restricted cash at beginning of period

7,890

6,994

896

Cash and short-term investments and restricted cash at end of period

$

7,936

$

6,406

$

1,530

$

1

Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

2

Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

3

Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory.

4

Elimination of net proceeds and payments to/from ME&T and Financial Products.

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SOURCE Caterpillar Inc.

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