Questions and Answers Sales and Revenues / Economy and Industry Q1:
Are you seeing any significant changes in your sales related to
U.S. housing? What are you expecting for 2008 housing starts? A:
Available indicators suggest the housing downturn will continue in
2008, and we project starts will decline to 1.1 million units, down
from 1.35 million in 2007. New problems for the housing industry
that will emerge in 2008 include a high level of mortgage resets,
an increase in home repossessions and the likelihood of a
significant decrease in home prices. Q2: Can you comment on your
machinery sales related to nonresidential construction, both in the
United States and outside the United States? A: Machinery sales
related to nonresidential construction declined throughout 2007 in
the United States, and economic factors impacting the industry
worsened in the last half. Banks tightened lending standards,
contracts for new construction declined at a faster pace, vacancy
rates started to increase and employment in nonresidential
construction declined relative to a year earlier. Slower economic
growth, a smaller increase in federal highway funding and reduced
corporate cash flows should cause the nonresidential construction
sector to weaken further in 2008. Nonresidential construction
should continue to do well outside the United States. Low interest
rates and good economic growth will allow businesses to invest more
in facilities and allow many governments to invest more in
infrastructure. Q3: Your 2007 sales and revenues, your view of the
world economy in 2008, and your sales outlook for 2008 continue to
be positive despite weak conditions in the United States. Can you
comment on why your sales are expected to be up with weakness in
the United States? A: The U.S. economy accounts for less than 30
percent of the world economy and has been underperforming the rest
of the world since early 2006. There are several factors that lead
us to believe that our growth will continue in 2008 despite
weakness in the U.S. economy. First, European countries continued
to turn in good economic growth in 2007, and we believe interest
rates in the eurozone will remain at 4 percent for the rest of the
year. We expect good growth in European economies that should
average 2.3 percent in 2008, down a little from 2007. Exports to
the United States account for a little more than 2 percent of
eurozone output; slower U.S. growth does not have a large impact on
the European economy. Second, developing economies collectively are
experiencing the best growth in years. Factors contributing to that
performance -- low inflation, low interest rates, highly
competitive exports, high commodity prices and much improved
government budgets -- remain in place. Improved economic conditions
have allowed these countries to correct some past underinvestment
in infrastructure, but more work remains. In addition, growing
populations are increasing the demand for new housing units and
infrastructure. Third, metals mining and energy industries
curtailed investments throughout the 1980s and 1990s. The current
worldwide economic recovery revealed that production capacities
were inadequate. Producers have increased investment but have not
yet caught up with needs. More than 90 percent of both worldwide
metals exploration spending and oil production occurs outside the
United States. Fourth, even in North America, we expect flat to
slightly higher sales despite weakness in the U.S. economy. -- In
2007, dealers reduced their machine inventories by about $1.1
billion resulting in company sales to North American dealers lower
than dealer sales to end customers. While we expect dealer sales to
end users to decline again in 2008, company sales will benefit as a
result of substantially lower forecasted changes to dealer
inventories than we experienced in 2007. -- Sales to U.S. coal
mines were depressed in 2007; rising coal prices and increasing
exports are driving expected improvements in 2008. -- While the
industry for on-highway truck engines is still very weak as a
result of very slow growth in the U.S. economy, we expect our sales
to improve from the depressed levels of 2007. -- Sales in Canada
remain strong, driven by high commodity prices. Q4: Mining and Oil
and Gas have been very strong industries for the past few years.
Can you comment on your expectations going forward from here? A:
Both metals and energy prices increased in 2007, and we expect that
prices will remain attractive for investing in 2008. Demand is
increasing, particularly in the developing economies, and producers
continue to struggle to meet demand. Worldwide metals inventories
remain low, and spare oil production capacity is tight. Our outlook
assumes these industries will remain positive for both machinery
and engine sales in 2008. Q5: Are you expecting an improvement in
sales related to U.S. coal mining? A: In the fourth quarter of
2007, Central Appalachian coal prices (a benchmark price for
Eastern coal) averaged more than $53 per ton, almost 17 percent
higher than a year earlier. Powder River Basin coal prices (Western
coal) averaged $10.40 per ton, or 18 percent higher. U.S. prices
have been at a discount to international prices, and that has led
to a 16 percent increase in exports through year-to-date October.
As a result, we experienced increased demand for some machines used
in coal mining such as large track-type tractors in fourth-quarter
2007. We expect that recovery will continue in 2008. Q6: You
mention the possibility of a U.S. recession. If this happens, what
would the impact be on Caterpillar? A: Over time, weakness in the
economy has spread from housing to nonresidential construction and
more recently to employment and manufacturing. A recession is
defined as a broad downturn in the economy, a development that
seems to be taking place. Many of our businesses are very
economically sensitive and have been declining in the United States
since early 2006. With or without an officially defined recession,
we expect North American sales to remain depressed in 2008. A
recession or the potential for a recession would likely lead to
actions such as significant interest rate cuts or fiscal measures,
which would speed recovery. If the Fed continues to cut interest
rates in 2008 as we expect and the U.S. government takes action to
stimulate economic growth, 2008 could be the bottom of this U.S.
machinery cycle. Q7: Can you comment on how dealer inventory
changed in the fourth quarter and the full year 2007? A: Worldwide
dealer machine inventories were fairly steady in the fourth quarter
(overall, dealer inventories increased less than $50 million), and
changes by region were relatively small. No region changed up or
down more than $50 million in the quarter. For the full year 2007,
North American dealers lowered inventories about $1.1 billion. By
comparison, North American dealers increased inventories about $300
million in 2006. This change had a negative impact on Caterpillar
sales in North America in 2007. Outside North America, dealers
increased inventories about $500 million in 2007 as compared with
an increase of about half that much in 2006. Engines Q8: Can you
update your expectations for the 2008 heavy-duty on-highway truck
industry? A: In 2008, we expect slow economic growth in the United
States. This slower growth will keep freight tonnage below 2006
levels and, given adequate freight capacity, cause carriers to make
only replacement purchases. For 2008, we project the North American
heavy-duty truck industry will be 185,000 to 195,000 vehicles, up
from an estimated 172,000 units in 2007. This small recovery will
occur after current vehicle inventory is reduced to desired levels
beginning in the second half of 2008. Q9: Can you comment on how
your program to increase production of large 3500 series engines is
coming? A: The capacity increase program continues to be on
schedule. Capacity began to increase in the third quarter of 2007
and will continue to increase in 2008. Q10: You've said that you
are facing an important decision on the future of your on-highway
truck engine business. When will you be ready to talk about your
plans? A: In light of the clear movement to vertical integration by
North American truck manufacturers, we are continuing to
investigate our full range of strategic options going forward. We
should soon be able to make this direction clear. Costs / Profit
Q11: Can you comment on why core operating costs were higher than
you expected in 2007? A: Our 2007 core operating costs increased
$1.2 billion over 2006. Manufacturing inefficiencies related to
supply chain disruptions, our focus on improving order-to-delivery
processes and capacity expansion initiatives have resulted in
higher costs than we forecast. Higher sales were also a factor and
were more than $2 billion above our original outlook. Many
facilities are operating at or near capacity, putting additional
pressure on costs. In addition, volume declined more than we
anticipated in on-highway truck engine facilities and negatively
impacted costs. Our initial assessment of 2007 core operating costs
assumed flat material costs. Instead, increasing commodity prices
resulted in about $300 million of additional material cost for the
year. Q12: Can you break down your change in core operating costs
for the fourth quarter and for the full year in more detail? A: The
following table summarizes the increase in core operating costs in
fourth quarter 2007 versus fourth quarter 2006. Core Operating Cost
Change (Millions of dollars) Fourth Quarter 2007 vs. 2006
Manufacturing Costs $355 SG&A (43) R&D (16) Total $296 The
following table summarizes the increase in core operating costs in
2007 versus 2006. Core Operating Cost Change (Millions of dollars)
Full Year 2007 vs. 2006 Manufacturing Costs $1,225 SG&A (30)
R&D 37 Total $1,232 Cash Flow / Financing Q13: Can you comment
on the strength of your financial position? A: We are in a very
strong financial position with a Machinery and Engines
debt-to-capital ratio of 31.2 percent. Going forward, we have the
capacity to fund growth, maintain our benefit plans at a
well-funded level, continue to increase our dividend and repurchase
stock when it is attractive. Q14: Can you comment on 2007 operating
cash flow? A: For Machinery and Engines, 2007 operating cash flow
was $5.446 billion. This was $833 million, or 18 percent higher
than full year 2006. The strong cash flow from Machinery and
Engines was primarily used for: -- Share Repurchase - $2.405
billion-used to repurchase 33.5 million shares -- Capital
Expenditures - $1.683 billion- primarily to replace and upgrade
existing production assets, support new product programs and
facilitate additional expansion of manufacturing capacity --
Dividends - $845 million-an increase of $119 million compared to
2006 -- Acquisitions - $244 million -- primarily for Franklin Power
Products, Inc. and International Fuel Systems, Inc. Q15: How much
stock was repurchased in the fourth quarter and for the year? Also,
how many shares were outstanding at year-end? A: Our continued
stock buy back is in support of our Board authorized $7.5 billion
stock repurchase program to be completed by 2011. In the fourth
quarter we repurchased 12.6 million shares at a cost of $920
million. For the full year we repurchased 33.5 million shares at a
cost of $2.405 billion. Basic shares outstanding at the end of the
year were 624 million. Q16: Are credit markets having any
significant negative impact at Cat Financial Services? Has Cat
Financial's past due ratio increased much this year? How about
credit losses? A: No. Due to Caterpillar's strong credit rating we
were able to maintain normal operations and fund all our needs.
We've been able to continue to fund growth at Cat Financial without
significant impact from the credit markets. Investor interest has
been strong, validating the quality of our debt issuance program.
At the end of the fourth quarter, past dues were 2.36 percent,
compared with 1.71 percent at the end of the fourth quarter of
2006. Most of this increase is related to North America and the
downturn in the housing market. Notably, past dues have improved
during this past quarter -- from 2.52 percent at the end of the
third quarter to the current level of 2.36 percent. Write-offs net
of recoveries were $68 million in 2007 compared with $47 million in
2006. This increase has also been driven by the downturn in the
U.S. housing market. Although past dues and write-offs have
increased from 2006, by historical standards Cat Financial's
portfolio continues to perform well. Other Q17: Can you comment on
your progress in implementing the Cat Production System and your
expectations for 2008? A: Extensive benchmarking of world-class
production systems completed in 2006 enabled us to define the
Caterpillar Production System (CPS) recipe for more than 300
manufacturing facilities throughout the world. This recipe was
rolled out to all our manufacturing operations during the first
half of 2007; the first year of the CPS journey. The CPS rollout
included extensive training of 6 Sigma black belts to conduct value
stream mapping and rapid improvement workshops. In our benchmarking
we learned that safety improvements usually precede quality,
velocity and cost benefits. We have been pleased with steadily
improving safety and quality across the company. We expect safety
and quality to continue to improve and expect modest improvements
in velocity and costs in 2008, with more to be realized in 2009 and
2010. GLOSSARY OF TERMS 1. Cat Production System (CPS) - The
Caterpillar Production System is the common Order-to-Delivery
process being implemented enterprise-wide to achieve our safety,
quality, velocity, earnings and growth goals for 2010 and beyond.
2. Consolidating Adjustments - Eliminations of transactions between
Machinery and Engines and Financial Products. 3. Core Operating
Costs - Machinery and Engines variable manufacturing cost change
[adjusted for volume] and changes in period manufacturing costs,
SG&A expenses and R&D expenses. Excludes the impact of
currency. 4. Currency - With respect to sales and revenues,
currency represents the translation impact on sales resulting from
changes in foreign currency exchange rates versus the U.S. dollar.
With respect to operating profit, currency represents the net
translation impact on sales and operating costs resulting from
changes in foreign currency exchange rates versus the U.S. dollar.
Currency includes the impacts on sales and operating profit for the
Machinery and Engines lines of business only; currency impacts on
Financial Products revenues and operating profit are included in
the Financial Products portions of the respective analyses. With
respect to other income/expense, currency represents the effects of
forward and option contracts entered into by the company to reduce
the risk of fluctuations in exchange rates and the net effect of
changes in foreign currency exchange rates on our foreign currency
assets and liabilities for consolidated results. 5. Debt to Capital
Ratio - A key measure of financial strength used by both management
and our credit rating agencies. The metric is a ratio of Machinery
and Engines debt (short-term borrowings plus long-term debt) to the
sum of Machinery and Engines debt and stockholders' equity. 6. EAME
- Geographic region including Europe, Africa, the Middle East and
the Commonwealth of Independent States (CIS). 7. Earning Assets -
Assets consisting primarily of total finance receivables net of
unearned income, plus equipment on operating leases, less
accumulated depreciation at Cat Financial. 8. Engines - A principal
line of business including the design, manufacture, marketing and
sales of engines for Caterpillar machinery; electric power
generation systems; on-highway vehicles and locomotives; marine,
petroleum, construction, industrial, agricultural and other
applications and related parts. Also includes remanufacturing of
Caterpillar engines and a variety of Caterpillar machinery and
engine components and remanufacturing services for other companies.
Reciprocating engines meet power needs ranging from 5 to 21,500
horsepower (4 to more than 16 000 kilowatts). Turbines range from
1,600 to 20,500 horsepower (1 200 to 15 000 kilowatts). 9.
Financial Products - A principal line of business consisting
primarily of Caterpillar Financial Services Corporation (Cat
Financial), Caterpillar Insurance Holdings, Inc. (Cat Insurance),
Caterpillar Power Ventures Corporation (Cat Power Ventures) and
their respective subsidiaries. Cat Financial provides a wide range
of financing alternatives to customers and dealers for Caterpillar
machinery and engines, Solar gas turbines as well as other
equipment and marine vessels. Cat Financial also extends loans to
customers and dealers. Cat Insurance provides various forms of
insurance to customers and dealers to help support the purchase and
lease of our equipment. Cat Power Ventures is an investor in
independent power projects using Caterpillar power generation
equipment and services. 10. Integrated Service Businesses - A
service business or a business containing an important service
component. These businesses include, but are not limited to,
aftermarket parts, Cat Financial, Cat Insurance, Cat Logistics, Cat
Reman, Progress Rail, OEM Solutions and Solar Turbine Customer
Services. 11. Latin America - Geographic region including Central
and South American countries and Mexico. 12. Machinery - A
principal line of business which includes the design, manufacture,
marketing and sales of construction, mining and forestry machinery
-- track and wheel tractors, track and wheel loaders, pipelayers,
motor graders, wheel tractor-scrapers, track and wheel excavators,
backhoe loaders, log skidders, log loaders, off-highway trucks,
articulated trucks, paving products, skid steer loaders and related
parts. Also includes logistics services for other companies and the
design, manufacture, remanufacture, maintenance and services of
rail-related products. 13. Machinery and Engines (M&E) - Due to
the highly integrated nature of operations, it represents the
aggregate total of the Machinery and Engines lines of business and
includes primarily our manufacturing, marketing and parts
distribution operations. 14. Manufacturing Costs - Manufacturing
costs represent the volume-adjusted change for variable costs and
the absolute dollar change for period manufacturing costs. Variable
manufacturing costs are defined as having a direct relationship
with the volume of production. This includes material costs, direct
labor and other costs that vary directly with production volume
such as freight, power to operate machines and supplies that are
consumed in the manufacturing process. Period manufacturing costs
support production but are defined as generally not having a direct
relationship to short-term changes in volume. Examples include
machinery and equipment repair, depreciation on manufacturing
assets, facility support, procurement, factory scheduling,
manufacturing planning and operations management. 15. M&E Other
Operating Expenses - Comprised primarily of gains (losses) on
disposal of long-lived assets, long-lived asset impairment charges
and impairment of goodwill. 16. Operating Profit - Sales and
revenues minus operating costs. 17. Price Realization - The impact
of net price changes excluding currency and new product
introductions. Consolidated price realization includes the impact
of changes in the relative weighting of sales between geographic
regions. 18. Profit - Consolidated profit before taxes less
provision for income taxes plus equity in profit (loss) of
unconsolidated affiliated companies. 19. Sales Volume - With
respect to sales and revenues, sales volume represents the impact
of changes in the quantities sold for machinery and engines as well
as the incremental revenue impact of new product introductions.
With respect to operating profit, sales volume represents the
impact of changes in the quantities sold for machinery and engines
combined with product mix -- the net operating profit impact of
changes in the relative weighting of machinery and engines sales
with respect to total sales. 20. 6 Sigma - On a technical level, 6
Sigma represents a measure of variation that achieves 3.4 defects
per million opportunities. At Caterpillar, 6 Sigma represents a
much broader cultural philosophy to drive continuous improvement
throughout the value chain. It is a fact-based, data-driven
methodology that we are using to improve processes, enhance
quality, cut costs, grow our business and deliver greater value to
our customers through Black Belt-led project teams. At Caterpillar,
6 Sigma goes beyond mere process improvement -- it has become the
way we work as teams to process business information, solve
problems and manage our business successfully. NON-GAAP FINANCIAL
MEASURES The following definition is provided for "non-GAAP
financial measures" in connection with Regulation G issued by the
Securities and Exchange Commission. This non-GAAP financial measure
has no standardized meaning prescribed by U.S. GAAP and therefore
is unlikely to be comparable to the calculation of similar measures
for other companies. Management does not intend this item to be
considered in isolation or as a substitute for the related GAAP
measure. MACHINERY AND ENGINES Caterpillar defines Machinery and
Engines as it is presented in the supplemental data as Caterpillar
Inc. and its subsidiaries with Financial Products accounted for on
the equity basis. Machinery and Engines information relates to the
design, manufacture and marketing of our products. Financial
Products information relates to the financing to customers and
dealers for the purchase and lease of Caterpillar and other
equipment. The nature of these businesses is different, especially
with regard to the financial position and cash flow items.
Caterpillar management utilizes this presentation internally to
highlight these differences. We also believe this presentation will
assist readers in understanding our business. Pages 34-39 reconcile
Machinery and Engines with Financial Products on the equity basis
to Caterpillar Inc. Consolidated financial information.
Caterpillar's latest financial results and current outlook are also
available via: Telephone: (800) 228-7717 (Inside the United States
and Canada) (858) 244-2080 (Outside the United States and Canada)
Internet: http://www.cat.com/investor http://www.cat.com/irwebcast
(live broadcast/replays of quarterly conference call) Caterpillar
Inc. Condensed Consolidated Statement of Results of Operations
(Unaudited) (Dollars in millions except per share data) Three
Months Ended Twelve Months Ended December 31, December 31, 2007
2006 2007 2006 Sales and revenues: Sales of Machinery and Engines
$11,360 $10,328 $41,962 $38,869 Revenues of Financial Products 784
675 2,996 2,648 Total sales and revenues 12,144 11,003 44,958
41,517 Operating costs: Cost of goods sold 8,920 7,971 32,626
29,549 Selling, general and administrative expenses 1,025 1,016
3,821 3,706 Research and development expenses 357 368 1,404 1,347
Interest expense of Financial Products 293 269 1,132 1,023 Other
operating expenses 294 233 1,054 971 Total operating costs 10,889
9,857 40,037 36,596 Operating profit 1,255 1,146 4,921 4,921
Interest expense excluding Financial Products 60 68 288 274 Other
income (expense) 88 49 320 214 Consolidated profit before taxes
1,283 1,127 4,953 4,861 Provision for income taxes 330 252 1,485
1,405 Profit of consolidated companies 953 875 3,468 3,456 Equity
in profit (loss) of unconsolidated affiliated companies 22 7 73 81
Profit $975 $882 $3,541 $3,537 Profit per common share $1.55 $1.36
$5.55 $5.37 Profit per common share - diluted (1) $1.50 $1.32 $5.37
$5.17 Weighted average common shares outstanding (millions) - Basic
630.4 647.6 638.2 658.7 - Diluted (1) 650.8 669.5 659.5 683.8 Cash
dividends declared per common share $.72 $.60 $1.38 $1.15 (1)
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) Assets December 31, December 31, Current assets: 2007
2006 Cash and short-term investments $1,122 $530 Receivables -
trade and other 8,249 8,607 Receivables - finance 7,503 6,804
Deferred and refundable income taxes 816 733 Prepaid expenses and
other current assets 583 638 Inventories 7,204 6,351 Total current
assets 25,477 23,663 Property, plant and equipment - net 9,997
8,851 Long-term receivables - trade and other 685 860 Long-term
receivables - finance 13,462 11,531 Investments in unconsolidated
affiliated companies 598 562 Noncurrent deferred and refundable
income taxes 1,553 1,949 Intangible assets 475 387 Goodwill 1,963
1,904 Other assets 1,922 1,742 Total assets $56,132 $51,449
Liabilities Current liabilities: Short-term borrowings: --
Machinery and Engines $187 $165 -- Financial Products 5,281 4,990
Accounts payable 4,723 4,085 Accrued expenses 3,178 2,923 Accrued
wages, salaries and employee benefits 1,126 938 Customer advances
1,442 921 Dividends payable 225 194 Other current liabilities 951
1,145 Long-term debt due within one year: -- Machinery and Engines
180 418 -- Financial Products 4,952 4,043 Total current liabilities
22,245 19,822 Long-term debt due after one year: -- Machinery and
Engines 3,639 3,694 -- Financial Products 14,190 13,986 Liability
for postemployment benefits 5,059 5,879 Other liabilities 2,116
1,209 Total liabilities 47,249 44,590 Stockholders' equity Common
stock 2,744 2,465 Treasury stock (9,451) (7,352) Profit employed in
the business 17,398 14,593 Accumulated other comprehensive income
(1,808) (2,847) Total stockholders' equity 8,883 6,859 Total
liabilities and stockholders' equity $56,132 $51,449 Certain
amounts for prior periods have been reclassified to conform to the
current period financial statement presentation. Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow (Unaudited) (Millions
of dollars) Twelve Months Ended December 31, Cash flow from
operating activities: 2007 2006 Profit $3,541 $3,537 Adjustments
for non-cash items: Depreciation and amortization 1,797 1,602 Other
199 197 Changes in assets and liabilities: Receivables - trade and
other 899 (148) Inventories (745) (827) Accounts payable and
accrued expenses 618 670 Customer advances 576 511 Other assets -
net 66 (262) Other liabilities - net 984 519 Net cash provided by
(used for) operating activities 7,935 5,799 Cash flow from
investing activities: Capital expenditures - excluding equipment
leased to others (1,700) (1,593) Expenditures for equipment leased
to others (1,340) (1,082) Proceeds from disposals of property,
plant and equipment 408 572 Additions to finance receivables
(13,946) (10,522) Collections of finance receivables 10,985 8,094
Proceeds from the sale of finance receivables 866 1,067 Investments
and acquisitions (net of cash acquired) (229) (513) Proceeds from
release of security deposit 290 - Proceeds from sale of
available-for-sale securities 282 539 Investments in
available-for-sale securities (485) (681) Other - net 461 323 Net
cash provided by (used for) investing activities (4,408) (3,796)
Cash flow from financing activities: Dividends paid (845) (726)
Common stock issued, including treasury shares reissued 328 414
Payment for stock repurchase derivative contracts (56) - Treasury
shares purchased (2,405) (3,208) Excess tax benefit from
stock-based compensation 155 169 Proceeds from debt issued
(original maturities greater than three months) 11,039 11,269
Payments on debt (original maturities greater than three months)
(10,888) (10,375) Short-term borrowings (original maturities three
months or less)-net (297) (136) Net cash provided by (used for)
financing activities (2,969) (2,593) Effect of exchange rate
changes on cash 34 12 Increase (decrease) in cash and short-term
investments 592 (578) Cash and short-term investments at beginning
of period 530 1,108 Cash and short-term investments at end of
period $1,122 $530 Certain amounts for prior periods have been
reclassified to conform to the current period financial statement
presentation. 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 December 31, 2007 (Unaudited) (Millions of dollars)
Supplemental Consolidating Data Machinery and Financial
Consolidating Consolidated Engines(1) Products Adjustments Sales
and revenues: Sales of Machinery and Engines $11,360 $11,360 $- $-
Revenues of Financial Products 784 - 888 (104)(2) Total sales and
revenues 12,144 11,360 888 (104) Operating costs: Cost of goods
sold 8,920 8,920 - - Selling, general and administrative expenses
1,025 887 138 - Research and development expenses 357 357 - -
Interest expense of Financial Products 293 - 295 (2)(4) Other
operating expenses 294 6 294 (6)(3) Total operating costs 10,889
10,170 727 (8) Operating profit 1,255 1,190 161 (96) Interest
expense excluding Financial Products 60 61 - (1)(4) Other income
(expense) 88 (27) 20 95(5) Consolidated profit before taxes 1,283
1,102 181 - Provision for income taxes 330 254 76 - Profit of
consolidated companies 953 848 105 - Equity in profit (loss) of
unconsolidated affiliated companies 22 21 1 - Equity in profit of
Financial Products' subsidiaries - 106 - (106)(6) Profit $975 $975
$106 $(106) (1) Represents Caterpillar Inc. and its subsidiaries
with Financial Products accounted for on the equity basis. (2)
Elimination of Financial Products' revenues earned from Machinery
and Engines. (3) Elimination of net expenses recorded by Machinery
and Engines paid to Financial Products. (4) Elimination of interest
expense recorded between Financial Products and Machinery and
Engines. (5) Elimination of discount recorded by Machinery and
Engines on receivables sold to Financial Products and of interest
earned between Machinery and Engines and Financial Products. (6)
Elimination of Financial Products' profit due to equity method of
accounting. Caterpillar Inc. Supplemental Data for Results of
Operations For The Three Months Ended December 31, 2006 (Unaudited)
(Millions of dollars) Supplemental Consolidating Data Machinery and
Financial Consolidating Consolidated Engines(1) Products
Adjustments Sales and revenues: Sales of Machinery and Engines
$10,328 $10,328 $- $- Revenues of Financial Products 675 - 799
(124)(2) Total sales and revenues 11,003 10,328 799 (124) Operating
costs: Cost of goods sold 7,971 7,971 - - Selling, general and
administrative expenses 1,016 916 120 (20)(3) Research and
development expenses 368 368 - - Interest expense of Financial
Products 269 - 272 (3)(4) Other operating expenses 233 (8) 235 6(3)
Total operating costs 9,857 9,247 627 (17) Operating profit 1,146
1,081 172 (107) Interest expense excluding Financial Products 68 71
- (3)(4) Other income (expense) 49 (62) 7 104(5) Consolidated
profit before taxes 1,127 948 179 - Provision for income taxes 252
196 56 - Profit of consolidated companies 875 752 123 - Equity in
profit (loss) of unconsolidated affiliated companies 7 7 - - Equity
in profit of Financial Products' subsidiaries - 123 - (123)(6)
Profit $882 $882 $123 $(123) (1) Represents Caterpillar Inc. and
its subsidiaries with Financial Products accounted for on the
equity basis. (2) Elimination of Financial Products' revenues
earned from Machinery and Engines. (3) Elimination of net expenses
recorded by Machinery and Engines paid to Financial Products. (4)
Elimination of interest expense recorded between Financial Products
and Machinery and Engines. (5) Elimination of discount recorded by
Machinery and Engines on receivables sold to Financial Products and
of interest earned between Machinery and Engines and Financial
Products. (6) Elimination of Financial Products' profit due to
equity method of accounting. Caterpillar Inc. Supplemental Data for
Results of Operations For The Twelve Months Ended December 31, 2007
(Unaudited) (Millions of dollars) Supplemental Consolidating Data
Machinery and Financial Consolidating Consolidated Engines(1)
Products Adjustments Sales and revenues: Sales of Machinery and
Engines $41,962 $41,962 $- $- Revenues of Financial Products 2,996
- 3,396 (400)(2) Total sales and revenues 44,958 41,962 3,396 (400)
Operating costs: Cost of goods sold 32,626 32,626 - - Selling,
general and administrative expenses 3,821 3,356 480 (15)(3)
Research and development expenses 1,404 1,404 - - Interest expense
of Financial Products 1,132 - 1,137 (5)(4) Other operating expenses
1,054 (8) 1,089 (27)(3) Total operating costs 40,037 37,378 2,706
(47) Operating profit 4,921 4,584 690 (353) Interest expense
excluding Financial Products 288 294 - (6)(4) Other income
(expense) 320 (104) 77 347(5) Consolidated profit before taxes
4,953 4,186 767 - Provision for income taxes 1,485 1,220 265 -
Profit of consolidated companies 3,468 2,966 502 - Equity in profit
(loss) of unconsolidated affiliated companies 73 69 4 - Equity in
profit of Financial Products' subsidiaries - 506 - (506)(6) Profit
$3,541 $3,541 $506 $(506) (1) Represents Caterpillar Inc. and its
subsidiaries with Financial Products accounted for on the equity
basis. (2) Elimination of Financial Products' revenues earned from
Machinery and Engines. (3) Elimination of net expenses recorded by
Machinery and Engines paid to Financial Products. (4) Elimination
of interest expense recorded between Financial Products and
Machinery and Engines. (5) Elimination of discount recorded by
Machinery and Engines on receivables sold to Financial Products and
of interest earned between Machinery and Engines and Financial
Products. (6) Elimination of Financial Products' profit due to
equity method of accounting. Caterpillar Inc. Supplemental Data for
Results of Operations For The Twelve Months Ended December 31, 2006
(Unaudited) (Millions of dollars) Supplemental Consolidating Data
Machinery and Financial Consolidating Consolidated Engines(1)
Products Adjustments Sales and revenues: Sales of Machinery and
Engines $38,869 $38,869 $- $- Revenues of Financial Products 2,648
- 3,114 (466)(2) Total sales and revenues 41,517 38,869 3,114 (466)
Operating costs: Cost of goods sold 29,549 29,549 - - Selling,
general and administrative expenses 3,706 3,294 446 (34)(3)
Research and development expenses 1,347 1,347 - - Interest expense
of Financial Products 1,023 - 1,033 (10)(4) Other operating
expenses 971 22 965 (16)(3) Total operating costs 36,596 34,212
2,444 (60) Operating profit 4,921 4,657 670 (406) Interest expense
excluding Financial Products 274 285 - (11)(4) Other income
(expense) 214 (256) 75 395(5) Consolidated profit before taxes
4,861 4,116 745 - Provision for income taxes 1,405 1,158 247 -
Profit of consolidated companies 3,456 2,958 498 - Equity in profit
(loss) of unconsolidated affiliated companies 81 79 2 - Equity in
profit of Financial Products' subsidiaries - 500 - (500)(6) Profit
$3,537 $3,537 $500 $(500) (1) Represents Caterpillar Inc. and its
subsidiaries with Financial Products accounted for on the equity
basis. (2) Elimination of Financial Products' revenues earned from
Machinery and Engines. (3) Elimination of net expenses recorded by
Machinery and Engines paid to Financial Products. (4) Elimination
of interest expense recorded between Financial Products and
Machinery and Engines. (5) Elimination of discount recorded by
Machinery and Engines on receivables sold to Financial Products and
of interest earned between Machinery and Engines and Financial
Products. (6) Elimination of Financial Products' profit due to
equity method of accounting. Caterpillar Inc. Supplemental Data for
Cash Flow For The Twelve Months Ended December 31, 2007 (Unaudited)
(Millions of dollars) Supplemental Consolidating Data Machinery and
Financial Consolidating Consolidated Engines(1) Products
Adjustments Cash flow from operating activities: Profit $3,541
$3,541 $506 $(506)(2) Adjustments for non-cash items: Depreciation
and amortization 1,797 1,093 704 - Undistributed profit of
Financial Products - (256) - 256(3) Other 199 114 (267) 352(4)
Changes in assets and liabilities: Receivables - trade and other
899 (317) (105) 1,321(4,5) Inventories (745) (745) - - Accounts
payable and accrued expenses 618 408 216 (6)(4) Customer advances
576 576 - - Other assets - net 66 63 (9) 12(4) Other liabilities -
net 984 969 40 (25)(4) Net cash provided by (used for) operating
activities 7,935 5,446 1,085 1,404 Cash flow from investing
activities: Capital expenditures - excluding equipment leased to
others (1,700) (1,683) (17) - Expenditures for equipment leased to
others (1,340) - (1,349) 9(4) Proceeds from disposals of property,
plant and equipment 408 14 398 (4)(4) Additions to finance
receivables (13,946) - (36,251) 22,305(5) Collections of finance
receivables 10,985 - 33,456 (22,471)(5) Proceeds from sale of
finance receivables 866 - 2,378 (1,512)(5) Net intercompany
borrowings - (177) 3 174(6) Investments and acquisitions (net of
cash acquired) (229) (244) - 15(7) Proceeds from release of
security deposit 290 290 - - Proceeds from sale of available-for-
sale securities 282 23 259 - Investments in available-for-sale
securities (485) (29) (456) - Other - net 461 122 341 (2)(7) Net
cash provided by (used for) investing activities (4,408) (1,684)
(1,238) (1,486) Cash flow from financing activities: Dividends paid
(845) (845) (254) 254(8) Common stock issued, including treasury
shares reissued 328 328 (2) 2(7) Payment for stock repurchase
derivative contracts (56) (56) - - Treasury shares purchased
(2,405) (2,405) - - Excess tax benefit from stock-based
compensation 155 155 - - Net intercompany borrowings - (3) 177
(174)(6) Proceeds from debt issued (original maturities greater
than three months) 11,039 224 10,815 - Payments on debt (original
maturities greater than three months) (10,888) (598) (10,290) -
Short-term borrowings (original maturities three months or
less)-net (297) (41) (256) - Net cash provided by (used for)
financing activities (2,969) (3,241) 190 82 Effect of exchange rate
changes on cash 34 22 12 - Increase (decrease) in cash and
short-term investments 592 543 49 - Cash and short-term investments
at beginning of period 530 319 211 - Cash and short-term
investments at end of period $1,122 $862 $260 $- (1) Represents
Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis. (2) Elimination of Financial
Products' profit after tax due to equity method of accounting. (3)
Non-cash adjustment for the undistributed earnings from Financial
Products. (4) Elimination of non-cash adjustments and changes in
assets and liabilities related to consolidated reporting. (5)
Reclassification of Cat Financial's cash flow activity from
investing to operating for receivables that arose from the sale of
inventory. (6) Net proceeds and payments to/from Machinery and
Engines and Financial Products. (7) Change in investment and common
stock related to Financial Products. (8) Elimination of dividends
from Financial Products to Machinery and Engines. Caterpillar Inc.
Supplemental Data for Cash Flow For The Twelve Months Ended
December 31, 2006 (Unaudited) (Millions of dollars) Supplemental
Consolidating Data Machinery and Financial Consolidating
Consolidated Engines(1) Products Adjustments Cash flow from
operating activities: Profit $3,537 $3,537 $500 $(500)(2)
Adjustments for non-cash items: Depreciation and amortization 1,602
943 659 - Undistributed profit of Financial Products - (128) - 128
(3) Other 197 140 (330) 387 (4) Changes in assets and liabilities:
Receivables - trade and other (148) (351) 6 197 (4,5) Inventories
(827) (827) - - Accounts payable and accrued expenses 670 507 185
(22)(4) Customer advances 511 511 - - Other assets - net (262)
(205) (44) (13)(4) Other liabilities - net 519 486 30 3 (4) Net
cash provided by (used for) operating activities 5,799 4,613 1,006
180 Cash flow from investing activities: Capital expenditures -
excluding equipment leased to others (1,593) (1,580) (41) 28 (4)
Expenditures for equipment leased to others (1,082) - (1,111) 29
(4) Proceeds from disposals of property, plant and equipment 572 29
581 (38)(4) Additions to finance receivables (10,522) - (35,561)
25,039 (5) Collections of finance receivables 8,094 - 32,670
(24,576)(5) Proceeds from the sale of finance receivables 1,067 -
2,110 (1,043)(5) Net intercompany borrowings - 123 (2) (121)(6)
Investments and acquisitions (net of cash acquired) (513) (513) - -
Proceeds from sale of available-for-sale securities 539 26 513 -
Investments in available-for-sale securities (681) (35) (646) -
Other - net 323 33 294 (4)(7) Net cash provided by (used for)
investing activities (3,796) (1,917) (1,193) (686) Cash flow from
financing activities: Dividends paid (726) (726) (372) 372(8)
Common stock issued, including treasury shares reissued 414 414
(13) 13(7) Treasury shares purchased (3,208) (3,208) - - Excess tax
benefit from stock-based compensation 169 169 - - Net intercompany
borrowings - 2 (123) 121(6) Proceeds from debt issued (original
maturities greater than three months) 11,269 1,445 9,824 - Payments
on debt (original maturities greater than three months) (10,375)
(839) (9,536) - Short-term borrowings (original maturities three
months or less)-net (136) (593) 457 - Net cash provided by (used
for) financing activities (2,593) (3,336) 237 506 Effect of
exchange rate changes on cash 12 8 4 - Increase (decrease) in cash
and short-term investments (578) (632) 54 - Cash and short-term
investments at beginning of period 1,108 951 157 - Cash and
short-term investments at end of period $530 $319 $211 $- (1)
Represents Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis. (2) Elimination of
Financial Products' profit after tax due to equity method of
accounting. (3) Non-cash adjustments for the undistributed earnings
from Financial Products. (4) Elimination of non-cash adjustments
and changes in assets and liabilities related to consolidated
reporting. (5) Reclassification of Cat Financial's cash flow
activity from investing to operating for receivables that arose
from the sale of inventory. (6) Net proceeds and payments to/from
Machinery and Engines and Financial Products. (7) Change in
investment and common stock related to Financial Products. (8)
Elimination of dividends from Financial Products to Machinery and
Engines. DATASOURCE: Caterpillar Inc.
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