Caterpillar Reports Third-Quarter 2016 Results

PEORIA, ILLINOIS, October 25,2016 /PRNewswire/ --

     
                                                   Third Quarter
    ($ in billions except profit per share)    2016              2015
 
    Sales and Revenues                       $9.160           $10.962 
    Profit Per Share                          $0.48             $0.94 
    Profit Per Share                          $0.85             $1.05
    (Excluding Restructuring Costs)

Caterpillar Inc. (NYSE: CAT) today announced profit per share of $0.48 for the third quarter of 2016, a decrease from $0.94 per share in the third quarter of 2015.  Excluding restructuring costs, profit per share was $0.85, down from $1.05 per share in the third quarter of 2015.  Third-quarter 2016 sales and revenues of $9.2 billion were down 16 percent from $11.0 billion in the third quarter of 2015.

"Economic weakness throughout much of the world persists and, as a result, most of our end markets remain challenged.  In North America, the market has an abundance of used construction equipment, rail customers have a substantial number of idle locomotives, and around the world there are a significant number of idle mining trucks," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.  "However, there were a few bright spots this quarter.  Both the construction industry and our machine market position improved in China.  Most commodity prices, while low, seem to have stabilized.  Parts sales have increased sequentially in each of the last two quarters.  Our machine market position and quality remain at high levels and our work on Lean and restructuring are continuing to help us lower costs.

"I'm pleased with how Caterpillar has responded and our team's incredible focus on reducing costs and pulling through profit despite sluggish end markets.  In the third quarter, despite a $1.8 billion decline in sales and revenues, our operating profit pull through was significantly better than our target range.  Lower variable manufacturing costs of $234 million and lower period costs of $420 million enabled us to offset much of the negative impact from a weak sales environment and continue investment in products and digital capabilities," said Oberhelman.

2016 Outlook

The full-year outlook for 2016 sales and revenues is about $39 billion, and profit is $2.35 per share, or $3.25 per share excluding restructuring costs.  The outlook does not include potential mark-to-market gains or losses related to pension and OPEB plans, which, as discussed in Q&A #10, are likely to significantly impact full-year 2016 results.  The previous outlook for 2016 expected sales and revenues to be in a range of $40.0 to $40.5 billion, with profit at the midpoint of the sales and revenues range of about $2.75 per share, or about $3.55 per share excluding restructuring costs.  Restructuring costs in 2016, which were expected to be about $700 million, are now forecast to be about $800 million, primarily due to asset write downs recognized in the third quarter.

Preliminary Outlook for 2017 Sales and Revenues

Our preliminary outlook for 2017 is that sales and revenues will not be significantly different than 2016.  The balance of risk, particularly during the first half of the year, is likely on the negative side.  We are, however, encouraged that most commodity prices important to our business have improved from the lows earlier in 2016.  Should commodity prices show relative stability and move higher in 2017, it is reasonable to expect that our business would respond, and we could see a more positive second half.  Our preliminary outlook for 2017 is based on our expectation that world economic growth will remain subdued at close to 2.5 percent - similar to the past few years.

"While we are seeing early signals of improvement in some areas, we continue to face a number of challenges.  We remain cautious as we look ahead to 2017, but are hopeful as the year unfolds we will begin to see more positive momentum.  Whether or not that happens, we are continuing to prepare for a better future.  In addition to substantial restructuring and significant cost reduction actions, we've kept our focus on customers and on the future by continuing to invest in our digital capabilities, connecting assets and jobsites and developing the next generation of more productive and efficient products," said Oberhelman.

Following is a summary of positive and negative factors that could influence 2017 sales and revenues:

Positive factors

Negative factors

"As you know, I've decided to retire after 41 years at Caterpillar, and Jim Umpleby will succeed me as CEO.  He's been a key part of the leadership team for several years and is absolutely ready to lead Caterpillar.  I'm confident I'm turning over a company that's ready for a better future.  We have a great team, our product portfolio is the best ever, our machine market position and quality remain at high levels and we've significantly improved our cost structure.  At some point, and I think we're getting closer to that point, our businesses will turn up.  Many of our businesses, including mining, oil and gas, rail and construction, are currently operating well below historical replacement demand levels in many parts of the world.  It's a good time for Jim to take over, as I know Caterpillar will deliver even better financial results when key industries begin to improve and get back to mid-cycle replacement demand levels," said Oberhelman.

Highlights

Notes:

About Caterpillar:

For 91 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent.  Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets.  With 2015 sales and revenues of $47.011 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.  The company principally operates through its three product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment.  For more information, visit caterpillar.com.  To connect with us on social media, visit caterpillar.com/social-media.

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," "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 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) government monetary or fiscal policies and infrastructure spending; (iii) commodity price changes, component price increases, fluctuations in demand for our products or significant shortages of component products; (iv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (v) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (vi) 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; (vii) our Financial Products segment's risks associated with the financial services industry; (viii) changes in interest rates or market liquidity conditions; (ix) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (x) new regulations or changes in financial services regulations; (xi) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) international trade policies and their impact on demand for our products and our competitive position; (xiii) our ability to develop, produce and market quality products that meet our customers' needs; (xiv) the impact of the highly competitive environment in which we operate on our sales and pricing; (xv) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (xvi) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost reduction actions; (xvii) inventory management decisions and sourcing practices of our dealers and our OEM customers; (xviii) compliance with environmental laws and regulations; (xix) alleged or actual violations of trade or anti-corruption laws and regulations; (xx) additional tax expense or exposure; (xxi) currency fluctuations; (xxii) our or Cat Financial's compliance with financial covenants; (xxiii) increased pension plan funding obligations; (xxiv) union disputes or other employee relations issues; (xxv) significant legal proceedings, claims, lawsuits or government investigations; (xxvi) changes in accounting standards; (xxvii) failure or breach of IT security; (xxviii) adverse effects of unexpected events including natural disasters; and (xxix) other factors described in more detail under "Item 1A. Risk Factors" in our Form 10-K filed with the SEC on February 16, 2016 for the year ended December 31, 2015.

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison

Third Quarter 2016 vs. Third Quarter 2015

To access this chart, go tohttp://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 3Q 2016earnings.

The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the third quarter of 2015 (at left) and the third quarter of 2016 (at right).  Items favorably impacting sales and revenues appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting sales and revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar.  Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees.

Sales and Revenues

Total sales and revenues were $9.160 billion in the third quarter of 2016, a decline of $1.802 billion, or 16 percent, compared with $10.962 billion in the third quarter of 2015.  The decrease was primarily due to lower sales volume, resulting from lower end-user demand attributable to continued weak commodity prices globally and economic weakness in many developing countries.  While sales for both new equipment and aftermarket parts declined in all segments, most of the decrease was for new equipment.  The unfavorable impact of price realization also contributed to the decline.

Sales declined in all regions.  In North America, sales decreased 20 percent primarily due to lower end-user demand for infrastructure, continuing declines in mining and the impact of low oil prices.  In EAME, sales declined 20 percent primarily in Africa/Middle East due to weak economic conditions, resulting from continued low oil and other commodity prices and an uncertain investment environment.  Sales decreased 22 percent in Latin America primarily due to continued widespread economic weakness across the region.  Weak commodity prices and inflation have also contributed to the decline.  Asia/Pacific sales declined 8 percent primarily due to lower end-user demand for most Energy & Transportation applications.

Energy & Transportation's sales declined 19 percent largely due to lower end-user demand for all applications. Construction Industries' sales decreased 13 percent primarily due to lower demand from end users and unfavorable price realization.  Resource Industries' sales declined 25 percent mostly due to continued low end-user demand.  Financial Products' segment revenues were about flat with the third quarter of 2015.

Consolidated Operating Profit

Consolidated Operating Profit Comparison

Third Quarter 2016 vs. Third Quarter 2015

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 3Q 2016 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit (Loss) between the third quarter of 2015 (at left) and the third quarter of 2016 (at right).  Items favorably impacting operating profitappear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting operating profit appear as downward stair steps with dollar amounts reflected in parentheses above each bar.  Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees.  The bar entitled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses.

Operating profit for the third quarter of 2016 was $481 million, compared with $925 million in the third quarter of 2015.  The decrease of $444 million was primarily due to lower sales volume, resulting from lower end-user demand attributable to continued weak commodity prices globally and economic weakness in many developing countries.  In addition, restructuring costs and price realization were unfavorable.  These items were partially offset by favorable period costs and variable manufacturing costs.  The unfavorable price realization resulted from competitive market conditions, primarily in Construction Industries.

Period costs were lower primarily due to substantial restructuring and cost reduction actions over the past year and lower short-term incentive compensation expense.  The reductions primarily impacted period manufacturing costs and selling, general and administrative expenses (SG&A).  About half of the improvement in variable manufacturing costs was due to lower material costs.  In addition, the impact of cost absorption was favorable as inventory decreased in the third quarter of 2015 and was about flat in the third quarter of 2016.

Restructuring costs of $324 million in the third quarter of 2016 were related to restructuring programs across the company, primarily in Resource Industries.  In the third quarter of 2015, restructuring costs were $98 million.

Other Profit/Loss Items 

Global Workforce

Caterpillar worldwide, full-time employment was about 97,100 at the end of the third quarter of 2016, compared with about 108,900 at the end of the third quarter of 2015, a decrease of about 11,800 full-time employees.  The flexible workforce decreased by about 2,300 for a total decrease in the global workforce of about 14,100.  The decrease was primarily the result of restructuring programs and lower production volumes.



September 30 Increase/ 2016 2015 (Decrease) Full-time employment 97,100 108,900 (11,800) Flexible workforce 11,700 14,000 (2,300) Total 108,800 122,900 (14,100) Geographic summary of change U.S. workforce (8,600) Non-U.S. workforce (5,500) Total (14,100)

 

SEGMENT RESULTS 

 

    
    Sales and   
    Revenues by 
    Geographic 
    Region 
                                        
     (Millions of           %      North  %      Latin  %               %     Asia/  %  
    dollars)         Total  Chan   Amer   Chan   Amer   Chan     EAME   Chan  Paci   Chan
                           ge     ica    ge     ica     ge             ge    fic    ge                             

Third Quarter 2016 Construction Industries(1 ) $ 3,554 (13)% $ 1,655 (19)% $ 287 (20)% $ 789 (18)% $ 823 14% Resource Industriessq uared 1,377 (25)% 454 (35)% 254 (19)% 303 (29)% 366 (8)% Energy & Transportati oncubed 3,534 (19)% 1,583 (15)% 280 (25)% 1,094 (17)% 577 (28)% All Other Segments⁴ 28 (28)% 6 (63)% - (100)% 5 (50)% 17 70% Corporate Items and Eliminations (30) (26) - (3) (1) Machinery, Energy & Transportati on $ 8,463 (18)% $ 3,672 (20)% $ 821 (22)% $2,188 (20)% $1,782 (8)% Financial Products Segment $ 749 -% $ 466 3% $ 84 (8)% $ 101 -% $ 98 (8)% Corporate Items and Eliminations (52) (28) (10) (4) (10) Financial Products Revenues $ 697 3% $ 438 9% $ 74 (10)% $ 97 2% $ 88 (11)% Consolidated Sales and Revenues $ 9,160 (16)% $ 4,110 (18)% $ 895 (21)% $2,285 (19)% $1,870 (8)% Third Quarter 2015 Construction Industries(1 ) $ 4,075 $ 2,037 $ 360 $ 958 $ 720 Resource Industriessq uared 1,842 702 312 429 399 Energy & Transportati oncubed 4,352 1,858 371 1,326 797 All Other Segments⁴ 39 16 3 10 10 Corporate Items and Eliminations (23) (25) - 1 1 Machinery, Energy & Transportati on $10,285 $ 4,588 $ 1,046 $2,724 $1,927 Financial Products Segment $ 752 $ 453 $ 91 $ 101 $ 107 Corporate Items and Eliminations (75) (52) (9) (6) (8) Financial Products Revenues $ 677 $ 401 $ 82 $ 95 $ 99 Consolidated Sales and Revenues $10,962 $ 4,989 $ 1,128 $2,819 $2,026
    
    1 Does not include inter-segment sales of $27 million and $17
    million in third quarter 2016 and 2015, respectively.
    2 Does not include inter-segment sales of $69 million and $88
    million in third quarter 2016 and 2015, respectively.
    3 Does not include inter-segment sales of $629 million and
    $702 million in third quarter 2016 and 2015, respectively.
    4 Does not include inter-segment sales of $95 million and $88
    million in third quarter 2016 and 2015, respectively.
    
 
    Sales and Revenues
    by Segment
 
                     Third      Sales    Price                  Third      $        %
    (Millions of     Quarter    Vol      Real     Cur           Quarter    Chan     Chan
     dollars)        2015       ume      ization  rency  Other  2016       ge       ge
    Construction
    Industries       $ 4,075   $ (384)   $ (165)   $ 28    $ -  $ 3,554   $ (521)   (13)  %
    Resource
    Industries         1,842     (439)      (29)      3      -    1,377     (465)   (25)  %
    Energy &
    Transportati
    on                 4,352     (777)      (19)    (22)     -    3,534     (818)   (19)  %
    All Other
    Segments              39      (11)         -       -     -       28      (11)   (28)  %
    Corporate
    Items and
    Eliminations        (23)       (9)         -       2     -      (30)      (7)
 
    Machinery,
    Energy &
    Transportati
    on              $ 10,285  $(1,620)    $ (213)   $ 11    $ -  $ 8,463  $(1,822)   (18) %
 
    Financial
    Products
    Segment              752         -          -      -     (3)     749       (3)      - %
    Corporate
    Items and
    Eliminations        (75)         -          -      -      23     (52)       23
    Financial
    Products
    Revenues           $ 677       $ -        $ -    $ -    $ 20    $ 697     $ 20      3 %
 
    Consolidated
    Sales and
    Revenues        $ 10,962   $(1,620)    $ (213)   $ 11   $ 20  $ 9,160  $(1,802)   (16) %
    
 
    Operating Profit (Loss) 
    by Segment
                               Third      Third                
                               Quarter    Quarter     $          % 
    (Millions of dollars)      2016       2015        Change     Change
    Construction Industries    $ 326      $ 354       $ (28)      (8) %
    Resource Industries          (77)       (42)        (35)     (83) %
    Energy & Transportation      572        683        (111)     (16) %
    All Other Segments           (22)       (11)        (11)    (100) %
    Corporate Items and
    Eliminations                (433)      (182)       (251)
    Machinery, Energy &
    Transportation             $ 366      $ 802      $ (436)     (54) %
    Financial Products
    Segment                      183        207         (24)     (12) %
    Corporate Items and
    Eliminations                 (12)       (22)         10
    Financial Products         $ 171      $ 185       $ (14)      (8) %
    Consolidating
    Adjustments                  (56)       (62)          6
 
    Consolidated Operating
    Profit (Loss)              $ 481      $ 925      $ (444)     (48) %
    
    CONSTRUCTION INDUSTRIES
 
    (Millions of dollars)
    Sales 
    Comparison
                 Third                Price               Third                
                 Quarter    Sales     Real     Currency   Quarter   $       % 
                 2015       Volume    ization             2016      Change  Change
  
    Sales
    Compar
    ison[1]      $4,075     ($384)     ($165)      $28    $3,554    ($521)  (13) %
 
    Sales by Geographic
    Region
 
                  Third            Third                            
                  Quarter          Quarter         $           % 
                  2016             2015            Change      Change
    North
    America        $1,655           $2,037         ($382)        (19)   %
    Latin
     America           287              360           (73)        (20)   %
    EAME              789              958          (169)        (18)   %
    Asia/Pacific      823              720           103          14    %
    Total1         $3,554           $4,075         ($521)        (13)   %
 
    Operating
    Profit
 
                 Third            Third           $             %
                 Quarter 2016     Quarter 2015    Change        Change
    Operating
    Profit               $326             $354     ($28)           (8)   %
 
    1 Does not include inter-segment sales of $27 million and $17 million in third quarter 2016
    and 2015, respectively.

Construction Industries' sales were $3.554 billion in the third quarter of 2016, a decrease of $521 million, or 13 percent, from the third quarter of 2015.  The decrease in sales was due to lower volume and unfavorable price realization.  While sales declined for both new equipment and aftermarket parts, most of the decrease was for new equipment.

Sales decreased in North America, EAME and Latin America and increased in Asia/Pacific.

Construction Industries' profit was $326 million in the third quarter of 2016, compared with $354 million in the third quarter of 2015.  The decrease in profit was primarily due to unfavorable price realization resulting from competitive market conditions and lower sales volume.  The decline was mostly offset by the favorable impact of restructuring and cost reduction actions, lower short-term incentive compensation expense and improved material costs.

    
    RESOURCE INDUSTRIES
 
    (Millions of dollars)
    Sales Comparison
                  Third               Price               Third                
                  Quarter   Sales     Real                Quarter      $         % 
                  2015      Volume    ization  Currency   2016         Change    Change
    Sales
    Comparison1   $1,842    ($439)    ($29)         $3     $1,377      ($465)    (25) %
 
    Sales by Geographic
    Region
 
                 Third      Third                     
                 Quarter    Quarter   $         % 
                 2016       2015      Change    Change
    North
    America         $454      $702    ($248)      (35)  %
    Latin
    America          254       312      (58)      (19)  %
    EAME             303       429     (126)      (29)  %
    Asia/Pacific     366       399      (33)       (8)  %
    Total1        $1,377    $1,842    ($465)      (25)  %
 
    Operating Profit (Loss)
 
                 Third            Third          $        %
                 Quarter 2016     Quarter 2015   Change   Change
    Operating
    Profit
    (Loss)            ($77)            ($42)     ($35)    (83)  %
 
    1 Does not include inter-segment sales of $69 million and $88 million in third quarter 2016
    and 2015, respectively.

Resource Industries' sales were $1.377 billion in the third quarter of 2016, a decrease of $465 million, or 25 percent, from the third quarter of 2015.  The decline was primarily due to lower sales volume.  While sales for both new equipment and aftermarket parts declined, nearly all of the decrease was for new equipment.  Part sales have increased sequentially in each of the last two quarters.

The sales decrease was primarily due to lower end-user demand across all regions.  While commodity prices have improved from their recent lows, it is not clear at this time if the current prices are sufficient to drive increased demand for new equipment.  Mining customers continued to focus on improving productivity in existing mines and reducing their total capital expenditures, as they have for several years.  In addition, sales of large construction equipment, including articulated trucks, are lower primarily in North America.  As a result, sales and new orders in Resource Industries continue to be weak.

Resource Industries incurred a loss of $77 million in the third quarter of 2016, compared with a loss of $42 million in the third quarter of 2015.  The unfavorable change was due to lower sales volume and unfavorable price realization, partially offset by the impact of restructuring and cost reduction actions, lower short-term incentive compensation expense and improved material costs.

    
    ENERGY & TRANSPORTATION
 
    (Millions 
    of dollars)
    Sales 
    Comparison 
                   Third              Price                Third                 
                   Quarter   Sales    Real      Currency   Quarter    $       % 
                   2015      Volume   ization              2016       Change  Change 
    Sales
    Comparison 1   $4,352   ($777)     ($19)       ($22)   $3,534     ($818)   (19) %
 
    Sales by Geographic
    Region
 
                  Third      Third                         
                  Quarter    Quarter     $         % 
                  2016       2015        Change    Change
    North
    America       $1,583      $1,858      ($275)     (15) %
    Latin
    America          280         371        (91)     (25) %
    EAME           1,094       1,326       (232)     (17) %
    Asia/Pacific     577         797       (220)     (28) %
    Total1        $3,534      $4,352      ($818)     (19) %
 
    Operating
    Profit
 
                 Third           Third                       
                 Quarter         Quarter    $        %  
                  2016            2015       Change   Change
    Operating
     Profit         $572            $683     ($111)   (16) %
 
    1 Does not include inter-segment sales of $629 million and $702 million in third quarter
    2016 and 2015, respectively.

Energy & Transportation's sales were $3.534 billion in the third quarter of 2016, a decrease of $818 million, or 19 percent, from the third quarter of 2015.  The decrease was primarily the result of lower sales volume across all applications.

Energy & Transportation's profit was $572 million in the third quarter of 2016, compared with $683 million in the third quarter of 2015.  The decline was primarily due to a decrease in sales volume, partially offset by the impact of restructuring and cost reduction actions, improved material costs and a favorable impact of cost absorption as inventory decreased in the third quarter of 2015 and was about flat in the third quarter of 2016.

    
    FINANCIAL PRODUCTS SEGMENT
 
    (Millions of dollars)
    Revenues by Geographic Region
                     Third         Third             
                     Quarter       Quarter   $        % 
                     2016          2015      Change   Change 
    North America       $466          $453      $13        3 %
    Latin America         84            91       (7)     (8) %
    EAME                 101           101        -        - %
    Asia/Pacific          98           107       (9)     (8) %
    Total               $749          $752      ($3)       - %
 
    Operating Profit
 
                     Third       Third                 
                     Quarter     Quarter    $          %
                     2016        2015       Change     Change 
    Operating Profit    $183        $207     ($24)     (12) %
 

Financial Products' revenues were $749 million in the third quarter of 2016, a decrease of $3 million, from the third quarter of 2015.  Unfavorable impacts from returned or repossessed equipment, primarily in North America, and lower average earning assets in Latin America and Asia/Pacific were about offset by higher average financing rates, primarily in North America.

Financial Products' profit was $183 million in the third quarter of 2016, compared with $207 million in the third quarter of 2015.  The decrease was primarily due to lower gains on sales of securities at Insurance Services in the third quarter of 2016, compared to the third quarter of 2015.

At the end of the third quarter of 2016, past dues at Cat Financial were 2.77 percent, compared with 2.68 percent at the end of the third quarter of 2015.  Write-offs, net of recoveries, were $29 million for the third quarter of 2016, compared with $69 million for the third quarter of 2015.

As of September 30, 2016, Cat Financial's allowance for credit losses totaled $346 million, or 1.28 percent of net finance receivables, compared with $348 million, or 1.26 percent of net finance receivables at September 30, 2015.  The allowance for credit losses at year-end 2015 was $338 million, or 1.22 percent of net finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $445 million in the third quarter of 2016, an increase of $241 million from the third quarter of 2015.  Corporate items and eliminations include: corporate-level expenses; restructuring costs; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences for ME&T, as segment profit is reported using annual fixed exchange rates; cost of sales methodology differences as segments use a current cost methodology; and inter-segment eliminations.

The increase in expense from the third quarter of 2015 was primarily due to a $226 million increase in restructuring costs.

QUESTIONS AND ANSWERS

    
         Price realization was lower in the third quarter of 2016, compared with the third
         quarter of 2015, especially in Construction Industries. What do you expect for
    Q1:  the remainder of the year?
 
         While we expect to see a competitive pricing environment in the fourth quarter,
         driven by excess industry capacity and an overall weak economic environment, we
         are not expecting further deterioration from third-quarter levels in the fourth
    A:   quarter.
 
         Could you summarize the status of the restructuring actions announced on
    Q2:  September 24, 2015?
 
         On September 24, 2015, Caterpillar announced a significant restructuring and cost
         reduction initiative, with actions expected through 2018. It included plans to
         lower operating costs by about $1.5 billion annually once fully implemented,
         reduce the workforce by more than 10,000 people, consolidate or close more than
    A:   20 facilities and decrease manufacturing square footage by more than 10 percent.
 
         With our most recent restructuring and consolidation announcements, all
         significant actions included in the September 2015 announcement have been made
         public. Since September 2015, the company has announced the closure,
         consolidation or contemplated closure of nearly 30 facilities around the world,
         which would eliminate more than 11 percent of manufacturing square footage.
         Additionally, the company has reduced the global workforce by about 14,000, which
         resulted from a combination of restructuring actions and lower volume.
 
         Through the first nine months of 2016, we reduced period costs, primarily period
         cost of sales and SG&A expense, by approximately $1.2 billion, compared with the
         first nine months of 2015. About $330 million of the decrease was a result of
         lower short-term incentive compensation expense. The remaining decrease of about
         $880 million was a result of ongoing restructuring and cost reduction actions,
         including those announced on September 24, 2015.
 
         Have you announced restructuring actions this year that were not related to your
    Q3:  September 2015 announcement?
 
         Yes. The ongoing weakness in many key end markets Caterpillar serves has resulted
         in more aggressive cost reduction and restructuring actions than we anticipated
         in our announcement last September. Over the past year, the company has taken
         additional restructuring actions, including ending production of on-highway
         vocational trucks and track drills; pursuing strategic alternatives, including a
         possible divestiture of room and pillar products; and consolidating two product
         development divisions within Resource Industries. Additional actions could still
         be taken as Caterpillar continues to align its cost structure with the economic
    A:   conditions in its industries.
 
         Restructuring costs for 2016 are expected to be about $800 million, an increase
         from our expectation of $700 million during the second quarter of 2016. The
         increase is primarily due to asset write downs recognized in the third quarter
         resulting from additional restructuring actions in Resource Industries.
 
    Q4:  Can you discuss changes in dealer inventories during 2016?
 
         Changes in dealer inventories had a negative impact on sales in both the third
         quarter of 2016 and the third quarter of 2015. Dealer machine and engine
         inventories decreased about $700 million in the third quarter of 2016 and about
    A:   $600 million in the third quarter of 2015.
 
         During the first nine months of 2016, dealer machine and engine inventories
         decreased about $800 million. We expect dealers will make substantial inventory
         reductions during the fourth quarter, resulting in lower year-end inventories in
         2016, compared to 2015.
 
    Q5:  Can you discuss changes to your order backlog?
 
         At the end of the third quarter of 2016, the order backlog was $11.6 billion, a
         reduction of about $150 million from the end of the second quarter of 2016, with
         no significant changes in any segment. Compared to the third quarter of 2015, the
    A:   order backlog has declined about $2.1 billion with decreases in all segments.
 
         Can you comment on expense related to your 2016 short-term incentive compensation
    Q6:  plans?
 
         Short-term incentive compensation expense is directly related to financial and
         operational performance, measured against targets set annually. As a result of
         lowering the 2016 profit outlook, we expect full-year incentive compensation
         expense to be lower than our second-quarter estimate. As a result, no short-term
         incentive compensation expense was recognized in the third quarter of 2016.
         Third-quarter 2015 expense was about $120 million. Through the first nine months,
    A:   2016 short-term incentive compensation expense was about $200 million.
 
         For 2016, our outlook includes short-term incentive compensation expense of about
         $265 million. Full-year 2015 short-term incentive compensation expense was about
         $585 million.
 
    Q7:  Can you give us an update on how Cat Financial is performing?
 
         Cat Financial's portfolio continues to perform well overall despite ongoing
         weakness in many key end markets. Third-quarter 2016 past dues were 2.77 percent,
         compared with 2.68 percent in the third quarter of 2015, with current past dues
         remaining lower than historical averages. Write-offs in the third quarter of 2016
         were $29 million, or 0.44 percent of the average retail portfolio, compared with
         $69 million, or 1.04 percent of the average retail portfolio in third quarter of
         2015, and slightly below historical averages for the third quarter. We believe
         customer risk exposure is well managed, with a broad distribution of portfolio
         exposure across a global customer base. Cat Financial continues to work closely
         with its customers to provide financing support for new Caterpillar product
    A:   purchases and to actively monitor global portfolio health.
 
    Q8:  Can you comment on your balance sheet and cash priorities?
 
         The ME&T debt-to-capital ratio was 37.1 percent at the end of the third quarter
         of 2016, compared with 39.0 percent at the end of the second quarter. Our cash
         and liquidity positions remain strong with an enterprise cash balance of $6.1
         billion as of September 30, 2016. ME&T operating cash flow for the third quarter
         of 2016 was $400 million, compared with $766 million in the third quarter of
         2015. For 2016, we expect ME&T operating cash flow to exceed dividends and
         capital expenditures. Our cash deployment priorities are unchanged, and we remain
    A:   focused on the continued strength of our balance sheet.
 
         Do you expect 2017 funding for your pension and OPEB plans to increase
    Q9:  substantially from 2016?
 
         Through September 2016, we have contributed about $270 million to our pension and
         OPEB plans and we expect full-year contributions of about $350 million. We expect
    A:   full-year contributions in 2017 to be about $550 million.
 
         Can you provide more information on the accounting change you made for pension
    Q10: and OPEB plans and the potential impact on 2016?
 
         Effective January 1, 2016, we made a change in accounting principle related to
         pension and OPEB plans. The expense recognized is essentially split into two
         components. The first component, annual benefits earned by employees along with
         interest cost on the liability and an expected return on plan assets, is
         recognized throughout the year. We consider this "ongoing" pension and OPEB
         expense. In the fourth quarter, we will recognize the second component, a
         mark-to-market adjustment, to reflect changes occurring during the year.
         Generally, changes in interest rates have the most significant impact on the
         mark-to-market adjustment. In years when interest rates drop, the present value
         of future benefit payments is higher and we incur a loss. In years when interest
         rates increase, the present value decreases and we incur a gain. The impact of
         changing interest rates can be volatile to earnings; however our pension and OPEB
         obligations will be paid through many years in the future and actual cash
         payments are expected to be relatively stable. Differences in actual versus
         expected investment performance of plan assets and changes in other economic and
    A:   demographic factors also impact the adjustment.
 
         While this year's impact could change significantly over the next quarter, based
         on interest rates (which are lower than year-end 2015) and investment returns as
         of the end of the third quarter, the year-end impact would be negative to profit
         after tax by approximately $2 billion or $3.50 per share. This adjustment will
         have no impact on 2016 cash flow, our pension funding obligations or benefits
         paid to plan participants.

GLOSSARY OF TERMS

    
        All Other Segments - Primarily includes activities such as: the business strategy,
        product management, development, and manufacturing of filters and fluids,
        undercarriage, tires and rims, ground engaging tools, fluid transfer products,
        precision seals and rubber, and sealing and connecting components primarily for
        Cat(R) products; parts distribution; distribution services responsible for dealer
        development and administration including a wholly owned dealer in Japan, dealer
        portfolio management and ensuring the most efficient and effective distribution of
        machines, engines and parts; digital investments for new customer and dealer
        solutions that integrate data analytics with state-of-the art digital technologies
    1.  while transforming the buying experience.
 
        Consolidating Adjustments - Elimination of transactions between Machinery, Energy
    2.  & Transportation and Financial Products.
 
        Construction Industries - A segment primarily responsible for supporting customers
        using machinery in infrastructure, forestry and building construction
        applications. Responsibilities include business strategy, product design, product
        management and development, manufacturing, marketing and sales and product
        support. The product portfolio includes backhoe loaders, small wheel loaders,
        small track-type tractors, skid steer loaders, multi-terrain loaders, mini
        excavators, compact wheel loaders, telehandlers, select work tools, small, medium
        and large track excavators, wheel excavators, medium wheel loaders, compact track
        loaders, medium track-type tractors, track-type loaders, motor graders,
    3.  pipelayers, forestry and paving products.
 
        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 impact on
        sales and operating profit for the Machinery, Energy & Transportation 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 (hedging) and the net effect of changes in foreign
        currency exchange rates on our foreign currency assets and liabilities for
    4.  consolidated results (translation).
 
        Debt-to-Capital Ratio - A key measure of Machinery, Energy & Transportation's
        financial strength used by management. The metric is defined as Machinery, Energy
        & Transportation's short-term borrowings, long-term debt due within one year and
        long-term debt due after one year (debt) divided by the sum of Machinery, Energy &
        Transportation's debt and stockholders' equity. Debt also includes Machinery,
    5.  Energy & Transportation's long-term borrowings from Financial Products.
 
        EAME - A geographic region including Europe, Africa, the Middle East and the
    6.  Commonwealth of Independent States (CIS).
 
        Earning Assets - Assets consisting primarily of total finance receivables net of
        unearned income, plus equipment on operating leases, less accumulated depreciation
    7.  at Cat Financial.
 
        Energy & Transportation - A segment primarily responsible for supporting customers
        using reciprocating engines, turbines, diesel-electric locomotives and related
        parts across industries serving power generation, industrial, oil and gas and
        transportation applications, including marine and rail-related businesses.
        Responsibilities include business strategy, product design, product management and
        development, manufacturing, marketing and sales and product support of turbines
        and turbine-related services, reciprocating engine powered generator sets,
        integrated systems used in the electric power generation industry, reciprocating
        engines and integrated systems and solutions for the marine and oil and gas
        industries; reciprocating engines supplied to the industrial industry as well as
        Cat machinery; the remanufacturing of Cat engines and components and
        remanufacturing services for other companies; the business strategy, product
        design, product management and development, manufacturing, remanufacturing,
        leasing and service of diesel-electric locomotives and components and other
        rail-related products and services and product support of on-highway vocational
    8.  trucks for North America.
 
        Financial Products Segment - Provides financing to customers and dealers for the
        purchase and lease of Cat and other equipment, as well as some financing for
        Caterpillar sales to dealers. Financing plans include operating and finance
        leases, installment sale contracts, working capital loans and wholesale financing
        plans. The segment also provides various forms of insurance to customers and
        dealers to help support the purchase and lease of our equipment. Financial
        Products segment profit is determined on a pretax basis and includes other
    9.  income/expense items.
 
        Latin America - A geographic region including Central and South American countries
    10. and Mexico.
 
        Lean Management - A holistic management system that uses a sequential cadence of
        principles to drive the highest quality and lowest total cost to achieve customer
    11. requirements.
 
        Machinery, Energy & Transportation (ME&T) - Represents the aggregate total of
        Construction Industries, Resource Industries, Energy & Transportation and All
    12. Other Segments and related corporate items and eliminations.
 
        Machinery, Energy & Transportation Other Operating (Income) Expenses - Comprised
        primarily of gains/losses on disposal of long-lived assets, gains/losses on
        divestitures and legal settlements and accruals. Restructuring costs classified as
        other operating expenses on the Results of Operations are presented separately on
    13. the Operating Profit Comparison.
 
        Operating Profit Pull Through - A key metric used by management to measure the
        rate of operating profit change relative to the change in sales and revenues. The
        metric is defined as the change in operating profit divided by the change in sales
        and revenues. Excludes restructuring costs and mark-to-market gains or losses
    14. resulting from pension and OPEB plan remeasurements.
 
        Pension and other postemployment benefit (OPEB) costs - The company's defined
    15. benefit pension and postretirement benefit plans.
 
        Period Costs - Includes period manufacturing costs, ME&T selling, general and
        administrative (SG&A) and research and development (R&D) expenses excluding the
        impact of currency and exit related costs that are included in restructuring costs
        (see definition below). 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. SG&A and R&D costs are not
        linked to the production of goods or services and include marketing, legal and
        financial services and the development of new and significant improvements in
    16. products or processes.
 
        Price Realization - The impact of net price changes excluding currency and new
        product introductions. Price realization includes geographic mix of sales, which
        is the impact of changes in the relative weighting of sales prices between
    17. geographic regions.
 
        Resource Industries - A segment primarily responsible for supporting customers
        using machinery in mining, quarry, waste, and material handling applications.
        Responsibilities include business strategy, product design, product management and
        development, manufacturing, marketing and sales and product support. The product
        portfolio includes large track-type tractors, large mining trucks, hard rock
        vehicles, longwall miners, electric rope shovels, draglines, hydraulic shovels,
        track and rotary drills, highwall miners, large wheel loaders, off-highway trucks,
        articulated trucks, wheel tractor scrapers, wheel dozers, landfill compactors,
        soil compactors, material handlers, continuous miners, scoops and haulers,
        hardrock continuous mining systems, select work tools, machinery components and
        electronics and control systems. In addition to equipment, Resource Industries
        also develops and sells technology to provide customers fleet management systems,
        equipment management analytics and autonomous machine capabilities. Resource
        Industries also manages areas that provide services to other parts of the company,
    18. including integrated manufacturing and research and development.
 
        Restructuring Costs - Primarily costs for employee separation costs, long-lived
        asset impairments and contract terminations. These costs are included in Other
        Operating (Income) Expenses. Restructuring costs also include other exit-related
        costs primarily for accelerated depreciation and equipment relocation (primarily
        included in Cost of goods sold) and sales discounts and payments to dealers and
    19. customers related to discontinued products (included in Sales of ME&T).
 
        Sales Volume - With respect to sales and revenues, sales volume represents the
        impact of changes in the quantities sold for Machinery, Energy & Transportation as
        well as the incremental revenue impact of new product introductions, including
        emissions-related product updates. With respect to operating profit, sales volume
        represents the impact of changes in the quantities sold for Machinery, Energy &
        Transportation combined with product mix as well as the net operating profit
        impact of new product introductions, including emissions-related product updates.
        Product mix represents the net operating profit impact of changes in the relative
    20. weighting of Machinery, Energy & Transportation sales with respect to total sales.
 
        Variable Manufacturing Costs - Represents volume-adjusted costs excluding the
        impact of currency. 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
    21. process.

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.  The non-GAAP financial measures we use 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 substituted for the related GAAP measure.        

Profit Per Share Excluding Restructuring Costs

We incurred restructuring costs in 2015 and in the first three quarters of 2016 and expect to incur additional restructuring costs in the fourth quarter of 2016.  We believe it is important to separately quantify the profit per share impact of restructuring costs in order for our results and outlook to be meaningful to our readers as these costs are incurred in the current year to generate longer-term benefits.  We have also provided 2015 profit per share excluding restructuring costs comparable to the 2016 presentation.  Reconciliation of profit per share excluding restructuring costs to the most directly comparable GAAP measure, diluted profit per share, are as follows:

     
  
                                           Third Quarter         2016 Outlook 
                                         2015        2016    Previous 1      Current 2
    Profit per share                    $0.94       $0.48       $2.75           $2.35
    Per share restructuring costs[3]    $0.11       $0.37       $0.80           $0.90
    Profit per share 
    excluding restructuring costs       $1.05       $0.85       $3.55           $3.25
 
    
    1 2016 Sales and Revenues Outlook in a range of $40.0-40.5
    billion (as of July 26, 2016). Profit per share at
    midpoint.
    2 2016 current outlook as of October 25, 2016. Sales and Revenues Outlook
    of about $39 billion.
    1-2 2016 Outlook does not include any impact from mark-to-market gains or
    losses resulting from pension and OPEB plan remeasurements. See Q&A #10 on
    page 15 for further discussion.
    3 At statutory tax rates.

Machinery, Energy & Transportation

Caterpillar defines Machinery, Energy & Transportation as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.  Machinery, Energy & Transportation 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 20-28 reconcile Machinery, Energy & Transportation with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.

Caterpillar's latest financial results and outlook are also available via:

    
    Telephone: 800-228-7717 (Inside the United States and Canada)
               858-764-9492 (Outside the United States and Canada)
    Internet:
               www.caterpillar.com/en/investors.html
               www.caterpillar.com/en/investors/quarterly-results.html (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                       Nine Months Ended
                                           September 30,               September 30,
                                           2016          2015          2016          2015
    Sales and revenues:
                 Sales of 
                 Machinery,                                                 
                 Energy & 
                 Transportation          $ 8,463       $ 10,285      $ 26,888      $ 33,829
                 Revenues of Financial
                 Products                    697            677         2,075         2,152                                                            
                 Total sales and revenues  9,160         10,962        28,963        35,981
 
    Operating costs: 
                                                                                 
                 Cost of goods sold        6,527          7,872        20,768        25,306
                 Selling, general and
                 administrative expenses     992          1,129         3,203         3,696
                 Research and development
                 expenses                    453            513         1,429         1,547
                 Interest expense of
                 Financial Products          147            142           447           440
                 Other operating (income)
                 expenses                    560            381         1,356         1,032 
                                                                                      
                 Total operating costs     8,679         10,037        27,203        32,021
 
    Operating profit                         481            925         1,760         3,960
 
                 Interest expense
                 excluding Financial
                 Products                    126            127           385           381
                 Other income (expense)       28            (15)          112           107
 
    Consolidated profit before taxes         383            783         1,487         3,686
 
                 Provision (benefit) for
                 income taxes                 96            218           372         1,074
                 Profit of consolidated
                 companies                   287            565         1,115         2,612
 
                 Equity in profit (loss)
                 of unconsolidated
                 affiliated companies        (4)            (3)           (7)             1
 
    Profit of consolidated and
    affiliated companies                     283            562         1,108         2,613
 
    Less: Profit (loss) attributable to
    noncontrolling interests                   -              3             4             7
 
    Profit 1                               $ 283         $  559       $ 1,104       $ 2,606
 
    Profit per common share                $ 0.48        $ 0.95        $ 1.89        $ 4.36
 
    Profit per common share - diluted 2    $ 0.48        $ 0.94        $ 1.88        $ 4.30
 
    Weighted-average common shares
    outstanding (millions)
                              - Basic       584.7         588.4         583.8         597.9
                              - Diluted 2   589.6         594.8         588.7         605.3
 
    Cash dividends declared per common
    share                                  $    -        $    -        $ 1.54        $ 1.47
 
    
    1 Profit attributable to common stockholders.
      Diluted by assumed exercise of stock-based compensation awards using the
    2 treasury stock method.


 

    
    Caterpillar Inc.
    Condensed Consolidated Statement of Financial Position
    (Unaudited)
    (Millions of dollars)
                                         September 30,               December 31,
                                         2016                        2015
    Assets
                Current assets:
                       Cash and
                       short-term                                          
                       investments       $     6,113                 $     6,460
                       Receivables -                                        
                       trade and other         5,797                       6,695
                       Receivables -                                       
                       finance                 8,719                       8,991
                       Prepaid
                       expenses and
                       other current                                       
                       assets                  1,892                       1,662
                                                                           9,70
                       Inventories             9,478                       9,700 
                                                                          
                Total current assets          31,999                      33,508
 
                Property, plant and                                   
                equipment - net               15,680                      16,090
                Long-term receivables                                      
                - trade and other              1,102                       1,170
                Long-term receivables                                
                - finance                     13,835                      13,651
                Noncurrent deferred
                and refundable income                                     
                taxes                          2,579                       2,489 
                                                                           
                Intangible assets              2,453                       2,821 
                                                                           
                Goodwill                       6,725                       6,615 
                                                                            
                Other assets                   2,029                       1,998 
                                                                     
    Total assets                         $    76,402                 $    78,342
 
    Liabilities
                Current liabilities:
                       Short-term
                       borrowings: 
                               -- 
                               Machinery, 
                               Energy & 
                               Transpor 
                               tation    $       263                 $         9 
                               -- 
                               Financial                                                    
                               Products        6,702                       6,958
                       Accounts                                           
                       payable                 4,713                       5,023
                       Accrued                                           
                       expenses                3,022                       3,116
                       Accrued wages,
                       salaries and
                       employee                                           
                       benefits                1,286                       1,994
                       Customer                                            
                       advances                1,161                       1,146
                       Dividends
                       payable                     -                         448
                       Other current                                      
                       liabilities             1,620                       1,671
                       Long-term debt
                       due within one
                       year:
                               --
                               Machinery,
                               Energy &
                               Transpor
                               tation            553                         517
                               --
                               Financial                                          
                               Products        5,970                       5,360
                Total current                                              
                liabilities                   25,290                      26,242
 
                Long-term debt due
                after one year:
                               --
                               Machinery,
                               Energy &
                               Transpor                                    
                               tation          8,432                       8,960
                               --
                               Financial                                            
                               Products       15,190                      16,209
                Liability for
                postemployment                                            
                benefits                       8,499                       8,843 
                                                                          
                Other liabilities              3,276                       3,203 
                                                                    
    Total liabilities                         60,687                      63,457
 
    Stockholders' equity 
                                                                          
                Common stock                   5,266                       5,238 
                                                                        
                Treasury stock               (17,544)                    (17,640)
                Profit employed in                                    
                the business                  29,450                      29,246
                Accumulated other
                comprehensive income                                 
                (loss)                        (1,527)                     (2,035)
                Noncontrolling
                interests                         70                          76 
                                                                     
    Total stockholders' equity                15,715                      14,885
    Total liabilities and                                             
    stockholders' equity                $     76,402                  $   78,342
 


 

    
    Caterpillar Inc.
    Condensed Consolidated Statement of Cash Flow
    (Unaudited)
    (Millions of dollars)
                                      Nine Months Ended
                                      September 30,
                                      2016                          2015
    Cash flow from operating
    activities:
           Profit of consolidated
           and affiliated companies   $     1,108               $     2,613
           Adjustments for non-cash
           items:
                       Depreciation
                       and
                       amortization         2,255                     2,272
                       Other                  640                       323
           Changes in assets and
           liabilities, net of
           acquisitions and
           divestitures:
                       Receivables -
                       trade and
                       other                1,128                       614
                       Inventories            331                       840
                       Accounts
                       payable               (163)                     (893)
                       Accrued
                       expenses              (153)                      (25)
                       Accrued
                       wages,
                       salaries and
                       employee
                       benefits              (727)                     (704)
                       Customer
                       advances               (24)                      (36)
                       Other assets
                       - net                 (141)                       96
                       Other
                       liabilities -
                       net                   (291)                      (236)
    Net cash provided by (used
    for) operating activities               3,963                     4,864
    Cash flow from investing
    activities:
           Capital expenditures -
           excluding equipment
           leased to others                  (807)                      (946)
           Expenditures for
           equipment leased to                                      
           others                          (1,393)                    (1,251)           
           Proceeds from disposals
           of leased assets and
           property, plant and
           equipment                          572                        473
           Additions to finance                                     
           receivables                     (6,911)                    (7,099)
           Collections of finance
           receivables                      6,968                      6,849
           Proceeds from sale of
           finance receivables                 55                        101
           Investments and
           acquisitions (net of
           cash acquired)                     (72)                      (140)
           Proceeds from sale of
           businesses and
           investments (net of cash
           sold)                                -                        174
           Proceeds from sale of
           securities                         304                        238
           Investments in
           securities                        (339)                      (296)
           Other - net                          5                        (76)
    Net cash provided by (used                                       
    for) investing activities              (1,618)                    (1,973)
    Cash flow from financing
    activities: 
                                                                     
           Dividends paid                  (1,348)                     (1,309)
           Distribution to
           noncontrolling interests            (8)                         (7)
           Common stock issued,
           including treasury
           shares reissued                    (54)                          34
           Treasury shares                                               
           purchased                             -                      (2,025)
           Excess tax benefit from
           stock-based compensation             12                          20
           Proceeds from debt
           issued (original
           maturities greater than
           three months)                     4,430                       4,082
           Payments on debt
           (original maturities
           greater than three                                           
           months)                          (5,602)                      (6,772)
           Short-term borrowings -
           net (original maturities
           three months or less)              (111)                       1,922
    Net cash provided by (used                                     
    for) financing activities               (2,681)                      (4,055)
    Effect of exchange rate
    changes on cash                            (11)                        (131)
    Increase (decrease) in cash                                          
    and short-term investments                (347)                      (1,295)
    Cash and short-term
    investments at beginning of
    period                                   6,460                        7,341
    Cash and short-term
    investments at end of period     $       6,113                   $    6,046
    
 
    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, 2016
    (Unaudited)
    (Millions of dollars) 
                                     Supplemental Consolidating Data 
                                     Machinery, 
                                     Energy &              Financial         Consolidating 
                      Consolidated   Transportation [1]     Products         Adjustments
    Sales and
    revenues:
           Sales of
           Machinery
           , Energy
           &
           Transport                    
           ation      $  8,463        $        8,463       $       -          $      -
           Revenues
           of
           Financial
           Products        697                     -              768               (71)  2 
           Total
           sales and                    
           revenues      9,160                 8,463              768               (71)
 
    Operating
    costs:
           Cost of
           goods                         
           sold         6,527                  6,528                -                (1)  3 
           Selling,
           general
           and
           administr
           ative
           expenses       992                    858              138                (4)  3 
           Research
           and
           developme
           nt
           expenses       453                    453                -                  -
           Interest
           expense
           of
           Financial 
           Products       147                      -               151               (4)  4 
           Other
           operating
           (income)
           expenses       560                    258               308               (6)  3 
           Total
           operating                     
           costs        8,679                  8,097               597               (15)
 
    Operating
    profit                481                    366               171               (56)
 
           Interest
           expense
           excluding
           Financial
           Products       126                    139                 -               (13) 4 
           Other
           income
           (expense)       28                    (25)               10                43  5 
  
    Consolidated
    profit before
    taxes                 383                    202               181                 -
 
           Provision
           (benefit)
           for
           income
           taxes           96                     36                60                 -
           Profit of 
           consolida
           ted
           companies      287                    166               121                  -
 
           Equity in
           profit
           (loss) of
           unconsoli
           dated
           affiliate
           d
           companies       (4)                    (4)                 -                 -
           Equity in
           profit of
           Financial
           Products'
           subsidiar
           ies              -                    120                  -             (120) 6 
  
    Profit of
    consolidated
    and affiliated
    companies             283                    282                  121           (120)
 
    Less: Profit
    (loss)
    attributable to
    noncontrolling
    interests               -                     (1)                  1               -
 
    Profit 7         $    283          $         283        $        120      $    (120)
    
 
      Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted
    1 for on the equity basis.
      Elimination of Financial Products' revenues earned from Machinery, Energy &
    2 Transportation.
      Elimination of net expenses recorded by Machinery, Energy & Transportation paid to
    3 Financial Products.
      Elimination of interest expense recorded between Financial Products and Machinery,
    4 Energy & Transportation.
      Elimination of discount recorded by Machinery, Energy & Transportation on
      receivables sold to Financial Products and of interest earned between Machinery,
    5 Energy & Transportation and Financial Products.
    6 Elimination of Financial Products' profit due to equity method of accounting.
    7 Profit attributable to common stockholders.
    
    Caterpillar Inc.
    Supplemental Data for Results of Operations
    For the Three Months Ended September 30, 2015
    (Unaudited)
    (Millions of dollars)
                                        Supplemental Consolidating Data
                                        Machinery,
                                        Energy &              Financial         Consolidating 
                     Consolidated       Transportation 1      Products          Adjustments
    Sales and
    revenues:
           Sales of
           Machinery
           , Energy
           &
           Transport                     
            ation      $    10,285       $        10,285       $      -         $     -
           Revenues
           of
           Financial
           Products           677                      -            772             (95) 2 
           Total
           sales and                     
           revenues        10,962                 10,285            772             (95)
 
    Operating
    costs:
           Cost of
           goods                         
           sold             7,872                  7,871              -               1  3 
           Selling,
           general
           and
           administr
           ative                         
           expenses         1,129                  1,015            139             (25)  3 
           Research
           and
           developme
           nt
           expenses           513                    513              -                -
           Interest
           expense
           of
           Financial
           Products           142                      -            144              (2)  4 
           Other
           operating
           (income)
           expenses           381                     84            304              (7)  3 
           Total
           operating                     
           costs           10,037                  9,483            587             (33)
 
    Operating
    profit                    925                    802            185             (62)
 
           Interest
           expense
           excluding
           Financial
           Products           127                    138              -             (11)  4 
           Other
           income
           (expense)          (15)                   (87)            21               51  5 
  
    Consolidated
    profit before
    taxes                     783                    577            206                -
 
           Provision
           (benefit)
           for
           income
           taxes              218                   156              62                -
           Profit of
           consolida
           ted
           companies          565                   421             144                -
 
           Equity in
           profit
           (loss) of
           unconsoli
           dated
           affiliate
           d
           companies          (3)                    (3)              -                -
           Equity in
           profit of
           Financial
           Products'
           subsidiar
           ies                 -                    144               -             (144) 6
  
    Profit of
    consolidated
    and affiliated
    companies                562                 562                144             (144)
 
    Less: Profit
    (loss)
    attributable to
    noncontrolling
    interests                  3                   3                  -                 -
 
    Profit 7          $      559            $    559              $ 144           $  (144)
    
 
             Represents Caterpillar Inc. and its subsidiaries with Financial Products
    1        accounted for on the equity basis.
             Elimination of Financial Products' revenues earned from Machinery, Energy &
    2        Transportation.
             Elimination of net expenses recorded by Machinery, Energy & Transportation
    3        paid to Financial Products.
             Elimination of interest expense recorded between Financial Products and
    4        Machinery, Energy & Transportation.
             Elimination of discount recorded by Machinery, Energy & Transportation on
             receivables sold to Financial Products and of
             interest earned between Machinery, Energy & Transportation and Financial
    5        Products.
    6        Elimination of Financial Products' profit due to equity method of accounting.
    7        Profit attributable to common stockholders.
    
    Caterpillar Inc.
    Supplemental Data for Results of Operations
    For the Nine Months Ended September 30, 2016
    (Unaudited)
    (Millions of dollars)
                                       Supplemental Consolidating Data
                                       Machinery,
                                       Energy &              Financial        Consolidating
                      Consolidated     Transportation 1      Products         Adjustments
    Sales and
    revenues:
           Sales of
           Machinery
           , Energy
           &
           Transport                     
           ation      $    26,888      $   26,888            $      -         $      -
           Revenues
           of
           Financial                                         
           Products         2,075               -                2,305             (230) 2
           Total
           sales and                                     
           revenues        28,963          26,888                2,305             (230)
 
    Operating
    costs:
           Cost of
           goods                          
           sold            20,768          20,769                    -               (1) 3
           Selling,
           general
           and
           administr
           ative                        
           expenses         3,203           2,794                  424              (15) 3
           Research
           and
           developme
           nt                            
           expenses         1,429           1,429                    -                 -
           Interest
           expense
           of
           Financial
           Products           447               -                  458               (11) 4
           Other
           operating
           (income)       
           expenses         1,356             462                  914               (20) 3
           Total
           operating                                    
           costs           27,203          25,454                1,796               (47)
 
    Operating                            
    profit                 1,760            1,434                  509              (183)
 
           Interest
           expense
           excluding
           Financial
           Products          385              422                    -               (37) 4
           Other
           income
           (expense)         112              (72)                  38               146  5
 
    Consolidated
    profit before        
    taxes                  1,487              940                  547                  -
 
           Provision
           (benefit)
           for
           income
           taxes             372              198                  174                  -
           Profit of
           consolida
           ted            
           companies       1,115              742                  373                  -
 
           Equity in
           profit
           (loss) of
           unconsoli
           dated
           affiliate
           d
           companies        (7)               (7)                   -                  -
           Equity in
           profit of
           Financial
           Products'
           subsidiar
           ies               -                 369                    -             (369) 6
 
    Profit of
    consolidated
    and affiliated                      
    companies            1,108               1,104                  373               (369)
 
    Less: Profit
    (loss)
    attributable to
    noncontrolling
    interests                4                  -                     4                  - 
  
                                        
    Profit 7         $   1,104            $  1,104             $   369           $    (369)
    
 
             Represents Caterpillar Inc. and its subsidiaries with Financial Products
    1        accounted for on the equity basis.
             Elimination of Financial Products' revenues earned from Machinery, Energy &
    2        Transportation.
             Elimination of net expenses recorded by Machinery, Energy & Transportation
    3        paid to Financial Products.
             Elimination of interest expense recorded between Financial Products and
    4        Machinery, Energy & Transportation.
             Elimination of discount recorded by Machinery, Energy & Transportation on
             receivables sold to Financial Products and of interest earned between
    5        Machinery, Energy & Transportation and Financial Products.
    6        Elimination of Financial Products' profit due to equity method of accounting.
    7        Profit attributable to common stockholders.


 

    
    Caterpillar Inc.
    Supplemental Data for Results of Operations
    For the Nine Months Ended September 30, 2015
    (Unaudited)
    (Millions of dollars)
                                       Supplemental Consolidating Data
                                       Machinery,
                                       Energy &              Financial        Consolidating
                     Consolidated      Transportation 1      Products         Adjustments
    Sales and
    revenues:
           Sales of
           Machinery
           , Energy
           &
           Transport                      
           ation     $   33,829         $     33,829         $       -         $         -
           Revenues
           of
           Financial                                          
            Products       2,152                    -             2,390             (238) 2
           Total
           sales and                                   
           revenues      35,981               33,829             2,390             (238)
 
    Operating
    costs:
           Cost of
           goods                          
            sold          25,306               25,306                 -                  -
           Selling,
           general
           and
           administr
           ative                        
           expenses       3,696                3,269               444              (17) 3
           Research
           and
           developme
           nt                            
           expenses       1,547                1,547                 -                -
           Interest
           expense
           of
           Financial
            Products         440                    -               445               (5) 4
           Other
           operating
           (income)       
           expenses       1,032                  149               903              (20) 3
           Total
           operating                                        
            costs         32,021                30,271            1,792              (42)
 
    Operating                             
     profit                3,960                 3,558              598             (196)
 
           Interest
           expense
           excluding
           Financial
           Products         381                   413                -             (32) 4
           Other
           income
           (expense)        107                   (79)              22             164  5
 
    Consolidated
    profit before                          
     taxes                 3,686                 3,066              620                 -
 
           Provision
           (benefit)
           for
           income         
            taxes          1,074                   885              189                 -
           Profit of
           consolida
           ted                           
            companies      2,612                 2,181              431                 -
 
           Equity in
           profit
           (loss) of
           unconsoli
           dated
           affiliate
           d
           companies         1                      1                -                   -
           Equity in
           profit of
           Financial
           Products'
           subsidiar
            ies               -                    429                -             (429) 6
 
    Profit of
    consolidated
    and affiliated                          
      companies            2,613                   2,611              431            (429)
 
    Less: Profit
    (loss)
    attributable to
    noncontrolling
    interests                7                     5                  2               - 
  
                                         
     Profit 7         $   2,606            $ 2,606               $   429         $   (429)
    
 
             Represents Caterpillar Inc. and its subsidiaries with Financial Products
    1        accounted for on the equity basis.
             Elimination of Financial Products' revenues earned from Machinery, Energy &
    2        Transportation.
             Elimination of net expenses recorded by Machinery, Energy & Transportation
    3        paid to Financial Products.
             Elimination of interest expense recorded between Financial Products and
    4        Machinery, Energy & Transportation.
             Elimination of discount recorded by Machinery, Energy & Transportation on
             receivables sold to Financial Products and of interest earned between
    5        Machinery, Energy & Transportation and Financial Products.
    6        Elimination of Financial Products' profit due to equity method of accounting.
    7        Profit attributable to common stockholders.
    
    Caterpillar Inc.
    Supplemental Data for Cash Flow
    For the Nine Months Ended September 30, 2016
    (Unaudited)
    (Millions of dollars)  
                                                 Supplemental Consolidating Data  
                                            Machinery,  
                                            Energy &           Financial   Consolidating 
                             Consolidated   Transportation 1   Products     Adjustments
    Cash flow from
    operating activities:
        Profit of
        consolidated and
        affiliated
        companies             $     1,108    $    1,104        $    373      $  (369) 2
        Adjustments for
        non-cash items:
               Depreciation
               and
               amortization         2,255         1,591             664              -
               Undistributed 
               profit of
               Financial
               Products                 -          (362)              -          362  3
               Other                  640           503            (11)          148  4
        Changes in assets
        and liabilities,
        net of acquisitions
        and divestitures:
               Receivables -
               trade and
               other                1,128           252             42          834  4,5
               Inventories            331           335              -           (4)   4
               Accounts
               payable               (163)         (130)            16          (49)   4
               Accrued
               expenses              (153)          (93)           (60)           -
               Accrued
               wages,
               salaries and
               employee
               benefits              (727)         (713)           (14)           -
               Customer
               advances               (24)          (24)              -           -
               Other assets
               - net                 (141)         (278)           102           35   4
               Other
               liabilities -
               net                   (291)         (402)           146          (35)  4
    Net cash provided by
    (used for) operating
    activities                      3,963         1,783          1,258          922
    Cash flow from
    investing activities:
        Capital
        expenditures -
        excluding equipment
        leased to others             (807)         (802)             (6)          1   4
        Expenditures for
        equipment leased to                                             
        others                     (1,393)          (56)         (1,377)          40  4
        Proceeds from
        disposals of leased
        assets and
        property, plant and
        equipment                     572            89             510          (27) 4
        Additions to                                                   
          finance receivables        (6,911)            -          (8,888)       1,977  5
        Collections of                                                                          
        finance receivables         6,968             -           9,308       (2,340) 5
        Net intercompany
        purchased
        receivables                     -             -             580         (580) 5
        Proceeds from sale
        of finance
        receivables                   55              -              55             -
        Net intercompany
        borrowings                     -           (716)           (999)        1,715 6
        Investments and
        acquisitions (net
        of cash acquired)            (72)           (72)               -            -
        Proceeds from sale 
        of securities                304             25             279             -
        Investments in
        securities                  (339)           (22)           (317)            -
        Other - net                    5             15             (17)            7  8
    Net cash provided by
    (used for) investing                        
    activities                    (1,618)        (1,539)           (872)          793
    Cash flow from
    financing activities: 
                                                  
        Dividends paid            (1,348)        (1,348)             (7)            7  7
        Distribution to
        noncontrolling
        interests                     (8)            (8)              -             -
        Common stock
        issued, including
        treasury shares
        reissued                     (54)           (54)              7            (7) 8
        Excess tax benefit
        from stock-based
        compensation                  12             12                 -            -
        Net intercompany                                                                         
        borrowings                     -            999               716       (1,715) 6
        Proceeds from debt
        issued (original
        maturities greater
        than three months)         4,430              6             4,424             -
        Payments on debt
        (original
        maturities greater                                             
        than three months)        (5,602)          (525)           (5,077)            -
        Short-term
        borrowings - net
        (original
        maturities three
        months or less)             (111)           254              (365)            -
    Net cash provided by
    (used for) financing                                                                   
    activities                    (2,681)          (664)             (302)       (1,715)
    Effect of exchange
    rate changes on cash             (11)           (26)               15              -
    Increase (decrease) in
    cash and short-term
    investments                     (347)          (446)               99              -
    Cash and short-term
    investments at
    beginning of period            6,460          5,340             1,120              -
    Cash and short-term
    investments at end of
    period                   $     6,113      $   4,894         $   1,219     $        -
 
        Represents Caterpillar Inc. and its subsidiaries with Financial Products
    1   accounted for on the equity basis.
        Elimination of Financial Products' profit after tax due to equity method of
    2   accounting.
        Elimination of non-cash adjustment for the undistributed earnings from Financial
    3   Products.
        Elimination of non-cash adjustments and changes in assets and liabilities related
    4   to consolidated reporting.
        Reclassification of Financial Products' cash flow activity from investing to
    5   operating for receivables that arose from the sale of inventory.
        Elimination of net proceeds and payments to/from Machinery, Energy &
    6   Transportation and Financial Products.
        Elimination of dividend from Financial Products to Machinery, Energy &
    7   Transportation.
        Elimination of change in investment and common stock related to Financial
    8   Products.
 
    
    Caterpillar Inc.
    Supplemental Data for Cash Flow
    For the Nine Months Ended September 30, 2015
    (Unaudited)
    (Millions of dollars)  
                                             Supplemental Consolidating Data  
                                             Machinery,  
                                             Energy &           Financial   Consolidating
                             Consolidated    Transportation 1   Products    Adjustments
    Cash flow from
    operating activities:
        Profit of
        consolidated and
        affiliated
        companies            $      2,613     $       2,611     $    431     $   (429)  2
        Adjustments for
        non-cash items:
               Depreciation
               and
               amortization         2,272             1,608          664             -
               Undistributed
               profit of
               Financial
               Products                -              (179)            -           179  3
               Other                 323               221           (92)          194  4
        Changes in assets
        and liabilities,
        net of acquisitions
        and divestitures:
               Receivables -
               trade and
                other                 614               342           (65)          337  4,5
               Inventories           840               845              -          (5)  4
               Accounts
               payable              (893)             (988)           56            39  4
               Accrued
               expenses              (25)              (41)            3            13  4
               Accrued
               wages,
               salaries and
               employee
               benefits             (704)             (695)          (9)             -
               Customer
               advances              (36)              (36)            -             -
               Other assets
               - net                  96                 1            58            37  4
               Other
               liabilities -
               net                  (236)             (243)           57           (50) 4
    Net cash provided by
    (used for) operating
    activities                     4,864              3,446        1,103           315
    Cash flow from
    investing activities:
        Capital
        expenditures -
        excluding equipment
        leased to others            (946)              (938)         (9)             1  4
        Expenditures for
        equipment leased to                                                  
        others                    (1,251)              (157)     (1,116)            22  4
        Proceeds from
        disposals of leased
        assets and
        property, plant and
        equipment                    473                 51         429             (7) 4
        Additions to                                                        
        finance receivables       (7,099)                 -      (9,434)          2,335 5,8
        Collections of                                                                                
         finance receivables        6,849                  -       9,001          (2,152) 5
        Net intercompany
        purchased
        receivables                    -                  -         758            (758) 5
        Proceeds from sale
        of finance
         receivables                  101                  -         101               -
        Net intercompany
         borrowings                     -                (21)          1              20 6
        Investments and
        acquisitions (net
        of cash acquired)          (140)               (140)          -               -
        Proceeds from sale
        of businesses and
        investments (net of
        cash sold)                  174                 180           -             (6) 8
        Proceeds from sale
         of securities               238                  16          222               -
        Investments in
        securities                 (296)                (20)        (276)              -
        Other - net                 (76)                (34)         (42)              -
    Net cash provided by
    (used for) investing                               
    activities                   (1,973)             (1,063)        (365)          (545)
    Cash flow from
    financing activities: 
                                                  
        Dividends paid           (1,309)             (1,309)        (250)           250 7
        Distribution to
        noncontrolling
        interests                    (7)                 (7)            -             -
        Common stock
        issued, including
        treasury shares
        reissued                     34                  34             -             -
        Treasury shares                         
        purchased                (2,025)             (2,025)            -             -
        Excess tax benefit
        from stock-based
        compensation                 20                  20             -             -
        Net intercompany
        borrowings                    -                  (1)           21           (20) 6
        Proceeds from debt
        issued (original
        maturities greater
        than three months)       4,082                    3         4,079             -
        Payments on debt
        (original
        maturities greater                                                
        than three months)       (6,772)               (513)       (6,259)            -
        Short-term
        borrowings - net
        (original
        maturities three
         months or less)          1,922                    5         1,917             -
    Net cash provided by
    (used for) financing                         
    activities                   (4,055)            (3,793)          (492)          230
    Effect of exchange
    rate changes on cash           (131)               (99)           (32)            -
    Increase (decrease) in
    cash and short-term                           
    investments                  (1,295)            (1,509)           214             -
    Cash and short-term
    investments at
    beginning of period          7,341               6,317          1,024             -
    Cash and short-term
    investments at end of
    period                   $   6,046         $     4,808      $   1,238        $    -
 
    
      Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted
    1 for on the equity basis.
      Elimination of Financial Products' profit after tax due to equity method of
    2 accounting.
      Elimination of non-cash adjustment for the undistributed earnings from Financial
    3 Products.
      Elimination of non-cash adjustments and changes in assets and liabilities related to
    4 consolidated reporting.
      Reclassification of Financial Products' cash flow activity from investing to
    5 operating for receivables that arose from the sale of inventory.
      Elimination of net proceeds and payments to/from Machinery, Energy & Transportation
    6 and Financial Products.
      Elimination of dividend from Financial Products to Machinery, Energy &
    7 Transportation.
      Elimination of proceeds received from Financial Products related to Machinery,
    8 Energy & Transportation's sale of businesses and investments.

#End Wide Release


 

CONTACT:  Rachel Potts, 309-675-6892 (Office), 309-573-3444 (Mobile) or Potts_Rachel_A@cat.com

#End release


 

This is a disclosure announcement from PR Newswire.