Caterpillar Reports Third-Quarter 2017 Results

DEERFIELD, Illinois, October 24, 2017 /PRNewswire/ --

Improving End Markets and Continued Focus on Operational Performance Drive Strong Quarter

    
                                                      Third Quarter   
    ($ in billions except profit per share)       2017              2016   
    Sales and Revenues                           $11.4              $9.2   
    Profit Per Share                             $1.77             $0.48   
    Adjusted Profit Per Share                    $1.95             $0.85

Caterpillar Inc. (NYSE: CAT) today announced third-quarter 2017 sales and revenues of $11.4 billion, compared with $9.2 billion in the third quarter of 2016. Third-quarter 2017 profit per share was $1.77, compared with $0.48 per share in the third quarter of 2016. Excluding restructuring costs, third-quarter 2017 adjusted profit per share was $1.95, compared with third-quarter 2016 adjusted profit per share of $0.85.

Caterpillar's financial position continued to strengthen in the quarter. Machinery, Energy & Transportation (ME&T) operating cash flow was about $600 million during the third quarter, and ME&T's debt-to-capital ratio improved to 36.1 percent, down from 38.6 percent at the end of the second quarter. The company ended the third quarter of 2017 with an enterprise cash balance of $9.6 billion.

"Higher sales volume and our team's focus on cost discipline resulted in improved profit margins across our three primary segments," said Caterpillar CEO Jim Umpleby.

2017 Outlook

Caterpillar continues to see strength in a number of industries and regions, including construction in China, on-shore oil and gas in North America, and increased capital investments by mining customers. We are working with our supply chain to increase production levels to satisfy customer demand for those markets that have improved.

In July 2017, Caterpillar provided an outlook range for full-year 2017 sales and revenues of $42 billion to $44 billion, with a midpoint of $43 billion. The company now expects full-year 2017 sales and revenues of about $44 billion.

For the full year of 2017, Caterpillar now expects profit per share of about $4.60, or adjusted profit per share of about $6.25. The previous outlook for 2017 profit was about $3.50 per share at the midpoint of the sales and revenues outlook, or adjusted profit per share of about $5.00. The company now expects to incur about $1.3 billion of restructuring costs in 2017, a slight increase from the previous outlook of about $1.2 billion. The outlook does not include potential mark-to-market gains or losses related to pension and other postemployment benefit (OPEB) plans. While the final impact will not be known until year end, the impact would be negative to profit based on information as of the end of the third quarter.

"As a result of our team's strong performance, we are raising our 2017 profit outlook," continued Umpleby. "We are executing our new strategy for profitable growth based on operational excellence, expanded offerings and services."

Notes:

About Caterpillar:
For more than 90 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 2016 sales and revenues of $38.537 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 primary 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 speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

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

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison

Third Quarter 2017 vs. Third Quarter 2016

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 3Q 2017 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the third quarter of 2016 (at left) and the third quarter of 2017 (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 $11.413 billion in the third quarter of 2017, an increase of $2.253 billion, or 25 percent, compared with $9.160 billion in the third quarter of 2016. The increase was primarily due to higher sales volume, with about half due to improved end-user demand and about half due to favorable changes in dealer inventories. The improvement in end-user demand was across all regions and most end markets. The favorable change in dealer inventories was primarily due to a decrease during the third quarter of 2016. By segment, the largest sales volume increase was in Construction Industries mostly due to the favorable impact of changes in dealer inventories and higher end-user demand for construction equipment. Sales volume for Resource Industries increased due to the favorable impact of changes in dealer inventories and higher end-user demand for aftermarket parts. Energy & Transportation's sales volume increased due to higher demand across all applications. Favorable price realization, primarily in Construction Industries, also contributed to the sales improvement. Financial Products' revenues were about flat.

Sales increased across all regions with the largest increase in North America. Sales improved 27 percent in North America primarily due to higher end-user demand for both equipment and aftermarket parts, as well as favorable changes in dealer inventories. Dealer inventories decreased during the third quarter of 2016 and were about flat in the third quarter of 2017. Asia/Pacific sales increased 31 percent primarily due to higher end-user demand for construction equipment. About half of the sales improvement in Asia/Pacific was in China resulting from increased building construction and infrastructure investment. EAME sales increased 22 percent primarily due to the favorable impact of changes in dealer inventories as dealers decreased inventories in the third quarter of 2016 and increased dealer inventories in the third quarter of 2017. Sales increased 24 percent in Latin America due to stabilizing economic conditions in several countries in the region that resulted in improved end-user demand from low levels.

Consolidated Operating Profit

Consolidated Operating Profit Comparison

Third Quarter 2017 vs. Third Quarter 2016

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 3Q 2017 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the third quarter of 2016 (at left) and the third quarter of 2017 (at right). Items favorably impacting operating profit appear 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 2017 was $1.577 billion, compared with $481 million in the third quarter of 2016. The increase of $1.096 billion was primarily due to higher sales volume. Favorable price realization, lower restructuring costs and variable manufacturing costs were partially offset by higher period costs. Price realization was favorable, primarily in Construction Industries.

Variable manufacturing costs were lower primarily due to the favorable impact from cost absorption as inventory increased in the third quarter of 2017 due to higher production volumes and was about flat in the third quarter of 2016. Material costs were slightly unfavorable due to increases in steel prices. Period costs were higher primarily due to higher short-term incentive compensation expense. Despite a significant increase in sales volume, period costs excluding short-term incentive compensation expense were about flat.

Restructuring costs were $90 million in the third quarter of 2017, compared with $324 million in the third quarter of 2016.

Other Profit/Loss Items

In addition, a discrete tax benefit of $18 million was recorded for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense.

Excluding restructuring costs, gain on the sale of Caterpillar's equity investment in IronPlanet in the second quarter of 2017, and discrete items, the 2017 estimated annual tax rate is expected to be 29 percent.

Global Workforce

Caterpillar worldwide, full-time employment was about 96,700 at the end of the third quarter of 2017, about flat with the end of the third quarter of 2016. The flexible workforce increased by about 6,500, primarily due to higher production volumes. In total, the global workforce increased by about 6,100. Since the end of the second quarter of 2017, the global workforce increased about 3,700 to support increasing production volumes.

    
                                           September 30
                                                               Increase/
                            2017               2016            (Decrease)
    Full-time employment    96,700            97,100               (400)
    Flexible workforce      18,200            11,700               6,500
    Total                  114,900           108,800               6,100
 
    Geographic Summary
    U.S. workforce          49,700            46,900               2,800
    Non-U.S. workforce      65,200            61,900               3,300
    Total                  114,900           108,800               6,100

SEGMENT RESULTS

     
  
    Sales and Revenues by Geographic Region  
                              %             %             %          %             %
    (Millions of           Cha-  North   Cha-  Latin   Cha-        Cha-   Asia/  Cha-
    dollars)        Total   nge  America  nge  America  nge  EAME   nge  Pacific  nge
    Third
    Quarter 2017
    Construction
    Industries(1)  $4,854   37%  $2,165   31%   $390   36% $1,008   28%  $1,291   57%
    Resource
    Industries(sq
    uared)           1,870   36%     581   28%    329   30%    488   61%     472   29%
    Energy &
    Transportati
    oncubed         3,961   12%   1,928   22%    300    7%  1,166    7%     567  (2)%
    All Other
    Segments⁴         56  100%      30  400%      1    -%     13   160%     12  (29)%
    Corporate
    Items and
    Eliminations     (28)          (25)          (1)          (2)            -
    Machinery,
    Energy &
    Transportati
    on            $10,713  27%   $4,679   27% $1,019   24% $2,673   22% $2,342   31%
 
    Financial
    Products
    Segment          $774   3%     $510    9%    $64  (24)%  $110    9%    $90  (8)%
    Corporate
    Items and
    Eliminations     (74)          (51)          (5)          (4)         (14)
    Financial
    Products
    Revenues        $700   -%      $459    5%    $59   (20)% $106    9%    $76  (14)%
 
    Consolidated
    Sales and
     Revenues     $11,413  25%    $5,138   25% $1,078  20%  $2,779   22% $2,418   29%
 
    Third
    Quarter 2016
    Construction
    Industries
    (1)           $3,554         $1,655         $287         $789         $823
    Resource
    Industries(sq
    uared)         1,377            454          254          303          366
    Energy &
    Transportati
    oncubed        3,534          1,583          280        1,094          577
    All Other
    Segments⁴        28              6            -            5           17
    Corporate
    Items and
    Eliminations    (30)           (26)            -          (3)          (1)
    Machinery,
    Energy &
    Transportati
    on            $8,463         $3,672        $ 821      $ 2,188      $ 1,782
 
    Financial
    Products
    Segment         $749           $466         $ 84        $ 101         $ 98
    Corporate
    Items and
    Eliminations    (52)           (28)         (10)          (4)         (10)
    Financial
    Products
    Revenues        $697           $438          $74         $ 97         $ 88
 
    Consolidated
    Sales and
    Revenues      $9,160         $4,110        $ 895      $ 2,285      $ 1,870
 
    1.Does not include inter-segment sales of $32 million and $27 million in third quarter 
     2017 and 2016, respectively.
    2.Does not include inter-segment sales of $86 million and $69 million in third quarter 
     2017 and 2016, respectively.
    3.Does not include inter-segment sales of $877 million and $629 million in third quarter 
     2017 and 2016, respectively.
    4.Does not include inter-segment sales of $89 million and $95 million in third quarter 
     2017 and 2016, respectively.  
    
 
    Sales and Revenues by Segment 
  
                      Third             Price                      Third       $      %
    (Millions of    Quarter    Sales    Real-                    Quarter
    dollars)           2016   Volume  ization  Currency  Other      2017  Change  Change
    Construction
    Industries      $ 3,554  $ 1,002    $ 291      $ 7    $ -    $ 4,854 $ 1,300   37 %
    Resource
    Industries        1,377      410       73       10      -      1,870     493   36 %
    Energy &
    Transportation    3,534      419     (21)       29      -      3,961     427   12 %
    All Other
    Segments             28       28        -        -      -         56      28  100 %
    Corporate Items
    and
    Eliminations       (30)        2        -        -      -       (28)       2
 
    Machinery,
    Energy &
    Transportation  $ 8,463  $ 1,861    $ 343     $ 46    $ -   $ 10,713  $2,250   27 %
 
    Financial
    Products
    Segment         $   749      $ -       $ -     $ -   $ 25      $ 774    $ 25    3 %
    Corporate Items
    and
    Eliminations       (52)        -         -       -   (22)       (74)    (22)
    Financial
    Products
    Revenues        $   697      $ -       $ -     $ -    $ 3      $ 700     $ 3    0 %
 
    Consolidated
    Sales and
    Revenues        $9,160   $ 1,861     $ 343    $ 46    $ 3   $ 11,413  $2,253   25 %
 
    
 
    Operating Profit
    (Loss) by Segment
                              Third         Third          $            %
    (Millions of dollars)  Quarter 2017  Quarter 2016   Change       Change
    Construction
    Industries                    $ 884         $ 326    $ 558       171 %
    Resource Industries             226          (77)      303       n/a %
    Energy &
    Transportation                  750           572      178        31 %
    All Other Segments                6          (22)       28       n/a %
    Corporate Items and
    Eliminations                  (359)         (433)       74
    Machinery, Energy &
    Transportation              $ 1,507         $ 366  $ 1,141       312 %
    Financial Products
    Segment                       $ 185         $ 183      $ 2         1 %
    Corporate Items and
    Eliminations                   (37)          (12)     (25)
    Financial Products            $ 148         $ 171   $ (23)      (13) %
    Consolidating
    Adjustments                    (78)          (56)     (22)
 
    Consolidated Operating
    Profit                      $ 1,577         $ 481  $ 1,096       228 %
 
    
    CONSTRUCTION INDUSTRIES
 
    (Millions of
    dollars)
    Sales Comparison 
                    Third                                     Third     
                    Quarter  Sales    Price                   Quarter       $       % 
                    2016     Volume   Realization  Currency   2017      Change  Change
 
    Sales
    Comparison(1)    $3,554    $1,002   $291         $7        $4,854    $1,300     37%
 
    Sales by Geographic Region
 
                         Third                Third                $             %
                      Quarter 2017         Quarter 2016         Change        Change
    North America        $2,165              $1,655              $510          31 %
    Latin America           390                 287               103          36 %
    EAME                  1,008                 789               219          28 %
    Asia/Pacific          1,291                 823               468          57 %
    Total1               $4,854              $3,554            $1,300          37 %
 
    Segment
    Profit
                       Third               Third                $                 %
                   Quarter 2017         Quarter 2016         Change          Change
    Segment
    Profit                 $884                $326            $558           171 %
 
    1Does not include inter-segment sales of $32 million and $27 million in third quarter 2017 and 2016, respectively.
 

Construction Industries' sales were $4.854 billion in the third quarter of 2017, compared with $3.554 billion in the third quarter of 2016. The increase was due to higher sales volume and favorable price realization.

Sales increased across all regions with the largest increases in North America and Asia/Pacific.

Construction Industries' profit was $884 million in the third quarter of 2017, compared with $326 million in the third quarter of 2016. The increase in profit was primarily due to higher sales volume and favorable price realization, partially offset by unfavorable period costs. The increase in period costs was due to higher short-term incentive compensation expense.

    
    RESOURCE INDUSTRIES
 
    (Millions of
    dollars)
    Sales Comparison 
                                        Price 
                 Third          Sales   Realiz-             Third          $         %
                 Quarter 2016   Volume  ation    Currency  Quarter 2017  Change   Change
 
    Sales
    Comparison1   $1,377        $410    $73      $10       $1,870        $493      36%
 
    Sales by Geographic
    Region 
  
                 Third            Third            $           %
                 Quarter 2017     Quarter 2016   Change      Change
    North
    America              $581             $454     $127         28 %
    Latin
    America               329              254       75         30 %
    EAME                  488              303      185         61 %
    Asia/Pacific          472              366      106         29 %
    Total1             $1,870           $1,377     $493         36 %
 
    Segment Profit (Loss)
                    Third            Third         $           %
                 Quarter 2017     Quarter 2016   Change      Change
    Segment
    Profit
    (Loss)               $226            ($77)     $303        n/a %
 
    1.Does not include inter-segment sales of $86 million and $69 million in third quarter
    2017 and 2016, respectively.
 

Resource Industries' sales were $1.870 billion in the third quarter of 2017, an increase of $493 million from the third quarter of 2016. The increase was primarily due to the favorable impact of changes in dealer inventories, an increase in end-user demand for aftermarket parts and favorable price realization. Dealer inventories were about flat in the third quarter of 2017, compared with a decrease in the third quarter of 2016. Dealer deliveries for new equipment increased slightly. Increases in certain commodity prices over the past year, along with continued commodity consumption, have resulted in increased mining activity and the need for maintenance and rebuild activities. Although commodity prices have improved, they remain volatile, but are generally above investment threshold prices, which is a positive for end-user demand.

Resource Industries' profit was $226 million in the third quarter of 2017, compared with a loss of $77 million in the third quarter of 2016. The improvement was due to higher sales volume, favorable price realization and lower variable manufacturing costs primarily due to cost absorption. Cost absorption was favorable as inventory increased in the third quarter of 2017 to support higher production volumes and was about flat in the third quarter of 2016. Period costs were about flat as an increase in short-term incentive compensation expense was offset by the favorable impact of restructuring and cost reduction actions.

    
    ENERGY & TRANSPORTATION
 
    (Millions of
    dollars)
    Sales Comparison 
                   Third          Sales   Price                  Third         $       %
                 Quarter 2016   Volume  Realization  Currency  Quarter 2017  Change  Change
 
    Sales
    Comparison1       $3,534      $419     ($21)       $29        $3,961    $427      12%
 
    Sales by Geographic
    Region
 
                    Third           Third               $             %
                    Quarter 2017    Quarter 2016        Change        Change
    North
    America               $1,928          $1,583          $345         22 %
    Latin
    America                  300             280            20          7 %
    EAME                   1,166           1,094            72          7 %
    Asia/Pacific             567             577          (10)        (2) %
    Total1                $3,961          $3,534          $427         12 %
 
    Segment
    Profit
                    Third           Third               $             %
                    Quarter 2017    Quarter 2016        Change        Change
    Segment
    Profit                  $750            $572          $178         31 %
 
    1Does not include inter-segment sales of $877 million and $629 million in third quarter
    2017 and 2016, respectively.
 

Energy & Transportation's sales were $3.961 billion in the third quarter of 2017, compared with $3.534 billion in the third quarter of 2016. The increase was primarily due to higher sales volume across all applications.

Energy & Transportation's profit was $750 million in the third quarter of 2017, compared with $572 million in the third quarter of 2016. The increase was primarily due to higher sales volume and lower variable manufacturing costs, partially offset by higher period costs. Variable manufacturing costs were favorable primarily due to cost absorption as inventory increased in the third quarter of 2017 to support higher production volumes and was about flat in the third quarter of 2016. The increase in period costs was primarily due to higher short-term incentive compensation expense.

    
    FINANCIAL PRODUCTS SEGMENT
 
    (Millions of
    dollars)
    Revenues by Geographic Region
                         Third            Third           $           %
                      Quarter 2017     Quarter 2016    Change      Change
    North America             $510             $466       $44         9 %
    Latin America               64               84      (20)      (24) %
    EAME                       110              101        9          9 %
    Asia/Pacific                90               98       (8)       (8) %
    Total                     $774             $749       $25         3 %
 
    Segment Profit 
                        Third            Third          $            %
                      Quarter 2017     Quarter 2016   Change      Change
    Segment Profit            $185             $183       $2         1 %
 

Financial Products' segment revenues were $774 million in the third quarter of 2017, an increase of $25 million, or 3 percent, from the third quarter of 2016. The increase was primarily due to higher average financing rates in North America and a favorable impact from intercompany lending activity in North America. These favorable impacts were partially offset by lower average earning assets in North America and lower average financing rates in Asia/Pacific.

Financial Products' profit was $185 million in the third quarter of 2017, compared with $183 million in the third quarter of 2016. The increase was primarily due to higher gains on sales of securities at Insurance Services, increased intercompany lending activity and an increase in net yield on average earning assets. These favorable impacts were mostly offset by an increase in the provision for credit losses at Cat Financial and an increase in selling, general and administrative (SG&A) expenses due to higher short-term incentive compensation expense.

At the end of the third quarter of 2017, past dues at Cat Financial were 2.73 percent, compared with 2.77 percent at the end of the third quarter of 2016. Write-offs, net of recoveries, were $47 million for the third quarter of 2017, compared with $29 million for the third quarter of 2016. The increase in write-offs, net of recoveries, was primarily due to the Latin America and marine portfolios.

As of September 30, 2017, Cat Financial's allowance for credit losses totaled $343 million, or 1.27 percent of finance receivables, compared with $346 million, or 1.28 percent of finance receivables as of September 30, 2016. The allowance for credit losses at year-end 2016 was $343 million, or 1.29 percent of finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $396 million in the third quarter of 2017, a decrease of $49 million from the third quarter of 2016. Corporate items and eliminations include: restructuring costs; corporate-level expenses; 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 decrease in expense from the third quarter of 2016 was primarily due to lower restructuring costs, partially offset by methodology differences and higher short-term incentive compensation expense.

QUESTIONS AND ANSWERS

    
        Can you comment on third-quarter restructuring costs and your 2017 outlook for
    Q1: restructuring costs?
 
        Restructuring costs of $90 million in the third quarter of 2017 were primarily
        related to programs in Resource Industries and Energy & Transportation.
        Third-quarter restructuring costs included a LIFO Inventory Decrement Benefit of
    A:  $29 million related to the closure of the facility in Gosselies, Belgium.
 
        We have incurred $1.011 billion of restructuring costs through the first nine
        months of 2017 and expect to incur about $1.3 billion for the full year of 2017,
        an increase from the previous outlook for 2017 restructuring costs of about $1.2
        billion.
 
    Q2: Can you discuss changes in dealer inventories during the third quarter of 2017?
 
        Changes in dealer inventories had a positive impact on sales from the third
        quarter of 2016 to the third quarter of 2017. Dealer machine and engine
        inventories increased about $200 million in the third quarter of 2017, compared
        with a decrease of about $700 million in the third quarter of 2016. During the
        first nine months of 2017, dealer inventories increased about $100 million,
        compared with a decrease of about $800 million during the first nine months of
    A:  2016.
 
    Q3: Can you discuss changes to your order backlog by segment?
 
        At the end of the third quarter of 2017, the order backlog was about $15.4
        billion, an increase of about $600 million from the end of the second quarter of
        2017. Construction Industries' order backlog increased about $500 million,
        Resource Industries' increased about $300 million and Energy & Transportation's
    A:  decreased about $200 million.
 
        Compared with the third quarter of 2016, the order backlog increased about $3.8
        billion. The increase was across all segments, most significantly in Construction
        Industries and Resource Industries.
 
        Can you comment on expense related to your 2017 short-term incentive compensation
    Q4: plans?
 
        Short-term incentive compensation expense is directly related to financial and
        operational performance, measured against targets set annually. Third-quarter 2017
        expense was about $400 million. No short-term incentive compensation expense was
    A:  recognized during the third quarter of 2016.
 
        For 2017, our current outlook includes short-term incentive compensation expense
        of about $1.4 billion. The previous 2017 outlook, issued in July, assumed
        short-term incentive compensation expense of about $1.3 billion. Full-year 2016
        short-term incentive compensation expense was about $250 million, significantly
        below targeted levels.
 
    Q5: What price action are you anticipating for 2018?
 
        In late September 2017, we notified our dealers of a price action of 0 to 2
        percent worldwide on most machines. This price action will be effective January
        2018 and includes adjustments to list prices and merchandising discounts. In
        conjunction with the planned January price action, Caterpillar will be
        implementing a structural change to machine pricing that will result in a
        reduction to list prices with offsetting reductions to merchandising discounts.
        These price actions are a result of current industry factors and general economic
        conditions. Details by product will be released to dealers in the near future and
    A:  will vary across geographic regions and products.
 
        In the past, you provided sales and revenues guidance for the following year in
    Q6: the third quarter. Why have you decided not to provide that guidance this year?
 
        Consistent with our new enterprise strategy, we are focused on operational
        excellence. Our segments are in the process of implementing strategies to drive
        profitable growth through margin expansion, asset efficiency, expanded offerings
    A:  and services. We will share more about 2018 in January.

GLOSSARY OF TERMS

    
        Adjusted Profit Per Share - Profit per share excluding restructuring costs for
        2017 and 2016. For 2017, adjusted profit per share also excludes a gain on the
     1. sale of an equity investment in IronPlanet recognized in the second quarter.
        All Other Segments - Primarily includes activities such as: business strategy,
        product management and development, and manufacturing of filters and fluids,
        undercarriage, tires and rims, ground engaging tools, fluid transfer products,
        precision seals, and rubber 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
     2. while transforming the buying experience.
        Consolidating Adjustments - Elimination of transactions between Machinery, Energy
     3. & 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, compact track loaders,
        multi-terrain loaders, mini excavators, compact wheel loaders, telehandlers,
        select work tools, small, medium and large track excavators, wheel excavators,
        medium wheel loaders, medium track-type tractors, track-type loaders, motor
     4. graders, pipelayers, forestry and paving products and related parts.
        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 only includes the impact
        on sales and operating profit for the Machinery, Energy & Transportation lines of
        business excluding restructuring costs; 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
     5. for 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 shareholders' equity. Debt also includes Machinery,
     6. Energy & Transportation's long-term borrowings from Financial Products.
        EAME - A geographic region including Europe, Africa, the Middle East and the
     7. 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
     8. 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
     9. trucks for North America.
        Financial Products Segment - Provides financing alternatives to customers and
        dealers around the world for Caterpillar products, as well as financing for
        vehicles, power generation facilities and marine vessels that, in most cases,
        incorporate Caterpillar products. Financing plans include operating and finance
        leases, installment sale contracts, working capital loans and wholesale financing
        plans. The segment also provides insurance and risk management products and
        services that help customers and dealers manage their business risk. Insurance and
        risk management products offered include physical damage insurance, inventory
        protection plans, extended service coverage for machines and engines, and dealer
        property and casualty insurance. The various forms of financing, insurance and
        risk management products offered to customers and dealers help support the
        purchase and lease of our equipment. Financial Products segment profit is
    10. determined on a pretax basis and includes other income/expense items.
        Latin America - A geographic region including Central and South American countries
    11. and Mexico.
        LIFO Inventory Decrement Benefit - A significant portion of Caterpillar's
        inventory is valued using the last-in, first-out (LIFO) method. With this method,
        the cost of inventory is comprised of "layers" at cost levels for years when
        inventory increases occurred. A LIFO decrement occurs when inventory decreases,
        depleting layers added in earlier, generally lower cost years. A LIFO decrement
        benefit represents the impact on operating profit of charging cost of goods sold
    12. with prior-year cost levels rather than current period costs.
        Machinery, Energy & Transportation (ME&T) - Represents the aggregate total of
        Construction Industries, Resource Industries, Energy & Transportation and All
    13. 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
    14. the Operating Profit Comparison.
        Pension and Other Postemployment Benefit (OPEB) - The company's defined benefit
    15. 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
        finance 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,
        electronics and control systems and related parts. In addition to equipment,
        Resource Industries also develops and sells technology products and services to
        provide customers fleet management, equipment management analytics and autonomous
        machine capabilities. Resource Industries also manages areas that provide services
        to other parts of the company, including integrated manufacturing and research and
    18. development.
        Restructuring Costs - Primarily costs for employee separation, 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, inventory write-downs, equipment
        relocation and project management costs and also LIFO inventory decrement benefits
        from inventory liquidations at closed facilities (primarily included in Cost of
    19. goods sold).
        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
        weighting of Machinery, Energy & Transportation sales with respect to total sales.
    20. The impact of sales volume on segment profit includes inter-segment sales.
        Variable Manufacturing Costs - Represents volume-adjusted costs excluding the
        impact of currency and restructuring costs (see definition above). 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
    21. supplies that are consumed in the manufacturing process.
 

NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures Caterpillar uses 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.      

Adjusted Profit per Share

Caterpillar believes it is important to separately quantify the profit impact of two special items in order for the company's results to be meaningful to readers. These items consist of restructuring costs, which are incurred in the current year to generate longer-term benefits, and a gain on sale of an equity investment. Caterpillar does not consider these items indicative of earnings from ongoing business activities and believes the non-GAAP measure will provide useful perspective on underlying business results and trends, and a means to assess the company's period-over-period results.

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

    
 
                                      Third Quarter                   2017 Outlook
                                                               Previous          Current
                                    2016          2017            1                 2
     Profit per share              $0.48         $1.77          $3.50             $4.60
     Per share
     restructuring costs3          $0.37         $0.18          $1.59             $1.74
     Per share gain on sale
     of equity investment4           -             -          ($0.09)           ($0.09)
     Adjusted profit per
     share                         $0.85         $1.95          $5.00             $6.25
 
     1 2017 sales and revenues outlook in a range of $42 billion to $44 billion
     (as of July 25, 2017). Profit per share at midpoint.
     2 2017 sales and revenues outlook of about $44 billion.
     3 At estimated annual tax rate based on full-year outlook for per share
     restructuring costs at statutory tax rates. Third-quarter 2017 and current
     2017 outlook at estimated annual rate of 20 percent. Previous 2017 outlook
     at estimated annual rate of 22 percent. 2017 outlook also includes $15
     million increase to prior year taxes related to non-U.S. restructuring costs
     recognized in the first quarter of 2017. Third-quarter 2017 includes an
     unfavorable interim adjustment of $0.06 per share resulting from the
     difference in the estimated annual tax rate for consolidated reporting of 32
     percent and the estimated annual tax rate for profit per share excluding
     restructuring costs, gain on sale of equity investment and discrete items of
     29 percent.
 
     4 At U.S. statutory tax rate of 35 percent.

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 Caterpillar 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. The company also believes this presentation will assist readers in understanding Caterpillar's business. Pages 17-25 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, 
                                               2017       2016            2017       2016
    Sales and revenues:
                 Sales of Machinery,                                                      
                 Energy & Transportation   $ 10,713      $ 8,463      $  30,482   $  26,888
                 Revenues of Financial
                 Products                       700          697          2,084       2,075 
                                                                                         
                 Total sales and revenues    11,413        9,160         32,566      28,963
 
    Operating costs: 
                                                                                  
                 Cost of goods sold          7,633         6,527         22,160      20,768
                 Selling, general and
                 administrative expenses     1,237           992          3,571       3,203
                 Research and development
                 expenses                      455           453          1,326       1,429
                 Interest expense of
                 Financial Products            163           147            484         447
                 Other operating (income)
                 expenses                      348           560          1,780       1,356 
                                                                                                
                 Total operating costs       9,836         8,679         29,321      27,203
 
    Operating profit                         1,577           481          3,245       1,760
 
                 Interest expense
                 excluding Financial
                 Products                      118           126            362         385
                 Other income (expense)         64            28             88         112
 
    Consolidated profit before taxes         1,523           383          2,971       1,487
 
                 Provision (benefit) for
                 income taxes                  470            96            921         372
                 Profit of consolidated
                 companies                   1,053           287          2,050       1,115
 
                 Equity in profit (loss)
                 of unconsolidated
                 affiliated companies            8           (4)              8         (7)
 
    Profit of consolidated and
    affiliated companies                     1,061          283           2,058       1,108
 
    Less: Profit (loss) attributable to
    noncontrolling interests                     2            -               5           4
 
    Profit 1                               $ 1,059      $   283         $ 2,053     $ 1,104
 
    Profit per common share                $  1.79      $  0.48         $  3.48     $  1.89
 
    Profit per common share - diluted 2    $  1.77      $  0.48         $  3.44     $  1.88
 
    Weighted-average common shares
    outstanding (millions)
                              - Basic        592.9        584.7           590.3       583.8
                              - Diluted 2    600.1        589.6           596.5       588.7
 
    Cash dividends declared per common
    share                                  $     -     $     -          $  1.55     $  1.54
 
                 Profit
                 attributable
                 to common
                 shareholders
               1 .
                 Diluted by
                 assumed
                 exercise of
                 stock-based
                 compensation
                 awards using
                 the treasury
                 stock
               2 method.
    
                                       Caterpillar Inc.
                    Condensed Consolidated Statement of Financial Position
                                         (Unaudited)
                                    (Millions of dollars) 
                                  September 30,                December 31, 
                                      2017                         2016
    Assets 
    Current assets: 
       Cash and short-term 
       investments                  $ 9,591                      $ 7,168 
       Receivables - 
       trade and other                6,691                        5,981 
       Receivables - finance          8,984                        8,522 
       Prepaid expenses and 
       other current 
       assets                         1,707                        1,682 
       Inventories                   10,212                        8,614 
       Total current assets          37,185                       31,967 
  
       Property, plant and                                    
       equipment - net               14,187                       15,322 
       Long-term 
       receivables - trade 
       and other                        969                        1,029 
       Long-term 
       receivables -                                         
       finance                       13,192                       13,556 
       Noncurrent deferred 
       and refundable 
       income taxes                   2,845                        2,790 
       Intangible assets              2,175                        2,349 
       Goodwill                       6,196                        6,020 
       Other assets                   1,811                        1,671 
       Total assets              $   78,560                   $   74,704
 
    Liabilities 
    Current liabilities: 
       Short-term borrowings: 
        -- Machinery, Energy 
        & Transportation            $    11                      $   209 
        -- Financial Products         5,459                        7,094 
       Accounts payable               6,113                        4,614 
       Accrued expenses               3,114                        3,003 
       Accrued wages, salaries 
       and employee benefits          2,333                        1,296 
       Customer advances              1,510                        1,167 
       Dividends payable                  -                          452 
       Other current 
       liabilities                    1,744                        1,635 
       Long-term debt 
       due within one 
       year: 
       -- Machinery, Energy 
       & Transportation                   5                          507 
       -- Financial 
       Products                       5,614                        6,155 
       Total current liabilities     25,903                       26,132 
       Long-term debt due 
       after one year: 
       -- Machinery, Energy 
       & Transportation               8,820                        8,436 
       -- Financial 
       Products                      16,015                       14,382 
       Liability for postemployment 
       benefits                       8,973                        9,357 
       Other liabilities              3,152                        3,184 
                                                                     
    Total liabilities                62,863                       61,491
 
    Shareholders' equity 
       Common stock                   5,460                        5,277 
                                                                     
       Treasury stock              (17,130)                     (17,478) 
       Profit employed in                                    
       the business                  28,530                       27,377 
       Accumulated other 
       comprehensive income                                   
       (loss)                       (1,233)                      (2,039) 
       Noncontrolling 
       interests                        70                           76 
                                                                      
    Total shareholders' equity      15,697                       13,213
    Total liabilities and                                            
    shareholders' equity       $    78,560                   $   74,704
 
    
                                       Caterpillar Inc.
                        Condensed Consolidated Statement of Cash Flow
                                         (Unaudited)
                                    (Millions of dollars)
                                                       Nine Months Ended
                                                         September 30,
                                              2017                          2016
    Cash flow from operating
    activities:
            Profit of consolidated
            and affiliated
            companies                    $  2,058                      $  1,108
            Adjustments for
            non-cash items:
                       Depreciation
                       and
                       amortization         2,153                         2,255
                       Other                  592                           640
            Changes in assets and
            liabilities, net of
            acquisitions and
            divestitures:
                       Receivables -
                       trade and
                       other                (455)                         1,128
                                           (1,489
                       Inventories              )                           331
                       Accounts
                       payable              1,371                         (163)
                       Accrued
                       expenses               121                         (153)
                       Accrued
                       wages,
                       salaries and
                       employee
                       benefits               962                         (727)
                       Customer
                       advances               310                          (24)
                       Other assets
                       - net                (137)                         (141)
                       Other
                       liabilities -
                       net                  (325)                         (279)
    Net cash provided by (used
    for) operating activities               5,161                         3,975
    Cash flow from investing
    activities:
            Capital expenditures -
            excluding equipment
            leased to others                (566)                         (807)
            Expenditures for
            equipment leased to            (1,071)                      (1,393)
            others                                                          
            Proceeds from disposals
            of leased assets and
            property, plant and
            equipment                         864                           572
            Additions to finance          (8,246)                        (6,911)
            receivables                                                      
            Collections of finance
            receivables                     8,532                         6,968
            Proceeds from sale of
            finance receivables                98                            55
            Investments and
            acquisitions (net of
            cash acquired)                   (47)                          (72)
            Proceeds from sale of
            businesses and
            investments (net of
            cash sold)                         93                             -
            Proceeds from sale of
            securities                        431                           304
            Investments in
            securities                      (594)                         (339)
            Other - net                        38                             5
    Net cash provided by (used                                           (1,618)
    for) investing activities               (468)                             
    Cash flow from financing
    activities: 
                                          (1,367)                        (1,348)
            Dividends paid                                                   
            Distribution to
            noncontrolling
            interests                         (7)                           (8)
            Common stock issued,
            including treasury
            shares reissued                   353                          (54)
            Proceeds from debt
            issued (original
            maturities greater than
            three months)                   7,334                         4,430
            Payments on debt
            (original maturities
            greater than three            (6,220)                        (5,602)
            months)                                                         
            Short-term borrowings -
            net (original
            maturities three months        (2,403)
            or less)                                                      (111)
    Net cash provided by (used             (2,310)                        (2,693)
    for) financing activities                                                
    Effect of exchange rate
    changes on cash                            40                          (11)
    Increase (decrease) in cash
    and short-term investments              2,423                         (347)
    Cash and short-term
    investments at beginning of
    period                                  7,168                         6,460
    Cash and short-term
    investments at end of period         $  9,591                      $  6,113
 
    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, 2017
                                               (Unaudited)
                                          (Millions of dollars)
                                                        Supplemental Consolidating Data 
                                        Machinery, 
                                         Energy &        Financial    Consolidating 
                     Consolidated    Transportation 1    Products      Adjustments
    Sales and
    revenues: 
    Sales of 
    Machinery, 
    Energy & 
    Transportation       $ 10,713      $  10,713         $   -        $     - 
    Revenues of 
    Financial 
    Products                  700              -           793            (93)     2 
    Total sales 
    and revenues           11,413         10,713           793            (93)
 
    Operating costs: 
    Cost of                         
    goods sold              7,633          7,633             -              - 
    Selling, 
    general and 
    administrative                      
    expenses                1,237          1,067           173             (3)     3 
    Research 
    and 
    development 
    expenses                  455            455             -               - 
    Interest 
    expense of 
    Financial 
    Products                  163              -           169             (6)     4 
    Other 
    operating 
    (income) 
    expenses                  348             51           303             (6)     3 
    Total 
    operating                        
    costs                   9,836          9,206           645            (15) 
  
                                            
    Operating profit        1,577          1,507           148            (78) 
    Interest expense 
    excluding 
    Financial 
    Products                  118            143             -            (25)     4 
    Other income 
    (expense)                  64           (22)            33             53      5
 
    Consolidated
    profit before                           
    taxes                   1,523          1,342           181              - 
  
    Provision 
    (benefit) 
    for income 
    taxes                     470            413            57              - 
    Profit of 
    consolidated 
    companies               1,053            929           124              - 
  
    Equity in 
    profit 
    (loss) of 
    unconsolidated 
    affiliated 
    companies                   8              8            -               - 
    Equity in 
    profit of 
    Financial 
    Products' 
    subsidiaries                -            122            -            (122)     6
 
    Profit of
    consolidated and
    affiliated                           
    companies               1,061          1,059           124           (122)
 
    Less: Profit
    (loss)
    attributable to
    noncontrolling
    interests                   2              -             2              - 
  
                                            
    Profit 7             $  1,059     $    1,059         $ 122         $ (122) 
  
     1     Represents Caterpillar Inc. and its subsidiaries with Financial
           Products accounted for on the equity  basis. 
     2     Elimination of Financial Products' revenues earned from Machinery,
           Energy & Transportation.
     3     Elimination of net expenses recorded by Machinery, Energy &
           Transportation paid to Financial Products.
     4     Elimination of interest expense recorded between Financial
           Products and Machinery, Energy & Transportation 
     5     Elimination of discount recorded by Machinery,
           Energy & Transportation on receivables sold to
           Financial Products and of interest earned between Machinery,
           Energy & Transportation and Financial Products.
     6     Elimination of Financial Products' profit due
           to equity method of accounting.
     7     Profit attributable to common shareholders.
    
                                            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 & 
    Transportation           $  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 
    administrative 
    expenses                      992             858               138            (4)   3 
    Research 
    and 
    development 
    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 
    consolidated companies        287            166                121             - 
  
    Equity in 
    profit 
    (loss) of 
    unconsolidated 
    affiliated 
    companies                     (4)            (4)                 -             - 
    Equity in 
    profit of 
    Financial 
    Products' 
    subsidiaries                   -            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) 
    1    Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.
    2    Elimination of Financial Products' revenues earned from Machinery, Energy & Transportation.
    3    Elimination of net expenses recorded by Machinery, Energy & Transportation paid to Financial Products.
    4    Elimination of interest expense recorded between Financial Products and Machinery, Energy & Transportation.
    5    Elimination of discount recorded by Machinery, Energy & Transportation on receivables sold to Financial Products and of interest earned between Machinery, Energy & Transportation and Financial Products.
    6    Elimination of Financial Products' profit due to equity method of accounting.
    7    Profit attributable to common shareholders.
    
                                             Caterpillar Inc.
                               Supplemental Data for Results of Operations
                               For the Nine Months Ended September 30, 2017
                                               (Unaudited)
                                          (Millions of dollars)
                                                        Supplemental Consolidating Data 
                                           Machinery, 
                                            Energy &           Financial     Consolidating
                        Consolidated    Transportation 1       Products        Adjustments
    Sales and
    revenues: 
    Sales of 
    Machinery, 
    Energy & 
    Transportation         $ 30,482      $   30,482            $   -            $     - 
    Revenues of 
    Financial                                              
    Products                  2,084              -              2,363              (279)  2 
    Total sales 
    and revenues             32,566         30,482              2,363              (279)
 
    Operating costs: 
    Cost of                          
    goods sold               22,160         22,160                 -                  - 
    Selling, 
    general and 
    administrative              
    expenses                  3,571          3,145                438               (12) 3 
    Research 
    and 
    development      
    expenses                  1,326          1,326                 -                  - 
    Interest 
    expense of 
    Financial 
    Products                    484            -                  499               (15) 4 
    Other  
    operating 
    (income)         
    expenses                  1,780           890                 906               (16) 3 
    Total 
    operating                                       
    costs                    29,321        27,521               1,843               (43) 
  
                            
    Operating profit          3,245         2,961                 520              (236) 
  
    Interest 
    expense 
    excluding 
    Financial 
    Products                    362           433                   -               (71)  4 
    Other 
    income 
    (expense)                    88         (110)                  33               165   5
 
    Consolidated
    profit before           
    taxes                     2,971        2,418                  553                 - 
  
    Provision 
    (benefit) 
    for income 
    taxes                       921          750                  171                 -

Profit of consolidated companies 2,050 1,668 382 - Equity in profit (loss) of unconsolidated affiliated companies 8 8 - - Equity in profit of Financial Products' subsidiaries - 377 - (377) 6 Profit of consolidated and affiliated companies 2,058 2,053 382 (377) Less: Profit (loss) attributable to noncontrolling interests 5 - 5 - Profit 7 $ 2,053 $ 2,053 $ 377 $ (377) 1 Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. 2 Elimination of Financial Products' revenues earned from Machinery, Energy & Transportation. 3 Elimination of net expenses recorded by Machinery, Energy & Transportation paid to Financial Products. 4 Elimination of interest expense recorded between Financial Products and Machinery, Energy & Transportation. 5 Elimination of discount recorded by Machinery, Energy & Transportation on receivables sold to Financial Products and of interest earned between Machinery, Energy & Transportation and Financial Products. 6 Elimination of Financial Products' profit due to equity method of accounting. 7 Profit attributable to common shareholders.
    
                                            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 &
           Transportat                      
           ion             $ 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
           administrat
           ive                              
           expenses           3,203           2,794             424              (15) 3
           Research
           and
           development                     
           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
           consolidate      
           d companies       1,115            742               373               -
 
           Equity in
           profit
           (loss) of
           unconsolida
           ted
           affiliated
           companies           (7)            (7)                 -               -
           Equity in
           profit of
           Financial
           Products'
           subsidiarie
           s                    -             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)    
    1        Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.
    2        Elimination of Financial Products' revenues earned from Machinery, Energy & Transportation.
    3        Elimination of net expenses recorded by Machinery, Energy & Transportation paid to Financial Products.
    4        Elimination of interest expense recorded between Financial Products and Machinery, Energy & Transportation.
    5        Elimination of discount recorded by Machinery, Energy & Transportation on receivables sold to Financial Products and of interest earned between Machinery, Energy & Transportation and Financial Products.
    6        Elimination of Financial Products' profit due to equity method of accounting.
    7        Profit attributable to common shareholders.      
    
                                                  Caterpillar Inc.
                                           Supplemental Data for Cash Flow
                                    For the Nine Months Ended September 30, 2017
                                                     (Unaudited)
                                                (Millions of dollars) 
                                                          Supplemental Consolidating Data 
                                            Machinery, 
                                            Energy &          Financial    Consolidating 
                            Consolidated   Transportation1    Products     Adjustments
    Cash flow from
    operating activities: 
    Profit of 
    consolidated and 
    affiliated 
    companies                    $ 2,058       $ 2,053          $  382      $ (377) 2 
    Adjustments for 
    non-cash items: 
    Depreciation 
    and 
    amortization                   2,153         1,507             646           - 
    Undistributed 
    profit of 
    Financial 
    Products                           -         (377)              -          377  3 
    Other                            592           524           (111)         179  4 
    Changes in assets 
    and liabilities, 
    net of acquisitions 
    and divestitures: 
    Receivables - 
    trade and 
    other                          (455)         (324)             62         (193) 4,5 
                                                    
    Inventories                  (1,489)       (1,487)             -            (2) 4 
    Accounts 
    payable                       1,371          1,412           (33)           (8) 4 
    Accrued 
    expenses                        121            118             3             - 
    Accrued 
    wages, 
    salaries and 
    employee 
    benefits                        962            943            19             - 
    Customer 
    advances                        310            310             -             - 
    Other assets 
    - net                         (137)             18           (54)         (101) 4 
    Other 
    liabilities - 
    net                           (325)          (533)           107           101  4
    Net cash provided by
    (used for) operating
    activities                    5,161          4,164         1,021          (24)
    Cash flow from
    investing activities: 
    Capital 
    expenditures - 
    excluding equipment 
    leased to others              (566)          (561)           (6)            1   4 
    Expenditures for 
    equipment leased to                                         
    others                      (1,071)           (13)        (1,074)          16   4 
    Proceeds from 
    disposals of leased 
    assets and 
    property, plant and 
    equipment                       864           142            733         (11)   4 
    Additions to                                              
    finance receivables         (8,246)             -        (9,765)        1,519   5 
    Collections of                                                                     
    finance receivables           8,532             -         10,194      (1,662)   5 
    Net intercompany 
    purchased 
    receivables                       -             -          (161)          161   5 
    Proceeds from sale 
    of finance 
    receivables                      98             -            98             - 
    Net intercompany                                                    
    borrowings                       -            165        (1,000)          835   6 
    Investments and 
    acquisitions (net 
    of cash acquired)              (47)          (47)             -                 - 
    Proceeds from sale 
    of businesses and 
    investments (net of 
    cash sold)                      93            93              -                 - 
    Proceeds from sale 
    of securities                  431            36            395                 - 
    Investments in 
    securities                   (594)          (165)         (429)                 - 
    Other - net                     38            17            21                  -
    Net cash provided by
    (used for) investing
    activities                   (468)          (333)         (994)               859
    Cash flow from
    financing activities: 
                                                
    Dividends paid             (1,367)        (1,367)            -                  - 
    Distribution to 
    noncontrolling 
    interests                      (7)            (7)            -                  - 
    Common stock 
    issued, including 
    treasury shares 
    reissued                       353           353             -                  - 
    Net intercompany 
    borrowings                      -          1,000          (165)            (835) 6 
    Proceeds from debt 
    issued (original 
    maturities greater 
    than three months)          7,334            362          6,972                 - 
    Payments on debt 
    (original 
    maturities greater                                             
    than three months)        (6,220)          (506)        (5,714)                 - 
    Short-term 
    borrowings - net 
    (original 
    maturities three                                               
    months or less)           (2,403)          (196)        (2,207)                 -
    Net cash provided by
    (used for) financing                                                
    activities                (2,310)          (361)        (1,114)             (835)
    Effect of exchange
    rate changes on cash          40              9              31                 -
    Increase (decrease) in
    cash and short-term                                                      
    investments                2,423          3,479         (1,056)                 -
    Cash and short-term
    investments at
    beginning of period        7,168          5,257          1,911                 -
    Cash and short-term
    investments at end of
    period                   $ 9,591        $ 8,736        $   855           $     -
 
        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.
 
     
                                                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                        (279)            (390)                 146         (35)  4
    Net cash provided by
    (used for) operating
    activities                3,975             1,795               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 
    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       (5,60                                        
    than three months)          2)               (525)              (5,077)         - 
    Short-term 
    borrowings - net 
    (original 
    maturities three 
    months or less)          (111)                 254                (365)         -
    Net cash provided by
    (used for) financing                                                       
    activities              (2,693)               (676)               (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.
 

CONTACT: Corrie Scott, Caterpillar, 224-551-4133 (Office), 808-351-3865 (Mobile) or Scott_Corrie@cat.com

This is a disclosure announcement from PR Newswire.