PEORIA, Illinois, January 26, 2017 /PRNewswire/ --

 

  
                                              FOURTH QUARTER           FULL YEAR

    ($ in billions except per share data)   2016          2015       2016      2015

    Sales and Revenues                    $9.574       $11.030    $38.537   $47.011
    Profit (Loss) Per Share               ($2.00)       ($0.16)    ($0.11)    $4.18
    Adjusted Profit Per Share              $0.83         $0.83      $3.42     $5.35

Caterpillar Inc. (NYSE: CAT) today announced fourth-quarter and full-year results for 2016.

Sales and revenues in the fourth quarter of 2016 were $9.6 billion, down from $11.0 billion in the fourth quarter of 2015. Fourth-quarter 2016 was a loss of $2.00 per share, compared with a loss of $0.16 per share in the fourth quarter of 2015.

Full-year sales and revenues in 2016 were $38.5 billion, down about 18 percent from $47.0 billion in 2015. The company lost $0.11 per share in 2016, compared with a profit of $4.18 per share in 2015.

Our fourth-quarter 2016 results included three large non-cash charges and higher than expected restructuring costs. These items resulted in a loss for the quarter and were the primary reason our results were lower than the outlook provided in October 2016. A discussion of these items - mark-to-market losses for remeasurement of pension and OPEB plans, a goodwill impairment charge, a deferred tax valuation allowance and restructuring costs - and their applicable impact on each period is in Q&A #1 on page 16. Because we do not consider these items to be indicative of earnings from ongoing business activities, the table above shows adjusted profit per share that excludes them. We believe adjusted profit per share provides a useful perspective on underlying business results and period-over-period changes.

Adjusted profit per share in the fourth quarter of 2016 was $0.83, the same as the fourth quarter of 2015, but higher than the outlook for profit per share excluding restructuring costs provided in October 2016. Adjusted profit per share in 2016 was $3.42, down from $5.35 per share in 2015. For the year, the impact on profit from lower sales and revenues was mitigated by a $2.3 billion reduction in period costs and variable manufacturing costs.

"Our results for the fourth quarter, while slightly better than expected, continued to reflect pressure in many of our end markets from weak economic conditions around much of the world. Our team did a great job in the quarter, as they have all year, aligning our cost structure with current demand while preserving capacity for the future. I'm confident we are focusing on the right areas: controlling costs, maintaining a strong balance sheet and investing in the key areas important to our future," said Caterpillar Chief Executive Officer Jim Umpleby.

2017 Outlook - Background 

Positives 

We are seeing positive signs that could be early indications of modest recovery in several of our businesses.

Resource Industries - Commodity prices at higher levels than a year ago, along with sequential improvements in parts sales in each of the last three quarters and improvements in quoting and order activity in the fourth quarter, suggest that mining-related sales may have bottomed. 

Construction Industries - Sales in China began recovering in 2016; sales in Europe seem to have stabilized and could improve some in 2017; and sales in Brazil, which are off their peak by over 80 percent, could improve if the Brazilian economy begins to recover from recession.

Energy & Transportation - Gas compression remains strong, and we have a solid backlog for turbines. If oil prices rise modestly and stabilize, it would be positive for our businesses that support drilling and well servicing.

Prospects for tax reform and an infrastructure spending bill in the United States are encouraging. While these initiatives would likely be a solid positive for many of our businesses, we would not expect to begin to see meaningful effects of these changes until sometime in 2018.

Concerns 

Resource Industries - While quoting interest in mining products has improved, we are expecting miners' capital spending to be about flat in 2017 after several years of decline. Sales of some large construction equipment within Resource Industries are likely to be down in 2017, compared with 2016.

Construction Industries - North America and EAME are the most concerning regions. While better economic growth and increased infrastructure spending may be on the horizon, the availability of used equipment has negatively impacted sales in North America during 2016 and we expect some negative impact in 2017. We expect sales in Africa/Middle East to be down again in 2017 due to overall economic weakness and continued pressure on economies that rely on oil revenues to drive economic growth. In addition, continuing uncertainty related to Brexit remains a concern in Europe.

Energy & Transportation - Rail remains challenged with low traffic volume and a significant number of idle locomotives. Additionally, weakness in shipbuilding is expected to be negative for our marine-related sales; power generation sales are projected to remain weak; and industrial engine sales to original equipment manufacturers are expected to be lower than 2016. 

2017 Outlook - Sales and Revenues and Profit 

Our expectations for 2017 are similar to those shared with investors in early December 2016. At that time, we believed the analyst consensus for 2017 sales and revenues of about $38 billion was a reasonable midpoint expectation. Our expectation for sales and revenues in 2017 are now slightly lower due to the strengthening of the U.S. dollar over the past two months, and as a result, our current outlook for sales and revenues in 2017 is a range of $36 billion to $39 billion with a midpoint of $37.5 billion.

We expect profit per share of about $2.30 at the midpoint of the sales and revenues outlook range. Excluding restructuring costs of about $500 million, we expect adjusted profit of about $2.90 per share at the midpoint, which reflects decremental operating profit pull through of about 30 percent from 2016.

"We continue to execute in a challenging economic environment and are focused on improving operating margins, profitability and shareholder returns. While we see signs of positive activity in some of our key end markets, the overall economic environment remains challenging," added Umpleby.

Highlights 

  • Sales and revenues were $38.5 billion in 2016 - 18 percent decrease from 2015 and slightly lower than expected
  • Period costs and variable manufacturing costs were $2.3 billion lower in 2016 - restructuring and cost reduction actions and lower incentive pay helped mitigate the impact of lower sales
  • Restructuring costs and three large non-cash items in the fourth quarter impacted profit substantially - resulting in a loss for the quarter and the year
  • Machinery, Engines & Transportation operating cash flow was $3.9 billion in 2016 - more than sufficient to cover capital expenditures and dividends
  • 2017 sales and revenues are expected to be $36 billion to $39 billion with a midpoint of $37.5 billion - some signs of recovery, but risk and uncertainty continue  
  • At the midpoint of the sales and revenues range, 2017 profit per share is expected to be about $2.30 with adjusted profit of about $2.90 per share 

Notes:

  • Glossary of terms is included on pages 19-20; first occurrence of terms shown in bold italics. 
  • Information on non-GAAP financial measures is included on page 21. 
  • Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 10 a.m. Central Time on Thursday, January 26, 2017, to discuss its 2016 fourth-quarter and full-year financial results. The accompanying slides will be available before the webcast on the Caterpillar website at http://www.caterpillar.com/investors/events-and-presentations.

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 product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect with us on social media, visit caterpillar.com/social-media.

Forward-Looking Statements 

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

Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity price changes, component price increases, fluctuations in demand for our products or significant shortages of component products; (iv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (v) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (vi) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (vii) our Financial Products segment's risks associated with the financial services industry; (viii) changes in interest rates or market liquidity conditions; (ix) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (x) new regulations or changes in financial services regulations; (xi) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) international trade policies and their impact on demand for our products and our competitive position; (xiii) our ability to develop, produce and market quality products that meet our customers' needs; (xiv) the impact of the highly competitive environment in which we operate on our sales and pricing; (xv) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (xvi) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost reduction actions; (xvii) inventory management decisions and sourcing practices of our dealers and our OEM customers; (xviii) compliance with environmental laws and regulations; (xix) alleged or actual violations of trade or anti-corruption laws and regulations; (xx) additional tax expense or exposure; (xxi) currency fluctuations; (xxii) our or Cat Financial's compliance with financial covenants; (xxiii) increased pension plan funding obligations; (xxiv) union disputes or other employee relations issues; (xxv) significant legal proceedings, claims, lawsuits or government investigations; (xxvi) changes in accounting standards; (xxvii) failure or breach of IT security; (xxviii) adverse effects of unexpected events including natural disasters; and (xxix) other factors described in more detail under "Item 1A. Risk Factors" in our Form 10-K filed with the SEC on February 16, 2016 for the year ended December 31, 2015.

CONSOLIDATED RESULTS 

Consolidated Sales and Revenues 

Consolidated Sales and Revenues Comparison 

Fourth Quarter 2016 vs. Fourth Quarter 2015 

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 4Q 2015 earnings.

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

Sales and Revenues 

Total sales and revenues were $9.574 billion in the fourth quarter of 2016, a decline of $1.456 billion, or 13 percent, compared with $11.030 billion in the fourth quarter of 2015. The decrease was almost entirely due to lower sales volume, resulting from lower end-user demand attributable to continued weak commodity prices globally and economic weakness in many countries. Although some commodity prices improved in the fourth quarter of 2016, the improvement was too recent to significantly impact our sales for the quarter. Sales for new equipment declined, while aftermarket parts sales were about flat. The unfavorable impact of price realization also contributed to the decline.

Sales declined in all regions except Asia/Pacific. In EAME, sales declined 30 percent primarily in Africa/Middle East due to weak economic conditions resulting from the continuing impact of low oil prices and an uncertain investment environment. In North America, sales decreased 15 percent primarily due to lower end-user demand for equipment used for infrastructure, the impact of continued low oil prices and an uncertain economic environment. Sales decreased 16 percent in Latin America primarily due to continued widespread economic weakness and inflation across the region. Asia/Pacific sales increased 10 percent primarily due to increased infrastructure and residential investment in China.

Energy & Transportation's sales declined 15 percent largely due to lower end-user demand for most applications. Resource Industries' sales declined 23 percent mostly due to continued low end-user demand. Construction Industries' sales decreased 8 percent primarily due to lower demand from end users, partially offset by favorable changes in dealer inventories. Financial Products' segment revenues were about flat with the fourth quarter of 2015.

Consolidated Operating Profit / (Loss) 

Consolidated Operating Profit Comparison 

Fourth Quarter 2016 vs. Fourth Quarter 2015 

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 4Q 2015 earnings. 

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit (Loss) between the fourth quarter of 2015 (at left) and the fourth quarter of 2016 (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 loss for the fourth quarter of 2016 was $1.262 billion, compared with a loss of $175 million in the fourth quarter of 2015, an unfavorable change of $1.087 billion. The most significant items were the unfavorable impact from mark-to-market losses related to pension and OPEB plans and a goodwill impairment charge in Resource Industries. Excluding these items, operating profit improved $279 million compared to the fourth quarter of 2015. The improvement was mostly due to lower period costs, a decrease in restructuring costs and favorable variable manufacturing costs, partially offset by lower sales volume. The unfavorable price realization resulted from competitive market conditions, primarily in Resource Industries.

Period costs were lower primarily due to substantial restructuring and cost reduction actions over the past year. The reductions impacted period manufacturing costs, selling, general and administrative expenses and research and development expenses about equally. Variable manufacturing costs were favorable mostly due to the impact of cost absorption as inventory decreased more significantly in the fourth quarter of 2015, compared to the fourth quarter of 2016.

Restructuring costs of $395 million in the fourth quarter of 2016 were related to restructuring programs across the company. In the fourth quarter of 2015, restructuring costs were $679 million, primarily related to a reduction in workforce.

Other Profit/Loss Items 

  • Other income/expense in the fourth quarter of 2016 was income of $34 million, compared with income of $54 million in the fourth quarter of 2015. The unfavorable change was primarily due to lower gains from the sales of securities in the fourth quarter of 2016, compared to the fourth quarter of 2015, and the impact from currency translation and hedging gains and losses. The unfavorable change in currency translation and hedging gains and losses was due to higher net losses in the fourth quarter of 2016, compared to the fourth quarter of 2015.
  • The provision for income taxes in the fourth quarter reflects an annual effective tax rate of approximately 36 percent, compared to 25.5 percent for the full-year 2015, excluding the items discussed below. The effective tax rate related to full-year adjusted profit before tax is 26 percent.

The provision for income taxes for the fourth quarter of 2016 also includes a $170 million charge related to the change from the third-quarter estimated annual tax rate. This change was primarily due to the negative impact from the portion of the goodwill impairment not deductible for tax purposes offsetting benefits related to the majority of pension and OPEB mark-to-market losses taxed at higher U.S. rates. In addition, the valuation allowance against U.S. state deferred tax assets was increased due to recent losses incurred in the United States resulting in a $141 million non-cash charge. The provision for income taxes for the fourth quarter of 2015 also included a benefit of $92 million related to the decrease from the third-quarter estimated annual tax rate. This benefit was primarily due to the renewal in the fourth quarter of the U.S. research and development tax credit for 2015. 

Global Workforce 

Caterpillar worldwide, full-time employment was about 95,400 at the end of 2016, compared with about 105,700 at the end of 2015, a decrease of about 10,300 full-time employees. The flexible workforce decreased by about 2,000 for a total decrease in the global workforce of about 12,300. The decrease was primarily the result of restructuring programs and lower production volumes.

 
                                                   December 31
                                                                   Increase/
                                      2016              2015      (Decrease)


    Full-time employment            95,400           105,700        (10,300)
    Flexible workforce              11,000            13,000         (2,000)
    Total                          106,400           118,700        (12,300)

    Geographic summary of change
    U.S. workforce                                                   (7,700)
    Non-U.S. workforce                                               (4,600)
    Total                                                           (12,300)

SEGMENT RESULTS 


   

    Sales and Revenues
    by Geographic Region
                                               %      North        %       Latin                 

    (Millions of dollars)           Total   Change   America    Change    America
    Fourth
    Quarter 2016
    Construction Industries(1)    $ 3,589    (8) %   $ 1,569    (16) %     $ 264       
    Resource Industriessquared      1,443   (23) %       471    (24) %       221           
    Energy & Transportation cubed   3,849   (15) %     1,722    (11) %       347            
    All Other Segments(4)              32   (14) %        11    (35) %         -             
    Corporate Items and
    Eliminations                     (28)               (23)                 (2)
    Machinery, Energy &
    Transportation               $ 8,885    (14) %   $ 3,750    (15) %     $ 830        

    Financial Products
    Segment                        $ 742     (1) %     $ 464       3 %      $ 83
    Corporate Items and
    Eliminations                     (53)                (29)                (9)                 
    Financial Products
    Revenues                       $ 689     (3) %     $ 435     (2) %      $ 74              

    Consolidated Sales and
    Revenues                     $ 9,574    (13) %   $ 4,185    (14) %     $ 904          

    Fourth
    Quarter 2015
    Construction Industries(1)   $ 3,905             $ 1,863               $ 298    
    Resource Industriessquared     1,878                 616                 280                 
    Energy &
    Transportationcubed            4,544               1,944                 411                
    All Other Segments(4)             37                  17                   1                    
    Corporate Items and
    Eliminations                     (46)               (47)                   -                    
    Machinery, Energy &
    Transportation               $10,318             $ 4,393               $ 990              

    Financial Products
    Segment                        $ 746               $ 452                $ 97                 
    Corporate Items and
    Eliminations                     (34)                 (6)               (13)
    Financial Products
    Revenues                       $ 712               $ 446                $ 84                 

    Consolidated
    Sales and Revenues           $11,030             $ 4,839             $ 1,074             

    1 Does not include inter-segment sales of $31 million and $43 million in fourth
    quarter 2016 and 2015, respectively.
    2 Does not include inter-segment sales of $87 million and $82 million in fourth
    quarter 2016 and 2015, respectively.
    3 Does not include inter-segment sales of $621 million and $615 million in fourth
    quarter 2016 and 2015, respectively.
    4 Does not include inter-segment sales of $117 million and $99 million in fourth
    quarter 2016 and 2015, respectively.

Table continues...

SEGMENT RESULTS 


   

    Sales and Revenues
    by Geographic Region
                                     %                     %        Asia/     %
    (Millions of dollars)         Change      EAME      Change    Pacific   Change
    Fourth Quarter 2016
    Construction Industries(1)    (11) %     $ 624      (34) %    $ 1,132     41 %
    Resource
    Industriessquared             (21) %       297      (35) %        454   (14) %
    Energy &
    Transportation cubed          (16) %     1,063      (26) %        717    (5) %
    All Other Segments (4)       (100) %         5      (17) %         16     23 %
    Corporate Items and
    Eliminations                                (2)                    (1)
    Machinery, Energy &
    Transportation                (16) %   $ 1,987      (30) %    $ 2,318    10 %

    Financial Products
    Segment                       (14) %      $ 99         2 %       $ 96   (4) %
    Corporate Items and
    Eliminations                                (4)                   (11)
    Financial Products
    Revenues                      (12) %      $ 95         3 %       $ 85   (6) %

    Consolidated
    Sales and Revenues            (16) %   $ 2,082      (29) %    $ 2,403    10 %

    Fourth Quarter 2015
    Construction
    Industries(1)                            $ 942                  $ 802
    Resource
    Industriessquared                          454                    528
    Energy &
    Transportationcubed                      1,431                    758
    All Other Segments(4)                        6                     13
    Corporate Items and
    Eliminations                                 -                      1
    Machinery, Energy &
    Transportation                         $ 2,833                $ 2,102

    Financial Products
    Segment                                   $ 97                  $ 100
    Corporate Items and
    Eliminations                                (5)                   (10)
    Financial Products
    Revenues                                  $ 92                   $ 90

    Consolidated
    Sales and
    Revenues                               $ 2,925                $ 2,192

    1 Does not include inter-segment sales of $31 million and $43 million in fourth
    quarter 2016 and 2015, respectively.
    2 Does not include inter-segment sales of $87 million and $82 million in fourth
    quarter 2016 and 2015, respectively.
    3 Does not include inter-segment sales of $621 million and $615 million in fourth
    quarter 2016 and 2015, respectively.
    4 Does not include inter-segment sales of $117 million and $99 million in fourth
    quarter 2016 and 2015, respectively.



   
    Sales and Revenues by Segment

                                Fourth     Sales          Price                         
    (Millions of dollars) Quarter 2015    Volume    Realization   Currency 
    Construction
    Industries                 $ 3,905    $ (363)          $ 1        $ 46    
    Resource Industries          1,878      (388)          (62)         15      
    Energy &
    Transportation               4,544      (663)          (21)        (11)      
    All Other Segments              37        (5)            -           -      
    Corporate Items and
    Eliminations                   (46)       16             2           -      

    Machinery, Energy &
    Transportation            $ 10,318  $ (1,403)        $ (80)       $ 50    

    Financial Products
    Segment                      $ 746       $ -           $ -         $ -  
    Corporate Items and
    Eliminations                   (34)        -             -           -   
    Financial Products
    Revenues                     $ 712       $ -           $ -         $ - 

    Consolidated Sales
    and Revenues              $ 11,030  $ (1,403)        $ (80)       $ 50

Table continues...

   

    Sales and Revenues by Segment

                                                Fourth        $        %
    (Millions of dollars)         Other   Quarter 2016   Change   Change
    Construction
    Industries                      $ -       $ 3,589    $ (316)   (8) %
    Resource Industries               -         1,443      (435)  (23) %
    Energy & Transportation           -         3,849      (695)  (15) %
    All Other Segments                -            32        (5)  (14) %
    Corporate Items and
    Eliminations                      -          (28)        18

    Machinery, Energy &
    Transportation                  $ -       $ 8,885  $ (1,433)  (14) %

    Financial Products
    Segment                        $ (4)        $ 742      $ (4)   (1) %
    Corporate Items and
    Eliminations                    (19)          (53)      (19)
    Financial Products
    Revenues                      $ (23)        $ 689     $ (23)   (3) %

    Consolidated Sales
    and Revenues                  $ (23)      $ 9,574  $ (1,456)  (13) %



   

    Operating
    Profit (Loss)
    by Segment
                                 Fourth        Fourth          $            %
    (Millions of dollars)  Quarter 2016  Quarter 2015     Change       Change
    Construction
    Industries                    $ 334         $ 178      $ 156         88 %
    Resource
    Industries                     (711)          (80)      (631)     (789) %
    Energy &
    Transportation                  638           741       (103)      (14) %
    All Other Segments              (34)          (39)         5         13 %
    Corporate Items and
    Eliminations                 (1,572)       (1,088)      (484)
    Machinery,
    Energy & Transportation    $ (1,345)       $ (288  )$ (1,057)     (367) %
    Financial Products
    Segment                       $ 149         $ 191      $ (42)      (22) %
    Corporate Items and
    Eliminations                     (9)         (15)          6
    Financial Products            $ 140        $ 176       $ (36)      (20) %
    Consolidating
    Adjustments                     (57)         (63)          6

    Consolidated Operating
    Profit (Loss)              $ (1,262)      $ (175) $   (1,087)     (621) %



   
    CONSTRUCTION INDUSTRIES

    (Millions of
     dollars)
    Sales
    Comparison
                                                                                                                          
                          Fourth    Sales        Price               Fourth      $        %
                         Quarter   Volume  Realization  Currency    Quarter  Change  Change
                            2015                                       2016
    Sales
    Comparison[1]         $3,905   ($363)           $1       $46     $3,589   ($316)  (8) %

    Sales by
    Geographic Region
                               
                          Fourth           Fourth        $           %
                    Quarter 2016     Quarter 2015   Change      Change
    North
    America               $1,569           $1,863   ($294)      (16) %
    Latin
    America                  264              298     (34)      (11) %
    EAME                     624              942    (318)      (34) %
    Asia/Pacific           1,132              802     330         41 %
    Total[1]              $3,589           $3,905   ($316)       (8) %

    Operating
    Profit
                                     
                         Fourth           Fourth        $            %
                   Quarter 2016     Quarter 2015    Change       Change
    Operating
    Profit                 $334             $178      $156         88 %

    [1] Does not include inter-segment sales of $31 million and $43 million in fourth
    quarter 2016 and 2015, respectively.

Construction Industries' sales were $3.589 billion in the fourth quarter of 2016, a decrease of $316 million, or 8 percent, from the fourth quarter of 2015. The decrease was mostly due to lower volume. Sales declined for new equipment and were about flat for aftermarket parts.

  • Sales volume declined primarily due to lower end-user demand, partially offset by a smaller decline in dealer inventories in the fourth quarter of 2016, compared with the fourth quarter of 2015.

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

  • Sales in EAME decreased primarily due to lower end-user demand. The sales decline was primarily in oil-producing economies in Africa/Middle East due to continued low oil prices and an uncertain investment environment.
  • In North America, the sales decline was primarily due to lower end-user demand. Although residential and non-residential building construction activity improved, we believe demand for new construction equipment has remained low due to end users' utilization of existing used equipment.
  • In Latin America, sales decreased slightly as lower end-user demand, attributable to weak economic conditions across the region, was partially offset by favorable changes in dealer inventories. Dealers reduced inventories more significantly in the fourth quarter of 2015 than in the fourth quarter of 2016.
  • Sales in Asia/Pacific were higher as a result of an increase in end-user demand primarily in China stemming from increased government support in infrastructure and residential investment. In addition, changes in Asia/Pacific dealer inventories were favorable as dealers increased inventories in the fourth quarter of 2016, compared with a decrease in the fourth quarter of 2015.

Construction Industries' profit was $334 million in the fourth quarter of 2016, compared with $178 million in the fourth quarter of 2015. The increase in profit was primarily due to lower period costs and the absence of an unfavorable impact from litigation in the fourth quarter of 2015, partially offset by lower sales volume, which includes a favorable mix of products. The lower period costs were mostly a result of the favorable impact of restructuring and cost reduction actions.


   
    RESOURCE INDUSTRIES

    (Millions of
    dollars)
    Sales Comparison
                                                                          

                                              
                        Fourth                 Price               Fourth        $       %
                       Quarter    Sales  Realization   Currency   Quarter   Change  Change
                          2015   Volume                              2016
    Sales
    Comparison[1]       $1,878    ($388)       ($62)        $15    $1,443   ($435)  (23) %

    Sales by
    Geographic Region

                       Fourth           Fourth        $            %
                 Quarter 2016     Quarter 2015   Change       Change
    North
    America              $471             $616   ($145)       (24) %
    Latin
    America               221              280     (59)       (21) %
    EAME                  297              454    (157)       (35) %
    Asia/Pacific          454              528     (74)       (14) %
    Total[1]           $1,443           $1,878   ($435)       (23) %

    Operating Profit (Loss)
                       Fourth           Fourth        $         %
                 Quarter 2016     Quarter 2015   Change    Change
    Operating
    Profit
    (Loss)             ($711)            ($80)   ($631)   (789) %

    [1] Does not include inter-segment sales of $87 million and $82 million in fourth quarter
    2016 and 2015, respectively.

Resource Industries' sales were $1.443 billion in the fourth quarter of 2016, a decrease of $435 million, or 23 percent, from the fourth quarter of 2015. The decline was primarily due to lower sales volume and the unfavorable impact of price realization resulting from competitive market conditions. Sales of new equipment decreased while sales of aftermarket parts increased slightly. Aftermarket parts sales have increased sequentially in each of the last three quarters.

The sales decrease was primarily due to lower end-user demand across all regions. While most commodity prices improved in the fourth quarter over a year earlier, current prices have not been sufficient to drive much increase in short-term demand for new equipment. We believe commodity prices now need to stabilize for a longer period of time to positively impact our sales. Mining customers continued to focus on improving productivity in existing mines and reducing their total capital expenditures, as they have for several years. In addition, sales of heavy construction equipment are lower, primarily in North America.

Resource Industries incurred a loss of $711 million in the fourth quarter of 2016, compared with a loss of $80 million in the fourth quarter of 2015. The most significant item impacting the fourth quarter of 2016 was a goodwill impairment charge of $595 million related to the Surface Mining & Technology reporting unit, discussed in Q&A #1 on page 16. Excluding the impairment charge, the fourth quarter of 2016 operating loss was unfavorable $36 million, compared with the fourth quarter of 2015. The unfavorable change was due to lower sales volume and unfavorable price realization, mostly offset by the favorable impact of restructuring and cost reduction actions.


   
    ENERGY & TRANSPORTATION

    (Millions of
    dollars)
    Sales Comparison
                   

                                               
                       Fourth                   Price               Fourth       $       %
                       Quarter     Sales   Realization   Currency   Quarter  Change  Change
                         2015    Volume                               2016
    Sales
    Comparison[1]      $4,544    ($663)         ($21)      ($11)    $3,849   ($695) (15) %

    Sales by
    Geographic Region
                   
                       Fourth          Fourth        $            %
                 Quarter 2016    Quarter 2015   Change       Change
    North
    America            $1,722          $1,944   ($222)       (11) %
    Latin
    America               347             411     (64)       (16) %
    EAME                1,063           1,431    (368)       (26) %
    Asia/Pacific          717             758     (41)        (5) %
    Total[1]           $3,849          $4,544   ($695)       (15) %

    Operating
    Profit
                       Fourth          Fourth       $            %
                 Quarter 2016    Quarter 2015   Change       Change
    Operating
    Profit               $638            $741   ($103)       (14) %

    [1] Does not include inter-segment sales of $621 million and $615 million in fourth
    quarter 2016 and 2015, respectively.


Energy & Transportation's sales were $3.849 billion in the fourth quarter of 2016, a decrease of $695 million, or 15 percent, from the fourth quarter of 2015. The decrease was primarily the result of lower sales volume.

  • Transportation - Sales decreased in North America, Asia/Pacific and EAME primarily due to continued weakness in the rail industry, with the most significant decline in North America. The North American rail industry continues to be depressed with a significant number of idle locomotives that impacted demand for rail services and aftermarket. The decline in Asia/Pacific was mostly due to lower demand for equipment used in marine applications, primarily for work boats. Sales in Latin America were about flat.
  • Oil and Gas - Sales decreased in much of the world due to the impact from low oil prices. The sales decline was primarily related to lower demand across all regions for equipment used for production, partially offset by increased demand for turbines used for gas compression.
  • Power Generation - Sales decreased in EAME and were about flat in all other regions. The decline in EAME was primarily a result of continued weakness in the Middle East with continued low oil prices limiting investments.
  • Industrial - Sales were about flat as an increase in Asia/Pacific was mostly offset by a decrease in EAME, both attributable to changes in end-user demand for most industrial applications.

Energy & Transportation's profit was $638 million in the fourth quarter of 2016, compared with $741 million in the fourth quarter of 2015. The decline was primarily due to a decrease in sales volume, partially offset by the impact of restructuring and cost reduction actions and a favorable impact of cost absorption as inventory decreased more significantly in the fourth quarter of 2015 than the fourth quarter of 2016.


   
    FINANCIAL PRODUCTS SEGMENT

    (Millions of dollars)
    Revenues by Geographic Region
                          Fourth                Fourth       $           %
                    Quarter 2016          Quarter 2015  Change      Change
    North America           $464                  $452     $12         3 %
    Latin America             83                    97     (14)     (14) %
    EAME                      99                    97       2         2 %
    Asia/Pacific              96                   100      (4)      (4) %
    Total                   $742                  $746     ($4)      (1) %

    Operating
    Profit
                          Fourth                Fourth      $           %
                    Quarter 2016          Quarter 2015  Change      Change
    Operating
    Profit                  $149                  $191   ($42)      (22) %


Financial Products' revenues were $742 million in the fourth quarter of 2016, a decrease of $4 million, or 1 percent, from the fourth quarter of 2015. The decline was primarily due to lower average earning assets in North America and Latin America, an unfavorable impact from returned or repossessed equipment primarily in North America and lower average financing rates in Latin America. These decreases were partially offset by higher average financing rates in North America.

Financial Products' profit was $149 million in the fourth quarter of 2016, compared with $191 million in the fourth quarter of 2015. The decrease was primarily due to lower gains on sales of securities at Insurance Services and an unfavorable impact from returned or repossessed equipment.

At the end of 2016, past dues at Cat Financial were 2.38 percent, compared with 2.14 percent at the end of 2015. The increase in past dues was primarily driven by the European marine portfolio. Write-offs, net of recoveries, were $123 million for the full-year 2016, compared with $155 million for the full-year 2015.

As of December 31, 2016, Cat Financial's allowance for credit losses totaled $343 million, or 1.29 percent of net finance receivables, compared with $338 million, or 1.22 percent of net finance receivables at year-end 2015.

Corporate Items and Eliminations 

Expense for corporate items and eliminations was $1.581 billion in the fourth quarter of 2016, an increase of $478 million from the fourth quarter of 2015. Corporate items and eliminations include: corporate-level expenses; restructuring costs; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences for ME&T, as segment profit is reported using annual fixed exchange rates; cost of sales methodology differences as segments use a current cost methodology; and inter-segment eliminations. 

The increase was due to the unfavorable impact of higher mark-to-market losses related to our pension and OPEB plans. Mark-to-market losses in the fourth quarter of 2016 were $985 million, compared to mark-to-market losses of $214 million in the fourth quarter of 2015. This was partially offset by a decrease in restructuring costs of $284 million compared to the fourth quarter of 2015.

2017 OUTLOOK 

Positives 

We are seeing positive signs that could be early indications of modest recovery in several of our businesses.

Resource Industries - Commodity prices at higher levels than a year ago, along with sequential improvements in parts sales in each of the last three quarters and improvements in quoting and order activity in the fourth quarter, suggest that mining-related sales may have bottomed. 

Construction Industries - Sales in China began recovering in 2016; sales in Europe seem to have stabilized and could improve some in 2017; and sales in Brazil, which are off their peak by over 80 percent, could improve if the Brazilian economy begins to recover from recession.

Energy & Transportation - Gas compression remains strong, and we have a solid backlog for turbines. If oil prices rise modestly and stabilize, it would be positive for our businesses that support drilling and well servicing.

Prospects for tax reform and an infrastructure spending bill in the United States are encouraging. While these initiatives would likely be a solid positive for many of our businesses, we would not expect to begin to see meaningful effects of these changes until sometime in 2018.

Concerns 

Resource Industries - While quoting interest in mining products has improved, we are expecting miners' capital spending to be about flat in 2017 after several years of decline. Sales of some large construction equipment within Resource Industries are likely to be down in 2017, compared with 2016.

Construction Industries - North America and EAME are the most concerning regions. While better economic growth and increased infrastructure spending may be on the horizon, the availability of used equipment has negatively impacted sales in North America during 2016 and we expect some negative impact in 2017. We expect sales in Africa/Middle East to be down again in 2017 due to overall economic weakness and continued pressure on economies that rely on oil revenues to drive economic growth. In addition, continuing uncertainty related to Brexit remains a concern in Europe.

Energy & Transportation - Rail remains challenged with low traffic volume and a significant number of idle locomotives. Additionally, weakness in shipbuilding is expected to be negative for our marine-related sales; power generation sales are projected to remain weak; and industrial engine sales to original equipment manufacturers are expected to be lower than 2016. 

2017 Outlook - Sales and Revenues and Profit 

Our expectations for 2017 are similar to those shared with investors in early December 2016. At that time, we believed the analyst consensus for 2017 sales and revenues of about $38 billion was a reasonable midpoint expectation. Our expectations for sales and revenues in 2017 are now slightly lower due to the strengthening of the U.S. dollar over the past two months, and as a result, our current outlook for sales and revenues in 2017 is a range of $36 billion to $39 billion with a midpoint of $37.5 billion.

We expect profit per share of about $2.30 at the midpoint of the sales and revenues outlook range. Excluding restructuring costs of about $500 million, we expect adjusted profit of about $2.90 per share at the midpoint, which reflects decremental operating profit pull through of about 30 percent from 2016.

Our 2016 results included several significant items: restructuring costs, mark-to-market losses for remeasurement of pension and OPEB plans, a goodwill impairment charge and a deferred tax valuation allowance. In 2017, we expect to incur about $500 million of restructuring costs primarily related to ongoing manufacturing facility consolidations to lower our cost structure in response to weak economic conditions. No estimate of potential restructuring costs for contemplated actions at Gosselies, Belgium, or Aurora, Illinois, has been included in our outlook. At this time, our outlook does not include a mark-to-market gain or loss for remeasurement of pension and OPEB plans. Our outlook does not include a goodwill impairment charge or significant changes to deferred tax asset valuation allowances in 2017.

The following factors are expected to contribute to an anticipated decline in profit in 2017: 

  • An expected decline in sales volume is anticipated to have a negative impact on profit, including the effect of an unfavorable sales mix as the decline is expected to be more concentrated in products with higher than average margin rates.
  • Short-term employee incentive compensation and labor cost inflation are expected to be unfavorable by about $600 million.
  • Financial Products segment profit is expected to be lower in 2017 in part due to gains on the sale of securities at Insurance Services in 2016 that we are not expecting to repeat in 2017.
  • The tax rate is expected to be about 27 percent in 2017.

The following factors are expected to partially offset an anticipated decline in profit in 2017: 

  • The primary positive is the continuation of substantial cost reduction in 2017. Not including short-term incentive compensation and labor inflation noted above, Caterpillar is expecting about $750 million of additional cost reduction in 2017.
    • About two-thirds is expected to be from lower period costs and is a result of restructuring actions taken in recent years and the company's continued focus on cost management.
    • About one-third is expected from variable costs. A reduction in material costs is the most significant factor. While we do not expect material cost reduction from commodity prices, we expect continued improvement in material costs from supplier collaboration, sourcing and design-related improvements.
  • In 2016, price realization was a substantial negative. While the pricing environment remains very competitive, we believe price realization has begun to level off. We expect price realization to be neutral to slightly positive in 2017.     

QUESTIONS AND ANSWERS

Q1: Can you provide more information on the four significant items impacting 2016 profit?
 
A: In order for our results to be more meaningful to our readers, we have separately quantified the impact of several significant items.
 
- Mark-to-Market Losses - Effective January 1, 2016, we made a change in accounting principle related to our pension and OPEB plans. Under the new accounting principle, we recognize actuarial gains and losses as a mark-to-market gain or loss when incurred rather than amortizing them to earnings over time. For 2016, the mark-to-market adjustment was a net loss of $985 million, primarily due to lower interest rates. Accounting rules require us to remeasure our future benefit payments using an interest rate as of each year-end. If interest rates drop, the present value of future benefit payments increases resulting in a mark-to-market loss. If interest rates increase, the present value of the future benefit payments decreases resulting in a mark-to-market gain. Differences in actual versus expected investment performance of plan assets and changes in other economic and demographic factors also impact the adjustment. We believe profit excluding the impact of mark-to-market gains or losses better reflects earnings from ongoing business performance because this adjustment has no impact on current year cash flow or on benefits paid to plan participants.
 
- Goodwill Impairment Charge - Step 1 of the annual goodwill impairment test performed as of October 1, 2016, indicated that the fair value of the Surface Mining & Technology reporting unit, included in Resourcen Industries, was lower than its carrying value. We completed step 2 of the impairment testing process during the fourth quarter of 2016 and recognized a non-cash impairment charge of $595 million. The mining industry has experienced weakness for several years and, while we continue to expect the industry to improve, we believe the pace of the improvement will be slower and cash flows and profitability will be lower than previously forecasted. After the impairment charge, goodwill of approximately $600 million remains in Surface Mining & Technology.
 
- State Deferred Tax Valuation Allowance - Based on recent losses incurred in the United States, we recorded a non-cash charge of $141 million to increase the valuation allowance against the related state net deferred tax
assets during the fourth quarter of 2016. If profitability improves in future periods, the valuation allowance can be reversed.
 
- Restructuring Costs - For the past several years, we have incurred substantial restructuring costs as a result of actions to lower our cost structure in response to weak economic conditions in the key industries we serve.
During 2016, we incurred $1.019 billion of restructuring costs primarily related to Resource Industries and Energy & Transportation.

To help improve the understanding of results for the quarter and the year, the following tables show the impact of these items:


   
                                Fourth Quarter 2016              Fourth Quarter 2015                                                             

    ($ in millions
    except per            Profit (Loss)   Profit (Loss)     Profit (Loss)  Profit (Loss)
    share data)           Before Taxes       per Share*     Before Taxes      per Share*

    Profit (Loss)              ($1,348)         ($2.00)          ($247)          ($0.16)

    Restructuring
    Costs                         $395           $0.45            $679            $0.76

    Mark-to-Market
    Losses                        $985           $1.14            $214            $0.23

    Goodwill
    Impairment Charge             $595           $0.98

    Deferred State Tax
    Valuation
    Allowance                                    $0.24

    Adjusted
    Profit                         $627          $0.83            $646            $0.83



                                     Full Year 2016                  Full Year 2015                        

    ($ in millions
    except per            Profit Before     Profit (Loss)   Profit Before          Profit
    share data)                   Taxes        per Share*           Taxes      per Share*

    Profit (Loss)                  $139           ($0.11)          $3,439          $4.18

    Restructuring
    Costs                        $1,019             $1.16            $898          $0.98

    Mark-to-Market
    Losses                         $985             $1.15            $179          $0.19

    Goodwill
    Impairment Charge              $595             $0.98

    Deferred State Tax
    Valuation Allowance                             $0.24

    Adjusted Profit              $2,738             $3.42          $4,516            $5.35

    *Per share amounts computed using fully diluted shares outstanding except for
    consolidated loss per share, which was computed using basic shares
    outstanding

    
Q2: Can you comment on your 2017 outlook for restructuring costs? Does it include impacts from contemplated actions at Caterpillar manufacturing facilities in Gosselies, Belgium, and Aurora, Illinois?

A: In 2017, we expect to incur about $500 million of restructuring costs primarily related to ongoing manufacturing facility consolidations to lower our cost structure in response to weak economic conditions. Most of the actions have been announced and are being implemented.
 
On September 24, 2015, Caterpillar announced a significant restructuring and cost reduction initiative, with actions expected through 2018. The largest action among those included in the initiative was related to our European manufacturing footprint. On September 2, 2016, Caterpillar announced that it is contemplating to allocate the volumes produced at the Gosselies, Belgium, facility to other manufacturing facilities. If the intention is confirmed, it would result in a collective layoff of about 2,000 employees and the closure of the Gosselies site. We are currently engaged in the information and consultation process with Gosselies employee representatives.
 
Additionally, on January 4, 2017, Caterpillar announced that it is contemplating the potential closure of the Aurora, Illinois, manufacturing facility. If this plan is confirmed, Caterpillar would move machine production from the Aurora facility to other U.S. manufacturing facilities.
 
No estimate of potential restructuring costs for Gosselies or Aurora has been included in our outlook for 2017 restructuring costs as the outcome of these contemplated actions is not yet known and no decisions have been made.
 
Q3: Can you discuss changes in dealer inventories during 2016 and expectations for 2017?
 
A: Dealer machine and engine inventories decreased about $800 million in the fourth quarter of 2016, compared with a decrease of about $1.0 billion in the fourth quarter of 2015. For the full year of 2016, dealer machine and engine inventories decreased about $1.6 billion, compared with a decrease of about $1.0 billion for the full year of 2015.
 
The level of dealer inventories at the end of 2017 will depend on dealer expectations for business in 2018. Our outlook range reflects an expectation that dealers will not reduce inventories in 2017 as much as they did in 2016.
 
Q4: Can you discuss the decline in Caterpillar inventory in the fourth quarter of 2016?
 
A: Caterpillar inventory declined about $900 million during the fourth quarter of 2016. A fourth-quarter decrease is not unusual, as some of our businesses ship long lead-time capital goods in the fourth quarter. For the full year of 2016, Caterpillar inventory declined about $1.1 billion.
 
Q5:  Can you discuss changes to your order backlog by segment?
 
A: At the end of 2016, the order backlog was about $12.1 billion. This represents about a $500 million increase from the end of the third quarter of 2016. The increase was in both Construction Industries and Resource Industries, more
significantly in Construction Industries. A decline in Energy & Transportation
partially offset the increase.
 
Compared with year-end 2015, the order backlog declined about $900 million. The decrease was in Energy & Transportation and Construction Industries, partially offset by an increase in Resource Industries.

Q6: Can you comment on expense related to your 2016 short-term incentive compensation plans? What are plans for 2017?
 
A: Short-term incentive compensation expense is directly related to financial and operational performance measured against targets set annually. Fourth-quarter 2016 expense was about $50 million and full-year 2016 expense was about $250 million. Fourth-quarter 2015 expense was about $45 million and full-year 2015 expense was about $585 million.

For 2017, our outlook includes short-term incentive compensation of about $750 million.
 
Q7:  Can you give us an update on how Cat Financial is performing?
 
A: Cat Financial's portfolio continues to perform well overall despite ongoing weakness in many key end markets. Fourth-quarter 2016 past dues were 2.38 percent, compared with 2.14 percent in the fourth quarter of 2015, with current
past dues remaining lower than historical averages. Write-offs in the fourth quarter of 2016 were $30 million, or 0.45 percent of the average retail portfolio, compared with $36 million, or 0.55 percent of the average retail
portfolio in the fourth quarter of 2015, and slightly below historical averages
for the fourth quarter.
 
Q8:  Can you comment on your balance sheet and cash priorities?
 
A: The ME&T debt-to-capital ratio was 41.0 percent at the end of 2016, compared with 39.0 percent at the end of 2015. Our cash and liquidity positions remain strong with an enterprise cash balance of $7.168 billion as of year-end 2016. ME&T operating cash flow for the full year of 2016 was $3.857 billion, compared with $5.175 billion in 2015. The decline was primarily due to impacts from lower profit. During the year, ME&T capital expenditures totaled $1.206 billion, and
funding for defined benefit pension plans was about $150 million.
 
Although our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our long-term cash deployment strategy remains unchanged: to maintain a strong financial position in support of our credit rating, provide capital to support growth, appropriately fund employee benefit plans, pay dividends and repurchase common stock.

GLOSSARY OF TERMS 


   
    1. All Other Segments - Primarily includes activities such as: the business strategy,
       product management, development, and manufacturing of filters and fluids,
       undercarriage, tires and rims, ground engaging tools, fluid transfer products,
       precision seals and rubber, and sealing and connecting components primarily for
       Cat(R) products; parts distribution; distribution services responsible for dealer
       development and administration including a wholly owned dealer in Japan, dealer
       portfolio management and ensuring the most efficient and effective distribution of
       machines, engines and parts; digital investments for new customer and dealer
       solutions that integrate data analytics with state-of-the art digital technologies
       while transforming the buying experience.

    2.  Consolidating Adjustments - Elimination of transactions between Machinery, Energy
        & Transportation and Financial Products.

    3.  Construction Industries - A segment primarily responsible for supporting customers
        using machinery in infrastructure, forestry and building construction
        applications. Responsibilities include business strategy, product design, product
        management and development, manufacturing, marketing and sales and product
        support. The product portfolio includes backhoe loaders, small wheel loaders,
        small track-type tractors, skid steer loaders, multi-terrain loaders, mini
        excavators, compact wheel loaders, telehandlers, select work tools, small, medium
        and large track excavators, wheel excavators, medium wheel loaders, compact track
        loaders, medium track-type tractors, track-type loaders, motor graders,
        pipelayers, forestry and paving products.

     4. Currency - With respect to sales and revenues, currency represents the translation
        impact on sales resulting from changes in foreign currency exchange rates versus
        the U.S. dollar. With respect to operating profit, currency represents the net
        translation impact on sales and operating costs resulting from changes in foreign
        currency exchange rates versus the U.S. dollar. Currency includes the impact on
        sales and operating profit for the Machinery, Energy & Transportation lines of
        business only; currency impacts on Financial Products' revenues and operating
        profit are included in the Financial Products' portions of the respective
        analyses. With respect to other income/expense, currency represents the effects of
        forward and option contracts entered into by the company to reduce the risk of
        fluctuations in exchange rates (hedging) and the net effect of changes in foreign
        currency exchange rates on our foreign currency assets and liabilities for
        consolidated results (translation).

     5. Debt-to-Capital Ratio - A key measure of Machinery, Energy & Transportation's
        financial strength used by management. The metric is defined as Machinery, Energy
        & Transportation's short-term borrowings, long-term debt due within one year and
        long-term debt due after one year (debt) divided by the sum of Machinery, Energy &
        Transportation's debt and stockholders' equity. Debt also includes Machinery,
        Energy & Transportation's long-term borrowings from Financial Products.

     6. EAME - A geographic region including Europe, Africa, the Middle East and the
        Commonwealth of Independent States (CIS).

     7. Earning Assets - Assets consisting primarily of total finance receivables net of
        unearned income, plus equipment on operating leases, less accumulated depreciation
        at Cat Financial.

     8. 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
        trucks for North America.

     9. Financial Products Segment - Provides financing to customers and dealers for the
        purchase and lease of Cat and other equipment, as well as some financing for
        Caterpillar sales to dealers. Financing plans include operating and finance
        leases, installment sale contracts, working capital loans and wholesale financing
        plans. The segment also provides various forms of insurance to customers and
        dealers to help support the purchase and lease of our equipment. Financial
        Products segment profit is determined on a pretax basis and includes other
        income/expense items.

    10. Latin America - A geographic region including Central and South American countries
        and Mexico.

    11. Machinery, Energy & Transportation (ME&T) - Represents the aggregate total of
        Construction Industries, Resource Industries, Energy & Transportation and All
        Other Segments and related corporate items and eliminations.

    12. 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
        the Operating Profit Comparison.

    13. Mark-to-market gains and losses - For our defined benefit pension and OPEB plans,
        represents the net gain or loss of actual results differing from our assumptions
        and the effects of changing assumptions. These gains and losses are immediately
        recognized through earnings upon the annual remeasurement in the fourth quarter,
        or on an interim basis as triggering events warrant remeasurement.

    14. Operating Profit Pull Through - A key metric used by management to measure the
        rate of operating profit change relative to the change in sales and revenues. The
        metric is defined as the change in operating profit divided by the change in sales
        and revenues. Excludes restructuring costs, mark-to-market gains or losses
        resulting from pension and OPEB plan remeasurements and goodwill impairment
        charges.

    15. Pension and other postemployment benefit (OPEB) - The company's defined benefit
        pension and postretirement benefit plans.

    16. 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, exit-related costs that are included in restructuring costs
        (see definition below) and mark-to-market gains or losses (see definition above).
        Period manufacturing costs support production but are defined as generally not
        having a direct relationship to short-term changes in volume. Examples include
        machinery and equipment repair, depreciation on manufacturing assets, facility
        support, procurement, factory scheduling, manufacturing planning and operations
        management. SG&A and R&D costs are not linked to the production of goods or
        services and include marketing, legal and financial services and the development
        of new and significant improvements in products or processes.

    17. 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
        geographic regions.

    18. Resource Industries - A segment primarily responsible for supporting customers
        using machinery in mining, quarry, waste, and material handling applications.
        Responsibilities include business strategy, product design, product management and
        development, manufacturing, marketing and sales and product support. The product
        portfolio includes large track-type tractors, large mining trucks, hard rock
        vehicles, longwall miners, electric rope shovels, draglines, hydraulic shovels,
        track and rotary drills, highwall miners, large wheel loaders, off-highway trucks,
        articulated trucks, wheel tractor scrapers, wheel dozers, landfill compactors,
        soil compactors, material handlers, continuous miners, scoops and haulers,
        hardrock continuous mining systems, select work tools, machinery components and
        electronics and control systems. In addition to equipment, Resource Industries
        also develops and sells technology to provide customers fleet management,
        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 development.

    19. Restructuring Costs - Primarily costs for employee separation costs, long-lived
        asset impairments and contract terminations. These costs are included in Other
        Operating (Income) Expenses. Restructuring costs also include other exit-related
        costs primarily for inventory write-downs, accelerated depreciation and equipment
        relocation (primarily included in Cost of goods sold) and sales discounts and
        payments to dealers and customers related to discontinued products (included in
        Sales of ME&T).

    20. 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.

    21. Surface Mining & Technology - A goodwill reporting unit included in Resource
        Industries. Its product portfolio includes large mining trucks, electric rope
        shovels, draglines, hydraulic shovels and related parts. In addition to equipment,
        Surface Mining & Technology also develops and sells technology products and
        services to provide customer fleet management, equipment management analytics and
        autonomous machine capabilities.

    22. 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
        supplies that are consumed in the manufacturing process.

NON-GAAP FINANCIAL MEASURES 

The following definitions are provided for "non-GAAP financial measures" in connection with Regulation G issued by the Securities and Exchange Commission. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or substituted for the related GAAP measure.

Adjusted Profit 

We believe it is important to separately quantify the profit impact of several special items in order for our results to be meaningful to our readers. These items consist of (i) restructuring costs, which are incurred in the current year to generate longer term benefits, (ii) pension and OPEB mark-to-market losses resulting from plan remeasurements, (iii) goodwill impairment charges and (iv) state deferred tax valuation allowances. We do not consider these items indicative of earnings from ongoing business activities and believe the non-GAAP measure will provide useful perspective on underlying business results and trends, and a means to assess our period-over-period results.

Reconciliations of adjusted profit before taxes to the most directly comparable GAAP measure, consolidated profit before taxes, are as follows:   


   
                                        Fourth Quarter            Full Year
     (millions of dollars)            2015          2016      2015        2016
     Profit (Loss) before taxes      ($247)      ($1,348)   $3,439        $139
     Restructuring costs              $679          $395      $898      $1,019
     Mark-to-market losses            $214          $985      $179        $985
     Goodwill impairment                 -          $595         -        $595
     Adjusted profit before taxes     $646          $627    $4,516      $2,738

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


   

                        Fourth Quarter              Full Year              Outlook
                       2015         2016         2015       2016      2016[1]    2017[2]
    Profit
    (Loss) per
    share            ($0.16)      ($2.00)       $4.18     ($0.11)      $2.35       $2.30
    Per share
    restructuring
    costs[3]         $0.76         $0.45        $0.98      $1.16       $0.90       $0.60
    Per share
    mark-to-market
    losses[3]        $0.23         $1.14        $0.19      $1.15           -           -
    Per share
    goodwill
    impairment[4]        -         $0.98            -      $0.98           -           -
    Per share
    state
    deferred tax
    valuation
    allowance            -         $0.24            -      $0.24           -           -
    Adjusted
    profit per
    share            $0.83         $0.83        $5.35      $3.42       $3.25       $2.90
   

    Per share amounts computed using fully diluted shares outstanding
    except for consolidated loss per share, which was computed using
    basic shares outstanding

    [1]2016 outlook as of October 25, 2016. Sales and Revenues
    Outlook of about $39 billion.
    [2]2017 Sales and Revenues Outlook in a range of $36 billion to
    $39 billion. Profit per share at midpoint.
    [1]-[2 ]Outlook profit per share does not include any impact from
    mark-to-market gains or losses resulting from pension and OPEB
    plan remeasurements.
    [3]At statutory tax rates.
    [4]Includes a $17 million tax benefit.


Machinery, Energy & Transportation 

Caterpillar defines Machinery, Energy & Transportation as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.  Machinery, Energy & Transportation information relates to the design, manufacture and marketing of our products. Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. The nature of these businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We also believe this presentation will assist readers in understanding our business. Pages 23-31 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:
               http://www.caterpillar.com/en/investors.html
               http://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          Twelve Months Ended
                                          December 31,                December 31,
                                        2016          2015         2016        2015
    Sales and revenues:


    Sales of Machinery,
    Energy & Transportation         $  8,885      $ 10,318     $ 35,773    $ 44,147
    Revenues of Financial
    Products                             689           712        2,764       2,864

    Total sales and revenues           9,574        11,030       38,537      47,011

    Operating costs:

    Cost of goods sold                 7,541         8,240       28,309      33,546              
    Selling, general and
    administrative expenses            1,483         1,255        4,686       4,951
    Research and development
    expenses                             522           572        1,951       2,119
    Interest expense of Financial
    Products                             149           147          596         587
    Goodwill impairment charge           595             -          595           -
    Other operating (income)
    expenses                             546           991        1,902       2,023

    Total operating costs             10,836        11,205       38,039       43,22  

    Operating profit (loss)           (1,262)         (175)         498       3,785

    Interest expense excluding
    Financial Products                   120           126          505         507
    Other income (expense)                34            54          146         161

    Consolidated profit (loss)
    before taxes                      (1,348)         (247)         139       3,439

    Provision (benefit) for income
    taxes                               (180)         (158)         192         916
    Profit (loss) of consolidated
    companies                         (1,168)          (89)         (53)      2,523

    Equity in profit (loss) of
    unconsolidated affiliated
    companies                              1            (1)          (6)          -

    Profit (loss) of consolidated and
    affiliated companies              (1,167)          (90)         (59)      2,523

    Less: Profit (loss) attributable to
    noncontrolling interests               4             4            8          11

    Profit (loss) [1]                $(1,171)        $ (94)      $  (67)    $ 2,512

    Profit (loss) per common share   $ (2.00)      $ (0.16)     $ (0.11)    $  4.23

    Profit (loss) per common
    share - diluted [2],[3]          $ (2.00)      $ (0.16)     $ (0.11)    $  4.18

    Weighted-average common shares
    outstanding (millions)
    - Basic                            585.8         582.3        584.3       594.3
    - Diluted [2],[3]                  585.8         582.3        584.3       601.3

    Cash dividends declared per
    common share                    $   1.54      $   1.54     $   3.08     $  3.01

 
    [1]           Profit (loss) attributable to common stockholders.
    [2]           Diluted by assumed exercise of stock-based compensation awards using the treasury stock
                  method.
    [3]           In the three months ended December 31, 2016 and 2015 and in the twelve months ended
                  December 31, 2016, the assumed exercise of stock-based compensation awards was not
                  considered because the impact would be antidilutive.


   
                                       Caterpillar Inc.
                    Condensed Consolidated Statement of Financial Position
                                         (Unaudited)
                                    (Millions of dollars)

                                             December 31,                  December 31,
                                                    2016                          2015
    Assets
               Current assets:
                     Cash and short-term                             
                     investments              $    7,168                    $    6,460
                     Receivables - trade                             
                     and other                     5,981                         6,695
                     Receivables -                                   
                     finance                       8,522                         8,991
                     Prepaid expenses
                     and other current                               
                     assets                        1,682                         1,662
                                                                     
                     Inventories                   8,614                         9,700
                                                                     
               Total current assets               31,967                        33,508

               Property, plant and                                   
               equipment - net                    15,322                        16,090
               Long-term receivables -                               
               trade and other                     1,029                         1,170
               Long-term receivables -                               
               finance                            13,556                        13,651
               Noncurrent deferred and                               
               refundable income taxes             2,790                         2,489
                                                                     
               Intangible assets                   2,349                         2,821
                                                                     
               Goodwill                            6,020                         6,615
                                                                     
               Other assets                        1,671                         1,998
                                                                     
    Total assets                              $   74,704                    $   78,342

    Liabilities
               Current liabilities:
                     Short-term
                     borrowings:
                             --
                             Machinery,
                             Energy &
                             Transportati
                             on                   $  209                    $        9
                             -- Financial                            
                             Products              7,094                         6,958
                                                                     
                     Accounts payable              4,614                         5,023
                                                                     
                     Accrued expenses              3,003                         3,116
                     Accrued wages,
                     salaries and                                    
                     employee benefits             1,296                         1,994
                                                                     
                     Customer advances             1,167                         1,146
                     Dividends payable               452                           448
                     Other current                                  
                     liabilities                   1,635                         1,671
                     Long-term debt due
                     within one year:
                             --
                             Machinery,
                             Energy &
                             Transportati
                             on                      507                           517
                             -- Financial                            
                             Products              6,155                         5,360
               Total current                                         
               liabilities                        26,132                        26,242

               Long-term debt due after
               one year:
                             --
                             Machinery,
                             Energy &
                             Transportati                            
                             on                    8,436                         8,960
                             -- Financial                            
                             Products             14,382                        16,209
               Liability for                                         
               postemployment benefits             9,357                         8,843
                                                                     
               Other liabilities                   3,184                         3,203
                                                                     
    Total liabilities                             61,491                        63,457

    Stockholders' equity
                                                                     
               Common stock                        5,277                         5,238
                                                                     
               Treasury stock                    (17,478)                      (17,640)
               Profit employed in the                                
               business                           27,377                        29,246
               Accumulated other
               comprehensive income                                  
               (loss)                             (2,039)                       (2,035)
               Noncontrolling interests               76                            76
                                                                     
    Total stockholders' equity                    13,213                        14,885
    Total liabilities and                                            
    stockholders' equity                      $   74,704                    $   78,342



   
                                       Caterpillar Inc.

                        Condensed Consolidated Statement of Cash Flow

                                         (Unaudited)

                                    (Millions of dollars)

                                                      Twelve Months Ended
                                                         December 31,
                                              2016                          2015
    Cash flow from operating
    activities:
           Profit (loss) of
           consolidated and
           affiliated companies         $    (59)                     $   2,523
           Adjustments for non-cash
           items:
                      Depreciation
                      and
                      amortization          3,034                         3,046
                      Actuarial
                      (gain) loss on
                      pension and
                      postretirement
                      benefits                985                           179
                      Provision
                      (benefit) for
                      deferred
                      income taxes          (431)                         (307)
                      Goodwill
                      impairment
                      charge                  595                             -
                      Other                   856                           453
           Changes in assets and
           liabilities, net of
           acquisitions and
           divestitures:
                      Receivables -
                      trade and
                      other                   829                           764
                      Inventories           1,109                         2,274
                      Accounts
                      payable               (200)                       (1,165)
                      Accrued
                      expenses              (201)                         (199)
                      Accrued wages,
                      salaries and
                      employee
                      benefits              (708)                         (389)
                      Customer
                      advances               (37)                         (501)
                      Other assets -
                      net                     224                           143
                      Other
                      liabilities -
                      net                   (388)                         (146)
    Net cash provided by (used
    for) operating activities               5,608                         6,675
    Cash flow from investing
    activities:
           Capital expenditures -
           excluding equipment
           leased to others               (1,109)                       (1,388)
           Expenditures for
           equipment leased to
           others                         (1,819)                       (1,873)
           Proceeds from disposals
           of leased assets and
           property, plant and
           equipment                          899                           760
           Additions to finance
           receivables                    (9,339)                       (9,929)
           Collections of finance
           receivables                      9,369                         9,247
           Proceeds from sale of
           finance receivables                127                           136
           Investments and
           acquisitions (net of
           cash acquired)                   (191)                         (400)
           Proceeds from sale of
           businesses and
           investments (net of cash
           sold)                                -                           178
           Proceeds from sale of
           securities                         694                           351
           Investments in
           securities                       (391)                         (485)
           Other - net                          -                         (114)
    Net cash provided by (used
    for) investing activities             (1,760)                       (3,517)
    Cash flow from financing
    activities:
           Dividends paid                 (1,799)                       (1,757)
           Distribution to
           noncontrolling interests           (8)                           (7)
           Common stock issued,
           including treasury
           shares reissued                   (23)                            33
           Treasury shares
           purchased                            -                       (2,025)
           Excess tax benefit from
           stock-based compensation            28                            24
           Proceeds from debt
           issued (original
           maturities greater than
           three months)                    5,115                         5,132
           Payments on debt
           (original maturities
           greater than three
           months)                        (6,565)                       (8,292)
           Short-term borrowings -
           net (original maturities
           three months or less)              140                         3,022
    Net cash provided by (used
    for) financing activities             (3,112)                       (3,870)
    Effect of exchange rate
    changes on cash                          (28)                         (169)
    Increase (decrease) in cash
    and short-term investments                708                         (881)
    Cash and short-term
    investments at beginning of
    period                                  6,460                         7,341
    Cash and short-term
    investments at end of period        $   7,168                     $   6,460

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


   
                                              Caterpillar Inc.
                                 Supplemental Data for Results of Operations
                                For the Three Months Ended December 31, 2016
                                                 (Unaudited)
                                            (Millions of dollars)

                                                  Supplemental Consolidating Data
                                       
                                        Machinery,           
                                         Energy &             Financial      Consolidating
                       Consolidated    Transportation [1]       Products       Adjustments
    Sales and
    revenues:
         Sales of
         Machinery,
         Energy &
         Transporta
         tion              $ 8,885         $ 8,885                 $   -        $     -
         Revenues
         of
         Financial
         Products              689               -                   760            (71)[2]
         Total
         sales and
         revenues            9,574           8,885                   760            (71)

    Operating
    costs:
         Cost of
         goods sold          7,541           7,542                     -             (1) [3]
         Selling,
         general
         and
         administra
         tive
         expenses            1,483           1,335                   149             (1) [3]
         Research
         and
         development
         expenses              522             522                     -              -
         Interest
         expense of
         Financial
         Products              149               -                   153             (4) [4]
         Goodwill
         impairment
         charge                595             595                     -              -
         Other
         operating
         (income)
         expenses              546             236                   318             (8) [3]
         Total
         operating                       
         costs              10,836          10,230                   620            (14)

    Operating                            
    profit (loss)           (1,262)         (1,345)                  140            (57)

         Interest
         expense
         excluding
         Financial
         Products              120             131                     -            (11) [4]
         Other
         income
         (expense)              34             (17)                    5             46 [5]

    Consolidated
    profit (loss)                        
    before taxes            (1,348)         (1,493)                  145              -

         Provision
         (benefit)
         for income
         taxes                (180)           (222)                   42              -
         Profit
         (loss) of
         consolidat
         ed                              
         companies          (1,168)         (1,271)                  103              -

         Equity in
         profit
         (loss) of
         unconsolid
         ated
         affiliated
         companies               1               1                     -              -
         Equity in
         profit of
         Financial
         Products'
         subsidiari
         es                      -             101                     -           (101) [6]

    Profit (loss)
    of
    consolidated
    and affiliated                       
    companies               (1,167)         (1,169)                  103           (101)

    Less: Profit
    (loss)
    attributable
    to
    noncontrolling
    interests                    4               2                     2              -

    Profit (loss)                        
    [7]                $    (1,171)    $    (1,171)                $ 101         $ (101)

               Represents Caterpillar Inc. and its subsidiaries with Financial
    [1]        Products accounted for on the equity basis.
               Elimination of Financial Products' revenues earned from Machinery,
    [2]        Energy & Transportation.
               Elimination of net expenses recorded by Machinery, Energy &
    [3]        Transportation paid to Financial Products.
               Elimination of interest expense recorded between Financial Products and
    [4]        Machinery, Energy & Transportation.
               Elimination of discount recorded by Machinery, Energy & Transportation
               on receivables sold to Financial Products and of interest earned
    [5]        between Machinery, Energy & Transportation and Financial Products.
               Elimination of Financial Products' profit due to equity method of
    [6]        accounting.
    [7]        Profit (loss) attributable to common stockholders.



   
                                              Caterpillar Inc.
                                 Supplemental Data for Results of Operations
                                For the Three Months Ended December 31, 2015

                                                 (Unaudited)
                                            (Millions of dollars)

                                                         Supplemental Consolidating Data
                                              
                                              Machinery,       
                                                Energy &        Financial    Consolidating
                          Consolidated     Transportation [1]   Products       Adjustments
    Sales and
    revenues:
         Sales of
         Machinery,
         Energy &
         Transporta                      
         tion          $     10,318          $     10,318          $   -       $     -
         Revenues
         of
         Financial
         Products               712                     -            789           (77) [2]
         Total
         sales and                       
         revenues            11,030                10,318            789           (77)

    Operating
    costs:
         Cost of
         goods sold           8,240                 8,242              -            (2) [3]
         Selling,
         general
         and
         administra
         tive
         expenses             1,255                 1,120            144            (9) [3]
         Research
         and
         development
         expenses               572                   572              -             -
         Interest
         expense of
         Financial
         Products               147                     -            148            (1) [4]
         Other
         operating
         (income)
         expenses               991                   672            321            (2) [3]
         Total
         operating                       
         costs               11,205                10,606            613           (14)

    Operating
    profit (loss)              (175)                 (288)           176           (63)

         Interest
         expense
         excluding
         Financial
         Products               126                   137              -           (11) [4]
         Other
         income
         (expense)               54                   (24)            26            52 [5]

    Consolidated
    profit (loss)
    before taxes               (247)                 (449)           202             -

         Provision
         (benefit)
         for income
         taxes                 (158)                 (199)            41             -
         Profit
         (loss) of
         consolidat
         ed
         companies              (89)                 (250)           161             -

         Equity in
         profit
         (loss) of
         unconsolid
         ated
         affiliated
         companies               (1)                   (1)             -             -
         Equity in
         profit of
         Financial
         Products'
         subsidiari
         es                       -                   162              -          (162) [6]

    Profit (loss)
    of
    consolidated
    and affiliated
    companies                   (90)                  (89)           161          (162)

    Less: Profit
    (loss)
    attributable
    to
    noncontrolling
    interests                     4                     5             (1)            -

    Profit (loss)
    [7]                      $  (94)               $  (94)         $ 162        $ (162)

               Represents Caterpillar Inc. and its subsidiaries with Financial
    [1]        Products accounted for on the equity basis.
               Elimination of Financial Products' revenues earned from Machinery,
    [2]        Energy & Transportation.
               Elimination of net expenses recorded by Machinery, Energy &
    [3]        Transportation paid to Financial Products.
               Elimination of interest expense recorded between Financial Products and
    [4]        Machinery, Energy & Transportation.
               Elimination of discount recorded by Machinery, Energy & Transportation
               on receivables sold to Financial Products and of interest earned
    [5]        between Machinery, Energy & Transportation and Financial Products.
               Elimination of Financial Products' profit due to equity method of
    [6]        accounting.
    [7]        Profit (loss) attributable to common stockholders.



   
                                              Caterpillar Inc.
                                Supplemental Data for Results of Operations
                               For the Twelve Months Ended December 31, 2016
                                                (Unaudited)
                                           (Millions of dollars)

                                                Supplemental Consolidating Data
                                          Machinery,
                                           Energy &            Financial      Consolidating
                     Consolidated     Transportation [1]       Products        Adjustments
    Sales and
    revenues:
         Sales of
         Machinery,
         Energy &
         Transporta                      
         tion          $   35,773   $     35,773                 $   -              $     -
         Revenues
         of
         Financial                                               
         Products           2,764              -                 3,065            (301) [2]
         Total
         sales and                                          
         revenues          38,537         35,773                 3,065            (301)

    Operating
    costs:
         Cost of                         
         goods sold        28,309         28,311                     -              (2) [3]
         Selling,
         general
         and
         administra
         tive           
         expenses           4,686          4,129                   573             (16) [3]
         Research
         and
         development     
         expenses           1,951          1,951                     -                -
         Interest
         expense of
         Financial
         Products             596              -                   611              (15) [4]
         Goodwill
         impairment
         charge               595            595                     -                -
         Other
         operating
         (income)                                                
         expenses           1,902            698                 1,232              (28) [3]
         Total
         operating                                          
         costs             38,039         35,684                 2,416              (61)

    Operating
    profit                    498             89                   649             (240)

         Interest
         expense
         excluding
         Financial
         Products             505            553                     -             (48) [4]
         Other
         income
         (expense)            146            (89)                   43              192 [5]

    Consolidated
    profit (loss)
    before taxes              139           (553)                  692                -

         Provision
         (benefit)
         for income
         taxes                192            (24)                  216                -
         Profit
         (loss) of
         consolidat
         ed
         companies            (53)          (529)                  476                -

         Equity in
         profit
         (loss) of
         unconsolid
         ated
         affiliated
         companies             (6)            (6)                    -                -
         Equity in
         profit of
         Financial
         Products'
         subsidiari
         es                     -            470                     -             (470) [6]

    Profit (loss)
    of
    consolidated
    and affiliated
    companies                 (59)           (65)                  476             (470)

    Less: Profit
    (loss)
    attributable
    to
    noncontrolling
    interests                   8              2                     6                -

    Profit (loss)
    [7]                     $ (67)        $  (67)                $ 470           $ (470)

               Represents Caterpillar Inc. and its subsidiaries with Financial
    [1]        Products accounted for on the equity basis.
               Elimination of Financial Products' revenues earned from Machinery,
    [2]        Energy & Transportation.
               Elimination of net expenses recorded by Machinery, Energy &
    [3]        Transportation paid to Financial Products.
               Elimination of interest expense recorded between Financial Products
    [4]        and Machinery, Energy & Transportation.
               Elimination of discount recorded by Machinery, Energy & Transportation
               on receivables sold to Financial Products and of interest earned
    [5]        between Machinery, Energy & Transportation and Financial Products.
               Elimination of Financial Products' profit due to equity method of
    [6]        accounting.
    [7]        Profit (loss) attributable to common stockholders.



   
                                             Caterpillar Inc.
                                Supplemental Data for Results of Operations
                               For the Twelve Months Ended December 31, 2015
                                                (Unaudited)
                                           (Millions of dollars)

                                               Supplemental Consolidating Data
                                       Machinery,
                                        Energy &         Financial         Consolidating
                   Consolidated    Transportation [1]    Products           Adjustments
    Sales and
    revenues:
         Sales of
         Machinery,
         Energy &
         Transporta                      
         tion          $ 44,147      $     44,147          $   -              $    -
         Revenues
         of
         Financial                                               
         Products         2,864                 -          3,179                (315) [2]
         Total
         sales and                                          
         revenues        47,011            44,147          3,179                (315)

    Operating
    costs:
         Cost of                         
         goods sold      33,546            33,548              -                  (2) [3]
         Selling,
         general
         and
         administra
         tive           
         expenses         4,951             4,389            588                 (26) [3]
         Research
         and
         development     
         expenses         2,119             2,119              -                   -
         Interest
         expense of
         Financial
         Products           587                 -            593                  (6) [4]
         Other
         operating
         (income)                                                
         expenses         2,023               821          1,224                 (22) [3]
         Total
         operating                                          
         costs           43,226            40,877          2,405                 (56)

    Operating           
    profit                3,785             3,270            774                (259)

         Interest
         expense
         excluding
         Financial
         Products           507               550              -                 (43) [4]
         Other
         income
         (expense)          161             (103)             48                 216 [5]

    Consolidated
    profit before        
    taxes                 3,439             2,617            822                   -

         Provision
         (benefit)
         for income
         taxes              916               686            230                   -
         Profit of
         consolidat
         ed             
         companies        2,523             1,931            592                   -

         Equity in
         profit
         (loss) of
         unconsolid
         ated
         affiliated
         companies            -                 -              -                   -
         Equity in
         profit of
         Financial
         Products'
         subsidiari
         es                   -               591              -                (591) [6]

    Profit of
    consolidated
    and affiliated      
    companies             2,523             2,522            592                (591)

    Less: Profit
    (loss)
    attributable
    to
    noncontrolling
    interests                11                10              1                   -

                        
    Profit [7]         $  2,512           $ 2,512          $ 591              $ (591)

               Represents Caterpillar Inc. and its subsidiaries with Financial
    [1]        Products accounted for on the equity basis.
               Elimination of Financial Products' revenues earned from Machinery,
    [2]        Energy & Transportation.
               Elimination of net expenses recorded by Machinery, Energy &
    [3]        Transportation paid to Financial Products.
               Elimination of interest expense recorded between Financial Products
    [4]        and Machinery, Energy & Transportation.
               Elimination of discount recorded by Machinery, Energy &
               Transportation on receivables sold to Financial Products and of
               interest earned between Machinery, Energy & Transportation and
    [5]        Financial Products.
               Elimination of Financial Products' profit due to equity method of
    [6]        accounting.
    [7]        Profit attributable to common stockholders.



   
                                                      Caterpillar Inc.
                                               Supplemental Data for Cash Flow
                                        For the Twelve Months Ended December 31, 2016
                                                         (Unaudited)
                                                    (Millions of dollars)

                                                         Supplemental Consolidating Data
                                              Machinery,
                                              Energy &         Financial    Consolidating
                           Consolidated   Transportation [1]    Products     Adjustments
    Cash flow from
    operating
    activities:
        Profit (loss) of
        consolidated and
        affiliated
        companies              $  (59)       $  (65)             $   476    $ (470) [2]
        Adjustments for
        non-cash items:
             Depreciation
             and
             amortization        3,034         2,144                 890          -
             Actuarial
             (gain) loss
             on pension
             and
             postretireme
             nt benefits           985           985                   -          -
             Provision
             (benefit)
             for deferred
             income taxes        (431)         (533)                 111        (9) [4]
             Goodwill
             impairment
             charge                595           595                   -          -
             Other                 856           687                (36)        205 [4]
        Financial
        Products'
        dividend in
        excess of profit             -           162                   -       (162) [3]
        Changes in
        assets and
        liabilities, net
        of acquisitions
        and
        divestitures:
             Receivables                                                                                         
             - trade and                                                                                         
             other                 829           171                (34)        692 [4],[5]
             Inventories         1,109         1,113                   -         (4) [4]
             Accounts
             payable             (200)         (168)                  31        (63) [4]
             Accrued
             expenses            (201)         (142)                (59)           -
             Accrued
             wages,
             salaries and
             employee
             benefits            (708)         (693)                (15)           -
             Customer
             advances             (37)          (37)                   -           -
             Other assets
             - net                 224            77                 145           2 [4]
             Other
             liabilities
             - net               (388)         (439)                  44           7 [4]
    Net cash provided
    by (used for)
    operating
    activities                   5,608         3,857               1,553         198
    Cash flow from
    investing
    activities:
        Capital
        expenditures -
        excluding
        equipment leased                            
        to others              (1,109)       (1,099)                (11)           1 [4]
        Expenditures for
        equipment leased                                                    
        to others              (1,819)         (107)             (1,760)          48 [4]
        Proceeds from
        disposals of
        leased assets
        and property,
        plant and
        equipment                  899           125                 805        (31) [4]
        Additions to
        finance                                                             
        receivables            (9,339)             -            (11,862)       2,523 [5]
        Collections of
        finance                                                                                       
        receivables              9,369             -              12,341     (2,972) [5]
        Net intercompany
        purchased
        receivables                  -             -                 399       (399) [5]
        Proceeds from
        sale of finance
        receivables                127             -                 127           -
        Net intercompany
        borrowings                   -         (542)                   1         541 [6]
        Investments and
        acquisitions
        (net of cash
        acquired)                (191)         (191)                   -           -
        Proceeds from
        sale of
        securities                 694            30                 664           -
        Investments in
        securities               (391)          (24)               (367)           -
        Other - net                  -            31                (38)           7 [8]
    Net cash provided
    by (used for)
    investing                                       
    activities                 (1,760)       (1,777)                 299       (282)
    Cash flow from
    financing
    activities:
                                                    
        Dividends paid         (1,799)       (1,799)               (632)         632 [7]
        Distribution to
        noncontrolling
        interests                  (8)           (8)                   -           -
        Common stock
        issued,
        including
        treasury shares
        reissued                  (23)          (23)                   7         (7) [8]
        Excess tax
        benefit from
        stock-based
        compensation                28            28                   -           -
        Net intercompany
        borrowings                   -           (1)                 542       (541) [6]
        Proceeds from
        debt issued
        (original
        maturities
        greater than
        three months)            5,115             6               5,109           -
        Payments on debt
        (original
        maturities
        greater than                                                        
        three months)          (6,565)         (533)             (6,032)           -
        Short-term
        borrowings - net
        (original
        maturities three
        months or less)            140           201                (61)           -
    Net cash provided
    by (used for)
    financing                                                          
    activities                 (3,112)       (2,129)             (1,067)          84
    Effect of exchange
    rate changes on
    cash                          (28)          (34)                   6           -
    Increase (decrease)
    in cash and
    short-term
    investments                    708          (83)                 791           -
    Cash and short-term
    investments at
    beginning of period          6,460         5,340               1,120           -
    Cash and short-term
    investments at end
    of period                  $ 7,168       $ 5,257             $ 1,911     $     -

        Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for
    [1] on the equity basis.
    [2] Elimination of Financial Products' profit after tax due to equity method of accounting.
        Elimination of Financial Products' dividend to Machinery, Energy & Transportation in
    [3] excess of Financial Products' profit.
        Elimination of non-cash adjustments and changes in assets and liabilities related to
    [4] consolidated reporting.
        Reclassification of Financial Products' cash flow activity from investing to operating
    [5] for receivables that arose from the sale of inventory.
        Elimination of net proceeds and payments to/from Machinery, Energy & Transportation and
    [6] Financial Products.
    [7] Elimination of dividend from Financial Products to Machinery, Energy & Transportation.
    [8] Elimination of change in investment and common stock related to Financial Products.



   
                                                     Caterpillar Inc.
                                             Supplemental Data for Cash Flow
                                      For the Twelve Months Ended December 31, 2015
                                                       (Unaudited)
                                                  (Millions of dollars)

                                                       Supplemental Consolidating Data
                                                 Machinery,
                                                  Energy &        Financial  Consolidating
                             Consolidated    Transportation [1]   Products    Adjustments
    Cash flow from
    operating activities:
       Profit of
       consolidated and
       affiliated companies     $ 2,523             $ 2,522     $   592     $ (591) [2]
       Adjustments for
       non-cash items:
                 Depreciation
                 and
                 amortization     3,046               2,164         882           -
                 Actuarial
                 (gain) loss
                 on pension
                 and
                 postretireme
                 nt benefits        179                 179           -           -
                 Provision
                 (benefit)
                 for deferred
                 income taxes     (307)               (425)         118           -
                 Other              453                 343       (138)         248 [4]
       Financial Products'
       dividend in excess
       of profit                      -                   9           -         (9) [3]
       Changes in assets
       and liabilities, net
       of acquisitions and
       divestitures:
                 Receivables
                 - trade and                                                                                
                 other              764                 461        (85)         388 [4],[5]
                 Inventories      2,274               2,280           -         (6) [4]
                 Accounts                       
                 payable        (1,165)             (1,343)          95          83 [4]
                 Accrued
                 expenses         (199)               (223)          11          13 [4]
                 Accrued
                 wages,
                 salaries and
                 employee
                 benefits         (389)               (390)           1           -
                 Customer
                 advances         (501)               (501)           -           -
                 Other assets
                 - net              143                 192        (55)           6 [4]
                 Other
                 liabilities
                 - net            (146)                (93)        (34)        (19) [4]
    Net cash provided by
    (used for) operating
    activities                    6,675               5,175       1,387         113
    Cash flow from
    investing activities:
       Capital expenditures
       - excluding
       equipment leased to                      
       others                   (1,388)             (1,373)        (16)           1 [4]
       Expenditures for
       equipment leased to                                                  
       others                   (1,873)               (257)     (1,643)          27 [4]
       Proceeds from
       disposals of leased
       assets and property,
       plant and equipment          760                 114         655         (9) [4]
       Additions to finance                                                                       
       receivables              (9,929)                   -    (12,928)       2,999 [5],[8]
       Collections of                                                                            
       finance receivables        9,247                   -      12,227     (2,980) [5]
       Net intercompany
       purchased
       receivables                    -                   -         745       (745) [5]
       Proceeds from sale
       of finance
       receivables                  136                   -         136           -
       Net intercompany
       borrowings                     -                   -           1         (1) [6]
       Investments and
       acquisitions (net of
       cash acquired)             (400)               (400)           -           -
       Proceeds from sale
       of businesses and
       investments (net of
       cash sold)                   178                 184           -         (6) [8]
       Proceeds from sale
       of securities                351                  25         326           -
       Investments in
       securities                 (485)                (27)       (458)           -
       Other - net                (114)                (49)        (65)           -
    Net cash provided by
    (used for) investing                                               
    activities                  (3,517)             (1,783)     (1,020)       (714)
    Cash flow from
    financing activities:
                                                
       Dividends paid           (1,757)             (1,757)       (600)         600 [7]
       Distribution to
       noncontrolling
       interests                    (7)                 (7)           -           -
       Common stock issued,
       including treasury
       shares reissued               33                  33           -           -
       Treasury shares                          
       purchased                (2,025)             (2,025)           -           -
       Excess tax benefit
       from stock-based
       compensation                  24                  24           -           -
       Net intercompany
       borrowings                     -                 (1)           -           1 [6]
       Proceeds from debt
       issued (original
       maturities greater
       than three months)         5,132                   3       5,129           -
       Payments on debt
       (original maturities
       greater than three                                                   
       months)                  (8,292)               (517)     (7,775)           -
       Short-term
       borrowings - net
       (original maturities
       three months or
       less)                      3,022                   4       3,018           -
    Net cash provided by
    (used for) financing                        
    activities                  (3,870)             (4,243)       (228)         601
    Effect of exchange
    rate changes on cash          (169)               (126)        (43)           -
    Increase (decrease) in
    cash and short-term
    investments                   (881)               (977)          96           -
    Cash and short-term
    investments at
    beginning of period           7,341               6,317       1,024           -
    Cash and short-term
    investments at end of
    period                      $ 6,460             $ 5,340     $ 1,120     $     -

            Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted
    [1]     for on the equity basis.
            Elimination of Financial Products' profit after tax due to equity method of
    [2]     accounting.
            Elimination of Financial Products' dividend to Machinery, Energy & Transportation in
    [3]     excess of Financial Products' profit.
            Elimination of non-cash adjustments and changes in assets and liabilities related to
    [4]     consolidated reporting.
            Reclassification of Financial Products' cash flow activity from investing to
    [5]     operating for receivables that arose from the sale of inventory.
            Elimination of net proceeds and payments to/from Machinery, Energy & Transportation
    [6]     and Financial Products.
            Elimination of dividend from Financial Products to Machinery, Energy &
    [7]     Transportation.
            Elimination of proceeds received from Financial Products related to Machinery,
    [8]     Energy & Transportation's sale of businesses and investments.


CONTACT: Rachel Potts, +1-309-675-6892 (Office), +1-309-573-3444 (Mobile) or Potts_Rachel_A@cat.com


This is a disclosure announcement from PR Newswire.

Copyright 2017 PR Newswire

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