Questions and Answers Economy / Sales Q1: What are your
expectations for U.S. housing? A: We project housing will weaken
further in the first half and then begin to improve later in the
year. We expect housing starts will be approximately 900 thousand
units, about the same as 2008. The more than 20-percent decline in
home prices since early 2006 and recent declines in mortgage
interest rates have already improved housing affordability to near
the record highs reached in the early 1970s. We expect mortgage
interest rates will decline below 4.5 percent, further improving
affordability. Q2: What's your forecast for key commodity prices in
2009? A: We project West Texas Intermediate crude oil will average
a little more than $40 per barrel, down from $100 in 2008. Copper
prices should average about $1.10 per pound, compared to $3.15 in
2008. Both price forecasts are below prices that we believe would
be attractive to launch new projects. Our forecast for the Central
Appalachian coal price is more than $40 per ton in 2009, down from
$89 in 2008. That price should be sufficiently high enough to
encourage about a 0.5 percent increase in coal production in the
United States. Coal prices in the rest of the world should also be
high enough to cause producers to increase output. Q3: What is the
forecast for economic growth in China, and how will the China
stimulus package impact Caterpillar? A: We estimate the Chinese
economy will grow about 7.5 percent this year, down from 9 percent
last year. The government recently announced a $586 billion
stimulus package to be spread over two years. Total construction
spending last year was about $900 billion, so the package should
help offset the slowing in construction that is underway. We do not
anticipate that this package, on its own, will stop the recent
decline in the Chinese machine industry. Q4: How do you expect the
U.S. stimulus package to impact Caterpillar? A: Our initial
assessment is that the package might have up to $150 billion in
infrastructure-related spending, spread over a two-year period. If
enacted quickly, perhaps $50 billion could be spent in 2009. That
expenditure would represent about 5 percent of total U.S.
construction spending in 2008 and would likely require some
increase in equipment purchases to handle the added work in
addition to increased utilization of the existing machine
population. Other measures in the package, such as tax cuts and
actions to improve the housing industry, could indirectly benefit
construction. Q5: How have dealer inventories changed recently, are
they too high, and what do you expect to happen in 2009? A: The
worse-than-expected weakening in dealer deliveries has contributed
to higher dealer inventories, in both dollars and months of supply.
We allowed dealers to cancel orders so that they could more quickly
adjust inventories to more appropriate amounts. We anticipate
dealers will reduce inventories this year around $1.5 billion, with
much of it occurring during the first half. Q6: Can you discuss
your order backlog in total for Caterpillar? How has it changed
since year-end 2007? Has it deteriorated over the past quarter? A:
Dealers reported significant slowdowns or declines in deliveries to
end users in fourth quarter 2008 and reduced their orders. We also
allowed dealers to cancel orders. As a result, our order backlog
declined significantly in the fourth quarter and ended the year at
$14.7 billion, well below the year-end 2007 level of $17.8 billion.
Q7: Can you address the backlog for mining products? A: We have a
mining order backlog today; however, as customers continue to
"delay" existing and greenfield expansions these orders are getting
pushed out accordingly. We are in constant dialogue with our
customers and dealers and are working through these issues. -- In
most cases, mining companies are delaying, not cancelling,
expansion plans. -- Both the speed and magnitude of the drop in
commodity prices, especially base metals, has driven short-term
cancellations and delays. -- Mining companies, like other
industries, have increased costs to obtain capital. -- Some
customers are highly leveraged, forcing short-term cost shedding
and capital preservation. -- We expect that global stimulus
packages will help improve demand and commodity prices. Engines Q8:
Can you address the backlog and sales prospects for 2009 for large
engines and turbines? A: The order backlog for turbines has
remained strong due to equipment order lead times. While declines
have varied by product family and model, we have seen a reduction
in reciprocating engine backlogs as order rates have abruptly
declined in all industries and cancellations have increased. As a
result, we have made necessary production cuts to address these
declines and have been able to improve availability in all
products. We anticipate weaker sales in 2009 and will continue to
make the appropriate production scheduling adjustments as needed.
Q9: What impact will your early exit from on-highway truck engines
have? A: We began to manage costs down and redeploy resources away
from the truck engine business in late 2008. This will continue
through the first half of 2009 as we fulfill the last customer
requirements. In December 2008, we announced a layoff affecting up
to 814 of our production workforce at the Mossville facility. This
is a result of exiting the on-highway engine business, coupled
with, lower demand for off-highway engines. Costs / Employment Q10:
You are going ahead with the new factories in Texas and Arkansas.
Why are you continuing with new U.S. capacity expansion? A: The new
facility in Texas represents a strategic long-term priority for
Caterpillar. The new facility will deliver a state-of-the-art
engine assembly process focused on producing the high-quality
products for which Caterpillar is known. The new assembly process
will be sized appropriately for our continuing off-highway engine
business and result in a more cost-effective assembly process. The
Texas location is also strategically located to the source of major
engine components and closer to a major seaport for export engines.
While the current market conditions are challenging, Caterpillar
must invest now to prepare for the introduction of Tier 4 off-
highway engines required in the more regulated markets after 2011.
The new facility in North Little Rock, Arkansas, represents an
important, long-term strategic step for Caterpillar. This facility
will be the North American home for Caterpillar's line of motor
graders. Manufacturing operations will be state-of-the-art, solely
dedicated to motor grader production, which will result in more
cost-effective production of motor graders. While the current
economic conditions are challenging, the new facility will support
the introduction of our Tier 4 compliant motor grader in 2010. The
move of motor grader production from our Decatur, Illinois,
facility also frees up space in Decatur to support the long-term
growth of our large off-highway truck business. We believe the
benefits from moving production of our motor grader line will
improve Caterpillar's long-term competitiveness for both motor
graders and large off-highway trucks. Q11: What do you expect
relative to R&D in 2009, and what about spending related to
Tier 4? A: We expect R&D expenses to decline somewhat in 2009
from 2008 levels. Sharper cuts are not likely as we continue to do
the product development required to meet Tier 4 emissions
requirements. We are prioritizing our R&D spending to focus on
Tier 4 commitments and to fund key technologies that will continue
to allow Caterpillar to provide industry leading customer value.
Q12: Summarize the impact of the consolidation of Cat Japan on
fourth quarter sales and profit. A: The consolidation of Cat Japan
added $261 million to fourth quarter sales but was about neutral to
profit. Cash Flow / Financial Position Q13: Outside of Cat
Financial, what has been Caterpillar's recent experience with debt
markets? Do you have access to capital? A: The problems in the
credit markets have had limited impact on Caterpillar Inc. due to
our strong credit rating. We have been able to maintain normal
operations and fund our needs. Caterpillar Inc. successfully issued
$1.5 billion of long-term debt in early December. The offering
generated strong investor demand. There also is strong demand for
our commercial paper and we have benefited from very low interest
rates on commercial paper. Q14: There seems to be more cash than
usual on your balance sheet, can you explain why? A: The enterprise
had $2.7 billion of cash at year-end 2008, an increase of $1.6
billion from year-end 2007. We increased our short-term borrowings
to provide a cushion of extra cash in the event that short-term
credit markets become disrupted. Q15: Can you summarize what
happened to your pension and other postretirement benefit plans in
2008 and how that impacts 2009? A: Accounting standards require
that we recognize the over-funded or under-funded status of our
pension and other postretirement benefit plan liabilities on our
balance sheet at the end of each year. Asset losses in our pension
and postretirement benefit plans were in excess of 30 percent in
2008. The funded status of our pension plans declined from 93
percent at the end of 2007 to 61 percent at the end of 2008. The
funded status of our postretirement benefit plans, which are not
required to be funded, declined from 29 percent to 21 percent. This
increase in unfunded liabilities resulted in a $3.4 billion charge
to Other Comprehensive Income (OCI), which is a component of
equity, in the fourth quarter of 2008. This non-cash charge to
equity negatively affected our debt-to-capital ratio by
approximately 11 percentage points. We expect to contribute
approximately $1 billion to our pension plans in 2009 compared with
$422 million in 2008. In addition, we expect our pension and other
postretirement benefit plan expenses to increase approximately $300
million in 2009, excluding any impact of redundancy charges. Q16:
What is your Machinery & Engines debt-to-capital ratio and how
has it changed over the course of the year? A: The debt-to-capital
ratio for Machinery and Engines was 57.9 percent at the end of
2008, above our target range of 35 to 45 percent. The $3.4 billion
equity reduction from pension and other postretirement benefits
increased the debt-to-capital ratio 11 percentage points. Our extra
cash cushion increased short-term debt and added 3 percentage
points to the debt-to-capital ratio. Additionally, in 2008 the
consolidation of Cat Japan increased the debt-to-capital ratio
about 7 percent. Financial Products Q17: Why did Financial Products
profit drop in fourth quarter compared to fourth-quarter 2007 when
revenues were higher? Can you discuss any unusual items that
affected your fourth-quarter results? A: Financial Products pre-tax
loss was $24 million for the fourth quarter of 2008, compared with
a pre-tax profit of $181 million in the fourth quarter of 2007. At
Cat Financial, profitability related directly to the portfolio was
down $77 million and consisted of a decreased net yield on average
earning assets and a higher provision for credit losses, partially
offset by higher average earning assets. In addition, interest rate
volatility in the fourth quarter resulted in mark-to-market
adjustments on interest rate derivative contracts, which lowered
profit $47 million compared to 2007. Cat Financial also reported a
$20 million currency exchange loss in the fourth quarter of 2008,
compared to a $4 million gain in 2007, and due to worse than
expected loss experience, recorded a $15 million write-down in
retained interests related to the securitized asset portfolio. In
addition, at Cat Insurance there was a $33 million charge related
to equity investments within the Cat Insurance investment
portfolio. Q18: Give us an update on the quality of Cat Financial's
asset portfolio. How are past dues, credit losses and allowances?
A: Key portfolio metrics remain somewhat stressed due to global
economic conditions. At the end of 2008, past dues were 3.88
percent compared with 2.36 percent at the end of 2007. The U.S. has
not yet shown signs of recovery, and we see continued slowing in
other geographical locations. We expect there will be continued
upward pressure on past dues throughout 2009. Bad debt write-offs,
net of recoveries, were $61 million for the fourth quarter of 2008
compared with $27 million for the fourth quarter of 2007; $31
million of the increase was driven by economic conditions primarily
in North America and $3 million was due to the 12-percent growth in
Cat Financial's average retail finance receivable portfolio. For
the full year of 2008, bad debt write- offs, net of recoveries,
were $121 million compared with $68 million for the full year of
2007. At the end of 2008, Cat Financial's allowance for credit
losses totaled $395 million, an increase of $42 million from the
end of 2007. Of the increase, $28 million is attributable to growth
in the retail finance receivable portfolio while $14 million
resulted from the increase in the allowance rate from 1.39 percent
to 1.44 percent of net finance receivables. Q19: How do these asset
quality metrics compare with prior recessions? A: At the end of
2008, past dues were 3.88 percent. As an historical comparison,
total Cat Financial past dues during the last U.S. recession were
4.78 percent at their peak at the end of the first quarter of 2002.
Total write-offs, net of recoveries for the full year of 2002 were
0.69 percent of our average retail portfolio, significantly higher
than the full-year 2008 rate of 0.48 percent. Cat Financial's
allowance for credit losses, totaling $395 million at the end of
2008, is appropriate for the current and expected global economic
environment. Q20: What are you expecting relative to past dues and
losses in 2009? A: Consistent with our 2009 economic outlook and
expected further weakening of the global economy, we expect past
dues and write-offs will likely be higher in 2009 compared with
2008. Cat Financial increased the allowance for credit losses to
$395 million, or 1.44 percent of net finance receivables at the end
of 2008, which we feel is appropriate for the current and expected
global economic environment. Should economic conditions worsen
beyond expectations, additional increases to Cat Financial's
allowance for credit losses may be needed. Q21: Describe your
access to debt markets over the past quarter. A: Generally, term
debt markets were fragile during the fourth quarter. In December
2008, Cat Financial issued $463 million in Cat Power Notes in the
U.S. These retail notes are unsecured demand notes sold through
brokers and dealers. The retail notes' terms range from 2 to 7
years. Credit spreads were elevated compared with normal levels
during the fourth quarter. Cat Financial did not issue medium-term
debt in the fourth quarter. Since year-end, the U.S. and certain
international debt markets, notably Europe, have improved with a
corresponding improvement in credit spreads. Q22: How much
commercial paper do you have, and do you have commercial paper with
maturities beyond a few days? A: Cat Financial has maintained
access to commercial paper (CP) markets throughout the credit
market disruption to fund ongoing operations. At year-end 2008, Cat
Financial had $5.244 billion in global CP outstanding. Of this
amount, 90 percent was in maturities beyond one week. Over the
fourth-quarter 2008, CP issuance ranged from overnight to three
months. Access has been good in the U.S. and satisfactory in Europe
and Canada. Pricing levels have been attractive in the U.S. and
satisfactory in both Europe and Canada. For example, since year-end
2008 Cat Financial has issued 30-day CP in the U.S. at 0.2 percent
APR, Europe at 2.0 percent APR and Canada at 1.4 percent APR. The
broader prevailing market conditions in Australia and Japan have
been more challenging, with higher pricing and more limited access.
Overall, global CP investor response has been positive. Q23: Are
you backing up your commercial paper with bank lines? How much? A:
Caterpillar Inc. and Cat Financial share a revolving credit
facility that, in September 2008, was increased by $0.3 billion to
$6.85 billion. The majority of this facility, totaling $5.85
billion, is allocated to Cat Financial and is used to backup 100
percent of our CP issuance globally. Q24: What happens if Cat
Financial's access to debt is severely limited in 2009? A: If
global conditions deteriorate so significantly that access to the
debt markets becomes unavailable to Cat Financial, it would rely
on: a) cash flow from its existing retail portfolio approximating
$1 billion per month to assist in retiring debt balances; b)
utilization of Cat Financial's cash balances, which totaled $1.08
billion at year-end 2008; and/or c) access to the $6.85 billion
revolving credit facility shared jointly with Caterpillar Inc. and
other credit line facilities held by the company. Q25: From a
competitive standpoint, are you competitive with other lenders in
financing Cat product, or are margins getting squeezed? A: Cat
Financial's overall competitiveness varies depending on the
specific competitor, type of customer, geographic location,
transaction amount, type of financial product (e.g. operating lease
vs. installment sales contract), tenor of transaction and the use
of below market interest rate programs. Cat Financial is less
competitive on certain transactions compared to companies with
access to government-supported funding programs. Cat Financial
remains competitive compared with those companies without access to
government-supported programs and for specific transaction types.
Cat Financial's net yield on average earning assets was $57 million
lower in the fourth quarter of 2008 compared with 2007 for a number
of reasons, including the impacts of intense competition,
maintaining higher cash balances in the fourth quarter and higher
levels of past due accounts. Q26: What happened with Cat Insurance?
Can you describe the fourth- quarter write-off in more detail? A:
In the fourth quarter of 2008, Cat Insurance recorded a $37 million
charge for an Other Than Temporary Impairment of the equity
investments within the Cat Insurance investment portfolio. Under
Cat Insurance's policy, management performs an equity-by-equity
review of investments where the market value is below book value.
Cat Insurance has a conservative investment philosophy. At year-
end, the portfolio mix was approximately 90 percent debt securities
and approximately 10 percent equity securities. The fourth-quarter
adjustment represents the mark-to-market amount for equities whose
value is not expected to recover in a reasonable timeframe. While
the charge in the fourth quarter was appropriate for current market
conditions, there could be additional write-downs if stock prices
decline from year-end levels or if the value of those stocks whose
value is only temporarily impaired fails to recover as expected.
Q27: Are used equipment prices continuing to fall and how does that
impact Cat Financial's lease business? A: Cat Financial has had a
consistent approach to underwriting over a number of years and has
a very diversified portfolio serving multiple industries. Residuals
are established by model based on a range of factors including: the
application, expected usage, lease term and past remarketing
experience. While in general used equipment prices are continuing
to trend lower, we believe that current lease residual values are
appropriate. Over the past 10 years, Cat Financial's gain or loss
on terminations has not been significant to profitability and has
averaged about 1 percent of Cat Financial's profit before tax. In
addition, Cat Financial's recent experience is consistent with its
historical performance. GLOSSARY OF TERMS 1. Cat Production System
(CPS) -- The Cat Production System is the common Order-to-Delivery
process being implemented enterprise-wide to achieve our safety,
quality, velocity, earnings and growth goals for 2010 and beyond.
2. Consolidating Adjustments -- Eliminations of transactions
between Machinery and Engines and Financial Products. 3. Currency
-- With respect to sales and revenues, currency represents the
translation impact on sales resulting from changes in foreign
currency exchange rates versus the U.S. dollar. With respect to
operating profit, currency represents the net translation impact on
sales and operating costs resulting from changes in foreign
currency exchange rates versus the U.S. dollar. Currency includes
the impacts on sales and operating profit for the Machinery and
Engines lines of business only; currency impacts on Financial
Products revenues and operating profit are included in the
Financial Products portions of the respective analyses. With
respect to other income/expense, currency represents the effects of
forward and option contracts entered into by the company to reduce
the risk of fluctuations in exchange rates and the net effect of
changes in foreign currency exchange rates on our foreign currency
assets and liabilities for consolidated results. 4. Debt-to-Capital
Ratio -- A key measure of financial strength used by both
management and our credit rating agencies. The metric is a ratio of
Machinery and Engines debt (short-term borrowings plus long-term
debt) and redeemable noncontrolling interest to the sum of
Machinery and Engines debt, redeemable noncontrolling interest, and
stockholders' equity. 5. EAME -- Geographic region including
Europe, Africa, the Middle East and the Commonwealth of Independent
States (CIS). 6. Earning Assets -- Assets consisting primarily of
total finance receivables net of unearned income, plus equipment on
operating leases, less accumulated depreciation at Cat Financial.
7. Engines -- A principal line of business including the design,
manufacture, marketing and sales of engines for Caterpillar
machinery; electric power generation systems; on-highway vehicles
and locomotives; marine, petroleum, construction, industrial,
agricultural and other applications and related parts. Also
includes remanufacturing of Caterpillar engines and a variety of
Caterpillar machinery and engine components and remanufacturing
services for other companies. Reciprocating engines meet power
needs ranging from 10 to 21,700 horsepower (8 to more than 16 000
kilowatts). Turbines range from 1,600 to 30,000 horsepower (1 200
to 22 000 kilowatts). 8. Financial Products -- A principal line of
business consisting primarily of Caterpillar Financial Services
Corporation (Cat Financial), Caterpillar Insurance Holdings, Inc.
(Cat Insurance), Caterpillar Power Ventures Corporation (Cat Power
Ventures) and their respective subsidiaries. Cat Financial provides
a wide range of financing alternatives to customers and dealers for
Caterpillar machinery and engines, Solar gas turbines as well as
other equipment and marine vessels. Cat Financial also extends
loans to customers and dealers. Cat Insurance provides various
forms of insurance to customers and dealers to help support the
purchase and lease of our equipment. Cat Power Ventures is an
investor in independent power projects using Caterpillar power
generation equipment and services. 9. Integrated Service Businesses
-- A service business or a business containing an important service
component. These businesses include, but are not limited to,
aftermarket parts, Cat Financial, Cat Insurance, Progress Rail,
Solar Turbines Customer Services, Cat Logistics, OEM Solutions and
Cat Reman. 10. Latin America -- Geographic region including Central
and South American countries and Mexico. 11. Machinery -- A
principal line of business which includes the design, manufacture,
marketing and sales of construction, mining and forestry machinery
-- track and wheel tractors, track and wheel loaders, pipelayers,
motor graders, wheel tractor-scrapers, track and wheel excavators,
backhoe loaders, log skidders, log loaders, off-highway trucks,
articulated trucks, paving products, skid steer loaders and related
parts. Also includes logistics services for other companies and the
design, manufacture, remanufacture, maintenance and services of
rail-related products. 12. Machinery and Engines (M&E) -- Due
to the highly integrated nature of operations, it represents the
aggregate total of the Machinery and Engines lines of business and
includes primarily our manufacturing, marketing and parts
distribution operations. 13. Machinery and Engines Other Operating
Expenses -- Comprised primarily of gains (losses) on disposal of
long-lived assets, long- lived asset impairment charges and
employee severance charges. 14. Manufacturing Costs -- Represent
the volume-adjusted change for manufacturing costs. Manufacturing
costs are defined as material costs and labor and overhead costs
related to the production process. Excludes the impact of currency.
15. Price Realization -- The impact of net price changes excluding
currency and new product introductions. Consolidated price
realization includes the impact of changes in the relative
weighting of sales between geographic regions. 16. Sales Volume --
With respect to sales and revenues, sales volume represents the
impact of changes in the quantities sold for machinery and engines
as well as the incremental revenue impact of new product
introductions. With respect to operating profit, sales volume
represents the impact of changes in the quantities sold for
machinery and engines combined with product mix-the net operating
profit impact of changes in the relative weighting of machinery and
engines sales with respect to total sales. 17. Shin Caterpillar
Mitsubishi Ltd. (SCM) -- Formerly a 50/50 joint venture between
Caterpillar and Mitsubishi Heavy Industries Ltd. (MHI). On August
1, 2008, SCM redeemed one-half of MHI's shares. Caterpillar now
owns 67 percent of the renamed entity, Caterpillar Japan Ltd.
NON-GAAP FINANCIAL MEASURES The following definition is provided
for "non-GAAP financial measures" in connection with Regulation G
issued by the Securities and Exchange Commission. This non-GAAP
financial measure has no standardized meaning prescribed by U.S.
GAAP and therefore is unlikely to be comparable to the calculation
of similar measures for other companies. Management does not intend
this item to be considered in isolation or as a substitute for the
related GAAP measure: Machinery and Engines - Caterpillar defines
Machinery and Engines as it is presented in the supplemental data
as Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis. Machinery and Engines
information relates to the design, manufacture and marketing of our
products. Financial Products information relates to the financing
to customers and dealers for the purchase and lease of Caterpillar
and other equipment. The nature of these businesses is different,
especially with regard to the financial position and cash flow
items. Caterpillar management utilizes this presentation internally
to highlight these differences. We also believe this presentation
will assist readers in understanding our business. Pages 39-44
reconcile Machinery and Engines with Financial Products on the
equity basis to Caterpillar Inc. consolidated financial
information. Caterpillar's latest financial results and current
outlook are also available via: Telephone: (800) 228-7717 (Inside
the United States and Canada) (858) 244-2080 (Outside the United
States and Canada) Internet:
http://www.cat.com/investorhttp://www.cat.com/irwebcast (live
broadcast/replays of quarterly conference call) Caterpillar Inc.
Condensed Consolidated Statement of Results of Operations
(Unaudited) (Dollars in millions except per share data) Three
Months Ended Twelve Months Ended December 31, December 31, 2008
2007 2008 2007 Sales and revenues: Sales of Machinery and Engines
$12,120 $11,360 $48,044 $41,962 Revenues of Financial Products 803
784 3,280 2,996 Total sales and revenues 12,923 12,144 51,324
44,958 Operating costs: Cost of goods sold 10,066 8,920 38,415
32,626 Selling, general and administrative expenses 1,305 1,025
4,399 3,821 Research and development expenses 507 357 1,728 1,404
Interest expense of Financial Products 299 293 1,153 1,132 Other
operating (income) expenses 289 294 1,181 1,054 Total operating
costs 12,466 10,889 46,876 40,037 Operating profit 457 1,255 4,448
4,921 Interest expense excluding Financial Products 71 60 274 288
Other income (expense) (26) 88 299 320 Consolidated profit (loss)
before taxes 360 1,283 4,473 4,953 Provision (benefit) for income
taxes (296) 330 953 1,485 Profit of consolidated companies 656 953
3,520 3,468 Equity in profit (loss) of unconsolidated affiliated
companies 5 22 37 73 Profit $661 $975 $3,557 $3,541 Profit per
common share $1.10 $1.55 $5.83 $5.55 Profit per common share -
diluted(1) $1.08 $1.50 $5.66 $5.37 Weighted average common shares
outstanding (millions) - Basic 602.1 630.4 610.5 638.2 - Diluted(1)
610.6 650.8 627.9 659.5 Cash dividends declared per common share
$.84 $.72 $1.62 $1.38 (1) Diluted by assumed exercise of
stock-based compensation awards using the treasury stock method.
Caterpillar Inc. Condensed Consolidated Statement of Financial
Position (Unaudited) (Millions of dollars) December 31, December
31, 2008 2007 Assets Current assets: Cash and short-term
investments $2,736 $1,122 Receivables - trade and other 9,397 8,249
Receivables - finance 9,051 7,503 Deferred and refundable income
taxes 1,223 816 Prepaid expenses and other current assets 765 583
Inventories 8,781 7,204 Total current assets 31,953 25,477
Property, plant and equipment - net 12,524 9,997 Long-term
receivables - trade and other 1,479 685 Long-term receivables -
finance 13,944 13,462 Investments in unconsolidated affiliated
companies 94 598 Noncurrent deferred and refundable income taxes
3,311 1,553 Intangible assets 511 475 Goodwill 2,261 1,963 Other
assets 1,705 1,922 Total assets $67,782 $56,132 Liabilities Current
liabilities: Short-term borrowings: -- Machinery and Engines $1,632
$187 -- Financial Products 6,997 5,281 Accounts payable 4,827 4,723
Accrued expenses 4,121 3,178 Accrued wages, salaries and employee
benefits 1,242 1,126 Customer advances 1,898 1,442 Dividends
payable 253 225 Other current liabilities 1,027 951 Long-term debt
due within one year: -- Machinery and Engines 330 180 -- Financial
Products 5,036 4,952 Total current liabilities 27,363 22,245
Long-term debt due after one year: -- Machinery and Engines 5,862
3,639 -- Financial Products 15,678 14,190 Liability for
postemployment benefits 9,975 5,059 Other liabilities 2,293 2,116
Total liabilities 61,171 47,249 Redeemable noncontrolling interest
524 - Stockholders' equity Common stock 3,057 2,744 Treasury stock
(11,217) (9,451) Profit employed in the business 19,826 17,398
Accumulated other comprehensive income (5,579) (1,808) Total
stockholders' equity 6,087 8,883 Total liabilities, redeemable
noncontrolling interest and stockholders' equity $67,782 $56,132
Caterpillar Inc. Condensed Consolidated Statement of Cash Flow
(Unaudited) (Millions of dollars) Twelve Months Ended December 31,
2008 2007 Cash flow from operating activities: Profit $3,557 $3,541
Adjustments for non-cash items: Depreciation and amortization 1,980
1,797 Other 383 199 Changes in assets and liabilities: Receivables
- trade and other (545) 899 Inventories (833) (745) Accounts
payable and accrued expenses 656 618 Customer advances 286 576
Other assets - net (470) 66 Other liabilities - net (227) 984 Net
cash provided by (used for) operating activities 4,787 7,935 Cash
flow from investing activities: Capital expenditures - excluding
equipment leased to others (2,445) (1,700) Expenditures for
equipment leased to others (1,566) (1,340) Proceeds from disposals
of property, plant and equipment 982 408 Additions to finance
receivables (14,031) (13,946) Collections of finance receivables
9,717 10,985 Proceeds from sale of finance receivables 949 866
Investments and acquisitions (net of cash acquired) (117) (229)
Proceeds from release of security deposit - 290 Proceeds from sale
of available-for-sale securities 357 282 Investments in
available-for-sale securities (339) (485) Other - net 197 461 Net
cash provided by (used for) investing activities (6,296) (4,408)
Cash flow from financing activities: Dividends paid (953) (845)
Common stock issued, including treasury shares reissued 135 328
Payment for stock repurchase derivative contracts (38) (56)
Treasury shares purchased (1,800) (2,405) Excess tax benefit from
stock-based compensation 56 155 Proceeds from debt issued (original
maturities greater than three months) 17,930 11,039 Payments on
debt (original maturities greater than three months) (14,439)
(10,888) Short-term borrowings (original maturities three months or
less)-net 2,074 (297) Net cash provided by (used for) financing
activities 2,965 (2,969) Effect of exchange rate changes on cash
158 34 Increase (decrease) in cash and short-term investments 1,614
592 Cash and short-term investments at beginning of period 1,122
530 Cash and short-term investments at end of period $2,736 $1,122
Certain amounts for prior periods have been reclassified to conform
to the current period financial statement presentation. All
short-term investments, which consist primarily of highly liquid
investments with original maturities of three months or less, are
considered to be cash equivalents. Caterpillar Inc. Supplemental
Data for Results of Operations For The Three Months Ended December
31, 2008 (Unaudited) (Millions of dollars) Supplemental
Consolidating Data Machinery Financial Consolidating Consolidated
and Engines(1) Products Adjustments Sales and revenues: Sales of
Machinery and Engines $12,120 $12,120 $- $- Revenues of Financial
Products 803 - 869 (66) (2) Total sales and revenues 12,923 12,120
869 (66) Operating costs: Cost of goods sold 10,066 10,066 - -
Selling, general and administrative expenses 1,305 1,131 186 (12)
(3) Research and development expenses 507 507 - - Interest expense
of Financial Products 299 - 305 (6) (4) Other operating (income)
expenses 289 (16) 304 1 (3) Total operating costs 12,466 11,688 795
(17) Operating profit 457 432 74 (49) Interest expense excluding
Financial Products 71 67 - 4 (4) Other income (expense) (26) 19
(98) 53 (5) Consolidated profit (loss) before taxes 360 384 (24) -
Provision (benefit) for income taxes (296) (267) (29) - Profit of
consolidated companies 656 651 5 - Equity in profit (loss) of
unconsolidated affiliated companies 5 5 - - Equity in profit of
Financial Products' subsidiaries - 5 - (5) (6) Profit $661 $661 $5
$(5) (1) Represents Caterpillar Inc. and its subsidiaries with
Financial Products accounted for on the equity basis. (2)
Elimination of Financial Products' revenues earned from Machinery
and Engines. (3) Elimination of net expenses recorded by Machinery
and Engines paid to Financial Products. (4) Elimination of interest
expense recorded between Financial Products and Machinery and
Engines. (5) Elimination of discount recorded by Machinery and
Engines on receivables sold to Financial Products and of interest
earned between Machinery and Engines and Financial Products. (6)
Elimination of Financial Products' profit due to equity method of
accounting. Caterpillar Inc. Supplemental Data for Results of
Operations For The Three Months Ended December 31, 2007 (Unaudited)
(Millions of dollars) Supplemental Consolidating Data Machinery
Financial Consolidating Consolidated and Engines(1) Products
Adjustments Sales and revenues: Sales of Machinery and Engines
$11,360 $11,360 $- $- Revenues of Financial Products 784 - 888
(104) (2) Total sales and revenues 12,144 11,360 888 (104)
Operating costs: Cost of goods sold 8,920 8,920 - - Selling,
general and administrative expenses 1,025 887 138 - (3) Research
and development expenses 357 357 - - Interest expense of Financial
Products 293 - 295 (2) (4) Other operating (income) expenses 294 6
294 (6) (3) Total operating costs 10,889 10,170 727 (8) Operating
profit 1,255 1,190 161 (96) Interest expense excluding Financial
Products 60 61 - (1) (4) Other income (expense) 88 (27) 20 95 (5)
Consolidated profit (loss) before taxes 1,283 1,102 181 - Provision
(benefit) for income taxes 330 254 76 - Profit of consolidated
companies 953 848 105 - Equity in profit (loss) of unconsolidated
affiliated companies 22 21 1 - Equity in profit of Financial
Products' subsidiaries - 106 - (106) (6) Profit $975 $975 $106
$(106) (1) Represents Caterpillar Inc. and its subsidiaries with
Financial Products accounted for on the equity basis. (2)
Elimination of Financial Products' revenues earned from Machinery
and Engines. (3) Elimination of net expenses recorded by Machinery
and Engines paid to Financial Products. (4) Elimination of interest
expense recorded between Financial Products and Machinery and
Engines. (5) Elimination of discount recorded by Machinery and
Engines on receivables sold to Financial Products and of interest
earned between Machinery and Engines and Financial Products. (6)
Elimination of Financial Products' profit due to equity method of
accounting. Caterpillar Inc. Supplemental Data for Results of
Operations For The Twelve Months Ended December 31, 2008
(Unaudited) (Millions of dollars) Supplemental Consolidating Data
Machinery Financial Consolidating Consolidated and Engines(1)
Products Adjustments Sales and revenues: Sales of Machinery and
Engines $48,044 $48,044 $- $- Revenues of Financial Products 3,280
- 3,588 (308) (2) Total sales and revenues 51,324 48,044 3,588
(308) Operating costs: Cost of goods sold 38,415 38,415 - -
Selling, general and administrative expenses 4,399 3,812 616 (29)
(3) Research and development expenses 1,728 1,728 - - Interest
expense of Financial Products 1,153 - 1,162 (9) (4) Other operating
(income) expenses 1,181 (33) 1,231 (17) (3) Total operating costs
46,876 43,922 3,009 (55) Operating profit 4,448 4,122 579 (253)
Interest expense excluding Financial Products 274 270 - 4 (4) Other
income (expense) 299 80 (38) 257 (5) Consolidated profit (loss)
before taxes 4,473 3,932 541 - Provision (benefit) for income taxes
953 822 131 - Profit of consolidated companies 3,520 3,110 410 -
Equity in profit (loss) of unconsolidated affiliated companies 37
38 (1) - Equity in profit of Financial Products' subsidiaries - 409
- (409) (6) Profit $3,557 $3,557 $409 $(409) (1) Represents
Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis. (2) Elimination of Financial
Products' revenues earned from Machinery and Engines. (3)
Elimination of net expenses recorded by Machinery and Engines paid
to Financial Products. (4) Elimination of interest expense recorded
between Financial Products and Machinery and Engines. (5)
Elimination of discount recorded by Machinery and Engines on
receivables sold to Financial Products and of interest earned
between Machinery and Engines and Financial Products. (6)
Elimination of Financial Products' profit due to equity method of
accounting. Caterpillar Inc. Supplemental Data for Results of
Operations For The Twelve Months Ended December 31, 2007
(Unaudited) (Millions of dollars) Supplemental Consolidating Data
Machinery Financial Consolidating Consolidated and Engines(1)
Products Adjustments Sales and revenues: Sales of Machinery and
Engines $41,962 $41,962 $- $- Revenues of Financial Products 2,996
- 3,396 (400) (2) Total sales and revenues 44,958 41,962 3,396
(400) Operating costs: Cost of goods sold 32,626 32,626 - -
Selling, general and administrative expenses 3,821 3,356 480 (15)
(3) Research and development expenses 1,404 1,404 - - Interest
expense of Financial Products 1,132 - 1,137 (5) (4) Other operating
(income) expenses 1,054 (8) 1,089 (27) (3) Total operating costs
40,037 37,378 2,706 (47) Operating profit 4,921 4,584 690 (353)
Interest expense excluding Financial Products 288 294 - (6) (4)
Other income (expense) 320 (104) 77 347 (5) Consolidated profit
(loss) before taxes 4,953 4,186 767 - Provision (benefit) for
income taxes 1,485 1,220 265 - Profit of consolidated companies
3,468 2,966 502 - Equity in profit (loss) of unconsolidated
affiliated companies 73 69 4 - Equity in profit of Financial
Products' subsidiaries - 506 - (506) (6) Profit $3,541 $3,541 $506
$(506) (1) Represents Caterpillar Inc. and its subsidiaries with
Financial Products accounted for on the equity basis. (2)
Elimination of Financial Products' revenues earned from Machinery
and Engines. (3) Elimination of net expenses recorded by Machinery
and Engines paid to Financial Products. (4) Elimination of interest
expense recorded between Financial Products and Machinery and
Engines. (5) Elimination of discount recorded by Machinery and
Engines on receivables sold to Financial Products and of interest
earned between Machinery and Engines and Financial Products. (6)
Elimination of Financial Products' profit due to equity method of
accounting. Caterpillar Inc. Supplemental Data for Cash Flow For
The Twelve Months Ended December 31, 2008 (Unaudited) (Millions of
dollars) Supplemental Consolidating Data Machinery Financial
Consolidating Consolidated and Engines(1) Products Adjustments Cash
flow from operating activities: Profit $3,557 $3,557 $409 $(409)
(2) Adjustments for non- cash items: Depreciation and amortization
1,980 1,225 755 - Undistributed profit of Financial Products -
(409) - 409 (3) Other 383 194 55 134 (4) Changes in assets and
liabilities: Receivables - trade and other (545) (471) (49)
(25)(4,5) Inventories (833) (833) - - Accounts payable and accrued
expenses 656 574 69 13 (4) Customer advances 286 286 - - Other
assets - net (470) (503) (102) 135 (4) Other liabilities - net
(227) (60) (33) (134) (4) Net cash provided by (used for) operating
activities 4,787 3,560 1,104 123 Cash flow from investing
activities: Capital expenditures - excluding equipment leased to
others (2,445) (2,421) (24) - Expenditures for equipment leased to
others (1,566) - (1,588) 22 (4) Proceeds from disposals of
property, plant and equipment 982 30 952 - (4) Additions to finance
receivables (14,031) - (37,811) 23,780 (5) Collections of finance
receivables 9,717 - 32,135 (22,418) (5) Proceeds from sale of
finance receivables 949 - 2,459 (1,510) (5) Net intercompany
borrowings - (168) 33 135 (6) Investments and acquisitions (net of
cash acquired) (117) (148) 28 3 (7) Proceeds from release of
security deposit - - - - Proceeds from sale of available-for-sale
securities 357 23 334 - Investments in available- for-sale
securities (339) (18) (321) - Other - net 197 139 58 - (7) Net cash
provided by (used for) investing activities (6,296) (2,563) (3,745)
12 Cash flow from financing activities: Dividends paid (953) (953)
- - (8) Common stock issued, including treasury shares reissued 135
135 - - (7) Payment for stock repurchase derivative contracts (38)
(38) - - Treasury shares purchased (1,800) (1,800) - - Excess tax
benefit from stock-based compensation 56 56 - - Net intercompany
borrowings - (33) 168 (135) (6) Proceeds from debt issued (original
maturities greater than three months) 17,930 1,673 16,257 -
Payments on debt (original maturities greater than three months)
(14,439) (296) (14,143) - Short-term borrowings (original
maturities three months or less)-net 2,074 737 1,337 - Net cash
provided by (used for) financing activities 2,965 (519) 3,619 (135)
Effect of exchange rate changes on cash 158 177 (19) - Increase
(decrease) in cash and short-term investments 1,614 655 959 - Cash
and short-term investments at beginning of period 1,122 862 260 -
Cash and short-term investments at end of period $2,736 $1,517
$1,219 $- (1) Represents Caterpillar Inc. and its subsidiaries with
Financial Products accounted for on the equity basis. (2)
Elimination of Financial Products' profit after tax due to equity
method of accounting. (3) Non-cash adjustment for the undistributed
earnings from Financial Products. (4) Elimination of non-cash
adjustments and changes in assets and liabilities related to
consolidated reporting. (5) Reclassification of Cat Financial's
cash flow activity from investing to operating for receivables that
arose from the sale of inventory. (6) Net proceeds and payments
to/from Machinery and Engines and Financial Products. (7) Change in
investment and common stock related to Financial Products. (8)
Elimination of dividends from Financial Products to Machinery and
Engines. Caterpillar Inc. Supplemental Data for Cash Flow For The
Twelve Months Ended December 31, 2007 (Unaudited) (Millions of
dollars) Supplemental Consolidating Data Machinery Financial
Consolidating Consolidated and Engines(1) Products Adjustments Cash
flow from operating activities: Profit $3,541 $3,541 $506 $(506)
(2) Adjustments for non- cash items: Depreciation and amortization
1,797 1,093 704 - Undistributed profit of Financial Products -
(256) - 256 (3) Other 199 114 (267) 352 (4) Changes in assets and
liabilities: Receivables - trade and other 899 (317) (105) 1,321
(4,5) Inventories (745) (745) - - Accounts payable and accrued
expenses 618 408 216 (6) (4) Customer advances 576 576 - - Other
assets - net 66 63 (9) 12 (4) Other liabilities - net 984 969 40
(25) (4) Net cash provided by (used for) operating activities 7,935
5,446 1,085 1,404 Cash flow from investing activities: Capital
expenditures - excluding equipment leased to others (1,700) (1,683)
(17) - Expenditures for equipment leased to others (1,340) -
(1,349) 9 (4) Proceeds from disposals of property, plant and
equipment 408 14 398 (4) (4) Additions to finance receivables
(13,946) - (36,251) 22,305 (5) Collections of finance receivables
10,985 - 33,456 (22,471) (5) Proceeds from sale of finance
receivables 866 - 2,378 (1,512) (5) Net intercompany borrowings -
(177) 3 174 (6) Investments and acquisitions (net of cash acquired)
(229) (244) - 15 (7) Proceeds from release of security deposit 290
290 - - Proceeds from sale of available-for-sale securities 282 23
259 - Investments in available-for-sale securities (485) (29) (456)
- Other - net 461 122 341 (2) (7) Net cash provided by (used for)
investing activities (4,408) (1,684) (1,238) (1,486) Cash flow from
financing activities: Dividends paid (845) (845) (254) 254 (8)
Common stock issued, including treasury shares reissued 328 328 (2)
2 (7) Payment for stock repurchase derivative contracts (56) (56) -
- Treasury shares purchased (2,405) (2,405) - - Excess tax benefit
from stock-based compensation 155 155 - - Net intercompany
borrowings - (3) 177 (174) (6) Proceeds from debt issued (original
maturities greater than three months) 11,039 224 10,815 - Payments
on debt (original maturities greater than three months) (10,888)
(598) (10,290) - Short-term borrowings (original maturities three
months or less)-net (297) (41) (256) - Net cash provided by (used
for) financing activities (2,969) (3,241) 190 82 Effect of exchange
rate changes on cash 34 22 12 - Increase (decrease) in cash and
short-term investments 592 543 49 - Cash and short-term investments
at beginning of period 530 319 211 - Cash and short-term
investments at end of period $1,122 $862 $260 $- (1) Represents
Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis. (2) Elimination of Financial
Products' profit after tax due to equity method of accounting. (3)
Non-cash adjustment for the undistributed earnings from Financial
Products. (4) Elimination of non-cash adjustments and changes in
assets and liabilities related to consolidated reporting. (5)
Reclassification of Cat Financial's cash flow activity from
investing to operating for receivables that arose from the sale of
inventory. (6) Net proceeds and payments to/from Machinery and
Engines and Financial Products. (7) Change in investment and common
stock related to Financial Products. (8) Elimination of dividends
from Financial Products to Machinery and Engines. DATASOURCE:
Caterpillar Inc. Web site: http://www.cat.com/
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