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Caterpillar Reports Record Sales and Revenues and Profit for 2012; Inventory Reduced $2 Billion in the Fourth Quarter

January 28, 2013

PEORIA, Ill., Jan. 28, 2013 /PRNewswire/ — Despite economic and political uncertainty in the United States, continued economic turmoil in much of Europe and slower growth in China, Caterpillar Inc. (NYSE: CAT) today announced record 2012 sales and revenues of $65.875 billion, an increase of 10 percent from $60.138 billion in 2011. Profit per share of $8.48 was also an all-time record, including the impact of the previously announced goodwill impairment charge of $0.87 per share related to Siwei. The 2012 profit per share of $8.48 was up 15 percent from $7.40 in 2011. Profit was $5.681 billion, an increase of 15 percent from $4.928 billion in 2011.

Fourth-quarter 2012 sales and revenues were $16.075 billion, down $1.168 billion from $17.243 billion in the fourth quarter of 2011. The impact of changes in dealer new machine inventories lowered sales by about $1.4 billion as dealers reduced inventories about $600 million in the fourth quarter of 2012, compared with an increase of about $800 million in the fourth quarter of 2011.

Fourth-quarter 2012 profit was $697 million compared with $1.547 billion in the fourth quarter of 2011. Profit was $1.04 per share in the fourth quarter of 2012 compared with profit per share of $2.32 in the fourth quarter of 2011. Fourth-quarter 2012 profit was negatively impacted by the previously announced goodwill impairment charge of $580 million, or $0.87 per share. Lower sales and revenues and the cost impact from sharply lower production and the $2 billion decline in Caterpillar inventory also had a negative impact on fourth-quarter profit. Those impacts were partially offset by a $300 million positive impact related to the settlement of prior-year tax returns.

“From an operational standpoint, 2012 was a very successful year with record sales and profit in a tough economic climate. Considering the weak economy in the United States, along with much of Europe in recession and China slowing, we had a solid year. Our incremental operating profit pull through was very good, we made progress adjusting inventory levels, and our quality and safety indicators continued to improve,” said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.

“I’m extremely pleased with our performance on reducing inventory $2 billion in the fourth quarter. As the world economy began to soften at mid year, we increased our focus on reducing inventory. Cat dealers also worked to lower their inventories, and, as a result, reduced their order rates during the second half of 2012. The result was a substantial reduction in our production levels and inventory. The reductions had a significantly negative impact on fourth-quarter sales and profit. The $2 billion inventory reduction in the fourth quarter was a remarkable effort, but we’re not done. Reduced production levels are likely to continue at least through the first quarter of 2013 until inventories and dealer order rates move back in line with end-user demand,” Oberhelman added.

2013 Outlook
The outlook for 2013 is sales and revenues in a range of $60 to $68 billion and profit per share of $7.00 to $9.00.

“The range of our 2013 outlook reflects the level of uncertainty we see in the world today. We’re encouraged by recent improvements in economic indicators, but remain cautious. While we expect some improvement in the U.S. economy, growth is expected to be relatively weak. We believe China’s economy will continue to improve, but not to the growth rates of 2010 and 2011. We also remain concerned about Europe and expect economies in that region will continue to struggle in 2013,” said Oberhelman.

“If the recent improvement in economic indicators continues, 2013 could be another record year for Caterpillar. We expect the first half of 2013 will be weaker than the first half of 2012, with better growth in the second half. However, if, like the last two years, growth and confidence decline in the second half, 2013 could be a tough year. Either way, as we demonstrated with inventory reductions in the fourth quarter, our team is prepared to execute and deliver,” Oberhelman added.

Notes:

  • Glossary of terms is included on pages 18-19; first occurrence of terms shown in bold italics.
  • Information on non-GAAP financial measures is included on page 20.

For more than 85 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. With 2012 sales and revenues of $65.875 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 also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services and Progress Rail Services. More information is available at: http://www.caterpillar.com.

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 economic conditions and economic conditions in the industries and markets we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity or component price increases and/or limited availability of raw materials and component products, including steel; (iv) our and our customers’, dealers’ and suppliers’ ability to access and manage liquidity; (v) political and economic risks and instability, including national or international conflicts and civil unrest; (vi) our and Cat Financial’s ability to: maintain credit ratings, avoid material increases in borrowing costs, and access capital markets; (vii) the financial condition and credit worthiness of Cat Financial’s customers; (viii) inability to realize expected benefits from acquisitions and divestitures, including the acquisition of Bucyrus International, Inc. and Siwei; (ix) international trade and investment policies; (x) challenges related to Tier 4 emissions compliance; (xi) market acceptance of our products and services; (xii) changes in the competitive environment, including market share, pricing and geographic and product mix of sales; (xiii) successful implementation of capacity expansion projects, cost reduction initiatives and efficiency or productivity initiatives, including the Caterpillar Production System; (xiv) sourcing practices of our dealers or original equipment manufacturers; (xv) compliance with environmental laws and regulations; (xvi) alleged or actual violations of trade or anti-corruption laws and regulations; (xvii) additional tax expense or exposure; (xviii) currency fluctuations; (xix) our or Cat Financial’s compliance with financial covenants; (xx) increased pension plan funding obligations; (xxi) union disputes or other employee relations issues; (xxii) significant legal proceedings, claims, lawsuits or investigations; (xxiii) compliance requirements imposed if carbon emissions legislation and/or regulations are adopted; (xxiv) changes in accounting standards; (xxv) failure or breach of IT security; (xxvi) adverse effects of natural disasters; and (xxvii) other factors described in more detail under “Item 1A. Risk Factors” in our Form 10-K filed with the SEC on February 21, 2012 for the year ended December 31, 2011. This filing is available on our website at www.caterpillar.com/secfilings.

                                                                  Key Points
                                                                  ----------

    Fourth Quarter 2012
    (Dollars in millions except per share data)
    ------------------------------------------

                                 Fourth Quarter         Fourth Quarter       $ Change   % Change
                                           2012                   2011
                                           ----                   ----
    Machinery
     and Power
     Systems
     Sales                                      $15,357                       $16,557          $(1,200)  (7)%
    Financial Products
     Revenues                                       718                           686               32     5%
                                                    ---                           ---              ---
    Total Sales
     and
     Revenues                                   $16,075                       $17,243          $(1,168)  (7)%
                                                =======                       =======          =======
                                                   $697                        $1,547            $(850) (55)%
    Profit
    Profit per
     common
     share -
     diluted                                      $1.04                         $2.32           $(1.28) (55)%

    Full Year 2012
    (Dollars in millions except per share data)
    ------------------------------------------

                                   Full Year              Full Year          $ Change % Change
                                           2012                   2011
                                           ----                   ----
    Machinery
     and Power
     Systems
     Sales                                      $63,068                       $57,392           $5,676    10%
    Financial Products
     Revenues                                     2,807                         2,746               61     2%
                                                  -----                         -----              ---
    Total Sales
     and
     Revenues                                   $65,875                       $60,138           $5,737    10%
                                                =======                       =======           ======
                                                 $5,681                        $4,928             $753    15%
    Profit
    Profit per
     common
     share -
     diluted                                      $8.48                         $7.40            $1.08    15%

2012 Highlights

  • 2012 sales and revenues of $65.875 billion and profit per share of $8.48 were both all-time records.
  • Inventory was significantly reduced during the fourth quarter of 2012, down about $2 billion from the third quarter of 2012.
  • Machinery and Power Systems (M&PS) operating cash flow was $4.198 billion in 2012, compared with $7.972 billion in 2011.
  • M&PS debt-to-capital ratio was 37.4 percent, down from 42.7 percent a year earlier.

2013 Outlook

  • The outlook for 2013 is sales and revenues in a range of $60 to $68 billion and profit per share of $7.00 to $9.00.
  • We expect capital expenditures for 2013 to be slightly below 2012 capital expenditures of $3.4 billion.

CONSOLIDATED RESULTS

Fourth Quarter 2012 vs. Fourth Quarter 2011

Consolidated Sales and Revenues Comparison
Fourth Quarter 2012 vs. Fourth Quarter 2011

To access this chart, go to http://caterpillar.com for the downloadable version of Caterpillar 4Q2012 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the fourth quarter of 2011 (at left) and the fourth quarter of 2012 (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 $16.075 billion in the fourth quarter of 2012, a decrease of $1.168 billion, or 7 percent, from the fourth quarter of 2011. When reviewing the change in sales and revenues, we focus on the following perspectives:

  • Reason for the change: Sales volume decreased $1.655 billion, and the impact of currency was unfavorable $82 million. The majority of the sales volume decrease was related to changes in dealer new machine inventories. These decreases were partially offset by increased price realization of $421 million and the favorable net impact of acquisitions and divestitures of $116 million. Financial Products revenues were $32 million higher.
  • Sales by geographic region: Excluding acquisitions and divestitures, sales decreased in all geographic regions except Latin America, with the most significant decrease in North America. Within Asia/Pacific, decreases in China and other parts of Asia/Pacific more than offset sales increases in Australia and Japan. Within EAME, lower sales in Europe and CIS were partially offset by increased sales in the Middle East and Africa.
  • Segment: The decrease in sales was primarily due to Construction Industries, with sales down 25 percent. Excluding acquisitions and divestitures, Resource Industries‘ sales improved 16 percent, and Power Systems‘ sales decreased 9 percent. Financial Products’ revenues were up 5 percent.

Consolidated Operating Profit

Consolidated Operating Profit Comparison
Fourth Quarter 2012 vs. Fourth Quarter 2011

To access this chart, go to http://caterpillar.com for the downloadable version of Caterpillar 4Q2012 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the fourth quarter of 2011 (at left) and the fourth quarter of 2012 (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 and Power Systems other operating (income) expenses.

Operating profit for the fourth quarter of 2012 was $1.038 billion, a decline of $922 million from the fourth quarter of 2011. The most significant item was the goodwill impairment charge related to Siwei of $580 million. The remaining $342 million decline was primarily the result of higher manufacturing costs and lower sales volume (which includes the impact of a favorable mix of products), partially offset by favorable price realization. Manufacturing costs were unfavorable primarily due to inefficiencies driven by lower production and declining inventory in the fourth quarter of 2012.

Other Profit/Loss Items

  • Interest expense excluding Financial Products increased $8 million from the fourth quarter of 2011.
  • Other income/expense was expense of $11 million compared with income of $125 million in the fourth quarter of 2011. The decrease was due to the unfavorable impact of currency gains and losses.
  • The provision for income taxes in the fourth quarter of 2012 reflects an effective tax rate of 30.5 percent compared with 26.5 percent for the fourth quarter of 2011, excluding the items discussed in the next paragraph. The increase from 26.5 percent to 30.5 percent is primarily due to changes in our geographic mix of profits from a tax perspective and the expiration of the U.S. research and development tax credit. While the American Taxpayer Relief Act of 2012 extended the credit, the related benefit will be reported in 2013 results due to the law’s enactment in January 2013.
    The 2012 fourth-quarter tax provision includes a benefit of $300 million from a decrease in tax and interest reserves due to a settlement reached with the Internal Revenue Service related to 2000 through 2006 U.S. tax returns. Approximately $200 million of this benefit is related to tax, and $100 million is related to interest. This was offset by a negative impact of $237 million from goodwill not deductible for tax purposes related to the Siwei goodwill impairment and the divestiture of portions of the Bucyrus distribution business. This compares to a $108 million net benefit in the fourth quarter of 2011.
  • Profit/loss attributable to noncontrolling interests favorably impacted profit by $12 million compared with the fourth quarter of 2011.

Global Workforce
Caterpillar worldwide full-time employment was 125,341 at the end of 2012 compared with 125,099 at the end of 2011, an increase of 242 full-time employees. The flexible workforce decreased 6,989 for a net decrease in the global workforce of 6,747.

The decrease was the result of divestitures and lower production in the fourth quarter of 2012, partially offset by acquisitions. Divestitures, primarily the sale of a majority interest in our third party logistics business and portions of the Bucyrus distribution business, decreased the global workforce by 7,723. Acquisitions, primarily Siwei, added 4,643 to the global workforce.

                                          December 31,
                                          ------------
                                     2012            2011 Change
                                     ----            ---- ------
    Full-time employment          125,341         125,099           242
    Flexible workforce             17,716          24,705        (6,989)
                                   ------          ------        ------
    Total                         143,057         149,804        (6,747)
                                  =======         =======        ======

    Summary of change
    -----------------
    U.S. workforce                                                   33
    Non-U.S. workforce                                           (3,700)
                                                                 ------
                                                                 (3,667)

    Acquisitions/divestitures net                                (3,080)
                                                                 ------
    Total                                                        (6,747)
                                                                 ======

    SEGMENT RESULTS
    ---------------

    Sales and Revenues by Geographic Region
                                            Total             %          North    %             Latin           %           EAME          %            Asia/           %
    (Millions of dollars)                                  Change       America Change         America       Change                    Change         Pacific       Change
                                                           ------       ------- ------         -------       ------                    ------         -------       ------
    Fourth Quarter 2012
    -------------------
    Construction Industries(1)                     $4,028         (25)%                $1,445          (17)%          $600       (23)%          $882          (28)%        $1,101  (32)%
    Resource Industries(2)                          5,776           14%                 1,467          (13)%         1,095         42%         1,266            32%         1,948    20%
    Power Systems(3)                                5,307          (6)%                 1,994           (9)%           539       (25)%         1,628           (4)%         1,146     9%
    All Other Segment4                                255         (49)%                   153          (35)%            16       (38)%            48          (67)%            38  (58)%
    Corporate Items and Eliminations                   (9)                                (12)                           1                         1                            1
    Machinery & Power Systems Sales               $15,357          (7)%                $5,047          (14)%        $2,251        (2)%        $3,825           (5)%        $4,234   (3)%

    Financial Products Segment                        789            5%                   422             2%           103         10%           104           (5)%           160    19%
    Corporate Items and Eliminations                  (71)                                (41)                          (8)                       (6)                         (16)
                                                      ---                                 ---                          ---                       ---                          ---
    Financial Products Revenues                      $718            5%                  $381             2%           $95          9%           $98             1%          $144    13%

    Consolidated Sales and Revenues               $16,075          (7)%                $5,428          (13)%        $2,346        (2)%        $3,923           (5)%        $4,378   (3)%
                                                  =======                              ======                       ======                    ======                       ======

    Fourth Quarter 2011
    -------------------
    Construction Industries 1                      $5,355                              $1,743                         $777                    $1,222                       $1,613
    Resource Industries(2)                          5,056                               1,694                          771                       962                        1,629
    Power Systems(3)                                5,672                               2,203                          722                     1,693                        1,054
    All Other Segment4                                496                                 235                           26                       145                           90
    Corporate Items and Eliminations                  (22)                                (15)                          (1)                       (4)                          (2)
                                                      ---                                 ---                          ---                       ---                          ---
    Machinery & Power Systems Sales               $16,557                              $5,860                       $2,295                    $4,018                       $4,384

    Financial Products Segment                        752                                 413                           94                       110                          135
    Corporate Items and Eliminations                  (66)                                (38)                          (7)                      (13)                          (8)
                                                      ---                                 ---                          ---                       ---                          ---
    Financial Products Revenues                      $686                                $375                          $87                       $97                         $127
                                                     ----                                ----                          ---                       ---

    Consolidated Sales and Revenues               $17,243                              $6,235                       $2,382                    $4,115                       $4,511
                                                  =======                              ======                       ======                    ======                       ======
     (1) Does not include inter-segment sales of $115 million and $142 million in fourth quarter 2012 and 2011,
         respectively.
     (2) Does not include inter-segment sales of $208 million and $314 million in fourth quarter 2012 and 2011,
         respectively.
     (3) Does not include inter-segment sales of $455 million and $644 million in fourth quarter 2012 and 2011,
         respectively.
       4 Does not include inter-segment sales of $773 million and $865 million in fourth quarter 2012 and 2011,
         respectively.

    Sales and Revenues by Segment
    -----------------------------

    (Millions of dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                    Fourth              Sales         Price        Currency        Acquisitions/     Other        Fourth            $ Change        %
                                                                                                                                                                                                                                                                                                                                                                                                                                                          Quarter 2011           Volume     Realization                     Divestitures                Quarter 2012                      Change
                                                                                                                                                                                                                                                                                                                                                                                                                                                          ------------                                                                                                                    ------
    Construction Industries                                                                                                                                                                                                                                                                                                                                                                                                                                              $5,355                 $(1,306)               $32                     $(53)               $      -            $     -           $4,028         $(1,327)     (25)%
    Resource Industries                                                                                                                                                                                                                                                                                                                                                                                                                                                   5,056                     301                267                        1                     151                  -            5,776             720        14%
    Power Systems                                                                                                                                                                                                                                                                                                                                                                                                                                                         5,672                    (559)                94                      (27)                    127                  -            5,307            (365)      (6)%
    All Other Segment                                                                                                                                                                                                                                                                                                                                                                                                                                                       496                     (78)                 1                       (2)                  (162)                  -              255            (241)     (49)%
    Corporate Items and Eliminations                                                                                                                                                                                                                                                                                                                                                                                                                                        (22)                    (13)                27                       (1)                      -                  -               (9)             13
                                                                                                                                                                                                                                                                                                                                                                                                                                                                            ---                     ---                ---                      ---                     ---                 ---             ---             ---
    Machinery & Power Systems Sales                                                                                                                                                                                                                                                                                                                                                                                                                                     $16,557                 $(1,655)              $421                     $(82)                   $116            $     -          $15,357         $(1,200)      (7)%

    Financial Products Segment                                                                                                                                                                                                                                                                                                                                                                                                                                              752                       -                  -                        -                       -                   37            789              37         5%
    Corporate Items and Eliminations                                                                                                                                                                                                                                                                                                                                                                                                                                        (66)                      -                  -                        -                       -                   (5)           (71)             (5)
                                                                                                                                                                                                                                                                                                                                                                                                                                                                            ---                     ---                ---                      ---                     ---                  ---            ---             ---
    Financial Products Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                            $686          $            -            $     -                 $      -                $      -                  $32           $718             $32         5%

    Consolidated Sales and Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                     $17,243                 $(1,655)              $421                     $(82)                   $116                  $32        $16,075         $(1,168)      (7)%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        =======                 =======               ====                     ====                    ====                  ===        =======         =======

    Operating Profit by Segment
    (Millions of                 Fourth
     dollars)                   Quarter           Fourth Quarter        $     %
                                     2012                   2011 Change    Change
                                     ----                   ----           ------
    Construction
     Industries                              $26                     $534         $(508) (95)%
    Resource
     Industries                              611                      997          (386) (39)%
    Power
     Systems                                 697                      823          (126) (15)%
    All Other
     Segment                                 126                      236          (110) (47)%
    Corporate
     Items and
     Eliminations                           (534)                    (721)          187
    Machinery &
     Power
     Systems                                $926                   $1,869         $(943) (50)%
    Financial
     Products
     Segment                                 180                      134            46    34%
    Corporate
     Items and
     Eliminations                              2                       22           (20)
                                             ---                      ---           ---
    Financial
     Products                               $182                     $156           $26    17%
     Consolidating
     Adjustments                             (70)                     (65)           (5)
                                             ---                      ---           ---
    Consolidated
     Operating
     Profit                               $1,038                   $1,960         $(922) (47)%
                                          ======                   ======         =====

Construction Industries
Construction Industries’ sales were $4.028 billion in the fourth quarter of 2012, a decrease of $1.327 billion, or 25 percent, from the fourth quarter of 2011. Sales decreased in all geographic regions of the world, driven by dealers reducing new machine inventory levels in the fourth quarter of 2012 compared with dealers increasing inventory levels in the fourth quarter of 2011. Dealer-reported new machine inventory decreased about $950 million during the fourth quarter of 2012 compared with an increase of about $525 million during the fourth quarter of 2011. Dealer deliveries to end users were about the same as the fourth quarter of 2011.

Construction Industries’ profit was $26 million in the fourth quarter of 2012 compared with $534 million in the fourth quarter of 2011. The decrease in profit was primarily due to lower sales volume and increased manufacturing costs from inefficiencies driven by lower production and declining inventory in the fourth quarter of 2012.

Resource Industries
Resource Industries’ sales were $5.776 billion in the fourth quarter of 2012, an increase of $720 million, or 14 percent, from the fourth quarter of 2011. The sales increase was due to higher volume, improved price realization and an increase in Bucyrus sales of $102 million. New equipment sales increased, while sales for aftermarket parts declined. Sales increased in every region of the world except North America, where declining coal production contributed to lower sales.

As a result of increased production capability, coupled with our existing mining order backlog, sales were higher than the fourth quarter of 2011. However, new orders were well below the fourth quarter of 2011.

Resource Industries’ profit was $611 million in the fourth quarter of 2012 compared with $997 million in the fourth quarter of 2011. The decrease was a result of the goodwill impairment charge related to Siwei of $580 million.

Excluding the impairment charge, segment profit improved as a result of favorable price realization and higher sales volume, which included a favorable mix of products. This was partially offset by higher manufacturing costs primarily due to inefficiencies driven by lower production and declining inventory in the fourth quarter of 2012.

See discussion on the impact of Bucyrus on page 16.

Power Systems
Power Systems’ sales were $5.307 billion in the fourth quarter of 2012, a decrease of $365 million, or 6 percent, from the fourth quarter of 2011. The decrease was the result of lower sales volume, partially offset by the acquisition of MWM Holding GmbH (MWM) and improved price realization.

Sales decreased in all regions except Asia/Pacific. Excluding acquisitions, sales for petroleum, industrial and electric power applications were lower. Most of the decline was a result of dealers reducing their inventory levels in 2012 compared with dealers increasing inventory levels in 2011. Rail-related sales also declined.

Power Systems’ profit was $697 million in the fourth quarter of 2012 compared with $823 million in the fourth quarter of 2011. The decrease was primarily due to lower sales volume (which includes the impact of a favorable mix of products), partially offset by favorable price realization.

MWM, acquired during the fourth quarter of 2011, added sales of $127 million, primarily in EAME, and increased segment profit by $26 million.

Financial Products Segment
Financial Products’ revenues were $789 million, an increase of $37 million, or 5 percent, from the fourth quarter of 2011. The increase was primarily due to the favorable impact from higher average earning assets, partially offset by the unfavorable impact from lower average financing rates on new and existing finance receivables and operating leases.

Financial Products’ profit was $180 million in the fourth quarter of 2012, compared with $134 million in the fourth quarter of 2011. The increase was primarily due to a $34 million favorable impact from lower claims experience at Cat Insurance and a $32 million favorable impact from higher average earning assets. These increases were partially offset by a $17 million increase in the provision for credit losses at Cat Financial.

During 2012, Cat Financial’s overall portfolio quality reflected continued improvement. At the end of 2012, past dues at Cat Financial were 2.26 percent compared with 2.80 percent at the end of the third quarter of 2012 and 2.89 percent at the end of 2011. Write-offs, net of recoveries, were $46 million for the fourth quarter of 2012, up from $38 million for the fourth quarter of 2011. Write-offs, net of recoveries, were $102 million for 2012, down from $158 million for 2011.

As of December 31, 2012, Cat Financial’s allowance for credit losses totaled $426 million or 1.49 percent of net finance receivables, compared with $369 million or 1.47 percent of net finance receivables at year-end 2011.

All Other Segment
All Other Segment includes groups that provide services such as component manufacturing, remanufacturing and logistics.

The decrease in sales was primarily due to the absence of our third party logistics business, which was sold in the third quarter of 2012.

The decrease in profit was primarily driven by lower production volume and the absence of our third party logistics business.

Corporate Items and Eliminations
Expense for corporate items and eliminations was $532 million in the fourth quarter of 2012, a decrease of $167 million from the fourth quarter of 2011. Corporate items and eliminations include: corporate-level expenses; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences, as segment profit is reported using annual fixed exchange rates; and inter-segment eliminations.

The decrease in expense from the fourth quarter of 2011 was primarily due to the favorable impact of currency and timing differences, partially offset by increased corporate costs. Segment profit for 2012 is based on fixed exchange rates set at the beginning of 2012, while segment profit for 2011 is based on fixed exchange rates set at the beginning of 2011. The difference in actual exchange rates compared with fixed exchange rates is included in corporate items and eliminations and is not reflected in segment profit.

2013 Outlook

2013 Economic Outlook
World economic conditions, while improving, are still relatively weak. Indicators improved in many countries in late 2012, suggesting better prospects for economic growth in 2013. In the large economies, we expect some improvement in the United States and China, and a continuation of economic uncertainty in Europe.

Overall, we expect the world economy will begin the year with weak growth and improve as 2013 unfolds. We anticipate overall world economic growth of at least 2.5 percent–a small improvement from our estimate of 2.3 percent for 2012.

Key points related to this outlook include:

  • Central banks reduced interest rates over the past 15 months and some further cuts are possible. With inflation low, we expect there will be little pressure to tighten policies in 2013. With the exception of Europe, monetary easing will likely offset much of the impacts of tighter fiscal budgets. Overall, we expect economic policies will be the most favorable for growth since 2010.
  • One sign lower interest rates are working is that both manufacturing and service purchasing manager indices improved over the past few months. Both ended 2012 at values that signal growth.
  • Another positive sign is that metals prices have improved from their mid-August 2012 lows, and fourth-quarter data for China indicates increased imports of coal, iron ore and copper.
  • We expect economic growth will improve demand for most metals in 2013, and average metal prices in 2013 will be higher than 2012. We expect copper will average $3.75 per pound in 2013 and China port iron ore $135 per ton. Those prices will likely be attractive for production and investment.
  • Coal prices also improved in late 2012, but are currently 5 to 20 percent below a year ago. We expect that continued relatively low prices for U.S. natural gas will keep pressure on coal prices in 2013. We are expecting Central Appalachian coal will average about $65 per ton, slightly higher than $63 per ton in 2012.
  • Average interest rates in developed economies are already below lows reached during the financial crisis, so prospects for lower rates are limited. However, some central banks are adding liquidity in their financial systems as a way to increase economic growth.
  • Growth in the developed economies will likely be slow in early 2013 and improve throughout the year. We expect economic growth will average about 1.5 percent this year, slightly above 2012.
  • Financial conditions have improved in the United States in response to past U.S. Federal Reserve easing. Credit spreads are down, bank capital ratios are near record highs and banks are easing lending standards. The Fed’s plan to increase monthly bond purchases to $85 billion will likely help ease financial conditions and increase lending. We expect the U.S. economy to grow at least 2.5 percent in 2013.
  • The underlying fundamentals that support U.S. housing construction continue to improve. Housing affordability is better, the inventory of unsold homes has come down significantly over the past few years and home prices have begun to recover. As a result, we expect housing starts to exceed 1 million units in 2013, which would be the highest year since 2007.
  • Nonresidential building construction in the United States improved in 2012, and we expect further growth in 2013. Vacancy rates are down, and property prices are up, both trends that we expect to continue. Infrastructure construction is likely to be higher as we expect state and local government spending to increase in 2013.
  • Interest rates in the Eurozone are at record lows, and credit spreads are improving. However, economic policies are less aggressive than in Japan and the United States. As a result, we expect growth in the Eurozone will struggle to match 2012, and we expect that construction activity will decline for the sixth consecutive year, reaching the lowest level since at least 1990.
  • We expect the new Japanese government to ease monetary policy and increase infrastructure spending. We expect Japanese economic growth near 1 percent in 2013.
  • Developing economies have been lowering interest rates for more than a year, and average rates are close to levels reached during the financial crisis. Low interest rates will likely contribute to better growth. We expect that, in the aggregate, developing economies will grow at more than 5 percent in 2013.
  • China’s economic slowdown in 2012 unfavorably impacted construction in China and world prices for metals, coal and oil. In the second half of 2012, the Chinese government accelerated credit growth and infrastructure spending, and, as a result, economic data in the fourth quarter improved. Our outlook assumes the Chinese government will maintain pro-growth policies throughout 2013. We expect economic growth near 8.5 percent and a more favorable environment for construction and commodity demand.
  • Most other Asian countries also lowered interest rates in 2012, and we expect faster economic growth in 2013 than 2012. Better economic growth is expected to be positive for construction.
  • Interest rates in Latin America have also been declining and are at record lows in Brazil. We expect lower interest rates, higher commodity prices and better world economic growth will improve economic growth in the region to about 4 percent in 2013. We also expect construction activity to improve as a result of better economic growth and large infrastructure programs.
  • Most countries in Africa/Middle East and CIS have maintained economic policies close to those adopted in the financial crisis, and, as a result, growth has generally been sustained. We expect pro-growth policies will continue throughout 2013, allowing about 4-percent economic growth in Africa/Middle East and in the CIS.

Economic Risks

  • Economic policies became more pro-growth in 2012, and, as a result, recent economic data has been more favorable. Overall, we expect policies to become even more stimulative, so upside to our outlook is possible. As in the past, we are concerned that central banks will reverse policies too early once better economic growth becomes apparent.
  • A downside risk is Eurozone growth lagging behind the rest of the world. As the disparity becomes more evident, concern about the Eurozone economy and its currency could return.

Sales and Revenues Outlook
We expect 2013 sales and revenues to be in a range of $60 to $68 billion reflecting both upside and downside potential from $65.9 billion of sales and revenues in 2012.

We are optimistic that recent positive economic indicators suggest economic growth in 2013, but we remain cautious about how quickly economic improvement will translate into higher sales and revenues.

Following are key points related to the 2013 sales and revenues outlook:

  • At the middle of our outlook range, sales and revenues are expected to be about $2 billion lower than in 2012.
  • More than all of the decline in sales and revenues is expected to be in our Resource Industries segment. Mining customers have announced lower capital expenditures in 2013, and mining equipment in dealer inventories is expected to decline in 2013.
  • Sales and revenues will be negatively impacted about $200 million per quarter in our All Other segment during the first half of 2013 as a result of the absence of sales from our third party logistics business, which was sold in July of 2012.
  • We expect that Construction Industries’ sales will be flat to up slightly in 2013 with improving end-user demand largely offset by the impact of dealers lowering inventories in 2013.
  • We expect Power Systems’ sales to be relatively flat in 2013 compared with 2012.
  • We are expecting price realization to improve about 1 percent in 2013.

2013 Profit Outlook

The outlook for 2013 profit is a range of $7.00 to $9.00 per share. Profit in 2012 was $8.48 per share. Absence of the $580 million ($0.87 per share) goodwill impairment related to Siwei is the most significant favorable factor when comparing the 2013 outlook to 2012 results.

Other key points related to our profit outlook for 2013:

  • Price realization is expected to be positive to profit in 2013, but the impact is expected to be about offset by higher depreciation and an unfavorable sales mix.
  • Negative items include lower sales volume and the absence of the $273 million pre-tax gain on the sale of a majority interest of our third party logistics business in the third quarter of 2012.
  • Absence of the $300 million favorable tax benefit from the settlement of prior-year returns in the fourth quarter of 2012 will be negative, but will be partially offset by the expectation of a favorable discrete tax benefit of about $85 million in 2013 related to U.S. tax law changes that were enacted in 2013, but were retroactive to 2012.
  • Excluding discrete items, we expect the effective tax rate for 2013 to be near the 30.5 percent rate in 2012.
  • Capital expenditures in 2013 are expected to be slightly below the $3.4 billion in 2012.

First Quarter of 2013
While we are not providing a specific sales and revenues and profit outlook for the first quarter of 2013, we are expecting that sales and revenues in the first quarter are likely to be significantly lower than the first quarter of 2012. The middle of our full-year outlook for sales and revenues is about $2 billion below 2012 sales and revenues. We expect that sales and revenues will decline more than $2 billion in the first quarter of 2013 compared with the first quarter of 2012.

Much of the expected decline in first-quarter sales is a result of the continuation of reduced production as dealers are expected to continue to lower their new machine inventories. We expect that dealer inventory reductions will be negative to sales in the first quarter of 2013, while in the first quarter of 2012 dealers increased inventory which benefitted Caterpillar sales.

Profit is also expected to be significantly lower in the first quarter of 2013 than in the first quarter of 2012–a result of lower expected sales and the negative cost impact of continuing low production levels and declining inventory.

    QUESTIONS AND ANSWERS
    ---------------------

    Q1:                   Your inventory, which had been a
                          concern, declined substantially in
                          the fourth quarter. Can you
                          describe what you did during the
                          quarter to lower inventory and how
                          it impacted your fourth-quarter
                          results?

    A:                    We are pleased with the work that
                          was done throughout the company to
                          achieve significant and orderly
                          inventory reduction in the fourth
                          quarter. The groundwork began
                          around mid-year as economic
                          indicators began to soften. Based
                          on softening economic conditions
                          and the amount of inventory we had
                          available in our Product
                          Distribution Centers (PDCs),
                          dealers also took action to lower
                          their inventories. As a result, new
                          orders from dealers declined
                          sharply in the third quarter, and
                          we began lowering production
                          schedules and incoming material
                          from suppliers around the world.
                          While production schedules began to
                          decline in the third quarter, the
                          most significant impacts on
                          production and the flow of incoming
                          material were in the fourth
                          quarter.

                          Our actions, coupled with dealer
                          inventory reductions, had a
                          significant negative impact on
                          fourth-quarter sales and profit.
                          For sales, the negative impact of
                          dealer inventory changes was about
                          the same as the total company
                          decline in sales and revenues from
                          the fourth quarter of 2011 to the
                          fourth quarter of 2012. The sales
                          decline, along with the negative
                          cost impact from lower production
                          and declining inventory, were
                          significantly unfavorable to
                          profit.

    Q2:                   Is inventory at about the right
                          level, or do you expect further
                          reductions?

    A:                    Yes, we expect further inventory
                          reductions as production levels
                          will continue to decline at least
                          through the first quarter of 2013.
                          However, we expect sales will be
                          lower in the first quarter of 2013
                          so the decline in inventory will
                          not likely be as significant as in
                          the fourth quarter of 2012.

    Q3:                   While you did not provide specific
                          sales and profit guidance for the
                          first quarter of 2013, your outlook
                          reflects caution regarding the
                          first quarter. Why?

    A:                    The first quarter is typically a
                          seasonally weaker quarter for
                          dealer sales. The impact of the
                          seasonal weakness is usually
                          partially offset in Caterpillar
                          sales as dealers add to inventories
                          ahead of seasonally stronger
                          second-quarter demand. We do not
                          expect dealers will add inventory
                          in the first quarter as they
                          usually do, rather, we expect
                          dealers will continue to reduce
                          their inventories until they are
                          right sized with demand. We expect
                          this will lead to a weak quarter
                          for Caterpillar sales well below
                          the first quarter of 2012.

    Q4:                   Dealer inventory declined in the
                          fourth quarter of 2012. What are
                          your expectations for 2013?

    A:                    Although dealer new machine
                          inventory declined in the fourth
                          quarter, it increased more than $1
                          billion during full-year 2012.
                          Over the course of 2012, we
                          continued to ramp up inventory in
                          our PDCs to better serve dealers
                          and customers. As a result, we
                          expect that dealers will be able to
                          reduce their inventories further in
                          2013. We expect that dealers will
                          reduce inventories by more than
                          they increased in 2012 and will
                          likely end 2013 with inventory
                          below year-end 2011 levels.

    Q5:                   Can you comment on your order
                          backlog at the end of the fourth
                          quarter?

    A:                    At the end of the fourth quarter,
                          the backlog was $19.6 billion. This
                          represents a $3.5 billion reduction
                          from the end of the third quarter
                          of 2012 and a $10.2 billion
                          reduction from year-end 2011. The
                          most significant decrease in the
                          fourth quarter of 2012 was in
                          Resource Industries. Although
                          dealer deliveries to end users in
                          the fourth quarter of 2012 remained
                          about flat compared with the third
                          quarter of 2012, orders received
                          from Cat dealers have continued to
                          be well below end-user demand.

    Q6:                   We can calculate incremental
                          operating profit pull through, but
                          the impact of your acquisitions and
                          divestitures makes the calculation
                          difficult. Can you adjust 2012 for
                          acquisitions, divestitures and
                          currency impacts?

    A:                    The following table shows the change
                          in sales and revenues and operating
                          profit. It excludes the impact of
                          acquisitions and divestitures that
                          occurred during 2011 or 2012, and
                          it adjusts sales and operating
                          profit changes for the impact of
                          currency changes.

    (Millions of dollars)
                                                                                                                                                  Change
                                                                                                                                                  ------
                                              2012                                                    2011
                                              ----                                                    ----
    Sales and Revenues                                                                                        $65,875                                        $60,138                                         $5,737
    Acquisitions and Divestitures                                                                                (5,521)                                        (2,853)                                        (2,668)
                                                                                                                 ------                                         ------                                         ------
    Sales and Revenues excluding Acquisitions and Divestitures                                                   60,354                                         57,285                                          3,069

    Sales Currency Impact                                                                              582                                              -                                            582
                                                                                                       ---                                            ---                                            ---
    Sales and Revenues excluding Acquisitions, Divestitures and Currency Impacts                              $60,936                                        $57,285                                         $3,651
                                                                                                              =======                                        =======                                         ======

    Operating Profit                                                                                           $8,573                                         $7,153                                         $1,420
    Acquisitions and Divestitures Operating (Profit) / Loss                                                      (103)                                            (9)                                           (94)
                                                                                                                 ----                                            ---                                            ---
    Operating Profit excluding Acquisitions and Divestitures                                                    8,470                                          7,144                                          1,326

    Operating Profit Currency Impact                                                                  (110)                                             -                                           (110)
                                                                                                      ----                                            ---                                           ----
    Operating Profit excluding Acquisitions, Divestitures and Currency Impacts                                 $8,360                                         $7,144                                         $1,216
                                                                                                               ======                                         ======                                         ======

    Incremental Margin Rate excluding Acquisitions and Divestitures Impacts                                                                                                                                      43%

    Incremental Margin Rate excluding Acquisitions, Divestitures and Currency Impacts                                                                                                                            33%

    Q7:             Can you comment on expense related to
                    your short-term incentive
                    compensation plans in 2012?

    A:              Short-term incentive compensation
                    expense is directly related to
                    financial and operational performance.

                    For 2012, the expense was about $825
                    million-$230 million in the first
                    quarter, $265 million in the second
                    quarter, $130 million in the third
                    quarter and $200 million in the fourth
                    quarter. In 2011, the total expense
                    was about $1.2 billion.

    Q8:             Can you summarize the impact of Bucyrus
                    operations on 2012 operating profit?

    A:              Following is a table that summarizes
                    the impact of Bucyrus on fourth-
                    quarter and full-year 2011 and 2012
                    results.
                                                                          Impact of Bucyrus on Profit
                                                                          ---------------------------
                                                                              Millions of dollars

    Impact Excluding Divestitures                          Fourth Quarter                             Fourth Quarter         Full Year         Full Year
    Gain/(Loss)                                                                2012                                    2011              2012              2011
    -----------                                                                ----
    Sales                                                                    $1,491                                  $1,389            $4,758            $2,524
    Cost of goods sold                                                       (1,269)                                 (1,140)           (3,716)           (2,159)
    SG&A                                                                       (161)                                   (161)             (635)             (351)
    R&D                                                                         (40)                                    (14)             (153)              (26)
    Other operating income (costs)                                                5                                      (7)                3               (84)
                                                                                ---                                     ---               ---               ---
    Operating profit (loss)                                                      26                                      67               257               (96)
                                                                                ---                                     ---               ---               ---

    Interest expense                                                            (28)                                    (35)             (130)              (79)
    Other income (expense)                                                       (9)                                     (1)              (12)             (228)
                                                                                ---                                     ---               ---              ----

    Profit (loss) before tax                                                    (11)                                     31               115              (403)
    Income tax (provision)/benefit                                                5                                      (3)              (40)              133
                                                                                ---                                     ---               ---               ---
    Profit (loss) after tax of cons. companies                                   (6)                                     28                75              (270)
    Profit (loss) attributable to non-controlling interest                        -                                      (1)               (1)               (1)
                                                                                ---                                     ---               ---               ---
    Profit/(loss)                                                               $(6)                                    $27               $74             $(271)
                                                                                ===                                     ===               ===             =====

    Distribution Business Divestitures Gain/(Loss)
    ----------------------------------------------
    SG&A                                                                       $(44)                                   $(17)            $(177)             $(32)
    Other operating income (costs)                                              124                                      96               310                96
                                                                                ---                                     ---               ---               ---
    Impact on operating profit                                                   80                                      79               133                64
    Income tax (provision)/benefit                                              (62)                                    (61)             (161)              (55)
                                                                                ---                                     ---              ----               ---
    Profit/(loss)                                                               $18                                     $18              $(28)               $9
    Fourth-quarter 2012 operating profit was unfavorably
     impacted by $58 million to correct for an
     overstatement of inventory resulting from previously
     recorded profit on inter-company sales. This error
     favorably impacted 2011 operating profit by $24
     million and first-quarter 2012 operating profit by
     $34 million.

    Q9:                Can you comment on M&PS operating cash
                       flow for 2012?

    A:                 Machinery and Power Systems (M&PS)
                       operating cash flow was $4.198 billion
                       in 2012, compared with $7.972 billion
                       in 2011. The decrease was due to
                       unfavorable changes in working
                       capital, most significantly accounts
                       payable. The reduction in payables
                       reflects a decline in material
                       purchases to support inventory
                       reductions achieved in the fourth
                       quarter of 2012. In addition, tax
                       payments, pension contributions and
                       short-term incentive compensation
                       payments were higher in 2012.

    The following questions and answers relate to the
     accounting misconduct at Siwei that was announced on
     January 18, 2013:

    Q10:               Does the discovery of misconduct at
                       Siwei change Caterpillar's strategy
                       for China or its view of the mining
                       industry?

    A:                 No. Caterpillar has 23 existing
                       manufacturing facilities in China,
                       four new facilities under
                       construction, four Research &
                       Development (R&D) centers and three
                       logistics and parts centers, employing
                       more than 15,000 people across the
                       country. In addition, China produces
                       and consumes more coal than any other
                       country in the world. Our strategy to
                       expand our coal mining business in
                       China is unchanged, and we are
                       optimistic about the underground coal
                       mining equipment opportunities. ?The
                       accounting misconduct that occurred at
                       Siwei does not reflect the way
                       Caterpillar does business and is not
                       in keeping with our Worldwide Code of
                       Conduct. The actions of the
                       individuals involved were clearly
                       wrong and purposely designed to
                       overstate the profitability of the
                       company prior to our acquisition. This
                       does not change our plans to develop,
                       grow and improve the business. ?The
                       acquisition is aligned with
                       Caterpillar's strategy to expand in
                       the rapidly growing Chinese coal
                       mining equipment industry utilizing
                       the Siwei roof support products and
                       manufacturing capabilities, combined
                       with Caterpillar's strong commitment
                       to product innovation and safety, to
                       help our mining customers in China
                       become more efficient and safer within
                       their mines.

    Q11:               What is Caterpillar's due diligence
                       process for mergers and acquisitions?

    A:                 We believe our process is rigorous and
                       robust and includes Caterpillar
                       personnel and outside accounting,
                       legal and financial advisors. It is
                       important to understand that Siwei was
                       a publicly traded company with audited
                       financial statements. What we
                       discovered at Siwei following the
                       acquisition was deliberate, multi-
                       year, coordinated accounting
                       misconduct that was concealed by the
                       persons responsible.

    Q12:               Can you provide more details about the
                       nature of the accounting misconduct?

    A:                 Caterpillar first became concerned
                       about an issue when discrepancies were
                       identified in November 2012, between
                       the inventory recorded in Siwei's
                       accounting records and the company's
                       actual physical inventory. This was
                       determined by a physical inventory
                       count conducted at Siwei as part of
                       Caterpillar's integration process.
                       Caterpillar promptly launched a
                       comprehensive review and investigation
                       into the nature and source of this
                       discrepancy. This extensive review has
                       identified inappropriate accounting
                       practices involving improper cost
                       allocation that resulted in overstated
                       profit. The review further identified
                       improper revenue recognition practices
                       involving early and, at times
                       unsupported, revenue recognition. This
                       review is ongoing.

    Q13:               Have the issues at Siwei had an impact
                       on your 2013 outlook?

    A:                 We do not expect the matters related to
                       Siwei to have a significant impact on
                       Caterpillar's 2013 sales and revenues
                       or profit.

    Q14:               Will there be litigation as a result of
                       the Siwei investigation?

    A:                 Caterpillar was misled by the
                       accounting misconduct at Siwei. There
                       has been a tremendous amount of time,
                       energy and resources dedicated to this
                       investigation to date. But, we are not
                       done. We are putting in more effort to
                       finish our investigation as we
                       consider all our options to recover
                       our losses and hold those responsible
                       accountable for their wrongdoing.
                       Caterpillar has a long-standing
                       policy not to comment on pending or
                       contemplated litigation, and further
                       comment is not appropriate at this
                       time.


    GLOSSARY OF TERMS
    -----------------
              1.   All Other Segment - Primarily includes
                   activities such as: the remanufacturing
                   of Cat engines and components and
                   remanufacturing services for other
                   companies as well as the product
                   management, development, manufacturing,
                   marketing and product support of
                   undercarriage, specialty products,
                   hardened bar stock components and
                   ground engaging tools primarily for
                   Caterpillar products; logistics
                   services; the product management,
                   development, marketing, sales and
                   product support of on-highway
                   vocational trucks for North America
                   (U.S. & Canada only); distribution
                   services responsible for dealer
                   development and administration, dealer
                   portfolio management and ensuring the
                   most efficient and effective
                   distribution of machines, engines and
                   parts; and the 50/50 joint venture with
                   Navistar (NC2) until it became a wholly
                   owned subsidiary of Navistar effective
                   September 29, 2011. On July 31, 2012,
                   we sold a majority interest in
                   Caterpillar's third party logistics
                   business.
              2.   Consolidating Adjustments - Eliminations
                   of transactions between Machinery and
                   Power Systems and Financial Products.
              3.   Construction Industries - A segment
                   responsible for small and core
                   construction machines. Responsibility
                   includes 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,
                   select work tools, small, medium and
                   large track excavators, wheel
                   excavators, medium wheel loaders,
                   medium track-type tractors, track-
                   type loaders, motor graders and pipe
                   layers. In addition, Construction
                   Industries has responsibility for Power
                   Systems and components in Japan and an
                   integrated manufacturing cost center
                   that supports Machinery and Power
                   Systems businesses.
              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 and Power Systems lines of
                   business only; currency impacts on
                   Financial Products revenues and
                   operating profit are included in the
                   Financial Products portions of the
                   respective analyses. With respect to
                   other income/expense, currency
                   represents the effects of forward and
                   option contracts entered into by the
                   company to reduce the risk of
                   fluctuations in exchange rates and the
                   net effect of changes in foreign
                   currency exchange rates on our foreign
                   currency assets and liabilities for
                   consolidated results.
              5.   Debt-to-Capital Ratio - A key measure
                   of financial strength used by both
                   management and our credit rating
                   agencies. The metric is a ratio of
                   Machinery and Power Systems debt
                   (short-term borrowings plus long-term
                   debt) and redeemable noncontrolling
                   interest to the sum of Machinery and
                   Power Systems debt, redeemable
                   noncontrolling interest and
                   stockholders' equity.
              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.   Financial Products Segment -Provides
                   financing to customers and dealers for
                   the purchase and lease of Caterpillar
                   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.
              9.   Latin America - Geographic region
                   including Central and South American
                   countries and Mexico.
             10.   Machinery and Power Systems (M&PS) -
                   Represents the aggregate total of
                   Construction Industries, Resource
                   Industries, Power Systems, and All
                   Other Segment and related corporate
                   items and eliminations.
             11.   Machinery and Power Systems Other
                   Operating (Income) Expenses - Comprised
                   primarily of gains/losses on disposal
                   of long-lived assets, long-lived
                   asset impairment charges, pension
                   curtailment charges and employee
                   redundancy costs.
             12.   Manufacturing Costs - Manufacturing
                   costs exclude the impacts of currency
                   and represent the volume-adjusted
                   change for variable costs and the
                   absolute dollar change for period
                   manufacturing costs. Variable
                   manufacturing costs are defined as
                   having a direct relationship with the
                   volume of production. This includes
                   material costs, direct labor and other
                   costs that vary directly with
                   production volume such as freight,
                   power to operate machines and supplies
                   that are consumed in the manufacturing
                   process. Period manufacturing costs
                   support production but are defined as
                   generally not having a direct
                   relationship to short-term changes in
                   volume. Examples include machinery and
                   equipment repair, depreciation on
                   manufacturing assets, facility support,
                   procurement, factory scheduling,
                   manufacturing planning and operations
                   management.
             13.   Power Systems - A segment responsible
                   for the product management,
                   development, manufacturing, marketing,
                   sales and product support of
                   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 petroleum industries; reciprocating
                   engines supplied to the industrial
                   industry as well as Caterpillar
                   machinery; the product management,
                   development, manufacturing, marketing,
                   sales and product support of turbines
                   and turbine-related services; the
                   development, manufacturing,
                   remanufacturing, maintenance, leasing
                   and service of diesel-electric
                   locomotives and components and other
                   rail-related products and services.
             14.   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.
             15.   Resource Industries - A segment
                   responsible for business strategy,
                   product design, product management and
                   development, manufacturing, marketing
                   and sales and product support for large
                   track-type tractors, large mining
                   trucks, underground mining equipment,
                   tunnel boring equipment, large wheel
                   loaders, off-highway trucks,
                   articulated trucks, wheel tractor
                   scrapers, wheel dozers, compactors,
                   select work tools, forestry products,
                   paving products, machinery components
                   and electronics and control systems. In
                   addition, Resource Industries manages
                   areas that provide services to other
                   parts of the company, including
                   integrated manufacturing, research and
                   development and coordination of the
                   Caterpillar Production System. On July
                   8, 2011, the acquisition of Bucyrus
                   International, Inc. was completed. This
                   added the responsibility for business
                   strategy, product design, product
                   management and development,
                   manufacturing, marketing and sales and
                   product support for electric rope
                   shovels, draglines, hydraulic shovels,
                   drills, highwall miners and electric
                   drive off-highway trucks to Resource
                   Industries. In addition, Resource
                   Industries segment profit includes
                   Bucyrus acquisition-related costs and
                   the impact from divestiture of portions
                   of the Bucyrus distribution business.
             16.   Sales Volume - With respect to sales and
                   revenues, sales volume represents the
                   impact of changes in the quantities
                   sold for Machinery and Power Systems 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
                   and Power Systems 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 and
                   Power Systems sales with respect to
                   total sales.
             17.   Siwei - ERA Mining Machinery Limited
                   (ERA), including its wholly-owned
                   subsidiary Zhengzhou Siwei Mechanical &
                   Electrical Manufacturing Co., Ltd.,
                   commonly known as Siwei, which was
                   acquired during the second quarter of
                   2012. Siwei primarily designs,
                   manufactures, sells and supports
                   underground coal mining equipment in
                   China and is included in our Resource
                   Industries segment.

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 substituted for the related GAAP measure.

Machinery and Power Systems
Caterpillar defines Machinery and Power Systems 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 Power Systems 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 24-29 reconcile Machinery and Power Systems 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/investor

                                   -----------------------------------
                                    http://www.caterpillar.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,
                                                                                                        2012               2011           2012                 2011
                                                                                                        ----               ----           ----                 ----
    Sales and revenues:
                                                                  Sales of Machinery and Power
                                                                  Systems                                      $15,357                 $16,557                      $63,068              $57,392
                                                                 Revenues of Financial Products                    718                     686                        2,807                2,746

                                                                 Total sales and revenues                       16,075                  17,243                       65,875               60,138

    Operating costs:
                                                                 Cost of goods sold                             11,899                  12,763                       47,055               43,578
                                                                  Selling, general and
                                                                  administrative expenses                        1,591                   1,487                        5,919                5,203
                                                                  Research and development
                                                                  expenses                                         613                     604                        2,466                2,297
                                                                  Interest expense of Financial
                                                                  Products                                         198                     203                          797                  826
                                                                 Goodwill impairment charge                        580                       -                          580                    -
                                                                  Other operating (income)
                                                                  expenses                                         156                     226                          485                1,081

                                                                 Total operating costs                          15,037                  15,283                       57,302               52,985

    Operating profit                                                                       1,038                          1,960                   8,573                     7,153

                                                                  Interest expense excluding
                                                                  Financial Products                               115                     107                          467                  396
                                                                 Other income (expense)                            (11)                    125                          130                  (32)

    Consolidated profit before taxes                                                         912                          1,978                   8,236                     6,725

                                                                  Provision (benefit) for income
                                                                  taxes                                            214                     416                        2,528                1,720

                                                                  Profit of consolidated
                                                                  companies                                        698                   1,562                        5,708                5,005

                                                                  Equity in profit (loss) of
                                                                  unconsolidated affiliated
                                                                  companies                                          2                       -                           14                  (24)

    Profit of consolidated and affiliated companies                                          700                          1,562                   5,722                     4,981

    Less: Profit (loss) attributable to noncontrolling interests                               3                             15                      41                        53

    Profit (1)                                                                                          $697                    $1,547                       $5,681               $4,928
                                                                                                        ====                    ======                       ======               ======

    Profit per common share                                                                            $1.07                     $2.39                        $8.71                $7.64

    Profit per common share - diluted(2)                                                               $1.04                     $2.32                        $8.48                $7.40

    Weighted average common shares
    outstanding (millions)
                                                                 - Basic                                         654.4                   647.1                        652.6                645.0
                                                                 - Diluted(2)                                    669.3                   665.9                        669.6                666.1

    Cash dividends declared per common share                                                           $1.04                     $0.92                        $2.02                $1.82
                                             (1) Profit attributable to common stockholders.
                                             (2)  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,
                                                                                                2012                                 2011
    Assets
                                                 Current assets:
                                                  Cash and
                                                  short-term
                                                  investments                                                                      $5,490                   $3,057
                                                  Receivables -
                                                  trade and
                                                  other                                                                            10,092                   10,285
                                                  Receivables -
                                                  finance                                                                           8,860                    7,668
                                                  Deferred and
                                                  refundable
                                                  income taxes                                                                      1,547                    1,580
                                                  Prepaid
                                                  expenses and
                                                  other current
                                                  assets                                                                              988                      994
                                                 Inventories                                                                       15,547                   14,544
                                                                                                                                   ------                   ------
                                                  Total current
                                                  assets                                                                           42,524                   38,128

                                                  Property, plant
                                                  and equipment -
                                                  net                                                                              16,461                   14,395
                                                  Long-term
                                                  receivables -
                                                  trade and other                                                                   1,316                    1,130
                                                  Long-term
                                                  receivables -
                                                  finance                                                                          14,029                   11,948
                                                  Investments in
                                                  unconsolidated
                                                  affiliated
                                                  companies                                                                           272                      133
                                                  Noncurrent
                                                  deferred and
                                                  refundable
                                                  income taxes                                                                      2,011                    2,157
                                                 Intangible assets                                                                  4,016                    4,368
                                                 Goodwill                                                                           6,942                    7,080
                                                 Other assets                                                                       1,785                    2,107

    Total assets                                                                                                     $89,356                      $81,446
                                                                                                                     =======                      =======

    Liabilities
                                                  Current
                                                  liabilities:
                                                  Short-term
                                                  borrowings:
                                                                                                       --Machinery and Power
                                                                                                       Systems                               $636                      $93
                                                                                                      -- Financial Products                 4,651                    3,895
                                                  Accounts
                                                  payable                                                                           6,753                    8,161
                                                  Accrued
                                                  expenses                                                                          3,667                    3,386
                                                  Accrued wages,
                                                  salaries and
                                                  employee
                                                  benefits                                                                          1,911                    2,410
                                                  Customer
                                                  advances                                                                          2,978                    2,691
                                                  Dividends
                                                  payable                                                                               -                      298
                                                  Other current
                                                  liabilities                                                                       2,055                    1,967
                                                  Long-term
                                                  debt due
                                                  within one
                                                  year:
                                                                                                       --Machinery and Power
                                                                                                       Systems                              1,113                      558
                                                                                                      -- Financial Products                 5,991                    5,102
                                                                                                                                            -----                    -----
                                                  Total current
                                                  liabilities                                                                      29,755                   28,561

                                                  Long-term debt
                                                  due after one
                                                  year:
                                                                                                       --Machinery and Power
                                                                                                       Systems                              8,666                    8,415
                                                                                                      -- Financial Products                19,086                   16,529
                                                  Liability for
                                                  postemployment
                                                  benefits                                                                         11,085                   10,956
                                                 Other liabilities                                                                  3,182                    3,583

    Total liabilities                                                                         71,774                                       68,044
                                                                                              ------                                       ------

    Redeemable noncontrolling interest                                                             -                                          473

    Stockholders' equity
                                                 Common stock                                                                       4,481                    4,273
                                                 Treasury stock                                                                   (10,074)                (10,281)
                                                  Profit employed
                                                  in the business                                                                  29,558                   25,219
                                                  Accumulated other
                                                  comprehensive
                                                  income (loss)                                                                    (6,433)                  (6,328)
                                                  Noncontrolling
                                                  interests                                                                            50                       46

    Total stockholders' equity                                                                17,582                                       12,929
                                                                                              ------                                       ------
    Total liabilities, redeemable noncontrolling
     interest and stockholders' equity                                                                               $89,356                      $81,446
                                                                                                                     =======                      =======

                                                    Caterpillar Inc.
                                      Condensed Consolidated Statement of Cash Flow
                                                       (Unaudited)
                                                  (Millions of dollars)

                                                                                                   Twelve Months Ended
                                                                                                       December 31,
                                                                                                      2012                2011
    Cash flow from operating activities:
                                                Profit of
                                                consolidated
                                                and affiliated
                                                companies                                 $5,722                        $4,981
                                                Adjustments for
                                                non-cash
                                                items:
                                               Depreciation and amortization               2,813                         2,527
                                               Goodwill impairment charge                    580                             -
                                               Other                                        (191)                          457
                                                Changes in
                                                assets and
                                                liabilities,
                                                net of
                                                acquisitions
                                                and
                                                divestitures:
                                               Receivables - trade and other                (173)                       (1,345)
                                               Inventories                                (1,149)                       (2,927)
                                               Accounts payable                           (1,868)                        1,555
                                               Accrued expenses                              183                           308
                                                Accrued wages, salaries and
                                                employee benefits                           (490)                          619
                                               Customer advances                             241                           173
                                               Other assets - net                            252                           (91)
                                               Other liabilities - net                      (679)                          753
                                                                                            ----                           ---
    Net cash provided by (used for) operating
     activities                                                        5,241                         7,010
                                                                       -----                         -----
    Cash flow from investing activities:
                                                Capital
                                                expenditures -
                                                excluding
                                                equipment
                                                leased to
                                                others                                    (3,350)                       (2,515)
                                                Expenditures
                                                for equipment
                                                leased to
                                                others                                    (1,726)                       (1,409)
                                                Proceeds from
                                                disposals of
                                                leased assets
                                                and property,
                                                plant and
                                                equipment                                  1,117                         1,354
                                                Additions to
                                                finance
                                                receivables                              (12,010)                      (10,001)
                                                Collections of
                                                finance
                                                receivables                                8,995                         8,874
                                                Proceeds from
                                                sale of
                                                finance
                                                receivables                                  132                           207
                                                Investments and
                                                acquisitions
                                                (net of cash
                                                acquired)                                   (618)                       (8,184)
                                                Proceeds from
                                                sale of
                                                businesses and
                                                investments
                                                (net of cash
                                                sold)                                      1,199                           376
                                                Proceeds from
                                                sale of
                                                available-
                                                for-sale
                                                securities                                   306                           247
                                                Investments in
                                                available-
                                                for-sale
                                                securities                                  (402)                         (336)
                                               Other - net                                   167                           (40)

    Net cash provided by (used for) investing
     activities                                                       (6,190)                     (11,427)
                                                                      ------                       -------
    Cash flow from financing activities:
                                               Dividends paid                             (1,617)                       (1,159)
                                                Distribution to
                                                noncontrolling
                                                interests                                     (6)                           (3)
                                                Common stock
                                                issued,
                                                including
                                                treasury
                                                shares
                                                reissued                                      52                           123
                                                Excess tax
                                                benefit from
                                                stock-based
                                                compensation                                 192                           189
                                                Acquisitions of
                                                noncontrolling
                                                interests                                   (449)                           (8)
                                                Proceeds from
                                                debt issued
                                                (original
                                                maturities
                                                greater than
                                                three months)                             16,015                        15,460
                                                Payments on
                                                debt (original
                                                maturities
                                                greater than
                                                three months)                            (11,099)                      (10,593)
                                                Short-term
                                                borrowings -
                                                net (original
                                                maturities
                                                three months
                                                or less)                                     461                           (43)

    Net cash provided by (used for) financing
     activities                                                        3,549                         3,966
                                                                       -----                         -----
    Effect of exchange rate changes on cash                             (167)                          (84)
                                                                        ----                           ---
    Increase (decrease) in cash and short-
     term investments                                                  2,433                          (535)
    Cash and short-term investments at
     beginning of period                                               3,057                         3,592
                                                                       -----                         -----
    Cash and short-term investments
     at end of period                                                             $5,490                        $3,057
                                                                                  ======                        ======
    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, 2012
                                                                                                      (Unaudited)
                                                                                                 (Millions of dollars)

                                                                                                               Supplemental Consolidating Data
                                                                                                               -------------------------------
                                                                                                           Machinery
                                                                               Consolidated                and Power                Financial       Consolidating
                                                                                                          Systems (1)               Products         Adjustments
                                                                               ------------              ------------              ----------      --------------
    Sales and revenues:
                                         Sales of Machinery and Power Systems                   $15,357                               $15,357                   $    -     $     -
                                         Revenues of Financial Products                             718                                     -                      807         (89)  (2)
                                                                                                                                                                               ---
                                         Total sales and revenues                                16,075                                15,357                      807         (89)

    Operating costs:
                                         Cost of goods sold                                      11,899                                11,899                        -           -
                                          Selling, general and administrative
                                          expenses                                                1,591                                 1,426                      188         (23)  (3)
                                         Research and development expenses                          613                                   613                        -           -
                                          Interest expense of Financial
                                          Products                                                  198                                     -                      199          (1)   4
                                         Goodwill impairment charge                                 580                                   580                        -           -
                                         Other operating (income) expenses                          156                                   (87)                     238           5   (3)
                                                                                                                                                                                    ---
                                         Total operating costs                                   15,037                                14,431                      625         (19)

    Operating profit                                                                              1,038                                   926                      182         (70)

                                          Interest expense excluding Financial
                                          Products                                                  115                                   126                        -         (11)   4
                                         Other income (expense)                                     (11)                                  (84)                      14          59    5
                                                                                                                                                                                    ---

    Consolidated profit before taxes                                                                912                                   716                      196           -

                                         Provision for income taxes                                 214                                   168                       46           -

                                         Profit of consolidated companies                           698                                   548                      150           -

                                          Equity in profit (loss) of
                                          unconsolidated affiliated companies                         2                                     2                        -           -
                                          Equity in profit of Financial
                                          Products' subsidiaries                                      -                                   147                        -        (147)   6
                                                                                                                                                                              ----

    Profit of consolidated and affiliated
     companies                                                                                      700                                   697                      150        (147)

    Less: Profit (loss) attributable to
     noncontrolling interests                                                3                                      -                            3                       -
                                                                           ---                                    ---                          ---                     ---

    Profit 7                                                                                       $697                                  $697                     $147       $(147)
                                                                                                   ====                                  ====                     ====       =====

    (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 Power Systems.
    ---       -------------------------------
    (3)        Elimination of net expenses
               recorded by Machinery and Power
               Systems paid to Financial
               Products.
    ---       --------------------------------
    4          Elimination of interest expense
               recorded between Financial
               Products and Machinery and Power
               Systems.
    ---       --------------------------------
    5          Elimination of discount recorded
               by Machinery and Power Systems
               on receivables sold to Financial
               Products and of interest earned
               between Machinery and Power
               Systems and Financial Products.
    ---       ---------------------------------
    6          Elimination of Financial
               Products' profit due to equity
               method of accounting.
    ---       -------------------------------
    7          Profit attributable to common
               stockholders.
    ---       ------------------------------

                                                                                                      Caterpillar Inc.
                                                                                        Supplemental Data for Results of Operations
                                                                                        For The Three Months Ended December 31, 2011
                                                                                                        (Unaudited)
                                                                                                   (Millions of dollars)

                                                                                                                           Supplemental Consolidating Data
                                                                                                                           -------------------------------
                                                                                                                       Machinery
                                                                                           Consolidated                and Power                Financial  Consolidating
                                                                                                                      Systems (1)               Products    Adjustments
                                                                                           ------------              ------------               ---------  -------------
    Sales and revenues:
                         Sales of Machinery and Power Systems                                               $16,557                               $16,557              $    - $     -
                         Revenues of Financial Products                                                         686                                     -                 766     (80)  (2)
                                                                                                                                                                                  ---
                         Total sales and revenues                                                            17,243                                16,557                 766     (80)

    Operating costs:
                         Cost of goods sold                                                                  12,763                                12,763                   -       -
                         Selling, general and administrative expenses                                         1,487                                 1,344                 177     (34)  (3)
                         Research and development expenses                                                      604                                   604                   -       -
                         Interest expense of Financial Products                                                 203                                     -                 203       -    4
                         Other operating (income) expenses                                                      226                                   (23)                230      19   (3)
                                                                                                                                                                                       ---
                         Total operating costs                                                               15,283                                14,688                 610     (15)

    Operating profit                                                                                          1,960                                 1,869                 156     (65)

                         Interest expense excluding Financial Products                                          107                                   118                   -     (11)   4
                         Other income (expense)                                                                 125                                    63                   8      54    5
                                                                                                                                                                                       ---

    Consolidated profit before taxes                                                                          1,978                                 1,814                 164       -

                         Provision for income taxes                                                             416                                   384                  32       -

                         Profit of consolidated companies                                                     1,562                                 1,430                 132       -

                         Equity in profit (loss) of unconsolidated affiliated companies                           -                                     -                   -       -
                         Equity in profit of Financial Products' subsidiaries                                     -                                   129                   -    (129)   6
                                                                                                                                                                                 ----

    Profit of consolidated and affiliated companies                                                           1,562                                 1,559                 132    (129

    Less: Profit (loss) attributable to noncontrolling interests                                                 15                                    12                   3       -
                                                                                                                ---                                   ---                 ---     ---

    Profit 7                                                                                                 $1,547                                $1,547                $129   $(129)
                                                                                                             ======                                ======                ====   =====

    (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 Power Systems.
    ---       -------------------------------
    (3)        Elimination of net expenses
               recorded by Machinery and Power
               Systems paid to Financial
               Products.
    ---       --------------------------------
    4          Elimination of interest expense
               recorded between Financial
               Products and Machinery and Power
               Systems.
    ---       --------------------------------
    5          Elimination of discount recorded
               by Machinery and Power Systems
               on receivables sold to Financial
               Products and of interest earned
               between Machinery and Power
               Systems and Financial Products.
    ---       ---------------------------------
    6          Elimination of Financial
               Products' profit due to equity
               method of accounting.
    ---       -------------------------------
    7          Profit attributable to common
               stockholders.
    ---       ------------------------------

                                                                                                       Caterpillar Inc.
                                                                                         Supplemental Data for Results of Operations
                                                                                        For The Twelve Months Ended December 31, 2012
                                                                                                         (Unaudited)
                                                                                                    (Millions of dollars)

                                                                                                                                  Supplemental Consolidating Data
                                                                                                                                  -------------------------------
                                                                                                                      Machinery
                                                                                          Consolidated                and Power                Financial          Consolidating
                                                                                                                     Systems (1)               Products            Adjustments
                                                                                          ------------              ------------               ---------          -------------
    Sales and revenues:
                         Sales of Machinery and Power Systems                                              $63,068                               $63,068                      $     - $     -
                         Revenues of Financial Products                                                      2,807                                     -                        3,160    (353)  (2)
                                                                                                                                                                                         ----
                         Total sales and revenues                                                           65,875                                63,068                        3,160    (353)

    Operating costs:
                         Cost of goods sold                                                                 47,055                                47,055                            -       -
                         Selling, general and administrative expenses                                        5,919                                 5,348                          618     (47)  (3)
                         Research and development expenses                                                   2,466                                 2,466                            -       -
                         Interest expense of Financial Products                                                797                                     -                          801      (4)   4
                         Goodwill impairment charge                                                            580                                   580                            -       -
                         Other operating (income) expenses                                                     485                                  (495)                       1,000     (20)  (3)
                                                                                                                                                                                               ---
                         Total operating costs                                                              57,302                                54,954                        2,419     (71)

    Operating profit                                                                                         8,573                                 8,114                          741    (282)

                         Interest expense excluding Financial Products                                         467                                   512                            -     (45)   4
                         Other income (expense)                                                                130                                  (146)                          39     237    5
                                                                                                                                                                                               ---

    Consolidated profit before taxes                                                                         8,236                                 7,456                          780       -

                         Provision for income taxes                                                          2,528                                 2,314                          214       -

                         Profit of consolidated companies                                                    5,708                                 5,142                          566       -

                         Equity in profit (loss) of unconsolidated affiliated companies                         14                                    14                            -       -
                         Equity in profit of Financial Products' subsidiaries                                    -                                   555                            -    (555)   6
                                                                                                                                                                                         ----

    Profit of consolidated and affiliated companies                                                          5,722                                 5,711                          566    (555)

    Less: Profit (loss) attributable to noncontrolling interests                                                41                                    30                           11       -
                                                                                                               ---                                   ---                          ---     ---

    Profit 7                                                                                                $5,681                                $5,681                         $555   $(555)
                                                                                                            ======                                ======                         ====   =====

    (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 Power Systems.
    ---       -------------------------------
    (3)        Elimination of net expenses
               recorded by Machinery and Power
               Systems paid to Financial
               Products.
    ---       --------------------------------
    4          Elimination of interest expense
               recorded between Financial
               Products and Machinery and Power
               Systems.
    ---       --------------------------------
    5          Elimination of discount recorded
               by Machinery and Power Systems
               on receivables sold to Financial
               Products and of interest earned
               between Machinery and Power
               Systems and Financial Products.
    ---       ---------------------------------
    6          Elimination of Financial
               Products' profit due to equity
               method of accounting.
    ---       -------------------------------
    7          Profit attributable to common
               stockholders.
    ---       ------------------------------

                                                                                                       Caterpillar Inc.
                                                                                         Supplemental Data for Results of Operations
                                                                                        For The Twelve Months Ended December 31, 2011
                                                                                                         (Unaudited)
                                                                                                    (Millions of dollars)

                                                                                                                                  Supplemental Consolidating Data
                                                                                                                                  -------------------------------
                                                                                                                      Machinery
                                                                                          Consolidated                and Power                Financial          Consolidating
                                                                                                                     Systems (1)               Products            Adjustments
                                                                                          ------------              ------------               ---------          -------------
    Sales and revenues:
                         Sales of Machinery and Power Systems                                              $57,392                               $57,392                      $     - $     -
                         Revenues of Financial Products                                                      2,746                                     -                        3,057    (311)  (2)
                                                                                                                                                                                         ----
                         Total sales and revenues                                                           60,138                                57,392                        3,057    (311)

    Operating costs:
                         Cost of goods sold                                                                 43,578                                43,578                            -       -
                         Selling, general and administrative expenses                                        5,203                                 4,631                          621     (49)  (3)
                         Research and development expenses                                                   2,297                                 2,297                            -       -
                         Interest expense of Financial Products                                                826                                     -                          827      (1)   4
                         Other operating (income) expenses                                                   1,081                                    63                        1,026      (8)  (3)
                                                                                                                                                                                               ---
                         Total operating costs                                                              52,985                                50,569                        2,474     (58)

    Operating profit                                                                                         7,153                                 6,823                          583    (253)

                         Interest expense excluding Financial Products                                         396                                   439                            -     (43)   4
                         Other income (expense)                                                                (32)                                 (279)                          37     210    5
                                                                                                                                                                                               ---

    Consolidated profit before taxes                                                                         6,725                                 6,105                          620       -

                         Provision (benefit) for income taxes                                                1,720                                 1,568                          152       -

                         Profit of consolidated companies                                                    5,005                                 4,537                          468       -

                         Equity in profit (loss) of unconsolidated affiliated companies                        (24)                                  (24)                           -       -
                         Equity in profit of Financial Products' subsidiaries                                    -                                   453                            -    (453)   6
                                                                                                                                                                                         ----

    Profit of consolidated and affiliated companies                                                          4,981                                 4,966                          468    (453)

    Less: Profit (loss) attributable to noncontrolling interests                                                53                                    38                           15       -

    Profit 7                                                                                                $4,928                                $4,928                         $453   $(453)
                                                                                                            ======                                ======                         ====   =====

    (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 Power Systems.
    ---       -------------------------------
    (3)        Elimination of net expenses
               recorded by Machinery and Power
               Systems paid to Financial
               Products.
    ---       --------------------------------
    4          Elimination of interest expense
               recorded between Financial
               Products and Machinery and Power
               Systems.
    ---       --------------------------------
    5          Elimination of discount recorded
               by Machinery and Power Systems
               on receivables sold to Financial
               Products and of interest earned
               between Machinery and Power
               Systems and Financial Products.
    ---       ---------------------------------
    6          Elimination of Financial
               Products' profit due to equity
               method of accounting.
    ---       -------------------------------
    7          Profit attributable to common
               stockholders.
    ---       ------------------------------

                                                                                           Caterpillar Inc.
                                                                                    Supplemental Data for Cash Flow
                                                                             For The Twelve Months Ended December 31, 2012
                                                                                              (Unaudited)
                                                                                         (Millions of dollars)

                                                                                                                                            Supplemental Consolidating Data
                                                                                                                                            -------------------------------
                                                                                                                                    Machinery
                                                                                                         Consolidated               and Power             Financial                Consolidating
                                                                                                                                   Systems (1)            Products                  Adjustments
                                                                                                         ------------             ------------           ----------             --------------
    Cash flow from operating activities:
                                                  Profit of
                                                  consolidated
                                                  and affiliated
                                                  companies                                      $5,722                                 $5,711                            $566                     $(555)    (2)
                                                  Adjustments for
                                                  non-cash
                                                  items:
                                                 Depreciation and amortization                    2,813                                  2,082                             731                         -
                                                  Undistributed profit of
                                                  Financial Products                                  -                                   (305)                              -                       305     (3)
                                                 Goodwill impairment charge                         580                                    580                               -                         -
                                                 Other                                             (191)                                  (298)                            (88)                      195      4
                                                  Changes in
                                                  assets and
                                                  liabilities,
                                                  net of
                                                  acquisitions
                                                  and
                                                  divestitures:
                                                 Receivables - trade and other                     (173)                                     -                             (37)                     (136)   4,5
                                                 Inventories                                     (1,149)                                (1,094)                              -                       (55)     4
                                                 Accounts payable                                (1,868)                                (1,821)                            (15)                      (32)     4
                                                 Accrued expenses                                   183                                    134                              48                         1      4
                                                  Accrued wages, salaries and
                                                  employee benefits                                (490)                                  (488)                             (2)                        -
                                                 Customer advances                                  241                                    241                               -                         -
                                                 Other assets - net                                 252                                    275                              (7)                      (16)     4
                                                 Other liabilities - net                           (679)                                  (819)                            124                        16      4
                                                                                                   ----                                   ----                             ---                       ---    ---
    Net cash provided by (used for) operating
     activities                                                          5,241                                  4,198                             1,320                          (277)
                                                                         -----                                  -----                             -----                          ----
    Cash flow from investing activities:
                                                  Capital
                                                  expenditures -
                                                  excluding
                                                  equipment
                                                  leased to
                                                  others                                         (3,350)                                (3,335)                            (15)                        -
                                                  Expenditures for
                                                  equipment
                                                  leased to
                                                  others                                         (1,726)                                  (100)                         (1,781)                      155    4,9
                                                  Proceeds from
                                                  disposals of
                                                  leased assets
                                                  and property,
                                                  plant and
                                                  equipment                                       1,117                                    244                             891                       (18)     4
                                                  Additions to
                                                  finance
                                                  receivables                                   (12,010)                                     -                         (18,754)                    6,744  5,8,9
                                                  Collections of
                                                  finance
                                                  receivables                                     8,995                                      -                          14,787                    (5,792)   5,9
                                                  Net intercompany
                                                  purchased
                                                  receivables                                         -                                      -                             250                      (250)     5
                                                  Proceeds from
                                                  sale of finance
                                                  receivables                                       132                                      -                             144                       (12)     5
                                                  Net intercompany
                                                  borrowings                                          -                                   (203)                             33                       170      6
                                                  Investments and
                                                  acquisitions
                                                  (net of cash
                                                  acquired)                                        (618)                                  (562)                              -                       (56)     9
                                                  Proceeds from
                                                  sale of
                                                  businesses and
                                                  investments
                                                  (net of cash
                                                  sold)                                           1,199                                  1,943                               -                      (744)     8
                                                  Proceeds from
                                                  sale of
                                                  available-for-
                                                  sale securities                                   306                                     27                             279                         -
                                                  Investments in
                                                  available-for-
                                                  sale securities                                  (402)                                    (8)                           (394)                        -
                                                 Other - net                                        167                                    126                              41                         -

    Net cash provided by (used for) investing
     activities                                                         (6,190)                                (1,868)                          (4,519)                           197
                                                                        ------                                 ------                            ------                           ---
    Cash flow from financing activities:
                                                 Dividends paid                                  (1,617)                                (1,617)                           (250)                      250      7
                                                  Distribution to
                                                  noncontrolling
                                                  interests                                          (6)                                    (6)                              -                         -
                                                  Common stock
                                                  issued,
                                                  including
                                                  treasury shares
                                                  reissued                                           52                                     52                               -                         -
                                                  Excess tax
                                                  benefit from
                                                  stock-based
                                                  compensation                                      192                                    192                               -                         -
                                                  Acquisitions of
                                                  noncontrolling
                                                  interests                                        (449)                                  (449)                              -                         -
                                                  Net intercompany
                                                  borrowings                                          -                                    (33)                            203                      (170)     6
                                                  Proceeds from
                                                  debt issued
                                                  (original
                                                  maturities
                                                  greater than
                                                  three months)                                  16,015                                  2,209                          13,806                         -
                                                  Payments on debt
                                                  (original
                                                  maturities
                                                  greater than
                                                  three months)                                 (11,099)                                (1,107)                         (9,992)                        -
                                                  Short-term
                                                  borrowings -
                                                  net (original
                                                  maturities
                                                  three months or
                                                  less)                                             461                                    (14)                            475                         -

    Net cash provided by (used for) financing
     activities                                                          3,549                                   (773)                            4,242                            80
                                                                         -----                                   ----                             -----                           ---
    Effect of exchange rate changes on cash                               (167)                                   (80)                              (87)                            -
                                                                          ----                                    ---                               ---                           ---
    Increase (decrease) in cash and short-term
     investments                                                         2,433                                  1,477                               956                             -
    Cash and short-term investments at beginning
     of period                                                           3,057                                  1,829                             1,228                             -
                                                                         -----                                  -----                             -----                           ---
    Cash and short-term investments
     at end of period                                                                $5,490                                $3,306                            $2,184                 $           -
                                                                                     ======                                ======                            ======               ===         ===
         (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 Financial Products' cash flow activity
               from investing to operating for receivables that arose
               from the sale of inventory.
         ---  ----------------------------------------------------------
           6   Elimination of net proceeds and payments to/from
               Machinery and Power Systems and Financial Products.
         ---  ----------------------------------------------------
           7   Elimination of dividend from Financial Products to
               Machinery and Power Systems.
         ---  ---------------------------------------------------
           8   Elimination of proceeds received from Financial Products
               related to Machinery and Power Systems' sale of portions
               of the Bucyrus distribution businesses to Cat dealers.
         ---  ---------------------------------------------------------
           9   Reclassification of Financial Products' payments related
               to Machinery and Power Systems' acquisition of
               Caterpillar Tohoku Limited.
         ---  ---------------------------------------------------------

                                                                                                           Caterpillar Inc.
                                                                                                   Supplemental Data for Cash Flow
                                                                                            For The Twelve Months Ended December 31, 2011
                                                                                                             (Unaudited)
                                                                                                        (Millions of dollars)

                                                                                                                                                                                               Supplemental Consolidating Data
                                                                                                                                                                                               -------------------------------
                                                                                                                                                                                       Machinery
                                                                                                                                                   Consolidated             and Power              Financial               Consolidating
                                                                                                                                                                           Systems (1)             Products                 Adjustments
                                                                                                                                                   ------------           ------------            ----------              --------------
    Cash flow from operating activities:
                                                            Profit of consolidated and
                                                            affiliated companies                                           $4,981                        $4,966                             $468                                   $(453)  (2)
                                                           Adjustments for non-cash items:
                                                           Depreciation and amortization                                    2,527                         1,802                              725                                       -
                                                           Other                                                              457                           342                             (112)                                    227    4
                                                            Financial Products' dividend in
                                                            excess of profit                                                    -                           147                                -                                    (147)  (3)
                                                            Changes in assets and
                                                            liabilities, net of
                                                            acquisitions and divestitures:
                                                           Receivables - trade and other                                   (1,345)                          286                                5                                  (1,636) 4,5
                                                           Inventories                                                     (2,927)                       (2,924)                               -                                      (3)   4
                                                           Accounts payable                                                 1,555                         1,635                               (8)                                    (72)   4
                                                           Accrued expenses                                                   308                           282                               28                                      (2)   4
                                                           Accrued wages, salaries and employee benefits                      619                           610                                9                                       -
                                                           Customer advances                                                  173                           173                                -                                       -
                                                           Other assets - net                                                 (91)                         (139)                              35                                      13    4
                                                           Other liabilities - net                                            753                           792                              (26)                                    (13)   4
                                                                                                                              ---                           ---                              ---                                     ---  ---
    Net cash provided by (used for) operating activities                                           7,010                             7,972                         1,124                              (2,086)
                                                                                                   -----                             -----                         -----                              ------
    Cash flow from investing activities:
                                                            Capital expenditures -
                                                            excluding equipment leased to
                                                            others                                                         (2,515)                       (2,503)                             (12)                                      -
                                                            Expenditures for equipment
                                                            leased to others                                               (1,409)                         (143)                          (1,342)                                     76    4
                                                            Proceeds from disposals of
                                                            leased assets and property,
                                                            plant and equipment                                             1,354                           259                            1,173                                     (78)   4
                                                            Additions to finance
                                                            receivables                                                   (10,001)                            -                          (17,058)                                  7,057  5,8
                                                            Collections of finance
                                                            receivables                                                     8,874                             -                           15,260                                  (6,386)   5
                                                            Net intercompany purchased
                                                            receivables                                                         -                             -                           (1,164)                                  1,164    5
                                                            Proceeds from sale of finance
                                                            receivables                                                       207                             -                              207                                       -
                                                           Net intercompany borrowings                                          -                           600                               41                                    (641)   6
                                                            Investments and acquisitions
                                                            (net of cash acquired)                                         (8,184)                       (8,184)                               -                                       -
                                                            Proceeds from sale of
                                                            businesses and investments
                                                            (net of cash sold)                                                376                           712                               11                                    (347)   8
                                                            Proceeds from sale of
                                                            available-for-sale
                                                            securities                                                        247                            13                              234                                       -
                                                            Investments in available-for-
                                                            sale securities                                                  (336)                          (15)                            (321)                                      -
                                                           Other - net                                                        (40)                          (70)                              26                                       4    9
                                                                                                                                                                                                                                          ---
    Net cash provided by (used for) investing activities                                         (11,427)                          (9,331)                       (2,945)                                 849
                                                                                                 -------                            ------                        ------                                 ---
    Cash flow from financing activities:
                                                           Dividends paid                                                  (1,159)                       (1,159)                            (600)                                    600    7
                                                            Distribution to noncontrolling
                                                            interests                                                          (3)                           (3)                               -                                       -
                                                            Common stock issued, including
                                                            treasury shares reissued                                          123                           123                                4                                      (4)   9
                                                            Excess tax benefit from stock-
                                                            based compensation                                                189                           189                                -                                       -
                                                            Acquisitions of noncontrolling
                                                            interests                                                          (8)                           (1)                              (7)                                      -
                                                           Net intercompany borrowings                                          -                           (41)                            (600)                                    641    6
                                                            Proceeds from debt issued
                                                            (original maturities greater
                                                            than three months)                                             15,460                         4,587                           10,873                                       -
                                                            Payments on debt (original
                                                            maturities greater than three
                                                            months)                                                       (10,593)                       (2,269)                          (8,324)                                      -
                                                            Short-term borrowings - net
                                                            (original maturities three
                                                            months or less)                                                   (43)                           60                             (103)                                      -

    Net cash provided by (used for) financing activities                                           3,966                             1,486                         1,243                               1,237
                                                                                                   -----                             -----                         -----                               -----
    Effect of exchange rate changes on cash                                                          (84)                             (123)                           39                                   -
                                                                                                     ---                              ----                           ---                                 ---
    Increase (decrease) in cash and short-term investments                                          (535)                                4                          (539)                                  -
    Cash and short-term investments at beginning of period                                         3,592                             1,825                         1,767                                   -
                                                                                                   -----                             -----                         -----                                 ---
    Cash and short-term investments at end of period                                                           $3,057                       $1,829                              $1,228                     $           -
                                                                                                               ======                       ======                              ======                   ===         ===
    (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)        Elimination of Financial Products' dividend to Machinery
               and Power Systems in excess of Financial Products'
               profit.
    ---       ---------------------------------------------------------
    4          Elimination of non-cash adjustments and changes in assets
               and liabilities related to consolidated reporting.
    ---       ----------------------------------------------------------
    5          Reclassification of Financial Products' cash flow activity
               from investing to operating for receivables that arose
               from the sale of inventory.
    ---       ----------------------------------------------------------
    6          Elimination of net proceeds and payments to/from
               Machinery and Power Systems and Financial Products.
    ---       ----------------------------------------------------
    7          Elimination of dividend from Financial Products to
               Machinery and Power Systems.
    ---       ---------------------------------------------------
    8          Elimination of proceeds received from Financial Products
               related to Machinery and Power Systems' sale of Carter
               Machinery.
    ---       ---------------------------------------------------------
    9          Elimination of change in investment and common stock
               related to Financial Products.
    ---       -----------------------------------------------------

SOURCE Caterpillar Inc.


Source: PR Newswire