PEORIA, Illinois, July 26, 2016 /PRNewswire/ --

Second Quarter Better Than Expected / Revised Full-year Outlook In Line With Wall Street Estimates


                                                 Second Quarter
    ($ in billions except profit per share)  2015              2016

    Sales and Revenues                    $12.317           $10.342
    Profit Per Share                        $1.31             $0.93
    Profit Per Share                        $1.40             $1.09
    (Excluding Restructuring Costs)

Caterpillar Inc. (NYSE: CAT) today announced profit per share of $0.93 for the second quarter of 2016, a decrease from $1.31 per share in the second quarter of 2015. Excluding restructuring costs, profit per share was $1.09, down from $1.40 per share in the second quarter of 2015. Second-quarter 2016 sales and revenues were $10.3 billion, down from $12.3 billion, or 16 percent, in the second quarter of 2015.

"I'm pleased with our financial performance and focus on our long-term strategy given the difficult economic and industry environment we're facing. Our goal when sales decrease is to lower costs so the decline in operating profit is no more than 25 to 30 percent of the decline in sales and revenues. For the quarter, our decremental operating profit pull through was better than our target range. Together with our dealers, we're having success managing through the downturn in industries like mining and oil and gas, and in sluggish economic conditions in much of the developing world. In what is likely to be our fourth down year for sales and revenues, we're proud of what we're accomplishing - our machine market position has increased, including in China, product quality continues to be at high levels, and the safety in our facilities is world class," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.

2016 Outlook

World economic growth remains subdued and is not sufficient to drive improvement in most of the industries and markets we serve. Commodity prices appear to have stabilized, but at low levels. Global uncertainty continues, and the recent Brexit outcome and the turmoil in Turkey add to risks, especially in Europe.

The outlook for 2016 that we provided with our first-quarter financial results in April expected sales and revenues in a range of $40 to $42 billion. At the midpoint of that range, profit was expected to be $3.00 per share, or $3.70 per share excluding restructuring costs. Over the past quarter, economic risks have persisted and, as a result, our current expectations for 2016 sales and revenues are closer to the bottom end of that outlook range.

Restructuring costs in 2016, which were expected to be about $550 million, are now forecast to be about $700 million, or about $0.80 per share. Additional workforce reductions expected in the second half of 2016 are the primary reason for the increase in restructuring costs. Sales and revenues for 2016 are expected to be in a range of $40.0 to $40.5 billion, and the profit outlook at the midpoint of the sales and revenues range is about $2.75 per share, or about $3.55 per share excluding restructuring costs. Our revised outlook for both sales and revenues and profit per share excluding restructuring costs is in line with the Thompson First Call analyst consensus.

"Despite a solid second quarter, we're cautious as we enter the second half of the year. We're not expecting an upturn in important industries like mining, oil and gas and rail to happen this year. We're continuing significant restructuring plans, which are designed to bring our cost structure more in line with demand while maintaining our capability to quickly serve our customers when our business recovers. Once it does recover, we expect substantial incremental profit improvement, realizing the benefits of the tough actions we're implementing now coupled with our ongoing investments in products and digital capabilities. Amidst these very challenging market conditions, our balance sheet remains strong, and our employees are delivering better performance on everything from safety, quality and cost management to machine market position. I'm inspired by our people as they're the primary reason we're weathering this downturn as successfully as we are," said Oberhelman.

Highlights

  • Second-quarter sales and revenues and profit were better than expected
  • Cost reduction efforts are paying off with second-quarter decremental operating profit pull through better than the target range
  • Mining, oil and gas, and rail industries remain challenged
  • Revised outlook for 2016 is in line with analyst estimates
  • Strong balance sheet ­- Maintained $0.77 per share dividend (announced June 8, 2016)

Notes:

  • Glossary of terms is included on pages 16-17; first occurrence of terms shown in bold italics.
  • Information on non-GAAP financial measures is included on page 18.
  • Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 10 a.m. Central Time on Tuesday, July 26, 2016, to discuss its 2016 second-quarter results. The slides accompanying the webcast will be available before the webcast on the Caterpillar website at http://www.caterpillar.com/investors/events-and-presentations.

About Caterpillar:
For 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2015 sales and revenues of $47.011 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect with us on social media, visit caterpillar.com/social-media.

Forward-Looking Statements

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

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

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison
Second Quarter 2016 vs. Second Quarter 2015

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 2Q 2016 earnings.


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

Sales and Revenues

Total sales and revenues were $10.342 billion in the second quarter of 2016, a decline of $1.975 billion, or 16 percent, compared with $12.317 billion in the second quarter of 2015. The decrease was primarily due to lower sales volume resulting from continued weak commodity prices globally and economic weakness in developing countries. While sales for both new equipment and aftermarket parts declined in all segments, most of the decrease was for new equipment. Unfavorable price realization also contributed to the decline.

Sales declined in all regions. In North America, sales decreased 16 percent primarily due to lower end-user demand for construction, continuing declines in mining and the impact of low oil prices. In EAME, sales declined 15 percent primarily in Africa/Middle East due to weak economic conditions resulting from low oil and other commodity prices and an uncertain political environment. Sales decreased 31 percent in Latin America primarily due to continued widespread economic weakness across the region. The most significant decreases were in Brazil and Mexico. Asia/Pacific sales declined 13 percent primarily due to lower end-user demand for Energy & Transportation applications.

Sales decreased in all segments. Energy & Transportation's sales declined 20 percent largely due to lower end-user demand for oil and gas and transportation applications. Resource Industries' sales declined 29 percent mostly due to continued low end-user demand. Construction Industries' sales decreased 8 percent primarily due to unfavorable price realization and lower demand from end users. Financial Products' segment revenues were down 3 percent primarily due to lower average earning assets.

Consolidated Operating Profit

Consolidated Operating Profit Comparison Second Quarter 2016 vs. Second Quarter 2015

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 2Q 2016 earnings.


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

Operating profit for the second quarter of 2016 was $785 million, compared with $1.333 billion in the second quarter of 2015. The decrease of $548 million was primarily due to lower sales volume, including an unfavorable mix of products. In addition, price realization and restructuring costs were unfavorable. The unfavorable price realization resulted from competitive market conditions and an unfavorable geographic mix of sales. These items were partially offset by significantly lower costs.

Period costs were lower primarily due to substantial restructuring activities and other cost reduction actions over the past year and lower short-term incentive compensation expense. The reductions primarily impacted period manufacturing costs and selling, general and administrative expenses (SG&A).

More than half of the improvement in variable manufacturing costs was from lower material costs. In addition, both cost absorption and freight costs were favorable. The impact of cost absorption was due to a more significant inventory decrease in the second quarter of 2015, compared to the second quarter of 2016.

Restructuring costs of $139 million in the second quarter of 2016 were related to several restructuring programs across the company. In the second quarter of 2015, restructuring costs were $86 million.

Other Profit/Loss Items 

  • Other income/expense in the second quarter of 2016 was income of $84 million, compared with expense of $72 million in the second quarter of 2015. The favorable change was primarily due to the net impact from currency translation and hedging gains and losses and a gain on the sale of securities in the second quarter of 2016. The favorable impact from currency translation and hedging was primarily due to the absence of net losses during the second quarter of 2015.
  • The provision for income taxes in the second quarter reflects an estimated annual tax rate of 25 percent, compared to 29.5 percent for the second quarter of 2015 and 25.5 percent for the full-year 2015 excluding discrete items. The full-year rate for 2015 of 25.5 percent was lower than the second-quarter 2015 rate primarily due to changes in the geographic mix of profits from a tax perspective, along with the impact of the permanent renewal of the U.S. research and development tax credit in the fourth quarter.

Global Workforce

Caterpillar worldwide, full-time employment was about 100,000 at the end of the second quarter of 2016, compared with about 111,200 at the end of the second quarter of 2015, a decrease of about 11,200 full-time employees. The flexible workforce decreased by about 2,700 for a total decrease in the global workforce of about 13,900. The decrease was primarily the result of restructuring programs and lower production volumes.


                                  June 30
                                                                      Increase/
                                    2016              2015           (Decrease)
    Full-time employment          100,000           111,200           (11,200)
    Flexible workforce             12,900            15,600            (2,700)
    Total                         112,900           126,800           (13,900)

    Geographic summary of change
    U.S. workforce                                                     (7,500)
    Non-U.S. workforce                                                 (6,400)
    Total                                                             (13,900)

SEGMENT RESULTS 


    Sales and Revenues by Geographic Region

       (Millions of                %   North      %   Latin     %             %   Asia/     %
     dollars)       Total   Change America Change America Change  EAME Change Pacific Change
    Second
    Quarter 2016
    Construction
     Industries[1]  $4,426     (8)%  $2,247  (13)%   $ 277  (32)% $1,010    -%    $892   12%
    Resource
    Industries[2]   1,457    (29)%     539  (36)%     258  (21)%    317 (25)%     343 (24)%
    Energy &
    Transportation
    [3]             3,750    (20)%   1,809  (11)%     277  (38)%  1,062 (22)%     602 (30)%
    All Other
    Segments[4]        41    (25)%      14  (30)%       2  (67)%      9 (25)%      16  (6)%
    Corporate
    Items and
    Eliminations      (29)             (25)             -            (2)           (2)
    Machinery,
    Energy &
    Transportation $9,645    (17)%  $4,584  (16)%    $814  (31)% $2,396 (15)%  $1,851 (13)%

    Financial
    Products
    Segment          $759     (3)%    $473    4 %     $82  (22)%   $103   2 %    $101 (18)%
    Corporate
    Items and
    Eliminations      (62)            (34)            (12)           (5)          (11)
    Financial
    Products
    Revenues         $697     (5)%    $439    2 %     $70  (26)%    $98   3 %     $90 (20)%

    Consolidated
    Sales and
    Revenues      $10,342    (16)%  $5,023  (15)%    $884  (31)% $2,494 (14)%  $1,941 (13)%

    Second
    Quarter 2015
    Construction
    Industries[1]   $4,803          $ 2,586           $408        $1,013          $796
    Resource
    Industries[2]   2,048              846            328           424           450
    Energy &
    Transportation
    [3]             4,708            2,034            444         1,364           866
    All Other
    Segments[4]        55               20              6            12            17
    Corporate
    Items and
    Eliminations      (31)             (30)             1            (2)            -
    Machinery,
    Energy &
    Transportation $11,583           $5,456         $1,187        $2,811        $2,129

    Financial
    Products
    Segment          $785             $456           $105          $101          $123
    Corporate
    Items and
    Eliminations      (51)             (25)           (10)           (6)          (10)
    Financial
    Products
    Revenues         $734             $431            $95           $95          $113

    Consolidated
    Sales and
    Revenues      $12,317           $5,887         $1,282        $2,906        $2,242

    [1] Does not include inter-segment sales of $12 million and $26 million in second
    quarter 2016 and 2015, respectively.
    [2] Does not include inter-segment sales of $57 million and $75 million in second
    quarter 2016 and 2015, respectively.
    [3] Does not include inter-segment sales of $658 million and $766 million in second
    quarter 2016 and 2015, respectively.
    [4] Does not include inter-segment sales of $101 million and $100 million in second
    quarter 2016 and 2015, respectively.

    Sales and Revenues by Segment

    (Millions of       Second  Sales    Price                         Second      $      %
    dollars)     Quarter 2015 Volume Realization Currency Other Quarter 2016  Change Change
    Construction
    Industries         $4,803  $(184)      $(203)     $10   $ -      $ 4,426   $(377)  (8)%
    Resource
    Industries          2,048   (562)        (26)      (3)    -        1,457    (591) (29)%
    Energy &
    Transportation      4,708   (951)         (4)      (3)    -        3,750    (958) (20)%
    All Other
    Segments               55    (14)          -        -     -           41     (14) (25)%
    Corporate
    Items and
    Eliminations          (31)     4           -       (2)    -          (29)      2

    Machinery,
    Energy &
     Transportation   $ 11,583 $(1,707)     $(233)      $2    $-       $9,645 $(1,938) (17)%

    Financial
    Products
    Segment               785      -           -        -   (26)         759     (26)  (3)%
    Corporate
    Items and
    Eliminations          (51)     -           -        -   (11)         (62)    (11)
    Financial
    Products
    Revenues             $734     $-          $-       $-  $(37)        $697    $(37)  (5)%

    Consolidated
    Sales and
    Revenues          $12,317 $(1,707)     $(233)      $2  $(37)     $10,342 $(1,975) (16)%

    Operating Profit (Loss) by Segment

    (Millions of     Second               Second          $                %
    dollars)      Quarter 2016         Quarter 2015    Change           Change
    Construction
    Industries            $550                 $588      $(38)            (6)%
    Resource
    Industries            (163)                  27      (190)          (704)%
    Energy &
    Transportation         602                  942      (340)           (36)%
    All Other
    Segments               (14)                 (18)        4              22%
    Corporate
    Items and
    Eliminations          (297)                (322)       25
    Machinery,
    Energy &
    Transportation        $678               $1,217     $(539)           (44)%

    Financial
    Products
    Segment                202                  184        18              10%
    Corporate
    Items and
    Eliminations           (31)                  (1)      (30)
    Financial
    Products              $171                 $183      $(12)            (7)%
    Consolidating
    Adjustments            (64)                 (67)        3

    Consolidated
    Operating
    Profit (Loss)         $785               $1,333     $(548)           (41)%

    CONSTRUCTION INDUSTRIES

    (Millions of dollars)
    Sales Comparison
                 Second       Sales     Price                Second      $      %
                 Quarter 2015 Volume Realization Currency Quarter 2016 Change Change

    Sales
    Comparison[1]      $4,803  ($184)      ($203)     $10       $4,426  ($377)  (8)%

    Sales by Geographic
    Region

                   Second         Second         $             %
                 Quarter 2016   Quarter 2015   Change        Change
    North
    America            $2,247         $2,586    ($339)       (13) %
    Latin
    America               277            408     (131)       (32) %
    EAME                1,010          1,013       (3)          - %
    Asia/Pacific          892            796       96          12 %
    Total[1]           $4,426         $4,803    ($377)         (8)%

    Operating
    Profit

                    Second         Second        $             %
                 Quarter 2016   Quarter 2015   Change        Change
    Operating
    Profit               $550           $588    ($38)          (6)%

    [1] Does not include inter-segment sales of $12 million and $26 million in second
    quarter 2016 and 2015, respectively.

Construction Industries' sales were $4.426 billion in the second quarter of 2016, a decrease of $377 million, or 8 percent, from the second quarter of 2015. The decrease in sales was due to unfavorable price realization and lower volume. While sales declined for both new equipment and aftermarket parts, most of the decrease was for new equipment.

  • Unfavorable price realization resulted from competitive market conditions globally and an unfavorable geographic mix of sales.
  • Sales volume declined primarily due to lower end-user demand.

Sales decreased in North America and Latin America while slightly increasing in Asia/Pacific. Sales in EAME were flat.

  • In North America, the sales decline was primarily due to lower end-user demand. Although residential and nonresidential construction activity is improving, we believe declines in activity related to oil and gas have resulted in the availability of existing equipment to support the increased demand. The decline was also due to unfavorable price realization and the unfavorable impact of dealers decreasing inventories in the second quarter of 2016, compared to flat inventories in the second quarter of 2015.
  • In Latin America, end-user demand was down across the region, with the most significant declines in Brazil due to the continued recession.
  • Sales in Asia/Pacific were higher as a result of the favorable impact of changes in dealer inventories, which were about flat in the second quarter of 2016 and decreased in the second quarter of 2015.
  • Sales in EAME were flat. Price realization was unfavorable, and sales declined in oil-producing economies and in South Africa. Price realization was unfavorable due to competitive market conditions, and the sales decline in South Africa was a result of continued weak economic conditions. These unfavorable items were about offset by sales increases in several European countries, reflecting modest improvements in economic conditions.

Construction Industries' profit was $550 million in the second quarter of 2016, compared with $588 million in the second quarter of 2015. The decrease in profit was primarily due to unfavorable price realization and lower sales volume, including an unfavorable mix of products. The decline was largely offset by favorable costs, primarily due to restructuring and cost reduction actions, lower material costs, favorable cost absorption and improved freight costs. The favorable cost absorption was a result of inventory decreasing more in the second quarter of 2015 than in the second quarter of 2016.


    RESOURCE INDUSTRIES

    (Millions of dollars)
    Sales Comparison
                    Second     Sales    Price               Second       $      %
                 Quarter 2015 Volume Realization Currency Quarter 2016 Change Change
    Sales
    Comparison[1]      $2,048  ($562)       ($26)     ($3)      $1,457  ($591) (29)%

    Sales by Geographic
    Region
                    Second           Second         $             %
                 Quarter 2016     Quarter 2015   Change        Change
    North
    America              $539             $846    ($307)        (36)%
    Latin
    America               258              328      (70)        (21)%
    EAME                  317              424     (107)        (25)%
    Asia/Pacific          343              450     (107)        (24)%
     Total[1]           $1,457           $2,048    ($591)        (29)%

    Operating Profit (Loss)

                    Second           Second         $             %
                 Quarter 2016     Quarter 2015   Change        Change
    Operating
    Profit
    (Loss)              ($163)             $27    ($190)       (704)%

    [1] Does not include inter-segment sales of $57 million and $75 million in second quarter
    2016 and 2015, respectively.

Resource Industries' sales were $1.457 billion in the second quarter of 2016, a decrease of $591 million, or 29 percent, from the second quarter of 2015. The decline was primarily due to lower sales volume. While sales were lower for both new equipment and aftermarket parts, most of the decrease was for new equipment.

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

Resource Industries incurred a loss of $163 million in the second quarter of 2016, compared with a profit of $27 million in the second quarter of 2015. The unfavorable change was due to a decrease in sales volume, partially offset by lower period costs due to restructuring and cost reduction actions and favorable material costs.


    ENERGY & TRANSPORTATION

    (Millions of dollars)
    Sales Comparison
                    Second    Sales     Price                Second      $      %
                 Quarter 2015 Volume Realization Currency Quarter 2016 Change Change

    Sales
     Comparison[1]      $4,708 ($951)        ($4)     ($3)       $3,750 ($958)  (20)%

    Sales by Geographic Region

                    Second          Second         $             %
                 Quarter 2016    Quarter 2015   Change        Change
    North
    America            $1,809          $2,034    ($225)         (11)%
    Latin America         277             444     (167)         (38)%
    EAME                1,062           1,364     (302)         (22)%
    Asia/Pacific          602             866     (264)         (30)%
    Total[1]           $3,750          $4,708    ($958)         (20)%

    Operating
    Profit
                    Second          Second         $             %
                 Quarter 2016    Quarter 2015   Change        Change
    Operating
    Profit               $602            $942    ($340)         (36)%

    [1] Does not include inter-segment sales of $658 million and $766 million in second
    quarter 2016 and 2015, respectively.

Energy & Transportation's sales were $3.750 billion in the second quarter of 2016, a decrease of $958 million, or 20 percent, from the second quarter of 2015. The decrease was primarily the result of lower sales volume. Sales decreased in all applications with nearly 80 percent of the decline in oil and gas and transportation.

  • Oil and Gas - Sales continued to decrease in much of the world due to low oil prices. The sales decline was most significant in EAME and Asia/Pacific, primarily due to lower demand for equipment used for gas compression, production and drilling applications. The decline in sales in North America was mostly due to lower end-user demand for reciprocating engines used in gas compression applications.
  • Transportation - Sales decreased in all geographic regions. The most significant decline was in Asia/Pacific primarily due to lower demand for equipment used in marine applications. The decrease in North America was due to discontinued production of on-highway vocational trucks. Weakness continued in the rail industry across all regions and was the most significant reason for the sales declines in EAME and Latin America. Sales into the rail industry in North America were about flat.
  • Power Generation - Sales decreased in EAME, Asia/Pacific and North America and were about flat in Latin America. The decline in EAME was a result of competitive price pressures, as well as continued weakness in the Middle East with low oil prices limiting investments. The decline in Asia/Pacific and North America was due to the absence of several large projects.
  • Industrial - Sales were lower primarily in North America and Latin America for most industrial applications due to lower end-user demand.

Energy & Transportation's profit was $602 million in the second quarter of 2016, compared with $942 million in the second quarter of 2015. The decline was due to lower sales volume, including an unfavorable mix of products, partially offset by lower costs primarily due to a decrease in short-term incentive compensation expense, the impact of restructuring and cost reduction actions, as well as favorable material costs.


     FINANCIAL PRODUCTS SEGMENT

     (Millions of dollars)
     Revenues by Geographic Region
                      Second                Second        $       %
                   Quarter 2016          Quarter 2015  Change  Change
     North America         $473                  $456     $17      4 %
     Latin America           82                   105     (23)   (22)%
     EAME                   103                   101       2      2 %
     Asia/Pacific           101                   123     (22)   (18)%
     Total                 $759                  $785    ($26)    (3)%

     Operating
     Profit
                      Second                Second        $       %
                   Quarter 2016          Quarter 2015  Change  Change
     Operating
     Profit                $202                  $184     $18      10%

Financial Products' revenues were $759 million in the second quarter of 2016, a decrease of $26 million, or 3 percent, from the second quarter of 2015. The decline was primarily due to lower average earning assets in Asia/Pacific and Latin America, partially offset by higher average earning assets in North America.

Financial Products' profit was $202 million in the second quarter of 2016, compared with $184 million in the second quarter of 2015. The improvement was primarily due to a $30 million increase in gains on sales of securities at Insurance Services and a $13 million decrease in SG&A expenses. These favorable impacts were partially offset by an $11 million unfavorable impact from the sale of returned or repossessed equipment primarily driven by the absence of gains in second quarter of 2015.

At the end of the second quarter of 2016, past dues at Cat Financial were 2.93 percent, compared with 2.97 percent at the end of the second quarter of 2015. Write-offs, net of recoveries, were $33 million for the second quarter of 2016, compared with $38 million for the second quarter of 2015.

As of June 30, 2016, Cat Financial's allowance for credit losses totaled $346 million, or 1.25 percent of net finance receivables, compared with $405 million, or 1.42 percent of net finance receivables at June 30, 2015. The allowance for credit losses at year-end 2015 was $338 million, or 1.22 percent of net finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $328 million in the second quarter of 2016, an increase of $5 million from the second quarter of 2015. Corporate items and eliminations include: corporate-level expenses; restructuring costs; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences for ME&T, as segment profit is reported using annual fixed exchange rates; cost of sales methodology differences, as segments use a current cost methodology; and inter-segment eliminations.

The increase in expense from the second quarter of 2015 was primarily due to an increase in restructuring costs and methodology differences, largely offset by timing differences and lower corporate costs.

2016 OUTLOOK 

World economic growth remains subdued and is not sufficient to drive improvement in most of the industries and markets we serve. Commodity prices appear to have stabilized, but at low levels. Global uncertainty continues, and the recent Brexit outcome and the turmoil in Turkey add to risks, especially in Europe.

The outlook for 2016 that we provided with our first-quarter financial results in April expected sales and revenues in a range of $40 to $42 billion. At the midpoint of that range, profit was expected to be $3.00 per share, or $3.70 per share excluding restructuring costs. Over the past quarter, economic risks have persisted and, as a result, our current expectations for 2016 sales and revenues are closer to the bottom end of that outlook range.

Restructuring costs in 2016, which were expected to be about $550 million, are now forecast to be about $700 million, or about $0.80 per share. Additional workforce reductions expected in the second half of 2016 are the primary reason for the increase in restructuring costs. Sales and revenues for 2016 are expected to be in a range of $40.0 to $40.5 billion, and the profit outlook at the midpoint of the sales and revenues range is about $2.75 per share, or about $3.55 per share excluding restructuring costs. Our revised outlook for both sales and revenues and profit per share excluding restructuring costs is in line with the Thompson First Call analyst consensus.


    QUESTIONS AND ANSWERS

               What caused the price deterioration in the second quarter, especially in
    Q1:        Construction Industries? What do you expect for the balance of the year?

               We continue to see competitive pressure that started in the last half of
               2015 driven by excess industry capacity, unfavorable currency pressure and
               an overall weak economic environment. We expect the current competitive
               pressure to continue for the remainder of 2016, although we expect our
               year-over-year comparison for price realization in the second half of the
    A:         year will be better than the first half.

               Oil prices have improved from the beginning of 2016 and have stabilized.
               How does this affect your thinking about shipments of reciprocating engines
    Q2:        and turbines for 2016?

               While oil prices have improved since the beginning of 2016, it is not clear
               at this time that the current price level is sufficient to drive increased
               demand. We have seen minimal change in the continued low drill rig counts
               and little improvement in our customers' fleet utilization rates. We
               continue to monitor a number of factors in addition to oil prices that
               shape our outlook, including recent order rates, quotation activity,
               current backlog, trends in retail statistics and discussions with our
               customers. Based on all of these factors, we do not see the current price
    A:         driving significant increase in demand for our products in 2016.

    Q3:        Can you discuss changes in dealer inventories during 2016?

               Changes in dealer inventories had little impact on sales from the second
               quarter of 2015 to the second quarter of 2016. Dealer machine and engine
               inventories decreased about $400 million in the second quarter of 2016 and
    A:         about $300 million in the second quarter of 2015.

               During the first six months of 2016, dealer machine and engine inventories
               decreased about $100 million. We expect dealers will reduce inventories
               during the remainder of 2016, resulting in lower year-end inventories in
               2016, compared to 2015.

    Q4:        Can you comment on your order backlog?

               At the end of the second quarter of 2016, the order backlog was $11.8
               billion. This represents about a $1.3 billion reduction from the end of the
               first quarter of 2016. About two-thirds of the decrease was in Construction
               Industries. It is not uncommon for the construction order backlog to
               decline during the second-quarter selling season, and we believe the
               reduction also reflects increased machine availability through our
               factories and product distribution centers. In addition, the order backlog
               for Energy & Transportation and Resource Industries declined. Compared to
               the second quarter of 2015, the order backlog has declined about $3.0
    A:         billion with decreases in all segments.

               Can you comment on expense related to your 2016 short-term incentive
    Q5:        compensation plans?

               Short-term incentive compensation expense is directly related to financial
               and operational performance, measured against targets set annually.
               Second-quarter 2016 expense was about $85 million. Second-quarter 2015
    A:         expense was about $200 million.

               For 2016, our outlook includes short-term incentive compensation expense of
               about $410 million. Full-year 2015 short-term incentive compensation
               expense was about $585 million.

    Q6:        Can you give us an update on how Cat Financial is performing?

               Cat Financial's portfolio continues to perform well overall despite ongoing
               weakness in many key end markets. The second quarter of 2016 past dues were
               2.93 percent, compared with 2.97 percent in the second quarter of 2015,
               with current past dues remaining lower than historical averages. Write-offs
               in the second quarter of 2016 were $33 million, or 0.48 percent of the
               average retail portfolio, compared with $38 million, or 0.56 percent of the
               average retail portfolio in second quarter of 2015, and only slightly above
               historical averages for the second quarter. We believe customer risk
               exposure is well managed, with a broad distribution of portfolio exposure
               across a global customer base. Cat Financial continues to work closely with
               its customers to provide financing support for new Caterpillar product
    A:         purchases and to actively monitor global portfolio health.

    Q7:        Can you comment on your balance sheet and cash priorities?

               The ME&T debt-to-capital ratio was 39.0 percent at the end of the second
               quarter of 2016, compared with 37.7 percent at the end of the first
               quarter. Our cash and liquidity positions remain strong with an enterprise
               cash balance of $6.764 billion as of June 30, 2016. ME&T operating cash
               flow for the second quarter of 2016 was $1.165 billion, compared with
               $1.638 billion in the second quarter of 2015. The decline was primarily due
               to lower profit and the absence of a dividend from Cat Financial that was
    A:         paid in the second quarter of 2015.

               Our long-term cash deployment priorities are unchanged, and we remain
               focused on the continued strength of our balance sheet in order to maintain
               our credit rating and the dividend.

               On June 23, 2016, the citizens of the United Kingdom voted to exit the
               European Union (Brexit). Although it is still early, how do you expect this
    Q8:        vote will impact your business?

               Although the new U.K. government confirmed its intent to move forward with
               Brexit, there is little economic data available that reflects activity
               since the referendum was held. It is possible that in the short term the
               uncertainty could impact our customers' purchasing decisions. We have a
               substantial manufacturing presence in the U.K., and a weaker British pound
               would be positive for our exports from the U.K. However, it is still too
               early to draw any definitive conclusions about what impact, if any, the
               Brexit vote will have on our business and on long-term economic growth in
    A:         Europe.

               Can you comment on your Solar Turbines business and how 2016 is progressing
               as compared with initial estimates? Also, how do you expect continued low
               oil and gas prices will affect how your customers administer parts and
    Q9:        service?

               At the beginning of the year, we forecasted Solar's sales to be down less
               than 10 percent in 2016. The market fundamentals are playing out like we
               forecasted, with new equipment sales related to oil down significantly,
               offset by higher sales into gas compression. The increase in midstream
               compression for turbines is being driven by pipeline capacity additions and
               significant infrastructure investment, primarily in North America, due to
               fuel switching to natural gas for power generation and the build out of new
               Liquefied Natural Gas (LNG) export facilities. Customer services are also
               an important part of Solar's business. Unlike equipment sold into many
               other industries Caterpillar serves, turbines operating in the field are
               generally not taken out of production in a market downturn. They are still
               operating and require parts, overhaul and field service. The backlog for
               Solar is flat from the end of the first quarter, and slightly up from the
               beginning of the year. However, customers are continuing to squeeze their
               maintenance budgets, and we expect them to delay some work into 2017. Based
               on our latest forecast, we now expect Solar's sales to be down about 10
    A:         percent from 2015.

               Can you provide an update on the readiness of your North American Tier 4
    Q10:       locomotives?

               Our North American Tier 4 freight locomotive is on schedule for deliveries
               in the second half of 2016. In addition, we recently introduced our entry
               into the passenger rail locomotive business with a Tier 4 offering to a
    A:         U.S. customer.

    Q11:       Did the tax rate related to restructuring costs change?

               During the second quarter, we revised how we report the tax impact of
               restructuring costs. Previously, we used the estimated annual tax rate (25
               percent for 2016). We are now using statutory tax rates for the
               jurisdictions where the costs are deductible to compute the after tax
               impact of restructuring costs. This change would have lowered per share
               restructuring costs in our April 2016 outlook from $0.70 to $0.62. This
               change had no impact on our April profit per share outlook of $3.00 per
               share; however, it would have lowered our outlook for profit per share
               excluding restructuring costs by $0.08 ($3.70 per share would have been
               $3.62 per share). As a result of this change, first-quarter 2016 per share
               restructuring costs were revised from $0.21 to $0.18. There was no impact
               to first-quarter 2016 profit per share of $0.46, however profit per share
    A:         excluding restructuring costs was revised from $0.67 to $0.64.

    GLOSSARY OF TERMS

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

NON-GAAP FINANCIAL MEASURES

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

Profit Per Share Excluding Restructuring Costs

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



                     First Quarter     Second Quarter           2016 Outlook
                         2016        2015         2016     Previous[1]   Current[2]
     Profit
      (Loss) per share    $0.46      $1.31        $0.93        $3.00         $2.75
     Per share
     restructuring
     costs[3]            $0.18      $0.09        $0.16        $0.70         $0.80
     Profit per share
     excluding
     restructuring
     costs               $0.64      $1.40        $1.09        $3.70         $3.55

     

[1] 2016 Sales and Revenues Outlook in a range of $40-42 billion (as of April 22, 2016). Profit per share at midpoint. 
[2] 2016 Sales and Revenues Outlook in a range of $40.0-40.5 billion (as of July 26, 2016). Profit per share at midpoint. 
[1-2] 2016 Outlook does not include any impact from mark-to-market gains or losses resulting from pension and OPEB plan remeasurements. 
[3] At statutory tax rates, except 2016 Previous Outlook, which was at the estimated annual tax rate. At statutory tax rates, the 2016 Previous Outlook for per share restructuring costs was $0.62.

 

Machinery, Energy & Transportation

Caterpillar defines Machinery, Energy & Transportation as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Machinery, Energy & Transportation information relates to the design, manufacture and marketing of our products. Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. The nature of these businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We also believe this presentation will assist readers in understanding our business. Pages 19-27 reconcile Machinery, Energy & Transportation with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.
     
    Caterpillar's latest financial results and outlook are also available via:

    Telephone: 800-228-7717 (Inside the United States and Canada)

               858-764-9492 (Outside the United States and Canada)

    Internet:  www.caterpillar.com/en/investors.html   

               www.caterpillar.com/en/investors/quarterly-results.html (live broadcast/replays of quarterly conference call)


    Caterpillar Inc.
    Condensed Consolidated Statement of Results of Operations
    (Unaudited)
    (Dollars in millions except per share data)

                                            Three Months Ended        Six Months Ended
                                                 June 30,                  June 30,
                                            2016          2015        2016        2015
    Sales and revenues:
                 Sales of Machinery,
                 Energy & Transportation  $9,645       $11,583     $18,425     $23,544
                 Revenues of Financial
                 Products                    697           734       1,378       1,475
                 Total sales and revenues 10,342        12,317      19,803      25,019

    Operating costs:
                 Cost of goods sold        7,419         8,674      14,241     17,434
                 Selling, general and
                 administrative expenses   1,123         1,318       2,211      2,567
                 Research and development
                 expenses                    468           510         976      1,034
                 Interest expense of
                 Financial Products          148           148         300        298
                 Other operating (income)
                 expenses                    399           334         796        651
                 Total operating costs     9,557        10,984      18,524     21,984

    Operating profit                         785         1,333       1,279      3,035

                 Interest expense
                 excluding Financial
                 Products                    130           125         259        254
                 Other income (expense)       84           (72)         84        122

    Consolidated profit before taxes         739         1,136       1,104      2,903

                 Provision (benefit) for
                 income taxes                184           335         276        856
                 Profit of consolidated
                 companies                   555           801         828      2,047

                 Equity in profit (loss)
                 of unconsolidated
                 affiliated companies         (2)            2          (3)         4

    Profit of consolidated and
    affiliated companies                     553           803         825      2,051

    Less: Profit (loss) attributable to
    noncontrolling interests                   3             1           4          4

    Profit [1]                              $550          $802        $821     $2,047

    Profit per common share                $0.94         $1.33       $1.41      $3.39

    Profit per common share - diluted [2]  $0.93         $1.31       $1.40      $3.34

    Weighted-average common shares
    outstanding (millions)
                              - Basic      584.1         603.2       583.4      604.1
                              - Diluted[2] 588.6         610.7       588.2      611.8

    Cash dividends declared per common
    share                                  $1.54         $1.47       $1.54      $1.47

      
   
[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)

                                          June 30,                    December 31,
                                            2016                          2015
    Assets
                Current assets:
                       Cash and
                       short-term
                       investments          $6,764                          $6,460
                       Receivables -
                       trade and other       6,326                           6,695
                       Receivables -
                       finance               9,201                           8,991
                       Prepaid
                       expenses and
                       other current
                       assets                1,857                           1,662
                       Inventories           9,458                           9,700

                Total current assets        33,606                          33,508

                Property, plant and
                equipment - net             15,916                          16,090
                Long-term receivables
                - trade and other            1,180                           1,170
                Long-term receivables
                - finance                   13,689                          13,651
                Noncurrent deferred
                and refundable income
                taxes                        2,536                           2,489

                Intangible assets            2,652                           2,821

                Goodwill                     6,677                           6,615

                Other assets                 2,044                           1,998
    Total assets                           $78,300                         $78,342

    Liabilities
                Current liabilities:
                       Short-term
                       borrowings:
                               --
                               Machinery
                               Energy &
                               Transportation $263                              $9
                               --
                               Financial
                               Products      7,220                           6,958
                       Accounts
                       payable               5,104                           5,023
                       Accrued
                       expenses              3,127                           3,116
                       Accrued wages,
                       salaries and
                       employee
                       benefits              1,265                           1,994
                       Customer
                       advances              1,259                           1,146
                       Dividends
                       payable                 450                             448
                       Other current
                       liabilities           1,635                           1,671
                       Long-term debt
                       due within one
                       year:
                              --
                              Machinery
                              Energy &
                              Transportation 1,055                             517
                              --
                              Financial
                              Products       5,805                           5,360
                Total current
                liabilities                 27,183                          26,242

                Long-term debt due
                after one year:
                              --
                              Machinery
                              Energy &
                              Transportation 8,434                           8,960
                              --
                              Financial
                              Products      15,546                          16,209
                Liability for
                postemployment
                benefits                     8,533                           8,843

                Other liabilities            3,301                           3,203

    Total liabilities                       62,997                          36,457

    Stockholders' equity

                Common stock                 5,277                           5,238

                Treasury stock             (17,579)                        (17,640)
                Profit employed in
                the business                29,167                          29,246
                Accumulated other
                comprehensive income
                (loss)                      (1,633)                         (2,035)
                Noncontrolling
                interests                       71                              76

    Total stockholders' equity              15,303                          14,885
    Total liabilities and
    stockholders' equity                   $78,300                         $78,342


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

                                                 Six Months Ended
                                                      June 30,
                                           2016                        2015
    Cash flow from operating
    activities:
           Profit of consolidated
           and affiliated companies        $825                      $2,051
           Adjustments for non-cash
           items:
                       Depreciation
                       and
                       amortization       1,494                       1,514
                       Other                368                         142
           Changes in assets and
           liabilities, net of
           acquisitions and
           divestitures:
                       Receivables -
                       trade and
                       other                573                         383
                       Inventories          305                         332
                       Accounts
                       payable              208                        (326)
                       Accrued
                       expenses               1                         (71)
                       Accrued
                       wages,
                       salaries and
                       employee
                       benefits            (743)                       (801)
                       Customer
                       advances              93                          98
                       Other assets
                       - net               (127)                        215
                       Other
                       liabilities -
                       net                 (197)                       (179)
    Net cash provided by (used
    for) operating activities             2,800                       3,358
    Cash flow from investing
    activities:
           Capital expenditures -
           excluding equipment
           leased to others                (580)                       (656)
           Expenditures for
           equipment leased to
           others                        (1,025)                       (815)
           Proceeds from disposals
           of leased assets and
           property, plant and
           equipment                        383                         367
           Additions to finance
           receivables                   (4,643)                     (4,577)
           Collections of finance
           receivables                    4,466                       4,477
           Proceeds from sale of
           finance receivables               42                          74
           Investments and
           acquisitions (net of
           cash acquired)                   (38)                        (63)
           Proceeds from sale of
           businesses and
           investments (net of cash
           sold)                              -                         168
           Proceeds from sale of
           securities                       195                         128
           Investments in
           securities                      (243)                       (119)
           Other - net                      (14)                        (75)
    Net cash provided by (used
    for) investing activities            (1,457)                     (1,091)
    Cash flow from financing
    activities:
           Dividends paid                  (898)                       (846)
           Distribution to
           noncontrolling interests           -                          (7)
           Common stock issued,
           including treasury
           shares reissued                  (47)                         33
           Treasury shares
           purchased                          -                        (525)
           Excess tax benefit from
           stock-based compensation           4                          18
           Proceeds from debt
           issued (original
           maturities greater than
           three months)                  2,841                       3,691
           Payments on debt
           (original maturities
           greater than three
           months)                       (3,331)                     (6,089)
           Short-term borrowings -
           net (original maturities
           three months or less)            391                       1,972
    Net cash provided by (used
    for) financing activities            (1,040)                     (1,753)
    Effect of exchange rate
    changes on cash                           1                         (34)
    Increase (decrease) in cash
    and short-term investments              304                         480
    Cash and short-term
    investments at beginning of
    period                                6,460                       7,341
    Cash and short-term
    investments at end of period         $6,764                      $7,821

     
    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 June 30, 2016
    (Unaudited)
    (Millions of dollars)

                                      Supplemental Consolidating Data
                                    Machinery,
                                    Energy &            Financial      Consolidating
                     Consolidated   Transportation1      Products        Adjustments
    Sales and
    revenues:
          Sales of
          Machinery, Energy
           & Transportation $9,645            $9,645           $ -                $ -
          Revenues of
          Financial
          Products            697                 -           778                (81)  [2]
          Total sales and
          revenues         10,342             9,645           778                (81)

    Operating
    costs:
           Cost of
            goods sold       7,419             7,419             -                  -
           Selling,
           general and
           administrative
           expenses         1,123               981           147                 (5)  [3]
           Research
           and development
           expenses           468               468             -                  -
           Interest
           expense of
           Financial
           Products           148                 -           152                 (4)  [4]
           Other operating
           (income)
           expenses           399                99           308                 (8)  [3]
           Total operating
           costs            9,557             8,967           607                (17)

    Operating
    profit                    785               678           171                (64)

           Interest expense
           excluding Financial
           Products           130               143             -                (13)  [4]
           Other income
           (expense)           84                 5            28                 51   [5]

    Consolidated
    profit before
    taxes                     739               540           199                  -

           Provision (benefit)
           for income
           taxes              184               122            62                  -
           Profit of
           consolidated
           companies          555               418           137                  -

           Equity in
           profit (loss) of
           unconsolidated
           affiliated
           companies           (2)               (2)            -                  -
           Equity in profit of
           Financial Products'
           subsidiaries         -               135             -               (135)  [6]

    Profit of consolidated
    and affiliated
    companies                 553               551           137               (135)

    Less: Profit (loss)
    attributable to
     noncontrolling interests    3                  1             2                  -

    Profit [7]               $550               $550          $135              $(135)

     

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

 


    Caterpillar Inc.
    Supplemental Data for Results of Operations
    For the Three Months Ended June 30, 2015
    (Unaudited)
    (Millions of dollars)

                                       Supplemental Consolidating Data
                                     Machinery,
                                     Energy &              Financial       Consolidating
                     Consolidated    Transportation [1]     Products        Adjustments
    Sales and
    revenues:
           Sales of
           Machinery,
           Energy &
            Transportation $11,583           $11,583              $ -              $ -
           Revenues of
           Financial
           Products           734                 -              805              (71)  [2]
           Total sales and
           revenues        12,317            11,583              805              (71)

    Operating
    costs:
           Cost of goods
           sold             8,674             8,675                -               (1)  [3]
           Selling, general
           and administrative
            expenses         1,318             1,140              172                6   [3]
           Research
           and development
           expenses           510               510                -                -
           Interest
           expense of
           Financial
            Products           148                 -              150               (2)  [4]
           Other operating
           (income)
           expenses           334                41              300               (7)  [3]
           Total operating
            costs           10,984            10,366              622               (4)

    Operating
    profit                  1,333             1,217              183              (67)

           Interest expense
           excluding Financial
           Products           125               136                -              (11)  [4]
           Other income
           (expense)          (72)             (130)               2               56   [5]

    Consolidated
    profit before
     taxes                   1,136               951              185                -

           Provision
           (benefit)
           for income
            taxes              335               276               59                -
           Profit of
           consolidated
            companies          801               675              126                -

           Equity in
           profit (loss) of
           unconsolidated
           affiliated
           companies            2                 2                -                -
           Equity in
           profit of
           Financial Products'
            subsidiaries         -               126                -             (126) [6]

    Profit of
    consolidated
    and affiliated
    companies                 803               803              126             (126)

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

     Profit [7]               $802              $802             $126            $(126)

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


 


    Caterpillar Inc.
    Supplemental Data for Results of Operations
    For the Six Months Ended June 30, 2016
    (Unaudited)
    (Millions of dollars)

                                         Supplemental Consolidating Data
                                    Machinery,
                                    Energy &              Financial     Consolidating
                     Consolidated   Transportation [1]    Products        Adjustments
    Sales and
    revenues:
           Sales of
           Machinery,
           Energy &
            Transportation $18,425          $18,425           $ -                 $ -
           Revenues of
           Financial
           Products         1,378                -         1,537                 (159)  [2]
           Total
           sales and
           revenues        19,803           18,425         1,537                 (159)

    Operating
    costs:
           Cost of goods
           sold            14,241           14,241             -                    -
           Selling,
           general and
           administrative
           expenses         2,211            1,936           286                  (11)  [3]
           Research and
           development
           expenses           976              976             -                    -
           Interest
           expense of
           Financial
           Products           300                -           307                   (7)  [4]
           Other operating
           (income)
           expenses           796              204           606                  (14)  [3]
           Total operating
           costs           18,524           17,357         1,199                  (32)

    Operating
    profit                  1,279            1,068           338                 (127)

           Interest expense
           excluding
           Financial
           Products           259              283             -                  (24)  [4]
           Other income
           (expense)           84              (47)           28                  103   [5]

    Consolidated
    profit before
    taxes                   1,104              738           366                    -

           Provision
           (benefit)
           for income
           taxes              276              162           114                    -
           Profit of
           consolidated
           companies          828              576           252                    -

           Equity in
           profit (loss) of
           unconsolidated
           affiliated
           companies           (3)              (3)            -                    -
           Equity in
           profit of
           Financial Products'
            subsidiaries         -              249             -                  (249)  [6]

    Profit of
    consolidated
    and affiliated
    companies                 825              822           252                  (249)

    Less: Profit (loss)
    attributable to
    noncontrolling
    interests                   4                1             3                     -

    Profit [7]               $821            $ 821          $249                 $(249)


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

 


    Caterpillar Inc.
    Supplemental Data for Results of Operations
    For the Six Months Ended June 30, 2015
    (Unaudited)
    (Millions of dollars)

                                       Supplemental Consolidating Data
                                     Machinery,
                                     Energy &              Financial       Consolidating
                     Consolidated    Transportation [1]    Products         Adjustments
    Sales and
    revenues:
           Sales of
           Machinery,
           Energy &
              Transportation $23,544         $23,544             $ -               $ -
           Revenues of
           Financial
           Products         1,475               -           1,618               (143)  [2]
           Total
           sales and
           revenues        25,019          23,544           1,618               (143)

    Operating
    costs:
           Cost of goods
            sold            17,434          17,435               -                 (1)  [3]
           Selling,
           general and
           administrative
           expenses         2,567           2,254             305                  8   [3]
           Research and
           development
            expenses         1,034           1,034               -                  -
           Interest
           expense of
           Financial
           Products           298               -             301                 (3)  [4]
           Other operating
           (income)
           expenses           651              65             599                (13)  [3]
           Total operating
            costs           21,984          20,788           1,205                 (9)

    Operating
     profit                  3,035           2,756             413               (134)

           Interest expense
           excluding
           Financial
           Products           254             275               -                (21)  [4]
           Other income
           (expense)          122               8               1                113   [5]

    Consolidated
    profit before
     taxes                   2,903           2,489             414                  -

           Provision
           (benefit)
           for income
            taxes              856             729             127                  -
           Profit of
           consolidated
            companies        2,047           1,760             287                  -

           Equity in
           profit (loss) of
           unconsolidated
           affiliated
           companies            4               4               -                  -
           Equity in
           profit of
           Financial Products'
            subsidiaries         -             285               -               (285)  [6]

    Profit of
    consolidated
    and affiliated
     companies               2,051           2,049             287               (285)

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


      Profit [7]             $2,047         $2,0147            $285              $(285)

 

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

 


    Caterpillar Inc.
    Supplemental Data for Cash Flow
    For the Six Months Ended June 30, 2016
    (Unaudited)
    (Millions of dollars)

                                              Supplemental Consolidating Data
                                            Machinery,
                                            Energy &            Financial   Consolidating
                             Consolidated   Transportation [1]   Products    Adjustments
    Cash flow from
    operating activities:
        Profit of
        consolidated and
        affiliated
        companies                    $825             $822           $252       $(249)  [2]
        Adjustments for
        non-cash items:
               Depreciation
               and
               amortization         1,494            1,056            438           -
               Undistributed
               profit of
               Financial
               Products                 -             (242)             -         242   [3]
               Other                  368              257              9         102   [4]
        Changes in assets
        and liabilities,
        net of acquisitions
        and divestitures:
               Receivables -
               trade and
               other                  573               45             19         509 [4,5]
               Inventories            305              309              -          (4)  [4]
               Accounts
               payable                208              284            (16)        (60)  [4]
               Accrued
               expenses                 1                8             (7)          -
               Accrued
               wages,
               salaries and
               employee
               benefits              (743)            (726)           (17)          -
               Customer
               advances                93               93              -           -
               Other assets
               - net                 (127)            (187)            82         (22)  [4]
               Other
               liabilities -
               net                   (197)            (336)           117          22   [4]
    Net cash provided by
    (used for) operating
    activities                      2,800            1,383            877         540
    Cash flow from
    investing activities:
        Capital
        expenditures -
        excluding equipment
        leased to others             (580)            (577)            (3)          -
        Expenditures for
        equipment leased to
        others                     (1,025)             (41)        (1,001)         17   [4]
        Proceeds from
        disposals of leased
        assets and
        property, plant and
        equipment                     383               49            344         (10)  [4]
        Additions to
        finance receivables        (4,643)               -         (6,026)      1,383   [5]
        Collections of
        finance receivables         4,466                -          6,007      (1,541)  [5]
        Net intercompany
        purchased
        receivables                     -                -            396        (396)  [5]
        Proceeds from sale
        of finance
        receivables                    42                -             42           -
        Net intercompany
        borrowings                      -             (832)        (1,000)      1,832   [6]
        Investments and
        acquisitions (net
        of cash acquired)             (38)             (38)             -           -
        Proceeds from sale
        of securities                 195               17            178           -
        Investments in
        securities                   (243)             (15)          (228)          -
        Other - net                   (14)              (1)           (20)          7   [8]
    Net cash provided by
    (used for) investing
    activities                     (1,457)          (1,438)        (1,311)      1,292
    Cash flow from
    financing activities:
        Dividends paid               (898)            (898)            (7)          7   [7]
        Common stock
        issued, including
        treasury shares
        reissued                      (47)             (47)             7          (7)  [8]
        Excess tax benefit
        from stock-based
        compensation                    4                4              -           -
        Net intercompany
        borrowings                      -            1,000            832      (1,832)  [6]
        Proceeds from debt
        issued (original
        maturities greater
        than three months)          2,841                1          2,840           -
        Payments on debt
        (original
        maturities greater
        than three months)         (3,331)              (7)        (3,324)          -
        Short-term
        borrowings - net
        (original
        maturities three
        months or less)               391              255            136           -
    Net cash provided by
    (used for) financing
    activities                     (1,040)             308            484      (1,832)
    Effect of exchange
    rate changes on cash                1              (14)            15           -
    Increase (decrease) in
    cash and short-term
    investments                       304              239             65           -
    Cash and short-term
    investments at
    beginning of period             6,460            5,340          1,120           -
    Cash and short-term
    investments at end of
    period                         $6,764           $5,579         $1,185         $ -

 

[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 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, Energy & Transportation and Financial Products. 
[7] Elimination of dividend from Financial Products to Machinery, Energy & Transportation.
[8] Elimination of change in investment and common stock related to Financial Products. 

 


    Caterpillar Inc.
    Supplemental Data for Cash Flow
    For the Six Months Ended June 30, 2015
    (Unaudited)
    (Millions of dollars)

                                              Supplemental Consolidating Data
                                          Machinery,
                                          Energy &             Financial   Consolidating
                            Consolidated  Transportation [1]   Products     Adjustments
    Cash flow from
    operating activities:
        Profit of
        consolidated and
        affiliated
        companies                 $2,051          $2,049           $287        $(285) [2]
        Adjustments for
        non-cash items:
               Depreciation
               and
                amortization        1,514           1,070            444            -
               Undistributed
               profit of
               Financial
               Products                -             (35)             -           35  [3]
               Other                 142              92            (65)         115  [4]
        Changes in assets
        and liabilities,
        net of acquisitions
        and divestitures:
               Receivables -
               trade and
               other                 383             377            (53)          59 [4,5]
               Inventories           332             337              -           (5)  [4]
               Accounts
               payable              (326)           (362)            24           12   [4]
               Accrued
                expenses              (71)            (75)             4            -
               Accrued
               wages,
               salaries and
               employee
               benefits             (801)           (788)           (13)           -
               Customer
               advances               98              98              -            -
               Other assets
               - net                 215             136             48           31   [4]
               Other
               liabilities -
               net                  (179)           (219)            71          (31)  [4]
    Net cash provided by
    (used for) operating
    activities                     3,358           2,680            747          (69)
    Cash flow from
    investing activities:
        Capital
        expenditures -
        excluding equipment
        leased to others            (656)           (651)            (5)           -
        Expenditures for
        equipment leased to
        others                      (815)           (108)          (726)          19   [4]
        Proceeds from
        disposals of leased
        assets and
        property, plant and
        equipment                    367              33            338           (4)  [4]
        Additions to
        finance receivables       (4,577)              -         (6,171)       1,594 [5,8]
        Collections of
        finance receivables        4,477               -          5,965       (1,488)  [5]
        Net intercompany
        purchased
        receivables                   -                -            295         (295) [5]
        Proceeds from sale
        of finance
        receivables                  74                -             74            -
        Net intercompany
        borrowings                    -              (35)             1           34  [6]
        Investments and
        acquisitions (net
        of cash acquired)           (63)             (63)             -            -
        Proceeds from sale
        of businesses and
        investments (net of
        cash sold)                  168              175              -           (7) [8]
        Proceeds from sale
        of securities               128                6            122            -
        Investments in
        securities                 (119)              (9)          (110)           -
        Other - net                 (75)             (29)           (46)           -
    Net cash provided by
    (used for) investing
    activities                   (1,091)            (681)          (263)        (147)
    Cash flow from
    financing activities:
        Dividends paid             (846)            (846)          (250)         250   [7]
        Distribution to
        noncontrolling
        interests                    (7)              (7)             -            -
        Common stock
        issued, including
        treasury shares
        reissued                     33               33              -            -
        Treasury shares
        purchased                  (525)            (525)             -            -
        Excess tax benefit
        from stock-based
        compensation                 18               18              -            -
        Net intercompany
        borrowings                    -               (1)            35          (34)  [6]
        Proceeds from debt
        issued (original
        maturities greater
        than three months)        3,691                3          3,688            -
        Payments on debt
        (original
        maturities greater
        than three months)       (6,089)            (509)        (5,580)           -
        Short-term
        borrowings - net
        (original
        maturities three
        months or less)           1,972                6          1,966            -
    Net cash provided by
    (used for) financing
    activities                   (1,753)          (1,828)          (141)         216
    Effect of exchange
    rate changes on cash            (34)             (22)           (12)           -
    Increase (decrease) in
    cash and short-term
    investments                     480              149            331            -
    Cash and short-term
    investments at
     beginning of period           7,341            6,317          1,024            -
    Cash and short-term
    investments at end of
    period                       $7,821           $6,466         $1,355          $ -

 

[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 non-cash adjustments 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, Energy & Transportation and Financial Products.
[7] Elimination of dividend from Financial Products to Machinery, Energy & Transportation.
[8] Elimination of proceeds received from Financial Products related to Machinery, Energy & Transportation's sale of businesses and investments.

 

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

This is a disclosure announcement from PR Newswire.

Copyright 2016 PR Newswire

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