Caterpillar Reports Fourth-Quarter and Full-Year 2017 Results; Provides Outlook for 2018

DEERFIELD, Ill., Jan. 25, 2018 /PRNewswire/ --


                                            Fourth Quarter    Full Year
                                            --------------    ---------


    ($ in billions except profit per share)              2017             2016    2017      2016
    --------------------------------------               ----             ----    ----      ----


    Sales and Revenues                                  $12.9             $9.6   $45.5     $38.5
    ------------------                                  -----             ----   -----     -----



    Profit (Loss) Per Share                           ($2.18)         ($2.00)  $1.26   ($0.11)
    -----------------------                            ------           ------   -----    ------



    Adjusted Profit Per Share                           $2.16            $0.83   $6.88     $3.42
    -------------------------                           -----            -----   -----     -----

    --  Fourth-quarter sales and revenues up 35 percent
    --  Broad-based sales recovery gained momentum in the fourth quarter of 2017
    --  Fourth-quarter 2017 results include a charge of $2.4 billion, or $3.91
        per share, from U.S. tax reform legislation
    --  Expect growth in many end markets in 2018
    --  Implementing new strategy focused on operational excellence and
        profitable growth

Caterpillar Inc. (NYSE: CAT) today announced fourth-quarter and full-year results for 2017.

Sales and revenues in the fourth quarter of 2017 were $12.9 billion, compared with $9.6 billion in the fourth quarter of 2016. Fourth-quarter 2017 loss was $2.18 per share, compared with a loss of $2.00 per share in the fourth quarter of 2016.

Full-year sales and revenues in 2017 were $45.5 billion, up about 18 percent from $38.5 billion in 2016. Full-year profit was $1.26 per share in 2017, compared with a loss of $0.11 per share in 2016.

Adjusted profit per share in the fourth quarter of 2017 was $2.16, compared with fourth-quarter 2016 adjusted profit per share of $0.83. Adjusted profit per share in 2017 was $6.88, compared with 2016 adjusted profit per share of $3.42.

Adjusted profit per share excludes several large adjustments consisting of the impact of U.S. tax reform, restructuring costs, mark-to-market losses for remeasurement of pension and OPEB plans, state deferred tax valuation allowance adjustments, a gain on sale of an equity investment in 2017 and a goodwill impairment charge in 2016. A discussion of these items is included in Q&A #1 on page 14.

Caterpillar's financial position continued to strengthen in the fourth quarter. Machinery, Energy & Transportation (ME&T) operating cash flow was $1.3 billion during the fourth quarter of 2017 and $5.5 billion for the full year of 2017. The ME&T debt-to-capital ratio was 36.7 percent at the end of 2017, compared to 41.0 percent at the end of 2016. The company ended 2017 with an enterprise cash balance of $8.3 billion. In the fourth quarter of 2017, the company made a discretionary contribution to U.S. pension plans of $1.0 billion and a payment for early debt retirement of $958 million.

"After four challenging years, many key markets improved in 2017, and our global team delivered strong results. We remained focused on operational excellence and made early investments in profitable growth initiatives as we began to implement our new strategy," said Caterpillar CEO Jim Umpleby.

2018 Outlook

Caterpillar is beginning 2018 with strong sales momentum resulting from strong order rates, lean dealer inventories and an increasing backlog. Additionally, there are positive economic indicators across most of the world and in many of the company's end markets. Caterpillar is preparing its factories and suppliers to be ready for continued growth, while remaining focused on managing with a flexible and competitive cost structure that should enable the company to respond quickly if economic fundamentals change.

The company expects 2018 profit per share in a range of $7.75 to $8.75. Excluding restructuring costs of about $400 million, adjusted profit per share is expected in a range of $8.25 to $9.25.

"We are in the early stages of implementing our strategy for profitable growth. In 2018, we expect to make additional investments in the expanded offerings and services important for Caterpillar's long-term success. We will use our Operating & Execution Model to bias resources to areas that represent the greatest opportunity for return on our investments," said Umpleby.

"Our focus on operational excellence will not waver as we work to develop a more competitive and flexible cost structure, including implementing lean manufacturing principles. We are positioned to capitalize on continued sales momentum or quickly adjust should conditions change," added Umpleby.

Following is a summary of the key drivers of sales assumptions included in the outlook:

Construction Industries - The company expects growth in 2018 with some tempering in the latter part of the year, largely due to anticipated seasonality of sales in China. Caterpillar expects improvement in North American residential, non-residential and infrastructure. The outlook does not include any impact from a potential U.S. infrastructure bill. Europe and Asia/Pacific are expected to continue to grow, and the recovery that started in Africa/Middle East and Latin America is expected to extend into 2018.

Resource Industries - The company believes that global economic momentum and increasing commodity prices are restoring miners' business confidence and financial health. The company anticipates miners' capital spend to increase as mining businesses invest in equipment replacement cycles. Higher machine utilization levels should support continued strong aftermarket parts opportunities. Strong global demand is expected to be a positive for heavy construction.

Energy & Transportation - Sales into Oil and Gas applications are expected to increase in 2018, led by reciprocating engines for gas compression and well servicing in North America. The current turbines backlog is healthy in support of the midstream pipeline business. The company expects an increase in Transportation primarily from recent acquisitions in rail services, while the locomotive and marine markets are expected to remain challenged. Power Generation sales are forecast to be slightly up after a multi-year downturn. Sales into Industrial applications are expected to be about flat.

Following are key points to help understand the elements of the 2018 profit outlook:

    --  An expected increase in sales volume is the most significant reason for
        the higher profit outlook, with volume increases forecasted across the
        three primary segments.
    --  Slightly favorable price realization is expected to be mostly offset by
        material cost increases due to higher commodity prices.
    --  Period costs excluding short-term incentive compensation expense are
        expected to increase due to labor inflation and targeted investments in
        profitable growth initiatives, including expanded offerings and
        services.
    --  The outlook includes short-term incentive compensation expense of about
        $900 million.
    --  Financial Products' segment profit is expected to be lower in 2018 than
        in 2017, primarily due to the absence of about $100 million of gains on
        sales of securities in 2017.
    --  The outlook assumes a tax rate of 24 percent, including the company's
        current estimate of the impact of U.S. tax reform legislation.
    --  ME&T capital expenditures are expected to be about $1.0 billion to $1.5
        billion.
    --  No stock repurchases are assumed in the outlook.
    --  The outlook does not include a mark-to-market gain or loss for
        remeasurement of pension and OPEB plans or changes to provisional
        estimates recorded in 2017 for U.S. tax reform.

Notes:

    --  Glossary of terms is included on pages 17-18; first occurrence of terms
        shown in bold italics.
    --  Information on non-GAAP financial measures is included on page 19.
    --  Caterpillar will conduct a teleconference and live webcast, with a slide
        presentation, beginning at 10 a.m. Central Time on Thursday, January 25,
        2018, to discuss its 2017 fourth-quarter and full-year financial
        results. The accompanying slides will be available before the webcast on
        the Caterpillar website at
        http://www.caterpillar.com/investors/events-and-presentations.

About Caterpillar:
For more than 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2017 sales and revenues of $45.462 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three primary segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect with us on social media, visit caterpillar.com/social-media.

Forward-Looking Statements

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

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

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison
Fourth Quarter 2017 vs. Fourth Quarter 2016

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 4Q 2017 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the fourth quarter of 2016 (at left) and the fourth quarter of 2017 (at right). Items favorably impacting sales and revenues appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting sales and revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees.

Sales and Revenues

Total sales and revenues were $12.896 billion in the fourth quarter of 2017, an increase of $3.322 billion, or 35 percent, compared with $9.574 billion in the fourth quarter of 2016. The increase was primarily due to higher sales volume, mostly due to improved end-user demand. In addition, favorable changes in dealer inventories contributed to increased sales volume. The improvement in end-user demand was across all regions and most end markets. The favorable change in dealer inventories was primarily due to a decrease in the fourth quarter of 2016, compared to dealer inventories that were about flat in the fourth quarter of 2017. By segment, the largest sales volume increase was in Construction Industries, mostly due to higher end-user demand for construction equipment and the favorable impact of changes in dealer inventories. Energy & Transportation's sales volume increased due to higher demand across all applications. Sales volume for Resource Industries increased due to higher end-user demand for equipment and aftermarket parts. Favorable price realization, primarily in Construction Industries and Resource Industries, also contributed to the sales improvement. Financial Products' revenues were about flat.

Sales increased across all regions with the largest increase in North America. Sales improved 46 percent in North America primarily due to higher end-user demand for both equipment and aftermarket parts. Changes in dealer inventories were favorable as dealer inventories decreased in the fourth quarter of 2016 and increased slightly in the fourth quarter of 2017. EAME sales increased 38 percent primarily due to higher end-user demand for equipment and favorable price realization. Asia/Pacific sales increased 22 percent primarily due to higher end-user demand for construction equipment. About half of the sales improvement in Asia/Pacific was in China resulting from increased building construction and infrastructure investment. Sales increased 39 percent in Latin America due to stabilizing economic conditions in several countries in the region that resulted in improved end-user demand from low levels, as well as favorable changes in dealer inventories.

Consolidated Operating Profit (Loss)

Consolidated Operating Profit Comparison
Fourth Quarter 2017 vs. Fourth Quarter 2016

To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 4Q 2017 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit (Loss) between the fourth quarter of 2016 (at left) and the fourth quarter of 2017 (at right). Items favorably impacting operating profit appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting operating profit appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees. The bar entitled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses.

Operating profit for the fourth quarter of 2017 was $1.161 billion, compared with a loss of $1.262 billion in the fourth quarter of 2016. The increase of $2.423 billion was due to higher sales volume, a decrease in mark-to-market losses related to pension and OPEB plans and the absence of a goodwill impairment charge in Resource Industries in 2016. Favorable price realization, lower variable manufacturing costs and lower restructuring costs were mostly offset by higher period costs. Price realization was favorable, primarily in Construction Industries and Resource Industries.

Variable manufacturing costs were lower primarily due to the favorable impact from cost absorption and lower warranty expense. Cost absorption was favorable as inventory was about flat in the fourth quarter of 2017, compared to a reduction in inventory in the fourth quarter of 2016. Material costs were slightly unfavorable due to increases in steel prices. Period costs were higher primarily due to higher short-term incentive compensation expense. Also contributing to increased period costs were targeted investments and higher manufacturing costs to support higher production volumes, partially offset by lower depreciation expense.

Restructuring costs were $245 million in the fourth quarter of 2017, compared with $395 million in the fourth quarter of 2016.

Other Profit/Loss Items

    --  Interest expense excluding Financial Products in the fourth quarter of
        2017 was $169 million, an increase of $49 million from the fourth
        quarter of 2016, primarily due to an early debt retirement.
    --  Other income/expense in the fourth quarter of 2017 was income of $119
        million, compared with income of $34 million in the fourth quarter of
        2016. The favorable change was primarily a result of gains on the sale
        of securities.
    --  The provision for income taxes in the fourth quarter reflects an annual
        effective tax rate of approximately 28 percent, compared to
        approximately 36 percent for the full year of 2016, excluding the items
        discussed below. The effective tax rate related to 2017 full-year
        adjusted profit before tax, excluding a discrete benefit from
        stock-based compensation awards, was 27 percent, compared to 26 percent
        in 2016.

The provision for income taxes in the fourth quarter of 2017 also includes a charge of $2.371 billion due to the enactment of U.S. tax reform legislation on December 22, 2017. The provisionally estimated charge includes a $596 million write-down of net deferred tax assets to reflect the reduction in the U.S. corporate tax rate from 35 percent to 21 percent beginning January 1, 2018, with the remainder primarily related to the cost of a mandatory deemed repatriation of non-U.S. earnings. Three items partially offset this charge:

    --  A $130 million benefit related to the change from the third-quarter
        estimated annual tax rate of 32 percent to approximately 28 percent for
        the full year of 2017, primarily due to a more favorable geographic mix
        of profits from a tax perspective, including the impact of U.S. pension
        and OPEB mark-to-market losses taxed at higher U.S. rates.
    --  A non-cash benefit of $111 million, net of U.S. federal tax at 35
        percent, from reductions in the valuation allowance against U.S. state
        deferred tax assets due to improved profits in the United States.
    --  A tax benefit of $19 million for the settlement of stock-based
        compensation awards with associated tax deductions in excess of
        cumulative U.S. GAAP compensation expense.

The provision for income taxes in the fourth quarter of 2016 also included a charge of $170 million related to the change from the third quarter of 2016 estimated annual tax rate. In addition, the valuation allowance against U.S. state deferred tax assets was increased in 2016, resulting in a $141 million non-cash charge, net of U.S. federal tax at 35 percent.

Global Workforce

Caterpillar worldwide, full-time employment was about 98,400 at the end of 2017, an increase of about 3,000 full-time employees from the end of 2016, primarily the result of higher production volumes. The flexible workforce increased by about 7,300, also primarily due to higher production volumes. In total, the global workforce increased by about 10,300.


                                 December 31
                                 -----------

                            2017              2016    Increase/

                                                   (Decrease)
                                                    ---------

    Full-time employment  98,400            95,400               3,000

    Flexible workforce    18,300            11,000               7,300
                          ------            ------               -----

    Total                116,700           106,400              10,300
                         =======           =======              ======


    Geographic Summary
    ------------------

    U.S. workforce        50,500            45,700               4,800

    Non-U.S. workforce    66,200            60,700               5,500
                          ------            ------               -----

    Total                116,700           106,400              10,300
                         =======           =======              ======

SEGMENT RESULTS



    Sales and Revenues by Geographic Region

                                                                                                                                           %      North           %           Latin           %                         %           Asia/             %

    (Millions of dollars)                                                                                                   Total         Change   America        Change       America        Change        EAME        Change       Pacific          Change
                                                                                                                            -----         ------   -------        ------       -------        ------        ----        ------       -------          ------

    Fourth Quarter 2017
    -------------------

    Construction Industries(1)                                                                                                     $5,258     47%          $2,346         50%            $392         48%          $976         56%            $1,544         36%

    Resource Industries(2)                                                                                                          2,205     53%             791         68%             384         74%           475         60%               555         22%

    Energy & Transportation(3)                                                                                                      4,706     22%           2,327         35%             374          8%         1,286         21%               719           - %

    All Other Segments?                                                                                                                52     63%              22        100%               1           - %          14        180%                15        (6)%

    Corporate Items and Eliminations                                                                                                 (27)                   (27)                          -                        -                            -
                                                                                                                                      ---                     ---                         ---                      ---                          ---

    Machinery, Energy & Transportation                                                                                            $12,194     37%          $5,459         46%          $1,151         39%        $2,751         38%            $2,833         22%


    Financial Products Segment                                                                                                       $783      6%            $505          9%             $80        (4)%          $107          8%               $91        (5)%

    Corporate Items and Eliminations                                                                                                 (81)                   (50)                       (12)                      (6)                         (13)
                                                                                                                                      ---                     ---                         ---                       ---                           ---

    Financial Products Revenues                                                                                                      $702      2%            $455          5%             $68        (8)%          $101          6%               $78        (8)%


    Consolidated Sales and Revenues                                                                                               $12,896     35%          $5,914         41%          $1,219         35%        $2,852         37%            $2,911         21%
                                                                                                                                  =======                  ======                      ======                    ======                        ======


    Fourth Quarter 2016
    -------------------

    Construction Industries(1)                                                                                                     $3,589                  $1,569                        $264                      $624                        $1,132

    Resource Industries(2)                                                                                                          1,443                     471                         221                       297                           454

    Energy & Transportation(3)                                                                                                      3,849                   1,722                         347                     1,063                           717

    All Other Segments?                                                                                                                32                      11                           -                        5                            16

    Corporate Items and Eliminations                                                                                                 (28)                   (23)                        (2)                      (2)                          (1)
                                                                                                                                      ---                     ---                         ---                       ---                           ---

    Machinery, Energy & Transportation                                                                                             $8,885                  $3,750                        $830                    $1,987                        $2,318


    Financial Products Segment                                                                                                       $742                    $464                         $83                       $99                           $96

    Corporate Items and Eliminations                                                                                                 (53)                   (29)                        (9)                      (4)                         (11)
                                                                                                                                      ---                     ---                         ---                       ---                           ---

    Financial Products Revenues                                                                                                      $689                    $435                         $74                       $95                           $85


    Consolidated Sales and Revenues                                                                                                $9,574                  $4,185                        $904                    $2,082                        $2,403
                                                                                                                                   ======                  ======                        ====                    ======                        ======


    (1)Does not include inter-segment sales of $37 million and $31 million in fourth quarter 2017 and 2016, respectively.

    (2)Does not include inter-segment sales of $103 million and $87 million in fourth quarter 2017 and 2016, respectively.

    (3)Does not include inter-segment sales of $934 million and $621 million in fourth quarter 2017 and 2016, respectively.

    4Does not include inter-segment sales of $103 million and $117 million in fourth quarter 2017 and 2016, respectively.



    Sales and Revenues by Segment


                                          Fourth           Sales            Price                                          Fourth                        $          %

    (Millions of dollars)              Quarter 2016        Volume        Realization      Currency       Other          Quarter 2017           Change            Change
                                       ------------        ------        -----------      --------       -----          ------------           ------            ------

    Construction Industries                         $3,589        $1,502             $146            $21        $     -                $5,258            $1,669           47%

    Resource Industries                              1,443           669               84              9              -                 2,205               762           53%

    Energy & Transportation                          3,849           808             (17)            66              -                 4,706               857           22%

    All Other Segments                                  32            20                -             -             -                    52                20           63%

    Corporate Items and Eliminations                  (28)            1                -             -             -                  (27)                1
                                                       ---           ---              ---           ---           ---                   ---               ---


    Machinery, Energy & Transportation              $8,885        $3,000             $213            $96        $     -               $12,194            $3,309           37%


    Financial Products Segment                        $742     $       -      $        -       $     -           $41                   $783               $41            6%

    Corporate Items and Eliminations                  (53)            -               -             -          (28)                  (81)             (28)
                                                       ---           ---             ---           ---           ---                    ---               ---

    Financial Products Revenues                       $689     $       -      $        -       $     -           $13                   $702               $13            2%


    Consolidated Sales and Revenues                 $9,574        $3,000             $213            $96            $13                $12,896            $3,322           35%
                                                    ======        ======             ====            ===            ===                =======            ======



    Profit (Loss) by Segment

                                            Fourth              Fourth                        $      %

    (Millions of dollars)                Quarter 2017        Quarter 2016          Change         Change
                                         ------------        ------------          ------         ------

    Construction Industries                             $838                  $334           $504         151%

    Resource Industries                                  209                 (711)           920          n/a

    Energy & Transportation                              881                   638            243          38%

    All Other Segments                                  (16)                 (34)            18          53%

    Corporate Items and Eliminations                   (821)              (1,572)           751
                                                        ----                ------            ---

    Machinery, Energy & Transportation                $1,091              $(1,345)        $2,436          n/a

    Financial Products Segment                          $233                  $149            $84          56%

    Corporate Items and Eliminations                    (77)                  (9)          (68)
                                                         ---                   ---            ---

    Financial Products                                  $156                  $140            $16          11%

    Consolidating Adjustments                           (86)                 (57)          (29)


    Consolidated Operating Profit (Loss)              $1,161              $(1,262)        $2,423          n/a
                                                      ======               =======         ======


    CONSTRUCTION INDUSTRIES



    (Millions of dollars)

    Segment Sales

                                                                                              Fourth                               Sales                  Price           Currency                 Fourth            $        %
                                                                                           Quarter 2016                                                                                                        Change       Change
                                                                                                                        Volume               Realization                              Quarter 2017



    Sales(1)                                                                                     $3,589                               $1,502                  $146                $21                   $5,258       $1,669        47%


    Sales by Geographic Region


                                                                                              Fourth                              Fourth                       $                 %
                                                                                           Quarter 2017                        Quarter 2016              Change                Change
                                                                                           ------------                        ------------              ------                ------

    North America                                                                                $2,346                               $1,569                  $777                50%

    Latin America                                                                                   392                                  264                   128                48%

    EAME                                                                                            976                                  624                   352                56%

    Asia/Pacific                                                                                  1,544                                1,132                   412                36%

    Total(1)                                                                                     $5,258                               $3,589                $1,669                47%


    Segment Profit

                                                                                              Fourth                              Fourth                       $                 %
                                                                                                                                               Change              Change
                                                                                           Quarter 2017                        Quarter 2016
                                                                                           ------------                        ------------

    Segment Profit                                                                                 $838                                 $334                  $504               151%


    (1) Does not include inter-segment sales of $37 million and $31 million in fourth quarter 2017 and 2016, respectively.

Construction Industries' sales were $5.258 billion in the fourth quarter of 2017, compared with $3.589 billion in the fourth quarter of 2016. The increase was due to higher sales volume and favorable price realization.

    --  Sales volume increased primarily due to higher end-user demand for
        construction equipment. In addition, there was a favorable impact from
        changes in dealer inventories as inventories decreased more in the
        fourth quarter of 2016 than in the fourth quarter of 2017.
    --  Price realization was favorable due to a weak pricing environment in the
        fourth quarter of 2016 and previously implemented price increases.

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

    --  In North America, the sales increase was due to higher end-user demand
        for construction equipment, mostly due to oil and gas, residential and
        non-residential construction activities. The impact of favorable changes
        in dealer inventories, as inventories decreased in the fourth quarter of
        2016 and were about flat in the fourth quarter of 2017, also contributed
        to increased sales.
    --  Sales in Asia/Pacific were higher as a result of an increase in end-user
        demand, primarily in China, stemming from increased building
        construction and infrastructure investment.
    --  Sales increased in EAME primarily due to higher end-user demand for
        construction equipment, reflecting improved economic conditions across
        much of the region. Favorable price realization also contributed to
        increased sales.
    --  Although construction activity remained weak in Latin America, sales
        were higher as end-user demand increased from low levels due to
        stabilizing economic conditions in several countries in the region.

Construction Industries' profit was $838 million in the fourth quarter of 2017, compared with $334 million in the fourth quarter of 2016. The increase in profit was primarily due to higher sales volume, favorable price realization and variable manufacturing efficiencies, partially offset by unfavorable period costs and higher material costs, primarily for steel. The increase in period costs was due to higher short-term incentive compensation expense, targeted investments and higher manufacturing period costs to support increased production volumes.


    RESOURCE INDUSTRIES



    (Millions of dollars)

    Segment Sales

                                                              Fourth                          Sales                         Price             Currency         Fourth                  $        %
                                                          Quarter 2016                                                                                      Quarter 2017        Change        Change
                                                                              Volume                      Realization



    Sales(1)                                                     $1,443                             $669                           $84                   $9              $2,205          $762        53%


    Sales by Geographic Region


                                                              Fourth                         Fourth                                $              %
                                                          Quarter 2017                                                     Change              Change
                                                                          Quarter 2016


    North America                                                  $791                             $471                          $320                  68%

    Latin America                                                   384                              221                           163                  74%

    EAME                                                            475                              297                           178                  60%

    Asia/Pacific                                                    555                              454                           101                  22%

    Total(1)                                                     $2,205                           $1,443                          $762                  53%


    Segment Profit (Loss)

                                                              Fourth                         Fourth                                $              %
                                                                                                             Change                    Change
                                                          Quarter 2017                    Quarter 2016
                                                          ------------                    ------------

    Segment Profit (Loss)                                          $209                           ($711)                         $920                  n/a


    (1) Does not include inter-segment sales of $103 million and $87 million in fourth quarter 2017 and 2016, respectively.

Resource Industries' sales were $2.205 billion in the fourth quarter of 2017, an increase of $762 million from the fourth quarter of 2016. The increase was primarily due to higher end-user demand for equipment and aftermarket parts in all regions, favorable impact of changes in dealer inventories and favorable price realization. Dealer deliveries for new equipment increased significantly. Positive commodity price trends in 2017 drove improved market conditions and financial health of mining companies. After several years of low investment, miners began to increase capital expenditures, reflecting more confidence in their end markets. Dealer inventories increased slightly in the fourth quarter of 2017, compared with a slight decrease in the fourth quarter of 2016.

Resource Industries' profit was $209 million in the fourth quarter of 2017, compared with a loss of $711 million in the fourth quarter of 2016. The improvement was primarily due to the absence of a goodwill impairment charge of $595 million in the fourth quarter of 2016. Higher sales volume and favorable price realization also contributed to increased profit.


    ENERGY & TRANSPORTATION



    (Millions of dollars)

    Segment Sales

                                                                                               Fourth                            Sales                 Price            Currency         Fourth             $            %
                                                                                                                                           Realization                                               Change       Change
                                                                                           Quarter 2016                          Volume                                              Quarter 2017
                                                                                           ------------                          ------                                              ------------


    Sales(1)                                                                                     $3,849                               $808                 ($17)                $66           $4,706         $857          22%


    Sales by Geographic Region


                                                                                               Fourth                            Fourth                      $              %
                                                                                                                                             Change              Change
                                                                                           Quarter 2017                      Quarter 2016
                                                                                           ------------                      ------------

    North America                                                                                $2,327                             $1,722                  $605                 35%

    Latin America                                                                                   374                                347                    27                  8%

    EAME                                                                                          1,286                              1,063                   223                 21%

    Asia/Pacific                                                                                    719                                717                     2                  0%

    Total(1)                                                                                     $4,706                             $3,849                  $857                 22%


    Segment Profit

                                                                                               Fourth                            Fourth                      $              %
                                                                                                                                             Change              Change
                                                                                           Quarter 2017                      Quarter 2016
                                                                                           ------------                      ------------

    Segment Profit                                                                                 $881                               $638                  $243                 38%


    (1) Does not include inter-segment sales of $934 million and $621 million in fourth quarter 2017 and 2016, respectively.

Energy & Transportation's sales were $4.706 billion in the fourth quarter of 2017, compared with $3.849 billion in the fourth quarter of 2016. The increase was primarily due to higher sales volume across all applications.

    --  Oil and Gas - Sales increased primarily due to higher demand for
        equipment used in gas compression and well servicing applications in
        North America.
    --  Transportation - Sales were higher in North America for rail services,
        driven by increased rail traffic, and due to additional deliveries of
        freight locomotives.
    --  Industrial - Sales were higher primarily in EAME due to increased demand
        for equipment used in electric power and agricultural end-user
        applications and aftermarket parts.
    --  Power Generation - Sales increased in EAME primarily due to the timing
        of projects.

Energy & Transportation's profit was $881 million in the fourth quarter of 2017, compared with $638 million in the fourth quarter of 2016. The increase was primarily due to higher sales volume, partially offset by higher period costs. The increase in period costs was primarily due to higher short-term incentive compensation expense, costs associated with higher production and targeted investments.


    FINANCIAL PRODUCTS SEGMENT



    (Millions of dollars)

    Revenues by Geographic Region

                                      Fourth       Fourth           $          %
                                                             Change     Change
                                  Quarter 2017 Quarter 2016
                                  ------------ ------------

    North America                         $505          $464        $41             9%

    Latin America                           80            83        (3)          (4)%

    EAME                                   107            99          8             8%

    Asia/Pacific                            91            96        (5)          (5)%

    Total                                 $783          $742        $41             6%


    Segment Profit

                                      Fourth       Fourth           $          %
                                                             Change     Change
                                  Quarter 2017 Quarter 2016
                                  ------------ ------------

    Segment Profit                        $233          $149        $84            56%

Financial Products' segment revenues were $783 million in the fourth quarter of 2017, an increase of $41 million, or 6 percent, from the fourth quarter of 2016. The increase was primarily due to higher average financing rates in North America, higher average earning assets in EAME and Asia/Pacific and a favorable impact from intercompany lending activity in North America. These favorable impacts were partially offset by lower average financing rates in Asia/Pacific.

Financial Products' segment profit was $233 million in the fourth quarter of 2017, compared with $149 million in the fourth quarter of 2016. The increase was primarily due to higher gains on sales of securities at Insurance Services and an increase in net yield on average earning assets.

At the end of 2017, past dues at Cat Financial were 2.78 percent, compared with 2.38 percent at the end of 2016. Write-offs, net of recoveries, were $114 million for the full year of 2017, compared with $123 million for the full year of 2016.

As of December 31, 2017, Cat Financial's allowance for credit losses totaled $365 million, or 1.33 percent of finance receivables, compared with $343 million, or 1.29 percent of finance receivables at year-end 2016.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $898 million in the fourth quarter of 2017, a decrease of $683 million from the fourth quarter of 2016. Corporate items and eliminations include: restructuring costs; corporate-level expenses; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences for ME&T, as segment profit is reported using annual fixed exchange rates; cost of sales methodology differences, as segments use a current cost methodology; and inter-segment eliminations.

The decrease in expense was primarily due to the favorable impact of lower mark-to-market losses related to pension and OPEB plans and lower restructuring costs, partially offset by methodology differences and higher short-term incentive compensation expense. Mark-to-market losses in the fourth quarter of 2017 were $301 million, compared to mark-to-market losses of $985 million in the fourth quarter of 2016.

QUESTIONS AND ANSWERS


    Q1:   Can you provide
          more information
          on the
          significant items
          impacting 2017
          and 2016 profit?


    A:    In order for our
          results to be
          more meaningful
          to our readers,
          we have
          separately
          quantified the
          impact of several
          significant
          items.


        --                   Restructuring Costs - In recent
                             years, we have incurred substantial
                             restructuring costs to achieve a
                             flexible and competitive cost
                             structure. During 2017, we incurred
                             $1.256 billion of restructuring
                             costs with about half related to
                             the closure of the facility in
                             Gosselies, Belgium. During 2016, we
                             incurred $1.019 billion of
                             restructuring costs.


        --                   Mark-to-Market Losses - Effective
                             January 1, 2016, we made a change
                             in accounting principle related to
                             our pension and OPEB plans. Under
                             this accounting principle, we
                             recognize actuarial gains and
                             losses as a mark-to-market gain
                             or loss when incurred rather than
                             amortizing them to earnings over
                             time. For 2017, the mark-to-
                             market adjustment was a net loss of
                             $301 million, primarily due to
                             lower interest rates and a change
                             in mortality assumptions, partially
                             offset by better than expected
                             returns on plan assets. For 2016,
                             the mark-to-market adjustment was
                             a net loss of $985 million,
                             primarily due to lower interest
                             rates.


        --                   State Deferred Tax Valuation
                             Allowance - Based on improved
                             profits in the United States, we
                             reduced the valuation allowance
                             against U.S. state deferred tax
                             assets during the fourth quarter of
                             2017, resulting in a non-cash
                             benefit of $111 million, net of
                             U.S. federal tax at 35 percent.
                             During the fourth quarter of 2016,
                             the valuation allowance against
                             U.S. state deferred tax assets was
                             increased, resulting in a $141
                             million non-cash charge, net of
                             U.S. federal tax at 35 percent.


        --                   Goodwill Impairment Charge - During
                             the fourth quarter of 2016, we
                             recognized a goodwill impairment
                             charge of $595 million related to
                             Resource Industries. No goodwill
                             impairment charges were recognized
                             during 2017.


        --                   U.S. Tax Reform - The fourth-
                             quarter 2017 provision for income
                             taxes includes a charge of $2.371
                             billion due to the enactment of
                             U.S. tax reform legislation on
                             December 22, 2017. The
                             provisionally estimated charge
                             includes a $596 million write-down
                             of net deferred tax assets to
                             reflect the reduction in the U.S.
                             corporate tax rate from 35 percent
                             to 21 percent, beginning January 1,
                             2018, with the remainder primarily
                             related to the cost of a mandatory
                             deemed repatriation of non-U.S.
                             earnings. Management believes this
                             charge is a reasonable estimate, as
                             of January 18, 2018, that may
                             change as additional required
                             information is prepared and
                             analyzed, interpretations and
                             assumptions are refined, additional
                             guidance is issued, and due to
                             actions we may take as a result of
                             the legislation.


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


                                           Fourth Quarter 2017                      Fourth Quarter 2016
                                           -------------------                      -------------------

                                              Profit Before                                                     Profit (Loss)
                                                  Taxes
                                                                                                                 Before Taxes
                                                                                                                 ------------

    ($ in millions except per share data)                             Profit (Loss)                             Profit (Loss)

                                                                        per Share*                                per Share*
    ---                                                                 ---------                                 ---------


    Profit (Loss)                                              $1,111                                   ($2.18)               ($1,348)  ($2.00)
    ------------                                               ------                                    ------                 -------    ------



    Restructuring Costs                                          $245                                     $0.31                    $395     $0.45
    -------------------                                          ----                                     -----                    ----     -----



    Mark-to-Market Losses                                        $301                                     $0.26                    $985     $1.14
    ---------------------                                        ----                                     -----                    ----     -----



    State Deferred Tax Valuation Allowance                                                             ($0.18)                           $0.24
    --------------------------------------                                                              ------                            -----



    U.S. Tax Reform Impact                                                                               $3.91
    ----------------------                                                                               -----



    Goodwill Impairment Charge                                                                                                   $595     $0.98
    --------------------------                                                                                                   ----     -----



    Adjusted Profit                                            $1,657                                     $2.16                    $627     $0.83




                                             Full Year 2017                            Full Year 2016
                                             --------------                            --------------

                                              Profit Before                                                     Profit Before
                                                  Taxes
                                                                                                                    Taxes
                                                                                                                    -----

    ($ in millions except per share data)                                 Profit                                Profit (Loss)

                                                                        per Share                                 per Share*
    ---                                                                 ---------                                 ---------


    Profit (Loss)                                              $4,082                                     $1.26                    $139   ($0.11)
    ------------                                               ------                                     -----                    ----    ------



    Restructuring Costs                                        $1,256                                     $1.68                  $1,019     $1.16
    -------------------                                        ------                                     -----                  ------     -----



    Mark-to-Market Losses                                        $301                                     $0.26                    $985     $1.15
    ---------------------                                        ----                                     -----                    ----     -----



    State Deferred Tax Valuation Allowance                                                             ($0.18)                           $0.24
    --------------------------------------                                                              ------                            -----



    Gain on Sale of Equity Investment                           ($85)                                  ($0.09)
    ---------------------------------                            ----                                    ------



    U.S. Tax Reform Impact                                                                               $3.95
    ----------------------                                                                               -----



    Goodwill Impairment Charge                                                                                                   $595     $0.98
    --------------------------                                                                                                   ----     -----



    Adjusted Profit                                            $5,554                                     $6.88                  $2,738     $3.42


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



    Q2:   Will new U.S. GAAP
          accounting rules
          effective in 2018
          have an impact on
          your financial
          statements?


    A:    We will be adopting
          several new
          accounting rules in
          2018, including the
          following:


        --                     Revenue Recognition - We have completed
                               our evaluation of the new accounting
                               standard on revenue recognition and do
                               not expect the impact will be material.
                               We will adopt the standard using the
                               modified retrospective approach, with no
                               change to prior year financial
                               statements.


        --                     Equity Securities - Our investments in
                               equity securities, primarily held by
                               Insurance Services, will be measured at
                               fair value through earnings. Previously,
                               the fair value adjustments for these
                               securities were reported in equity until
                               the securities were sold or an
                               impairment was recognized. We will adopt
                               the standard using the modified
                               retrospective approach, with no change
                               to prior year financial statements. At
                               December 31, 2017, the fair value of our
                               equity securities impacted by this
                               accounting change was approximately $450
                               million.


        --                     Pension and OPEB Costs - Components of
                               pension and OPEB costs, other than
                               service costs, will be reclassified from
                               operating costs to other income/
                               expense. This change will be made
                               retroactively to all periods presented.
                               In 2017, these costs included a net
                               credit of approximately $275 million
                               related to ongoing costs and a charge of
                               $301 million for the year-end mark-to-
                               market adjustment.


    Q3:   Can you discuss
          changes in dealer
          inventories during
          2017?


    A:    Changes in dealer
          inventories had a
          positive impact on
          sales from the
          fourth quarter of
          2016 to the fourth
          quarter of 2017.
          Dealer machine and
          engine inventories
          were about flat in
          the fourth quarter
          of 2017, compared
          with a decrease of
          about $800 million
          in the fourth
          quarter of 2016.
          For the full year
          of 2017, dealer
          inventories
          increased about
          $100 million,
          compared with a
          decrease of about
          $1.6 billion for
          the full year of
          2016.


    Q4:   Can you discuss
          changes to your
          order backlog by
          segment?


    A:    At the end of the
          fourth quarter of
          2017, the order
          backlog was about
          $15.8 billion, an
          increase of about
          $400 million from
          the end of the
          third quarter of
          2017. The increase
          was in Resource
          Industries,
          partially offset by
          a decline in Energy
          & Transportation.
          Construction
          Industries' order
          backlog was about
          flat.


         Compared with the
          fourth quarter of
          2016, the order
          backlog increased
          about $3.7 billion.
          The increase was
          across all
          segments, most
          significantly in
          Resource Industries
          and Construction
          Industries.


    Q5:   Can you comment on
          expense related to
          your 2017 short-
          term incentive
          compensation plans?


    A:    Short-term
          incentive
          compensation
          expense is directly
          related to
          financial and
          operational
          performance,
          measured against
          targets set
          annually. Fourth-
          quarter 2017
          expense was about
          $350 million,
          compared to fourth-
          quarter 2016
          expense of about
          $50 million. Full-
          year 2017 expense
          was about $1.4
          billion, compared
          to full-year 2016
          expense of about
          $250 million.


    Q6:   Full-year 2017
          sales and revenues
          were up 18 percent,
          and the fourth
          quarter of 2017 was
          up 35 percent. Is
          this significant
          ramp in demand
          impacting
          availability and
          how is the company
          responding?


    A:    The sharp increase
          in demand in 2017,
          which followed four
          years of declining
          sales, led to ramp-
          up challenges for
          certain products
          due to supplier
          constraints. During
          2017, the company
          worked with our
          global suppliers to
          respond to
          significant
          increases in
          demand. Despite
          improvements in
          material flows in
          the second half of
          2017, parts and
          components
          constraints remain
          across some
          products, which
          could impact the
          company's growth
          potential in 2018
          as we continue to
          ramp up our global
          suppliers.


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


    A:    The ME&T debt-to-
          capital ratio was
          36.7 percent at the
          end of 2017,
          compared with 41.0
          percent at the end
          of 2016. The
          improvement was
          primarily due to
          lower debt of $1.2
          billion, which
          included the early
          debt retirement of
          about $900 million
          due in December
          2018.


         Our cash and
          liquidity positions
          remain strong with
          an enterprise cash
          balance of $8.3
          billion as of year-
          end 2017. ME&T
          operating cash flow
          for the full year
          of 2017 was $5.5
          billion, compared
          with $3.9 billion
          in 2016. The
          increase was
          primarily due to
          higher profit
          offset partially by
          working capital
          impacts including
          increases in
          inventory during
          2017. During the
          year, ME&T capital
          expenditures
          totaled $916
          million. Funding
          for defined benefit
          pension plans was
          about $1.4 billion,
          including a $1.0
          billion
          discretionary U.S.
          contribution
          completed in
          December 2017.


         Our priorities for
          cash deployment
          have not changed.
          While our short-
          term priorities for
          the use of cash may
          vary from time to
          time as business
          needs and
          conditions dictate,
          our long-term cash
          deployment strategy
          is focused on the
          following
          priorities. Our top
          priority is to
          maintain a strong
          financial position
          in support of a
          Mid-A rating.
          Next, we intend to
          fund operational
          requirements and
          commitments. Then,
          we intend to fund
          priorities that
          profitably grow the
          company and return
          capital to
          shareholders
          through dividend
          growth and share
          repurchases.

GLOSSARY OF TERMS



    1.               Adjusted Profit Per Share - Profit per
                     share excluding restructuring costs and
                     pension and OPEB mark-to-market losses
                     for 2017 and 2016. For 2017, adjusted
                     profit per share also excludes a gain on
                     the sale of an equity investment in
                     IronPlanet recognized in the second
                     quarter, as well as state deferred tax
                     valuation allowance reversal and the
                     impact of the U.S. tax reform in the
                     fourth quarter. For 2016, adjusted profit
                     per share also excludes a goodwill
                     impairment charge and state deferred tax
                     valuation allowance recognized in the
                     fourth quarter.

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

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

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

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

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

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

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

    9.               Energy & Transportation - A segment
                     primarily responsible for supporting
                     customers using reciprocating engines,
                     turbines, diesel-electric locomotives
                     and related parts across industries
                     serving Power Generation, Industrial, Oil
                     and Gas and Transportation applications,
                     including marine and rail-related
                     businesses. Responsibilities include
                     business strategy, product design,
                     product management and development,
                     manufacturing, marketing and sales and
                     product support of turbines and turbine-
                     related services, reciprocating engine-
                     powered generator sets, integrated
                     systems used in the electric power
                     generation industry, reciprocating
                     engines and integrated systems and
                     solutions for the marine and oil and gas
                     industries; reciprocating engines
                     supplied to the industrial industry as
                     well as Cat machinery; the
                     remanufacturing of Cat engines and
                     components and remanufacturing services
                     for other companies; the business
                     strategy, product design, product
                     management and development,
                     manufacturing, remanufacturing, leasing
                     and service of diesel-electric
                     locomotives and components and other
                     rail-related products and services and
                     product support of on-highway vocational
                     trucks for North America.

    10.              Financial Products Segment - Provides
                     financing alternatives to customers and
                     dealers around the world for Caterpillar
                     products, as well as financing for
                     vehicles, power generation facilities and
                     marine vessels that, in most cases,
                     incorporate Caterpillar products.
                     Financing plans include operating and
                     finance leases, installment sale
                     contracts, working capital loans and
                     wholesale financing plans. The segment
                     also provides insurance and risk
                     management products and services that
                     help customers and dealers manage their
                     business risk. Insurance and risk
                     management products offered include
                     physical damage insurance, inventory
                     protection plans, extended service
                     coverage for machines and engines, and
                     dealer property and casualty insurance.
                     The various forms of financing, insurance
                     and risk management products offered to
                     customers and dealers help support the
                     purchase and lease of our equipment.
                     Financial Products segment profit is
                     determined on a pretax basis and includes
                     other income/expense items.

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

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

    13.              Machinery, Energy & Transportation Other
                     Operating (Income) Expenses - Comprised
                     primarily of gains/losses on disposal of
                     long-lived assets, gains/losses on
                     divestitures and legal settlements and
                     accruals. Restructuring costs classified
                     as other operating expenses on the
                     Results of Operations are presented
                     separately on the Operating Profit
                     Comparison.

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

    15.              Pension and Other Postemployment Benefit
                     (OPEB) - The company's defined benefit
                     pension and postretirement benefit plans.

    16.              Period Costs - Includes period
                     manufacturing costs, ME&T selling,
                     general and administrative (SG&A) and
                     research and development (R&D) expenses
                     excluding the impact of currency and
                     exit-related costs that are included in
                     restructuring costs (see definition
                     below). Period manufacturing costs
                     support production but are defined as
                     generally not having a direct
                     relationship to short-term changes in
                     volume. Examples include machinery and
                     equipment repair, depreciation on
                     manufacturing assets, facility support,
                     procurement, factory scheduling,
                     manufacturing planning and operations
                     management. SG&A and R&D costs are not
                     linked to the production of goods or
                     services and include marketing, legal and
                     finance services and the development of
                     new and significant improvements in
                     products or processes.

    17.              Price Realization - The impact of net
                     price changes excluding currency and new
                     product introductions. Price realization
                     includes geographic mix of sales, which
                     is the impact of changes in the relative
                     weighting of sales prices between
                     geographic regions.

    18.              Resource Industries - A segment primarily
                     responsible for supporting customers
                     using machinery in mining, quarry and
                     aggregates, 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, rotary
                     drills, large wheel loaders, off-highway
                     trucks, articulated trucks, wheel tractor
                     scrapers, wheel dozers, landfill
                     compactors, soil compactors, hard rock
                     continuous mining systems, select work
                     tools, machinery components, electronics
                     and control systems and related parts. In
                     addition to equipment, Resource
                     Industries also develops and sells
                     technology products and services to
                     provide customers fleet management,
                     equipment management analytics and
                     autonomous machine capabilities. Resource
                     Industries also manages areas that
                     provide services to other parts of the
                     company, including integrated
                     manufacturing and research and
                     development, as well as global
                     procurement.

    19.              Restructuring Costs - Primarily costs for
                     employee separation, long-lived asset
                     impairments and contract terminations.
                     These costs are included in Other
                     Operating (Income) Expenses.
                     Restructuring costs also include other
                     exit-related costs primarily for
                     accelerated depreciation, inventory
                     write-downs, equipment relocation and
                     project management costs and also LIFO
                     inventory decrement benefits from
                     inventory liquidations at closed
                     facilities (primarily included in Cost of
                     goods sold).

    20.              Sales Volume - With respect to sales and
                     revenues, sales volume represents the
                     impact of changes in the quantities sold
                     for Machinery, Energy & Transportation as
                     well as the incremental revenue impact of
                     new product introductions, including
                     emissions-related product updates. With
                     respect to operating profit, sales volume
                     represents the impact of changes in the
                     quantities sold for Machinery, Energy &
                     Transportation combined with product mix
                     as well as the net operating profit
                     impact of new product introductions,
                     including emissions-related product
                     updates. Product mix represents the net
                     operating profit impact of changes in the
                     relative weighting of Machinery, Energy &
                     Transportation sales with respect to
                     total sales. The impact of sales volume
                     on segment profit includes inter-segment
                     sales.

    21.              Variable Manufacturing Costs - Represents
                     volume-adjusted costs excluding the
                     impact of currency and restructuring
                     costs (see definition above). Variable
                     manufacturing costs are defined as having
                     a direct relationship with the volume of
                     production. This includes material costs,
                     direct labor and other costs that vary
                     directly with production volume such as
                     freight, power to operate machines and
                     supplies that are consumed in the
                     manufacturing process.

NON-GAAP FINANCIAL MEASURES

The following definitions are provided for the non-GAAP financial measures used in this report. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.

Adjusted Profit

Caterpillar believes it is important to separately quantify the profit impact of several significant items in order for the company's results to be meaningful to readers. These items consist of (i) restructuring costs, which are incurred in the current year to generate longer-term benefits, (ii) pension and OPEB mark-to-market losses resulting from plan remeasurements, (iii) state deferred tax valuation allowance (reversal), (iv) a gain on the sale of an equity investment, (v) U.S. tax reform impact and (vi) goodwill impairment charges. Caterpillar does not consider these items indicative of earnings from ongoing business activities and believes the non-GAAP measures will provide useful perspective on underlying business results and trends, and a means to assess period-over-period results.

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


                                         Fourth Quarter         Full Year
                                         --------------         ---------

    (millions of dollars)                 2016             2017            2016     2017
                                          ----             ----            ----     ----

    Profit (Loss) before taxes        ($1,348)          $1,111            $139   $4,082

    Restructuring costs                   $395             $245          $1,019   $1,256

    Mark-to-market losses                 $985             $301            $985     $301

    Gain on sale of equity investment        -               -              -   ($85)

    Goodwill impairment                   $595                -           $595        -

    Adjusted profit before taxes          $627           $1,657          $2,738   $5,554

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


                                            Fourth Quarter                       Full Year                            Outlook
                                            --------------                       ---------                            -------

                                            2016                    2017                    2016                    2017                       2018
                                            ----                    ----                    ----                    ----                       ----

    Profit (Loss) per
     share                               ($2.00)                ($2.18)                ($0.11)                  $1.26                $7.75-$8.75

    Per share
     restructuring
     costs(1)                              $0.45                   $0.31                   $1.16                   $1.68                      $0.50

    Per share mark-
     to-market
     losses(2)                             $1.14                   $0.26                   $1.15                   $0.26                          -

    Per share state
     deferred tax
     valuation
     allowance
     (reversal)(3)                         $0.24                 ($0.18)                  $0.24                 ($0.18)                         -

    Per share gain on
     sale of equity
     investment(2)                             -                      -                      -                ($0.09)                         -

    Per share U.S.
     tax reform
     impact                                    -                  $3.91                       -                  $3.95                          -

    Per share
     goodwill
     impairment4                           $0.98                       -                  $0.98                       -                         -

    Adjusted profit
     per share                             $0.83                   $2.16                   $3.42                   $6.88                $8.25-$9.25

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

    (1)At statutory tax rates. 2016
     and 2017 are prior to
     consideration of U.S. tax
     reform.  Full year 2017 also
     includes $15 million increase to
     prior year taxes related to non-
     U.S. restructuring costs.

    2 At statutory tax rates prior to
     consideration of U.S. tax
     reform.

    (3)Net of U.S. federal tax at 35
     percent.

    4Includes a $17 million tax
     benefit.

Machinery, Energy & Transportation

Caterpillar defines Machinery, Energy & Transportation as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Machinery, Energy & Transportation information relates to the design, manufacture and marketing of Caterpillar products. Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. The nature of these businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. The company also believes this presentation will assist readers in understanding Caterpillar's business. Pages 21-29 reconcile Machinery, Energy & Transportation with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.

Caterpillar's latest financial results and outlook are also available via:


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

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


    Internet:

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

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



                                                                                                                                 Caterpillar Inc.

                                                                                                            Condensed Consolidated Statement of Results of Operations

                                                                                                                                   (Unaudited)

                                                                                                                   (Dollars in millions except per share data)



                                                                                                               Three Months Ended                                    Twelve Months Ended

                                                                                                                  December 31,                                          December 31,

                                                                                                                   2017                               2016                               2017       2016
                                                                                                                   ----                               ----                               ----       ----

    Sales and revenues:

                                                                   Sales of Machinery, Energy &
                                                                   Transportation                                   $12,194                                                       $8,885                         $42,676                 $35,773

                                                                  Revenues of Financial Products                        702                                                          689                           2,786                   2,764


                                                                  Total sales and revenues                           12,896                                                        9,574                          45,462                  38,537


    Operating costs:

                                                                  Cost of goods sold                                  8,889                                                        7,541                          31,049                  28,309

                                                                   Selling, general and administrative
                                                                   expenses                                           1,606                                                        1,483                           5,177                   4,686

                                                                  Research and development expenses                     579                                                          522                           1,905                   1,951

                                                                   Interest expense of Financial
                                                                   Products                                             162                                                          149                             646                     596

                                                                  Goodwill impairment charge                              -                                                         595                               -                    595

                                                                  Other operating (income) expenses                     499                                                          546                           2,279                   1,902


                                                                  Total operating costs                              11,735                                                       10,836                          41,056                  38,039



    Operating profit (loss)                                                                       1,161                                                  (1,262)                              4,406                        498


                                                                   Interest expense excluding Financial
                                                                   Products                                             169                                                          120                             531                     505

                                                                  Other income (expense)                                119                                                           34                             207                     146



    Consolidated profit (loss) before taxes                                                       1,111                                                  (1,348)                              4,082                        139


                                                                  Provision (benefit) for income taxes                2,418                                                        (180)                          3,339                     192


                                                                   Profit (loss) of consolidated
                                                                   companies                                        (1,307)                                                     (1,168)                            743                    (53)


                                                                   Equity in profit (loss) of
                                                                   unconsolidated affiliated companies                    8                                                            1                              16                     (6)



    Profit (loss) of consolidated and affiliated companies                                      (1,299)                                                 (1,167)                                759                       (59)


    Less:  Profit (loss) attributable to noncontrolling interests                                     -                                                       4                                   5                          8


    Profit (loss) (1)                                                                                   $(1,299)                                                    $(1,171)                              $754                   $(67)
                                                                                                         =======                                                      =======                               ====                    ====



    Profit (loss) per common share                                                                       $(2.18)                                                     $(2.00)                             $1.27                 $(0.11)


    Profit (loss) per common share - diluted 2,3                                                         $(2.18)                                                     $(2.00)                             $1.26                 $(0.11)


    Weighted-average common shares
    outstanding (millions)

                                                                  - Basic                                             596.4                                                        585.8                           591.8                   584.3

                                                                  - Diluted 2,3                                       596.4                                                        585.8                           599.3                   584.3


    Cash dividends declared per common share                                                               $1.56                                                        $1.54                              $3.11                   $3.08

    (1)          Profit (loss)
                 attributable
                 to common
                 shareholders.

    (2)          Diluted by
                 assumed
                 exercise of
                 stock-based
                 compensation
                 awards using
                 the treasury
                 stock method.

    (3)          In the three
                 months ended
                 December 31,
                 2017 and 2016
                 and in the
                 twelve months
                 ended
                 December 31,
                 2016, the
                 assumed
                 exercise of
                 stock-based
                 compensation
                 awards was
                 not
                 considered
                 because the
                 impact would
                 be
                 antidilutive.



                                                                  Caterpillar Inc.

                                               Condensed Consolidated Statement of Financial Position

                                                                     (Unaudited)

                                                                (Millions of dollars)



                                                                                                           December 31,                            December 31,

                                                                                                                       2017                                 2016

    Assets

                                                                                                      Current assets:

                                                                                                       Cash and short-
                                                                                                       term investments                                  $8,261                           $7,168

                                                                                                       Receivables -
                                                                                                       trade and other                                    7,436                            5,981

                                                                                                       Receivables -
                                                                                                       finance                                            8,757                            8,522

                                                                                                       Prepaid expenses
                                                                                                       and other current
                                                                                                       assets                                             1,772                            1,682

                                                                                                      Inventories                                        10,018                            8,614
                                                                                                                                                         ------                            -----

                                                                                                      Total current assets                               36,244                           31,967


                                                                                                       Property, plant and
                                                                                                       equipment - net                                   14,155                           15,322

                                                                                                       Long-term
                                                                                                       receivables - trade
                                                                                                       and other                                            990                            1,029

                                                                                                       Long-term
                                                                                                       receivables -
                                                                                                       finance                                           13,542                           13,556

                                                                                                       Noncurrent deferred
                                                                                                       and refundable
                                                                                                       income taxes                                       1,693                            2,790

                                                                                                      Intangible assets                                   2,111                            2,349

                                                                                                      Goodwill                                            6,200                            6,020

                                                                                                      Other assets                                        2,027                            1,671


    Total assets                                                                                                                           $76,962                             $74,704
                                                                                                                                           =======                             =======


    Liabilities

                                                                                                      Current liabilities:

                                                                                                       Short-term
                                                                                                       borrowings:

                                                                                                                             --Machinery, Energy &
                                                                                                                             Transportation                          $1                            $209

                                                                                                                            -- Financial Products                 4,836                           7,094

                                                                                                      Accounts payable                                    6,487                            4,614

                                                                                                      Accrued expenses                                    3,220                            3,003

                                                                                                       Accrued wages,
                                                                                                       salaries and
                                                                                                       employee benefits                                  2,559                            1,296

                                                                                                      Customer advances                                   1,193                            1,167

                                                                                                      Dividends payable                                     466                              452

                                                                                                       Other current
                                                                                                       liabilities                                        1,975                            1,635

                                                                                                       Long-term debt
                                                                                                       due within one
                                                                                                       year:

                                                                                                                             --Machinery, Energy &
                                                                                                                             Transportation                           6                             507

                                                                                                                            -- Financial Products                 6,188                           6,155
                                                                                                                                                                  -----                           -----

                                                                                                       Total current
                                                                                                       liabilities                                       26,931                           26,132


                                                                                                       Long-term debt due
                                                                                                       after one year:

                                                                                                                             --Machinery, Energy &
                                                                                                                             Transportation                       7,929                           8,436

                                                                                                                            -- Financial Products                15,918                          14,382

                                                                                                       Liability for
                                                                                                       postemployment
                                                                                                       benefits                                           8,365                            9,357

                                                                                                      Other liabilities                                   4,053                            3,184


    Total liabilities                                                                                                63,196                                             61,491
                                                                                                                     ------                                             ------




    Shareholders' equity

                                                                                                      Common stock                                        5,593                            5,277

                                                                                                      Treasury stock                                   (17,005)                        (17,478)

                                                                                                       Profit employed in
                                                                                                       the business                                      26,301                           27,377

                                                                                                       Accumulated other
                                                                                                       comprehensive income
                                                                                                       (loss)                                           (1,192)                         (2,039)

                                                                                                       Noncontrolling
                                                                                                       interests                                             69                               76


    Total shareholders' equity                                                                                       13,766                                             13,213
                                                                                                                     ------                                             ------

    Total liabilities and shareholders' equity                                                                                             $76,962                             $74,704
                                                                                                                                           =======                             =======




                                                                          Caterpillar Inc.

                                                            Condensed Consolidated Statement of Cash Flow

                                                                             (Unaudited)

                                                                        (Millions of dollars)



                                                                                                               Twelve Months Ended

                                                                                                                   December 31,

                                                                                                                   2017                         2016

    Cash flow from operating activities:

                                                     Profit (loss) of
                                                     consolidated and
                                                     affiliated
                                                     companies                                            $759                                         $(59)

                                                     Adjustments for
                                                     non-cash items:

                                                    Depreciation and amortization                        2,877                                         3,034

                                                     Actuarial (gain) loss on pension
                                                     and postretirement benefits                           301                                           985

                                                     Provision (benefit) for deferred
                                                     income taxes                                        1,213                                         (431)

                                                    Goodwill impairment charge                               -                                          595

                                                    Other                                                  746                                           856

                                                    Changes in assets
                                                     and liabilities,
                                                     net of
                                                     acquisitions and
                                                     divestitures:

                                                    Receivables - trade and other                      (1,151)                                          829

                                                    Inventories                                        (1,295)                                        1,109

                                                    Accounts payable                                     1,478                                         (200)

                                                    Accrued expenses                                       175                                         (201)

                                                     Accrued wages, salaries and
                                                     employee benefits                                   1,187                                         (708)

                                                    Customer advances                                     (69)                                         (37)

                                                    Other assets - net                                   (192)                                          224

                                                    Other liabilities - net                              (327)                                        (360)
                                                                                                          ----                                          ----

    Net cash provided by (used for) operating
     activities                                                                 5,702                                                5,636
                                                                                -----                                                -----

    Cash flow from investing activities:

                                                    Capital
                                                     expenditures -
                                                     excluding
                                                     equipment leased
                                                     to others                                           (898)                                      (1,109)

                                                     Expenditures for
                                                     equipment leased
                                                     to others                                         (1,438)                                      (1,819)

                                                    Proceeds from
                                                     disposals of
                                                     leased assets and
                                                     property, plant
                                                     and equipment                                       1,164                                           899

                                                     Additions to
                                                     finance
                                                     receivables                                      (11,953)                                      (9,339)

                                                     Collections of
                                                     finance
                                                     receivables                                        12,018                                         9,369

                                                     Proceeds from sale
                                                     of finance
                                                     receivables                                           127                                           127

                                                     Investments and
                                                     acquisitions (net
                                                     of cash acquired)                                    (59)                                        (191)

                                                     Proceeds from sale
                                                     of businesses and
                                                     investments (net
                                                     of cash sold)                                         100                                             -

                                                     Proceeds from sale
                                                     of securities                                         932                                           694

                                                     Investments in
                                                     securities                                        (1,048)                                        (391)

                                                    Other - net                                             61                                             -


    Net cash provided by (used for) investing
     activities                                                                 (994)                                             (1,760)
                                                                                 ----                                               ------

    Cash flow from financing activities:

                                                    Dividends paid                                     (1,831)                                      (1,799)

                                                     Common stock
                                                     issued, including
                                                     treasury shares
                                                     reissued                                              566                                          (23)

                                                     Treasury shares
                                                     purchased                                               -                                            -

                                                    Proceeds from debt
                                                     issued (original
                                                     maturities
                                                     greater than
                                                     three months)                                       9,063                                         5,115

                                                    Payments on debt
                                                     (original
                                                     maturities
                                                     greater than
                                                     three months)                                     (8,384)                                      (6,565)

                                                    Short-term
                                                     borrowings - net
                                                     (original
                                                     maturities three
                                                     months or less)                                   (3,058)                                          140

                                                    Other - net                                            (9)                                          (8)


    Net cash provided by (used for) financing
     activities                                                               (3,653)                                             (3,140)
                                                                               ------                                               ------

    Effect of exchange rate changes on cash                                        38                                                 (28)
                                                                                  ---                                                  ---

    Increase (decrease) in cash and short-term
     investments                                                                1,093                                                  708

    Cash and short-term investments at beginning of
     period                                                                     7,168                                                6,460
                                                                                -----                                                -----

    Cash and short-term investments at end
     of period                                                                              $8,261                                         $7,168
                                                                                            ======                                         ======


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




                                                                                                                            Caterpillar Inc.
                                                                                                               Supplemental Data for Results of Operations
                                                                                                              For the Three Months Ended December 31, 2017

                                                                                                                               (Unaudited)
                                                                                                                          (Millions of dollars)



                                                                                                                   Supplemental Consolidating Data
                                                                                                                   -------------------------------

                                                                                                        Machinery,

                                                                               Consolidated              Energy &                          Financial       Consolidating
                                                                                                                                            Products
                                                                                                    Transportation (1)                                      Adjustments


    Sales and revenues:

                                          Sales of Machinery, Energy &
                                          Transportation                                    $12,194                                            $12,194                       $        -     $         -

                                         Revenues of Financial Products                         702                                                  -                             804            (102)  (2)


                                         Total sales and revenues                            12,896                                             12,194                              804            (102)


    Operating costs:

                                         Cost of goods sold                                   8,889                                              8,890                                -             (1)  (3)

                                          Selling, general and administrative
                                          expenses                                            1,606                                              1,444                              166              (4)  (3)

                                         Research and development expenses                      579                                                579                                -               -

                                          Interest expense of Financial
                                          Products                                              162                                                  -                             168              (6)    4

                                         Other operating (income) expenses                      499                                                190                              314              (5)  (3)


                                         Total operating costs                               11,735                                             11,103                              648             (16)



    Operating profit                                                                       1,161                                              1,091                              156             (86)


                                          Interest expense excluding Financial
                                          Products                                              169                                                189                                -            (20)    4

                                         Other income (expense)                                 119                                                (6)                              59               66     5



    Consolidated profit before taxes                                                       1,111                                                896                              215                -


                                         Provision (benefit) for income taxes                 2,418                                              2,567                            (149)               -


                                          Profit (loss) of consolidated
                                          companies                                         (1,307)                                           (1,671)                             364                -


                                          Equity in profit (loss) of
                                          unconsolidated affiliated companies                     8                                                  8                                -               -

                                          Equity in profit of Financial
                                          Products' subsidiaries                                  -                                               361                                -           (361)    6



    Profit (loss) of consolidated and
     affiliated companies                                                                (1,299)                                           (1,302)                             364            (361)


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


    Profit (loss) 7                                                                      $(1,299)                                          $(1,299)                            $361           $(361)
                                                                                          =======                                            =======                             ====            =====


    (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 (loss) attributable to common
                 shareholders.
    ---         -------------------------------------



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



                                                                                                        Supplemental Consolidating Data
                                                                                                        -------------------------------

                                                                                          Machinery,

                                                                 Consolidated              Energy &                      Financial                Consolidating
                                                                                      Transportation (1)                 Products
                                                                                                                                                   Adjustments
                                                                                                                                                   -----------

    Sales and revenues:

                            Sales of Machinery, Energy &
                            Transportation                                     $8,885                                              $8,885                       $        - $         -

                           Revenues of Financial Products                         689                                                   -                             760         (71)  (2)


                           Total sales and revenues                             9,574                                               8,885                              760         (71)


    Operating costs:

                           Cost of goods sold                                   7,541                                               7,542                                -         (1)  (3)

                            Selling, general and administrative
                            expenses                                            1,483                                               1,335                              149          (1)  (3)

                           Research and development expenses                      522                                                 522                                -           -

                            Interest expense of Financial
                            Products                                              149                                                   -                             153          (4)    4

                           Goodwill impairment charge                             595                                                 595                                -           -

                           Other operating (income) expenses                      546                                                 236                              318          (8)  (3)


                           Total operating costs                               10,836                                              10,230                              620         (14)



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


                            Interest expense excluding Financial
                            Products                                              120                                                 131                                -        (11)    4

                           Other income (expense)                                  34                                                (17)                               5           46     5



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


                           Provision (benefit) for income taxes                 (180)                                              (222)                              42            -


                            Profit (loss) of consolidated
                            companies                                         (1,168)                                            (1,271)                             103            -


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

                            Equity in profit of Financial
                            Products' subsidiaries                                  -                                                101                                -       (101)    6



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


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


    Profit (loss) 7                                                        $(1,171)                                           $(1,171)                            $101       $(101)
                                                                            =======                                             =======                             ====        =====


    (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 (loss) attributable to common
                 shareholders.
    ---         -------------------------------------




                                                                                                                     Caterpillar Inc.
                                                                                                        Supplemental Data for Results of Operations
                                                                                                       For the Twelve Months Ended December 31, 2017
                                                                                                                        (Unaudited)
                                                                                                                   (Millions of dollars)



                                                                                                           Supplemental Consolidating Data
                                                                                                     -------------------------------

                                                                                          Machinery,

                                                                 Consolidated              Energy &                          Financial               Consolidating
                                                                                      Transportation (1)                      Products                Adjustments
                                                                                      -----------------                       --------                -----------

    Sales and revenues:

                            Sales of Machinery, Energy &
                            Transportation                                    $42,676                                            $42,676                           $      - $       -

                           Revenues of Financial Products                       2,786                                                  -                             3,167      (381)  (2)


                           Total sales and revenues                            45,462                                             42,676                              3,167      (381)


    Operating costs:

                           Cost of goods sold                                  31,049                                             31,050                                  -       (1)  (3)

                            Selling, general and administrative
                            expenses                                            5,177                                              4,589                                604       (16)  (3)

                           Research and development expenses                    1,905                                              1,905                                  -         -

                            Interest expense of Financial
                            Products                                              646                                                  -                               667       (21)    4

                           Other operating (income) expenses                    2,279                                              1,080                              1,220       (21)  (3)


                           Total operating costs                               41,056                                             38,624                              2,491       (59)



    Operating profit                                                         4,406                                              4,052                                676      (322)


                            Interest expense excluding Financial
                            Products                                              531                                                622                                  -      (91)    4

                           Other income (expense)                                 207                                              (116)                                92        231     5



    Consolidated profit before taxes                                         4,082                                              3,314                                768          -


                           Provision (benefit) for income taxes                 3,339                                              3,317                                 22          -


                            Profit (loss) of consolidated
                            companies                                             743                                                (3)                               746          -


                            Equity in profit (loss) of
                            unconsolidated affiliated companies                    16                                                 16                                  -         -

                            Equity in profit of Financial
                            Products' subsidiaries                                  -                                               738                                  -     (738)    6



    Profit of consolidated and affiliated
     companies                                                                 759                                                751                                746      (738)


    Less:  Profit (loss) attributable to
     noncontrolling interests                                                    5                                                (3)                                 8          -


    Profit 7                                                                   $754                                               $754                               $738     $(738)
                                                                               ====                                               ====                               ====      =====


    (1)          Represents Caterpillar Inc. and its
                 subsidiaries with Financial Products
                 accounted for on the equity basis.
    ---         ------------------------------------

    (2)          Elimination of Financial Products'
                 revenues earned from Machinery,
                 Energy & Transportation.
    ---         -----------------------------------

    (3)          Elimination of net expenses recorded
                 by Machinery, Energy &
                 Transportation paid to Financial
                 Products.
    ---         -------------------------------------

    4            Elimination of interest expense
                 recorded between Financial Products
                 and Machinery, Energy &
                 Transportation.
    ---         ------------------------------------

    5            Elimination of discount recorded by
                 Machinery, Energy & Transportation
                 on receivables sold to Financial
                 Products and of interest earned
                 between Machinery, Energy &
                 Transportation and Financial
                 Products.
    ---         ------------------------------------

    6            Elimination of Financial Products'
                 profit due to equity method of
                 accounting.
    ---         -----------------------------------

    7            Profit attributable to common
                 shareholders.
    ---         ------------------------------



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



                                                                                                        Supplemental Consolidating Data
                                                                                                        -------------------------------

                                                                                          Machinery,

                                                                 Consolidated              Energy &                          Financial               Consolidating
                                                                                                                              Products
                                                                                      Transportation (1)                                              Adjustments
                                                                                                                                                      -----------

    Sales and revenues:

                            Sales of Machinery, Energy &
                            Transportation                                    $35,773                                            $35,773                           $        - $         -

                           Revenues of Financial Products                       2,764                                                  -                               3,065        (301)  (2)


                           Total sales and revenues                            38,537                                             35,773                                3,065        (301)


    Operating costs:

                           Cost of goods sold                                  28,309                                             28,311                                    -         (2)  (3)

                            Selling, general and administrative
                            expenses                                            4,686                                              4,129                                  573         (16)  (3)

                           Research and development expenses                    1,951                                              1,951                                    -           -

                            Interest expense of Financial
                            Products                                              596                                                  -                                 611         (15)    4

                           Goodwill impairment charge                             595                                                595                                    -           -

                           Other operating (income) expenses                    1,902                                                698                                1,232         (28)  (3)


                           Total operating costs                               38,039                                             35,684                                2,416         (61)



    Operating profit                                                           498                                                 89                                  649        (240)


                            Interest expense excluding Financial
                            Products                                              505                                                553                                    -        (48)    4

                           Other income (expense)                                 146                                               (89)                                  43          192     5



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


                           Provision (benefit) for income taxes                   192                                               (24)                                 216            -


                            Profit (loss) of consolidated
                            companies                                            (53)                                             (529)                                 476            -


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

                            Equity in profit of Financial
                            Products' subsidiaries                                  -                                               470                                    -       (470)    6



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


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


    Profit (loss) 7                                                           $(67)                                             $(67)                                $470       $(470)
                                                                               ====                                               ====                                 ====        =====


    (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 (loss) attributable to common
                 shareholders.
    ---         -------------------------------------



                                                                                                                     Caterpillar Inc.

                                                                                                             Supplemental Data for Cash Flow

                                                                                                      For the Twelve Months Ended December 31, 2017

                                                                                                                       (Unaudited)

                                                                                                                   (Millions of dollars)

                                                                                                                                                                      Supplemental Consolidating Data
                                                                                                                                                                      -------------------------------

                                                                                                                                                       Machinery,

                                                                                                        Consolidated                        Energy &                          Financial                  Consolidating
                                                                                                                                                                                          Products
                                                                                                                                                   Transportation (1)                                                Adjustments
                                                                                                                                                                                                                      ---

    Cash flow from operating activities:

                                                     Profit (loss) of
                                                     consolidated and
                                                     affiliated
                                                     companies                                    $759                                                         $751                                                    $746                    $(738)   (2)

                                                     Adjustments for
                                                     non-cash items:

                                                    Depreciation and amortization                2,877                                                        2,016                                                     861                         -

                                                     Undistributed profit of Financial
                                                     Products                                        -                                                        (13)                                                      -                       13    (3)

                                                     Actuarial (gain) loss on pension
                                                     and postretirement benefits                   301                                                          301                                                       -                        -

                                                     Provision (benefit) for deferred
                                                     income taxes                                1,213                                                        1,500                                                   (285)                      (2)     4

                                                    Other                                          746                                                          673                                                   (179)                      252      4

                                                    Changes in assets
                                                     and liabilities,
                                                     net of
                                                     acquisitions and
                                                     divestitures:

                                                    Receivables - trade and other              (1,151)                                                       (649)                                                     90                     (592)   4,5

                                                    Inventories                                (1,295)                                                     (1,282)                                                      -                     (13)     4

                                                    Accounts payable                             1,478                                                        1,588                                                    (85)                     (25)     4

                                                    Accrued expenses                               175                                                          169                                                       6                         -

                                                     Accrued wages, salaries and
                                                     employee benefits                           1,187                                                        1,160                                                      27                         -

                                                    Customer advances                             (69)                                                        (69)                                                      -                        -

                                                    Other assets - net                           (192)                                                       (186)                                                      8                      (14)     4

                                                    Other liabilities - net                      (327)                                                       (500)                                                    157                        16      4
                                                                                                  ----                                                         ----                                                     ---                       ---    ---

    Net cash provided by (used for) operating
     activities                                                                  5,702                                                5,459                                                        1,346                         (1,103)
                                                                                 -----                                                -----                                                        -----                          ------

    Cash flow from investing activities:

                                                    Capital
                                                     expenditures -
                                                     excluding
                                                     equipment leased
                                                     to others                                   (898)                                                       (889)                                                   (10)                        1      4

                                                     Expenditures for
                                                     equipment leased
                                                     to others                                 (1,438)                                                        (27)                                                (1,443)                       32      4

                                                    Proceeds from
                                                     disposals of
                                                     leased assets and
                                                     property, plant
                                                     and equipment                               1,164                                                          192                                                     987                      (15)     4

                                                     Additions to
                                                     finance
                                                     receivables                              (11,953)                                                           -                                               (13,920)                    1,967      5

                                                     Collections of
                                                     finance
                                                     receivables                                12,018                                                            -                                                 14,357                   (2,339)     5

                                                     Net intercompany
                                                     purchased
                                                     receivables                                     -                                                           -                                                  (732)                      732      5

                                                     Proceeds from sale
                                                     of finance
                                                     receivables                                   127                                                            -                                                    127                         -

                                                     Net intercompany
                                                     borrowings                                      -                                                          21                                                       -                     (21)     6

                                                     Investments and
                                                     acquisitions (net
                                                     of cash acquired)                            (59)                                                        (59)                                                      -                        -

                                                     Proceeds from sale
                                                     of businesses and
                                                     investments (net
                                                     of cash sold)                                 100                                                          100                                                       -                        -

                                                     Proceeds from sale
                                                     of securities                                 932                                                           79                                                     853                         -

                                                     Investments in
                                                     securities                                (1,048)                                                       (198)                                                  (850)                        -

                                                    Other - net                                     61                                                           21                                                      40                         -


    Net cash provided by (used for) investing
     activities                                                                  (994)                                               (760)                                                       (591)                            357
                                                                                  ----                                                 ----                                                         ----                             ---

    Cash flow from financing activities:

                                                    Dividends paid                             (1,831)                                                     (1,831)                                                  (725)                      725      7

                                                     Common stock
                                                     issued, including
                                                     treasury shares
                                                     reissued                                      566                                                          566                                                       -                        -

                                                     Net intercompany
                                                     borrowings                                      -                                                           -                                                   (21)                       21      6

                                                    Proceeds from debt
                                                     issued (original
                                                     maturities
                                                     greater than
                                                     three months)                               9,063                                                          361                                                   8,702                         -

                                                    Payments on debt
                                                     (original
                                                     maturities
                                                     greater than
                                                     three months)                             (8,384)                                                     (1,465)                                                (6,919)                        -

                                                    Short-term
                                                     borrowings - net
                                                     (original
                                                     maturities three
                                                     months or less)                           (3,058)                                                       (204)                                                (2,854)                        -

                                                    Other - net                                    (9)                                                         (9)                                                      -                        -


    Net cash provided by (used for) financing
     activities                                                                (3,653)                                             (2,582)                                                     (1,817)                            746
                                                                                ------                                               ------                                                       ------                             ---

    Effect of exchange rate changes on cash                                         38                                                    7                                                           31                               -
                                                                                   ---                                                  ---                                                          ---                             ---

    Increase (decrease) in cash and short-term
     investments                                                                 1,093                                                2,124                                                      (1,031)                              -

    Cash and short-term investments at beginning of
     period                                                                      7,168                                                5,257                                                        1,911                               -
                                                                                 -----                                                -----                                                        -----                             ---

    Cash and short-term investments at end
     of period                                                                         $8,261                                                     $7,381                                                   $880                        $   -
                                                                                       ======                                                     ======                                                   ====                      === ===



         (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.
         ---    ---------------------------------------------------


                                                                                                                   Caterpillar Inc.

                                                                                                            Supplemental Data for Cash Flow

                                                                                                     For the Twelve Months Ended December 31, 2016

                                                                                                                      (Unaudited)

                                                                                                                 (Millions of dollars)

                                                                                                                                                                    Supplemental Consolidating Data
                                                                                                                                                                    -------------------------------

                                                                                                                                                     Machinery,

                                                                                                      Consolidated                        Energy &                          Financial                  Consolidating

                                                                                                                                                 Transportation (1)                     Products                   Adjustments
                                                                                                                                                                                                                    ---

    Cash flow from operating activities:

                                                     Profit (loss) of
                                                     consolidated and
                                                     affiliated
                                                     companies                                 $(59)                                                       $(65)                                                   $476                    $(470)   (2)

                                                     Adjustments for
                                                     non-cash items:

                                                    Depreciation and amortization              3,034                                                        2,144                                                     890                         -

                                                     Actuarial (gain) loss on pension
                                                     and postretirement benefits                 985                                                          985                                                       -                        -

                                                     Provision (benefit) for deferred
                                                     income taxes                              (431)                                                       (533)                                                    111                       (9)     4

                                                    Goodwill impairment charge                   595                                                          595                                                       -                        -

                                                    Other                                        856                                                          687                                                    (36)                      205      4

                                                     Financial
                                                     Products'
                                                     dividend in
                                                     excess of profit                              -                                                         162                                                       -                    (162)   (3)

                                                    Changes in assets
                                                     and liabilities,
                                                     net of
                                                     acquisitions and
                                                     divestitures:

                                                    Receivables - trade and other                829                                                          171                                                    (34)                      692    4,5

                                                    Inventories                                1,109                                                        1,113                                                       -                      (4)     4

                                                    Accounts payable                           (200)                                                       (168)                                                     31                      (63)     4

                                                    Accrued expenses                           (201)                                                       (142)                                                   (59)                        -

                                                     Accrued wages, salaries and
                                                     employee benefits                         (708)                                                       (693)                                                   (15)                        -

                                                    Customer advances                           (37)                                                        (37)                                                      -                        -

                                                    Other assets - net                           224                                                           77                                                     145                         2      4

                                                    Other liabilities - net                    (360)                                                       (411)                                                     44                         7      4
                                                                                                ----                                                         ----                                                     ---                       ---    ---

    Net cash provided by (used for) operating
     activities                                                                 5,636                                               3,885                                                        1,553                             198
                                                                                -----                                               -----                                                        -----                             ---

    Cash flow from investing activities:

                                                    Capital
                                                     expenditures -
                                                     excluding
                                                     equipment leased
                                                     to others                               (1,109)                                                     (1,099)                                                   (11)                        1      4

                                                     Expenditures for
                                                     equipment leased
                                                     to others                               (1,819)                                                       (107)                                                (1,760)                       48      4

                                                    Proceeds from
                                                     disposals of
                                                     leased assets and
                                                     property, plant
                                                     and equipment                               899                                                          125                                                     805                      (31)     4

                                                     Additions to
                                                     finance
                                                     receivables                             (9,339)                                                           -                                               (11,862)                    2,523      5

                                                     Collections of
                                                     finance
                                                     receivables                               9,369                                                            -                                                 12,341                   (2,972)     5

                                                     Net intercompany
                                                     purchased
                                                     receivables                                   -                                                           -                                                    399                     (399)     5

                                                     Proceeds from sale
                                                     of finance
                                                     receivables                                 127                                                            -                                                    127                         -

                                                     Net intercompany
                                                     borrowings                                    -                                                       (542)                                                      1                       541      6

                                                     Investments and
                                                     acquisitions (net
                                                     of cash acquired)                         (191)                                                       (191)                                                      -                        -

                                                     Proceeds from sale
                                                     of securities                               694                                                           30                                                     664                         -

                                                     Investments in
                                                     securities                                (391)                                                        (24)                                                  (367)                        -

                                                    Other - net                                    -                                                          31                                                    (38)                        7      8


    Net cash provided by (used for) investing
     activities                                                               (1,760)                                            (1,777)                                                         299                           (282)
                                                                               ------                                              ------                                                          ---                            ----

    Cash flow from financing activities:

                                                    Dividends paid                           (1,799)                                                     (1,799)                                                  (632)                      632      7

                                                     Common stock
                                                     issued, including
                                                     treasury shares
                                                     reissued                                   (23)                                                        (23)                                                      7                       (7)     8

                                                     Net intercompany
                                                     borrowings                                    -                                                         (1)                                                    542                     (541)     6

                                                    Proceeds from debt
                                                     issued (original
                                                     maturities
                                                     greater than
                                                     three months)                             5,115                                                            6                                                   5,109                         -

                                                    Payments on debt
                                                     (original
                                                     maturities
                                                     greater than
                                                     three months)                           (6,565)                                                       (533)                                                (6,032)                        -

                                                    Short-term
                                                     borrowings - net
                                                     (original
                                                     maturities three
                                                     months or less)                             140                                                          201                                                    (61)                        -

                                                    Other - net                                  (8)                                                         (8)                                                      -                        -


    Net cash provided by (used for) financing
     activities                                                               (3,140)                                            (2,157)                                                     (1,067)                             84
                                                                               ------                                              ------                                                       ------                             ---

    Effect of exchange rate changes on cash                                      (28)                                               (34)                                                           6                               -
                                                                                  ---                                                 ---                                                          ---                             ---

    Increase (decrease) in cash and short-term
     investments                                                                  708                                                (83)                                                         791                               -

    Cash and short-term investments at beginning of
     period                                                                     6,460                                               5,340                                                        1,120                               -
                                                                                -----                                               -----                                                        -----                             ---

    Cash and short-term investments at end
     of period                                                                        $7,168                                                    $5,257                                                 $1,911                        $   -
                                                                                      ======                                                    ======                                                 ======                      === ===


         (1)    Represents Caterpillar Inc. and its subsidiaries with
                 Financial Products accounted for on the equity basis.
         ---    ------------------------------------------------------

         (2)    Elimination of Financial Products' profit after tax due
                 to equity method of accounting.
         ---    --------------------------------------------------------

         (3)    Elimination of Financial Products' dividend to
                 Machinery, Energy & Transportation in excess of
                 Financial Products' profit.
         ---    -----------------------------------------------

           4     Elimination of non-cash adjustments and changes in
                 assets and liabilities related to consolidated
                 reporting.
         ---    ---------------------------------------------------

           5     Reclassification of Financial Products' cash flow
                 activity from investing to operating for receivables
                 that arose from the sale of inventory.
         ---    -----------------------------------------------------

           6     Elimination of net proceeds and payments to/from
                 Machinery, 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.
         ---    -----------------------------------------------------

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