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(Continued-2) Caterpillar Inc.: Files Form 10-Q -14-

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept 2019



Caterpillar Inc.
Caterpillar Inc.: Files Form 10-Q FQE 30 Sept 2019

31-Oct-2019 / 17:38 CET/CEST
Information réglementaire transmise par EQS Group.
Le contenu de ce communiqué est de la responsabilité de l'émetteur.

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from to
Commission File Number: 1-768

CATERPILLAR INC.

(Exact name of registrant as specified in its charter)

Delaware 37-0602744

(State or other jurisdiction of incorporation) (IRS Employer I.D. No.)
510 Lake Cook Road, Suite 100, Deerfield, Illinois 60015

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (224) 551-4000

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol (s) Name of each exchange on which registered

Common Stock ($1.00 par value) CAT New York Stock Exchange

9 3/8% Debentures due March 15, 2021 CAT21 New York Stock Exchange

8% Debentures due February 15, 2023 CAT23 New York Stock Exchange

5.3% Debentures due September 15, 2035 CAT35 New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for

the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File
required to be submitted pursuant to Rule 405 of Regulation

S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large
accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule
12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer

Non-accelerated filer Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes No At September 30, 2019, 552,658,387 shares of common stock of the registrant were outstanding.

Table of Contents

Table of Contents

Part I. Financial Information

Item 1. Financial Statements 3

Item 2. Management's Discussion and Analysis of Financial Condition and Results of 67

Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk 96

Item 4. Controls and Procedures 96

Part II. Other Information

Item 1. Legal Proceedings 97

Item 1A. Risk Factors *

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 97

Item 3. Defaults Upon Senior Securities *

Item 4. Mine Safety Disclosures *

Item 5. Other Information *

Item 6. Exhibits 98

* Item omitted because no answer is called for or item is not applicable.

2

Table of Contents

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

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

Sales and revenues: Three
Months
Ended
September
30

2019 2018

Sales of Machinery, Energy & $ $
Transportation.................................. 11,97 12,76
4 3
Revenues of Financial 784 747
Products...........................................
Total sales and 12,75 13,51
revenues................................................ 8 0
Operating costs:
Cost of goods 8,569 9,022
sold....................................................
Selling, general and administrative 1,251 1,299
expenses..................................
Research and development 431 479
expenses........................................
Interest expense of Financial 189 185
Products.......................................
Other operating (income) 298 390
expenses.........................................
Total operating 10,73 11,37
costs.................................................. 8 5
Operating 2,020 2,135
profit......................................................
Interest expense excluding Financial 103 102
Products.................................
Other income 88 102
(expense)................................................
Consolidated profit before 2,005 2,135
taxes............................................
Provision (benefit) for income 518 415
taxes........................................
Profit of consolidated 1,487 1,720
companies..........................................
Equity in profit (loss) of unconsolidated affiliated 7 7
companies.......................
Profit of consolidated and affiliated 1,494 1,727
companies.................................
Less: Profit (loss) attributable to noncontrolling - -
interests.............................
Profit 1 $
1,727

..................................................................
$ 1,494

Profit per common $ $
share................................................ 2.69 2.92
Profit per common share - diluted 2 $
2.88

..................................................................
$ 2.66
Weighted-average common shares outstanding (millions)
- Basic.......................................................... 556.3 592.1
- Diluted 2 561.2 599.4
1 Profit attributable to common shareholders.
2 Diluted by assumed exercise of stock-based compensation awards
using the treasury stock method.

See accompanying notes to Consolidated Financial Statements.

3

Table of Contents

Caterpillar Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
(Dollars in millions)

Three Months Ended September 30

2019 2018
Profit of consolidated $ 1,494 $ 1,727
and affiliated
companies
.......................
...............
Other comprehensive
income (loss), net of
tax:
Foreign currency (263) (65)
translation, net of tax
(provision)/benefit of:
2019 - $(21); 2018 -
$(3)............
Pension and other
postretirement
benefits:
Amortization of prior (8) (7)
service (credit) cost,
net of tax
(provision)/benefit of:
2019 - $2; 2018 -
$2....
Derivative financial
instruments:
Gains (losses) 59 32
deferred, net of tax
(provision)/benefit of:
2019 - $(16); 2018 -
$(9)..............
(Gains) losses (76) (31)
reclassified to
earnings, net of tax
(provision)/benefit of:
2019 - $20; 2018 - $8
......
Available-for-sale
securities:
Gains (losses) 4 (1)
deferred, net of tax
(provision)/benefit of:
2019 - $(2); 2018 -
$0...............
Total other (284) (72)
comprehensive income
(loss), net of tax
.......................
..............
Comprehensive income 1,210 1,655
.......................
.......................
.........
Less: comprehensive - -
income attributable to
the noncontrolling
interests..............
..........
Comprehensive income $ 1,210 $ 1,655
attributable to
shareholders
.......................
...........

See accompanying notes to Consolidated Financial Statements.

4


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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept 2019 -2-


Table of Contents

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

Sales and revenues: Nine
Months
Ended
September
30

2019 2018

Sales of Machinery, Energy & $ $
Transportation.................................. 38,36 38,19
9 2
Revenues of Financial 2,287 2,188
Products...........................................
Total sales and 40,65 40,38
revenues................................................ 6 0
Operating costs:
Cost of goods 27,51 27,01
sold.................................................... 3 0
Selling, general and administrative 3,879 4,015
expenses..................................
Research and development 1,307 1,384
expenses........................................
Interest expense of Financial 571 533
Products.......................................
Other operating (income) 946 1,028
expenses.........................................
Total operating 34,21 33,97
costs.................................................. 6 0
Operating 6,440 6,410
profit......................................................
Interest expense excluding Financial 309 305
Products.................................
Other income 316 350
(expense)................................................
Consolidated profit before 6,447 6,455
taxes............................................
Provision (benefit) for income 1,470 1,377
taxes........................................
Profit of consolidated 4,977 5,078
companies..........................................
Equity in profit (loss) of unconsolidated affiliated 20 21
companies.......................
Profit of consolidated and affiliated 4,997 5,099
companies.................................
Less: Profit (loss) attributable to noncontrolling 2
interests.............................
Profit 1 $
5,099

..................................................................
$ 4,995

Profit per common $ $
share................................................ 8.84 8.57
Profit per common share - diluted 2 $
8.45

..................................................................
$ 8.75
Weighted-average common shares outstanding (millions) 565.2 595.3

- Basic..........................................................
- Diluted 2 570.8 603.8
1 Profit attributable to common shareholders.
2 Diluted by assumed exercise of stock-based compensation awards
using the treasury stock method.

See accompanying notes to Consolidated Financial Statements.

5

Table of Contents

Caterpillar Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
(Dollars in millions)

Nine Months Ended September 30

2019 2018
Profit of consolidated $ 4,997 $ 5,099
and affiliated companies
........................
..............
Other comprehensive
income (loss), net of
tax:
Foreign currency (186) (292)
translation, net of tax
(provision)/benefit of:
2019 - $(19); 2018 -
$(18)............
Pension and other
postretirement benefits:
Current year prior - (2)
service credit (cost),
net of tax
(provision)/benefit of:
2019 - $0; 2018 - $1
......
Amortization of prior (22) (21)
service (credit) cost,
net of tax
(provision)/benefit of:
2019 - $8; 2018 - $5....
Derivative financial
instruments:
Gains (losses) deferred, 53 73
net of tax
(provision)/benefit of:
2019 - $(15); 2018 -
$(23).............
(Gains) losses (86) (109)
reclassified to
earnings, net of tax
(provision)/benefit of:
2019 - $23; 2018 -
$32.....
Available-for-sale
securities:
Gains (losses) deferred, 34 (14)
net of tax
(provision)/benefit of:
2019 - $(10); 2018 - $3
..............
Total other (207) (365)
comprehensive income
(loss), net of tax
........................
.............
Comprehensive income 4,790 4,734
........................
........................
.......
Less: comprehensive 2 -
income attributable to
the noncontrolling
interests...............
.........
Comprehensive income $ 4,788 $ 4,734
attributable to
shareholders
........................
..........

See accompanying notes to Consolidated Financial Statements.

6

Table of Contents

Caterpillar Inc.
Consolidated Statement of Financial Position
(Unaudited)
(Dollars in millions)

Assets September December
30, 31,

Current assets:
2019 2018

Cash and short-term
investments...................................

Receivables - trade and
other......................................

Receivables -
finance...........................................

Prepaid expenses and other current
assets..............................

Inventories..................................................
$ 7,906 $ 7,857
8,275 8,802
9,192 8,650
1,607 1,765
12,180 11,529
Total current 39,160 38,603
assets..............................................
Property, plant and equipment - 12,842 13,574
net...................................
Long-term receivables - trade and 1,193 1,161
other.................................
Long-term receivables - 12,412 13,286
finance......................................
Noncurrent deferred and refundable income 1,372 1,439
taxes..........................
Intangible 1,630 1,897
assets................................................
Goodwill..................................................... 6,142 6,217
Other 3,242 2,332
assets...................................................
Total $ 77,993 $ 78,509
assets......................................................
Liabilities
Current liabilities:
Short-term borrowings:
Machinery, Energy & $ - $ -
Transportation.............................
Financial Products.......................................... 4,268 5,723
Accounts 6,141 7,051
payable..............................................
Accrued expenses............................................. 3,727 3,573
Accrued wages, salaries and employee 1,518 2,384
benefits..........................
Customer 1,309 1,243
advances.............................................
Dividends - 495
payable.............................................
Other current 2,188 1,919
liabilities..........................................
Long-term debt due within one year:
Machinery, Energy & 25 10
Transportation.............................
Financial Products.......................................... 8,025 5,820
Total current 27,201 28,218

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -3-


liabilities............................................
Long-term debt due after one year:
Machinery, Energy & 9,134 8,005
Transportation.............................
Financial Products.......................................... 16,454 16,995
Liability for postemployment 5,900 7,455
benefits..................................
Other 4,311 3,756
liabilities.................................................
Total 63,000 64,429
liabilities..................................................
..
Commitments and contingencies (Notes 11 and 14)
Shareholders' equity
Common stock of $1.00 par value:
Authorized shares: 2,000,000,000
Issued shares: (9/30/19 and 12/31/18 - 814,894,624) at 5,951 5,827
paid-in amount............
Treasury stock (9/30/19 - 262,236,237 shares; 12/31/18 - (23,693) (20,531)
239,351,886 shares) at cost..
Profit employed in the 34,477 30,427
business......................................
Accumulated other comprehensive income (1,783) (1,684)
(loss)...........................
Noncontrolling 41 41
interests...........................................
Total shareholders' 14,993 14,080
equity............................................
Total liabilities and shareholders' $ 77,993 $ 78,509
equity..................................

See accompanying notes to Consolidated Financial Statements.

7

Table of Contents

Caterpillar Inc.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
(Dollars in millions)

Three Months Ended September 30, 2018 Common Treasury Profit Accumulated Noncontrolling Total
stock stock employ other interests
ed in comprehensive
the income (loss)
busine
ss

Balance at June 30, $ $ $ $ (1,496) $ 63 $
2018.......................... 5,746 (18,028) 28,657 14,94
2
Profit of consolidated and affiliated - - 1,727 - - 1,727
companies..........
Foreign currency translation, net of - - - (65) - (65)
tax...............
Pension and other postretirement benefits, - - - (7) - (7)
net of tax......
Derivative financial instruments, net of - - - 1 - 1
tax............
Available-for-sale securities, net of (1) - (1)
tax...............
Change in ownership from noncontrolling (27) (13) (40)
interests.......
Common shares issued from treasury stock 7 29 - - - 36
for stock-based

compensation:
555,936.........................
Stock-based compensation 52 - - - - 52
expense.................
Common shares repurchased: 4,774,613 1 - (682) - - - (682)
Other..................................... (63) - - - (10) (73)
Balance at September 30, $ $ $ $ (1,568) $ 40 $
2018...................... 5,715 (18,681) 30,384 15,89
0
Three Months Ended September 30, 2019
Balance at June 30, $ $ $ $ (1,499) $ 41 $
2019.......................... 5,822 (22,467) 32,981 14,87
8
Profit of consolidated and affiliated - - 1,494 - - 1,494
companies..........
Foreign currency translation, net of - - - (263) - (263)
tax...............
Pension and other postretirement benefits, - - - (8) - (8)
net of tax......
Derivative financial instruments, net of - - - (17) - (17)
tax............
Available-for-sale securities, net of - - - 4 - 4
tax...............
Common shares issued from treasury stock - 20 - - - 20
for stock-based

compensation:
404,606.........................
Stock-based compensation 57 - - - - 57
expense.................
Common shares repurchased: 10,335,410 1 - (1,246) - - - (1,24
6)
Other..................................... 72 - 2 - - 74
Balance at September 30, $ $ $ $ (1,783) $ 41 $
2019...................... 5,951 (23,693) 34,477 14,99
3

1 See Note 12 for additional information.

See accompanying notes to Consolidated Financial Statements.

8

Table of Contents

Caterpillar Inc.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
(Dollars in millions)

Nine Months Ended September 30, 2018 Common Treasury Profit Accumulated Noncontrolling Total
stock stock employ other interests
ed in comprehensive
the income (loss)
busine
ss

Balance at December 31, $ $ $ $ (1,192) $ 69 $
2017...................... 5,593 (17,005) 26,301 13,76
6
Adjustments to adopt new accounting
guidance
Revenue - - (12) - - (12)
recognition..........................
Tax accounting for intra-entity asset - - (35) - -
transfers..........
35)

Recognition and measurement of financial - - 11 (11) - -
assets and liabilities
Balance at January 1, 5,593 (17,005) 26,265 (1,203) 69 13,71
2018........................ 9
Profit of consolidated and affiliated - - 5,099 - - 5,099
companies..........
Foreign currency translation, net of - - - (292) - (292)
tax...............
Pension and other postretirement benefits, - - - (23) - (23)
net of tax......
Derivative financial instruments, net of - - - (36) -
tax............
1)

Available-for-sale securities, net of - - - (14) - (14)
tax...............
Change in ownership from noncontrolling (25) - - - (18) (43)
interests.......
Dividends declared 1 - - (980) - - (980)
Distribution to noncontrolling (1) (1)
interests...............
Common shares issued from treasury stock 36 256 292
for stock-based

compensation:
5,284,974........................
Stock-based compensation 164 - - - - 164
expense.................
Common shares repurchased: 12,804,035 2 - (1,932) - - - (1,93
2)
Other..................................... (53) - - - (10) (63)
Balance at September 30, $ $ $ $ (1,568) $ 40 $
2018...................... 5,715 (18,681) 30,384 15,89
0
Nine Months Ended September 30, 2019
Balance at December 31, $ $ $ $ (1,684) $ 41 $

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -4-


2018...................... 5,827 (20,531) 30,427 14,08
0
Adjustments to adopt new accounting
guidance3
Lease - - 235 - - 235
accounting............................
Reclassification of certain tax effects (108) 108
from accumulated other

comprehensive
income.........................
Balance at January 1, 5,827 (20,531) 30,554 (1,576) 41 14,31
2019........................ 5
Profit of consolidated and affiliated - - 4,995 - 2 4,997
companies..........
Foreign currency translation, net of - - - (186) - (186)
tax...............
Pension and other postretirement benefits, - - - (22) - (22)
net of tax......
Derivative financial instruments, net of - - - (33) - (33)
tax............
Available-for-sale securities, net of - - - 34 - 34
tax...............
Dividends declared 1 - - (1,074 - - (1,07
) 4)
Distribution to noncontrolling (2) (2)
interests...............
Common shares issued from treasury stock (62) 121 59
for stock-based

compensation:
2,907,710........................
Stock-based compensation 170 - - - - 170
expense.................
Common shares repurchased: 25,792,061 2 - (3,283) - - - (3,28
3)
Other..................................... 16 - 2 - - 18
Balance at September 30, $ $ $ $ (1,783) $ 41 $
2019...................... 5,951 (23,693) 34,477 14,99
3

1 Dividends per share of common stock of $1.89 and $1.64 were declared in the nine months ended September
30, 2019 and 2018, respectively.

2 See Note 12 for additional information.

3 See Note 2 for additional information.

See accompanying notes to Consolidated Financial Statements.

9

Table of Contents

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

Nine
Months
Ended
September
30

2019 2018
Cash flow from operating activities:
Profit of consolidated and affiliated $ $
companies....................................... 4,997 5,099
Adjustments for non-cash items:
Depreciation and 1,933 2,065
amortization...............................................
Other............................................................... 627 630
Changes in assets and liabilities, net of acquisitions and
divestitures:
Receivables - trade and 427 (725)
other...............................................
Inventories........................................................... (676) (1,82
2)
Accounts (669) 496
payable.......................................................
Accrued 114 (32)
expenses.......................................................
Accrued wages, salaries and employee (858) (418)
benefits...................................
Customer 169 59
advances......................................................
Other assets - 3 394
net.......................................................
Other liabilities - (1,58 (1,27
net..................................................... 9) 1)
Net cash provided by (used for) operating 4,478 4,475
activities......................................
Cash flow from investing activities:
Capital expenditures - excluding equipment leased to (723) (921)
others..............................
Expenditures for equipment leased to (1,13 (1,20
others......................................... 3) 8)
Proceeds from disposals of leased assets and property, plant and 812 732
equipment....................
Additions to finance (9,45 (9,09
receivables................................................. 3) 2)
Collections of finance 9,144 8,032
receivables................................................
Proceeds from sale of finance 183 416
receivables...........................................
Investments and acquisitions (net of cash (6) (357)
acquired)....................................
Proceeds from sale of businesses and investments (net of cash 3 14
sold).........................
Proceeds from sale of 281 363
securities.................................................
Investments in (425) (417)
securities......................................................
Other - (37) 24
net...............................................................
Net cash provided by (used for) investing activities (1,35 (2,41
..................................... 4) 4)
Cash flow from financing activities:
Dividends (1,56 (1,44
paid............................................................ 4) 4)
Common stock issued, including treasury shares 59 292
reissued................................
Common shares (3,28 (2,00
repurchased................................................... 3) 0)
Proceeds from debt issued (original maturities greater than three
months):
Machinery, Energy & 1,479 47
Transportation..........................................
Financial 7,348 7,026
Products......................................................
Payments on debt (original maturities greater than three months):
Machinery, Energy & (8) (6)
Transportation..........................................
Financial (6,05 (5,63
Products...................................................... 4) 6)
Short-term borrowings - net (original maturities three months or less) (1,00 (465)
....................... 6)
Other - net (2) (32)
Net cash provided by (used for) financing (3,03 (2,21
activities...................................... 1) 8)
Effect of exchange rate changes on (47) (117)
cash.............................................
Increase (decrease) in cash and short-term investments and restricted 46 (274)
cash...................
Cash and short-term investments and restricted cash at beginning of 7,890 8,320
period......................
Cash and short-term investments and restricted cash at end of $ $
period.......................... 7,936 8,046

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.

See accompanying notes to Consolidated Financial Statements.

10

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. A. Nature of operations

Information in our financial statements and related commentary are presented in the following categories:

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

Financial Products - Primarily includes the company's Financial Products Segment. This category includes

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Caterpillar Financial Services Corporation (Cat Financial), Caterpillar Insurance Holdings Inc. (Insurance
Services) and their respective subsidiaries.

B. Basis of presentation

In the opinion of management, the accompanying unaudited financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated
results of operations for the three and nine months ended September 30, 2019 and 2018, (b) the consolidated
comprehensive income for the three and nine months ended September 30, 2019 and 2018, (c) the consolidated
financial position at September 30, 2019 and December 31, 2018, (d) the consolidated changes in
shareholders' equity for the three and nine months ended September 30, 2019 and 2018 and (e) the
consolidated cash flow for the nine months ended September 30, 2019 and 2018. The financial statements have
been prepared in conformity with generally accepted accounting principles in the United States of America
(U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Interim results are not necessarily indicative of results for a full year. The information included in this
Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in
our company's annual report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K).

The December 31, 2018 financial position data included herein is derived from the audited consolidated
financial statements included in the 2018 Form 10-K but does not include all disclosures required by U.S.
GAAP. Certain amounts for prior periods have been reclassified to conform to the current period financial
statement presentation.

Unconsolidated Variable Interest Entities (VIEs)

We have affiliates, suppliers and dealers that are VIEs of which we are not the primary beneficiary.
Although we have provided financial support, we do not have the power to direct the activities that most
significantly impact the economic performance of each entity. Our maximum exposure to loss from VIEs for
which we are not the primary beneficiary was $138 million and $131 million as of September 30, 2019 and
December 31, 2018, respectively.

In addition, Cat Financial has end-user customers that are VIEs of which we are not the primary
beneficiary. Although we have provided financial support to these entities and therefore have a variable
interest, we do not have the power to direct the activities that most significantly impact their economic
performance. Our maximum exposure to loss from our involvement with these VIEs is limited to the credit
risk inherently present in the financial support that we have provided. These risks are evaluated and
reflected in our financial statements as part of our overall portfolio of finance receivables and related
allowance for credit losses.

11

Table of Contents

2. New accounting guidance

A. Adoption of new accounting standards

Lease accounting (Accounting Standards Update (ASU) 2016-02) - In February 2016, the Financial Accounting
Standards Board (FASB) issued accounting guidance that revises the accounting for leases. Under the new
guidance, lessees are required to recognize a right-of-use asset and a lease liability for substantially
all leases. The new guidance will continue to classify leases as either financing or operating, with
classification affecting the pattern of expense recognition. The accounting applied by a lessor under the
new guidance will be substantially equivalent to current lease accounting guidance. The new guidance was
effective January 1, 2019 and was applied using a modified retrospective approach through a cumulative
effect adjustment to retained earnings as of January 1, 2019. The prior period comparative information has
not been recasted and continues to be reported under the accounting guidance in effect for those periods.

The new guidance provides a number of optional practical expedients in transition. We elected the "package
of practical expedients," which allows us not to reassess under the new guidance our prior conclusions
about lease identification, lease classification and initial direct costs. We did not elect the
use-of-hindsight practical expedient. In addition, the new guidance provides practical expedients for an
entity's ongoing lessee accounting. For certain property and information technology equipment leases, we
have elected to separate payments for lease components from non-lease components. For all other leases, we
have elected not to separate lease and non-lease components. We have elected the short-term lease
recognition exemption for all leases that qualify, which means we will not recognize right-of-use assets or
lease liabilities for these leases with a term of twelve months or less.

The most significant effects of adoption relate to the recognition of right-of-use assets and lease
liabilities on our balance sheet for operating leases and providing new disclosures about our leasing
activities. In addition, we derecognized existing assets and debt obligations for a sale-leaseback
transaction that qualified for sale accounting under the new guidance. The gain associated with this change
in accounting was recognized through opening retained earnings as of January 1, 2019. The adoption did not
have a material impact on our results of operations.

In March 2019, the FASB issued Leases - Codification improvements (ASU 2019-01) which amended the new
leasing guidance. Under these amendments, lessors that are not manufacturers or dealers will use their
cost, less any discounts that may apply, as the fair value of the underlying asset, and lessors within the
scope of Financial Services-Depository and Lending guidance will present all principal payments received
under leases within investment activities on the statement of cash flows. We adopted the new guidance
effective January 1, 2019, and the adoption did not have a material impact to our financial statements.

See Note 10 for additional information.

Table of Contents

The cumulative effect of initially applying the new lease guidance to our consolidated financial statements
on January

1, 2019 was as
follows:
Consolidated
Statement of
Financial Position
Cumulative
Balance as of Impact from
December 31, Adopting New Balance as of
(Millions of 2018 Lease Guidance January 1,
dollars) 2019
Assets
Prepaid expenses and $ 1,765 $ (17) $ 1,748
other current
assets..............
....
Property, plant and $ 13,574 $ (26) $ 13,548
equipment -
net.................
.....
Noncurrent deferred $ 1,439 $ (77) $ 1,362
and refundable
income
taxes............
Other $ 2,332 $ 713 $ 3,045
assets..............
....................
...
Liabilities
Accrued $ 3,573 $ (27) $ 3,546
expenses............
....................
.
Other current $ 1,919 $ 209 $ 2,128
liabilities.........
....................
.
Long-term debt due $ 8,005 $ (362) $ 7,643
after one
year................
.......

Machinery, Energy &
Transportation......
.............
Other $ 3,756 $ 538 $ 4,294
liabilities.........
....................
......
Shareholders' equity $ 30,427 $ 235 $ 30,662

Profit employed in
the
business............
............

We adopted the following ASUs effective January 1, 2019, none of which had a material impact on our
financial statements:

ASU Description

2017-08 Premium amortization on purchased callable debt securities

2017-12 Derivatives and hedging - Targeted improvements

2018-02 Reclassification of certain tax effects from accumulated other comprehensive income B. Accounting
standards issued but not yet adopted

Credit losses (ASU 2016-13) - In June 2016, the FASB issued accounting guidance to introduce a new model
for recognizing credit losses on financial instruments based on an estimate of current expected credit
losses. The new guidance will apply to loans, accounts receivable, trade receivables, other financial
assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new
guidance will also apply to debt securities and other financial assets measured at fair value through other
comprehensive income. We will adopt the new guidance effective January 1, 2020. An implementation team is
continuing to work on the design of new processes and controls as well as assessing the effects of the new
guidance. While we are still evaluating the impact of the new guidance, we do not expect a material impact
to our financial statements.

We consider the applicability and impact of all ASUs. ASUs not listed above were assessed and either
determined to be not applicable or not expected to have a material impact on our financial statements.

3. Sales and revenue contract information

Trade receivables represent amounts due from dealers and end users for the sale of our products. In
addition, Cat Financial provides wholesale inventory financing for a dealer's purchase of inventory.
Wholesale inventory receivables are included in Receivables - trade and other and Long-term receivables -
trade and other in the Consolidated Statement of Financial Position. Trade receivables from dealers and end
users were $7,156 million and $7,743 million as of September 30, 2019 and December 31, 2018, respectively,
and are recognized in Receivables - trade and other in the Consolidated Statement of Financial Position.
Long-term trade receivables from dealers and end users were $670 million and $674 million as of September
30, 2019 and December 31, 2018, respectively, and are recognized in Long-term receivables - trade and other

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -6-


in the Consolidated Statement of Financial Position.

13

Table of Contents

We invoice in advance of recognizing the sale of certain products. We recognize advanced customer payments
as a contract liability in Customer advances and Other liabilities in the Consolidated Statement of
Financial Position. Long­term customer advances recognized in Other Liabilities in the Consolidated
Statement of Financial Position were $519 million and $437 million as of September 30, 2019 and December
31, 2018, respectively. We reduce the contract liability when revenue is recognized. During the three and
nine months ended September 30, 2019, we recognized $101 million and $976 million, respectively, of revenue
that was recorded as a contract liability at the beginning of 2019.

As of September 30, 2019, we have entered into contracts with dealers and end users for which sales have
not been recognized as we have not satisfied our performance obligations and transferred control of the
products. The dollar amount of unsatisfied performance obligations for contracts with an original duration
greater than one year is $6.1 billion, of which $2.4 billion is expected to be completed and revenue
recognized in the twelve months following September 30, 2019. We have elected the practical expedient not
to disclose unsatisfied performance obligations with an original contract duration of one year or less.
Contracts with an original duration of one year or less are primarily sales to dealers for machinery,
engines and replacement parts.

See Note 16 for further disaggregated sales and revenues information.

4. Stock-based compensation

Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be
recognized in the financial statements based on the grant date fair value of the award. Our stock-based
compensation primarily

consists of stock options, restricted stock units (RSUs) and performance-based restricted stock units
(PRSUs).

Upon separation from service, if a participant is 55 years of age or older with more than five years of
service, the participant meets the criteria for a "Long Service Separation." For PRSU awards granted prior
to 2019, only a prorated number of shares may vest at the end of the performance period based upon
achievement of the performance target, with the proration based upon the number of months of continuous
employment during the three-year performance period. Award terms for the 2019 PRSU grant allow for
continued vesting upon achievement of the performance target specified in the award document for employees
who meet the criteria for a "Long Service Separation" and fulfill a requisite service period of six months.
Compensation expense for the 2019 PRSU grant with respect to employees who have met the criteria for a
"Long Service Separation" is recognized over the period from the grant date to the end of the six-month
requisite service period. For employees who become eligible for a "Long Service Separation" subsequent to
the end date of the six-month requisite service period and prior to the completion of the vesting period,
compensation expense is recognized over the period from the grant date to the date eligibility is achieved.

We recognized pretax stock-based compensation expense of $57 million and $170 million for the three and
nine months ended September 30, 2019, respectively, and $52 million and $164 million for the three and nine
months ended September 30, 2018, respectively.

The following table illustrates the type and fair value of the stock-based compensation awards granted
during the nine months ended September 30, 2019 and 2018, respectively:

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018

Weighted- Weighted- Weighted- Weighted-

Average Fair Average Grant Average Fair Average Grant

Shares Granted Value Per Share Date Stock Price Shares Granted Value Per Share Date Stock Price

Stock options 1,499,524 $ 40.98 $ 138.35 1,605,220 $ 46.11 $ 150.90

RSUs 657,389 $ 138.35 $ 138.35 722,521 $ 150.64 $ 150.64

PRSUs 342,097 $ 138.35 $ 138.35 344,866 $ 150.93 $ 150.93

14

Table of Contents

The following table provides the assumptions used in determining the fair value of the stock-based awards
for the nine months ended September 30, 2019 and 2018, respectively:

Grant Year

2019 2018
Weighted-average dividend 2.56% 2.70%
yield....................................
Weighted-average 29.1% 30.2%
volatility................................
.......
Range of 25.1-38.7% 21.5-33.0%
volatilities..............................
..............
Range of risk-free interest 2.48-2.68% 2.02-2.87%
rates.....................................
Weighted-average expected 7 years 8 years
lives....................................

As of September 30, 2019, the total remaining unrecognized compensation expense related to nonvested
stock-based compensation awards was $201 million, which will be amortized over the weighted-average
remaining requisite service periods of approximately 1.6 years.

5. Derivative financial instruments and risk management

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates,
interest rates and commodity prices. Our Risk Management Policy (policy) allows for the use of derivative
financial instruments to prudently manage foreign currency exchange rate, interest rate and commodity price
exposures. Our policy specifies that derivatives are not to be used for speculative purposes. Derivatives
that we use are primarily foreign currency forward, option and cross currency contracts, interest rate
contracts and commodity forward and option contracts. Our derivative activities are subject to the
management, direction and control of our senior financial officers. Risk management practices, including
the use of financial derivative instruments, are presented to the Audit Committee of the Board of Directors
at least annually.

All derivatives are recognized on the Consolidated Statement of Financial Position at their fair value. On
the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair
value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the
variability of cash flow (cash flow hedge) or (3) an undesignated instrument. Changes in the fair value of
a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain
or loss on the hedged recognized asset or liability that is attributable to the hedged risk, are recorded
in current earnings. Changes in the fair value of a derivative that is qualified, designated and highly
effective as a cash flow hedge are recorded in Accumulated other comprehensive income (loss) (AOCI), to the
extent effective, on the Consolidated Statement of Financial Position until they are reclassified to
earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the
fair value of undesignated derivative instruments are reported in current earnings. Cash flows from
designated derivative financial instruments are classified within the same category as the item being
hedged on the Consolidated Statement of Cash Flow. Cash flows from undesignated derivative financial
instruments are included in the investing category on the Consolidated Statement of Cash Flow.

We formally document all relationships between hedging instruments and hedged items, as well as the
risk-management objective and strategy for undertaking various hedge transactions. This process includes
linking all derivatives that are designated as fair value hedges to specific assets and liabilities on the
Consolidated Statement of Financial Position and linking cash flow hedges to specific forecasted
transactions or variability of cash flow.

We also formally assess, both at the hedge's inception and on an ongoing basis, whether the designated
derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values
or cash flow of hedged items. When a derivative is determined not to be highly effective as a hedge or the
underlying hedged transaction is no longer probable, we discontinue hedge accounting prospectively, in
accordance with the derecognition criteria for hedge accounting.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of
sales made and costs incurred in foreign currencies. Movements in foreign currency rates also affect our
competitive position as these changes may affect business practices and/or pricing strategies of
non-U.S.-based competitors. Additionally, we have balance sheet positions denominated in foreign
currencies, thereby creating exposure to movements in exchange rates.

15

Table of Contents

Our Machinery, Energy & Transportation operations purchase, manufacture and sell products in many locations
around the world. As we have a diversified revenue and cost base, we manage our future foreign currency
cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched
foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements
that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing
anticipated foreign currency cash flow for up to five years. As of September 30, 2019, the maximum term of
these outstanding contracts was approximately 51 months.

We generally designate as cash flow hedges at inception of the contract any Australian dollar, Brazilian

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -7-


real, British pound, Canadian dollar, Chinese yuan, Indian rupee, Japanese yen, Mexican peso, Singapore
dollar or Thailand baht forward or option contracts that meet the requirements for hedge accounting and the
maturity extends beyond the current quarter-end. Designation is performed on a specific exposure basis to
support hedge accounting. The remainder of Machinery, Energy & Transportation foreign currency contracts
are undesignated.

As of September 30, 2019, $10 million of deferred net losses, net of tax, included in equity (AOCI in the
Consolidated Statement of Financial Position), are expected to be reclassified to current earnings (Other
income (expense) in the Consolidated Statement of Results of Operations) over the next twelve months when
earnings are affected by the hedged transactions. The actual amount recorded in Other income (expense) will
vary based on exchange rates at the time the hedged transactions impact earnings.

In managing foreign currency risk for our Financial Products operations, our objective is to minimize
earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet
positions and future transactions denominated in foreign currencies. Our policy allows the use of foreign
currency forward, option and cross currency contracts to offset the risk of currency mismatch between our
assets and liabilities and exchange rate risk associated with future transactions denominated in foreign
currencies. Our foreign currency forward and option contracts are primarily undesignated. We designate
fixed-to-fixed cross currency contracts as cash flow hedges to protect against movements in exchange rates
on foreign currency fixed-rate assets and liabilities.

Interest Rate Risk

Interest rate movements create a degree of risk by affecting the amount of our interest payments and the
value of our fixed-rate debt. Our practice is to use interest rate contracts to manage our exposure to
interest rate changes.

Our Machinery, Energy & Transportation operations generally use fixed-rate debt as a source of funding. Our
objective is to minimize the cost of borrowed funds. Our policy allows us to enter into fixed-to-floating
interest rate contracts and forward rate agreements to meet that objective. We designate fixed-to-floating
interest rate contracts as fair value hedges at inception of the contract, and we designate certain forward
rate agreements as cash flow hedges at inception of the contract.

Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the
interest rate profile (fixed or floating rate) of Cat Financial's debt portfolio with the interest rate
profile of our receivables portfolio within predetermined ranges on an ongoing basis. In connection with
that policy, we use interest rate derivative instruments to modify the debt structure to match assets
within the receivables portfolio. This matched funding reduces the volatility of margins between
interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates
move.

Our policy allows us to use fixed-to-floating, floating-to-fixed and floating-to-floating interest rate
contracts to meet the match-funding objective. We designate fixed-to-floating interest rate contracts as
fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest
rate. We designate most floating-to-fixed interest rate contracts as cash flow hedges to protect against
the variability of cash flows due to changes in the benchmark interest rate.

We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate contracts at
both Machinery, Energy & Transportation and Financial Products. The gains or losses associated with these
contracts at the time of liquidation are amortized into earnings over the original term of the previously
designated hedged item.

16

Table of Contents

Commodity Price Risk

Commodity price movements create a degree of risk by affecting the price we must pay for certain raw
material. Our policy is to use commodity forward and option contracts to manage the commodity risk and
reduce the cost of purchased materials.

Our Machinery, Energy & Transportation operations purchase base and precious metals embedded in the
components we purchase from suppliers. Our suppliers pass on to us price changes in the commodity portion
of the component cost. In addition, we are subject to price changes on energy products such as natural gas
and diesel fuel purchased for operational use.

Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter
into commodity forward and option contracts to lock in the purchase price of a portion of these commodities
within a five-year horizon. All such commodity forward and option contracts are undesignated.

The location and fair value of derivative instruments reported in the Consolidated Statement of Financial
Position are as follows:

(Millions of dollars) Consolidated Statement of Financial Asset (Liability) Fair Value

Position Location September 30, 2019 December 31, 2018

Designated derivatives
Foreign exchange
contracts
Machinery, Energy & Receivables - trade and $ 23 $ 16
Transportation..... other.........
Machinery, Energy & Long-term receivables - 1 -
Transportation..... trade and other
Machinery, Energy & Accrued (35) (26)
Transportation..... expenses................
.
Machinery, Energy & Other - (9)
Transportation..... liabilities.............
.....
Financial Receivables - trade and 59 53
Products................. other.........
Financial Long-term receivables - 59 35
Products................. trade and other
Financial Accrued (6) (9)
Products................. expenses................
.
Interest rate contracts
Financial Receivables - trade and - 1
Products................. other.........
Financial Long-term receivables - 7 3
Products................. trade and other
Financial Accrued (61) (40)
Products................. expenses................
.
$ 47 $ 24
Undesignated derivatives
Foreign exchange
contracts
Machinery, Energy & Receivables - trade and $ 2 $ 2
Transportation..... other.........
Machinery, Energy & Accrued (1) (21)
Transportation..... expenses................
.
Financial Receivables - trade and 22 15
Products................. other.........
Financial Long-term receivables - 6 5
Products................. trade and other
Financial Accrued (14) (14)
Products................. expenses................
.
Commodity contracts
Machinery, Energy & Receivables - trade and 2 1
Transportation..... other.........
Machinery, Energy & Accrued (9) (31)
Transportation..... expenses................
.
$ 8 $ (43)

17

Table of Contents

The total notional amounts of the derivative instruments are as follows:

(Millions of dollars) September 30, 2019 December 31, 2018

Machinery, Energy & $ 2,177 $ 1,834
Transportation.................................
...
Financial $ 8,639 $ 10,210
Products.......................................
..........

The notional amounts of the derivative financial instruments do not represent amounts exchanged by the
parties. The amounts exchanged by the parties are calculated by reference to the notional amounts and by
other terms of the derivatives, such as foreign currency exchange rates, interest rates or commodity
prices.

The effect of derivatives designated as hedging instruments on the Consolidated Statement of Results of
Operations is as follows:

Cash Flow Hedges

Three Months Ended September 30, 2019

(Millions Amount of Recognized in Earnings
of Gains
dollars) (Losses)
Recognized
in AOCI

Foreign
exchange
contracts

Machinery
, Energy
&
Transport
ation
Classification of Amount of Amount of
Gains (Losses) Gains the line
(Losses) items
Reclassified in the
from AOCI Consolidat
ed
Statement
of Results
of
Operations
containing
hedging
gains
(losses)
$ (13)
Sales of Machinery, Energy & $ 3 $ 11,97
Transportation 4
Financial 100
Products.
.........
....
Interest expense of Financial 9 $ 189

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -8-


Products ...
Other income 89 $ 88
(expense)..........
Interest
rate
contracts
Machinery -Interest $ 103
, Energy
& 2)
Transport
ation expense excluding Financial

Products.....................
Financial (12) Interest expense of Financial $ 189
Products. Products ...
......... 1)
....

$ 75 $ 96

Three Months Ended September 30, 2018

Recognized in Earnings

Foreign Amount of Classification Amount of Recognized
exchange Gains of Gains in
contracts (Losses) Gains (Losses) (Losses) Earnings
Recognized Reclassified (Ineffective
in AOCI from AOCI Portion)
(Effective
Portion)

Machinery $ (15) Other income $ (17) $
, Energy (expense).....
& .......
Transport
ation.
Financial 53 Other income 51
Products. (expense).....
......... .......
..
Interest 5
expense of
Financial
Products ..
Interest 3 Interest
rate expense of
contracts Financial
Products ....

Financial
Products.
.........
..
$ 41 $ 39 $

18

Table of Contents

Cash Flow Hedges

Nine Months Ended September 30, 2019

(Millions Amount of Recognized in Earnings
of Gains
dollars) (Losses)
Recognized
in AOCI

Foreign
exchange
contracts

Machinery
, Energy
&
Transport
ation
Classification of Amount of Amount of
Gains (Losses) Gains the line
(Losses) items
Reclassified in the
from AOCI Consolidat
ed
Statement
of Results
of
Operations
containing
hedging
gains
(losses)
$ 8
Sales of Machinery, Energy & $ 4 $ 38,36
Transportation 9
Cost of goods (4) $ 27,51
sold.............. 3
Financial 132
Products.
.........
....
Interest expense of Financial 23 $ 571
Products ...
Other income 91 $ 316
(expense)..........
Interest
rate
contracts
Machinery -Interest (3) $ 309
, Energy
&
Transport
ation expense excluding Financial

Products.....................
Financial (72) Interest expense of Financial (2) $ 571
Products. Products ...
.........
....

$ 68 $ 109

Nine Months Ended September 30, 2018

Recognized in Earnings

Foreign Amount of Classification of Amount of Recognized
exchange Gains Gains (Losses) Gains in
contracts (Losses) (Losses) Earnings
Recognized Reclassified (Ineffective
in AOCI from AOCI Portion)
(Effective
Portion)

Machinery $ (55) Other income $ (12) $
, Energy (expense)...........
&
Transport
ation.
Financial 143 Other income 141
Products. (expense)...........
.........
...
Interest expense of Financial 13
Products ..
Interest
rate
contracts
Machinery -Interest (2)
, Energy
&
Transport
ation. expense excluding Financial

Products......................
Financial 8 Interest expense of Financial 1
Products. Products ....
.........
...
$ 96 $ 141 $

19

Table of Contents

The effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of
Operations is as follows:

(Millions of dollars) Three Months Ended Three Months Ended

Classification of Gains (Losses) September 30, 2019 September 30, 2018

Foreign exchange contracts

Machinery, Energy & Transportation...... Other income (expense)............ $ (1) $ (5)

Financial Products.................. Other income (expense) ..........................15 13
Commodity contracts

Machinery, Energy & Transportation...... Other income (expense) ..........................(6) (5)

$ 8 $ 3

Foreign exchange Classification of Nine Nine Months
contracts Gains (Losses) Months Ended
Ended September
September 30, 2018
30, 2019

Machinery, Other income $ 12 $ (43)
Energy & (expense)..........
Transportation..
....
Financial Other income (24) 29
Products........ (expense)..........
..........
Commodity Other income 10 (5)
contracts (expense)..........

Machinery,
Energy &
Transportation..
....
$ (2) $ (19)

We enter into International Swaps and Derivatives Association (ISDA) master netting agreements within
Machinery, Energy & Transportation and Financial Products that permit the net settlement of amounts owed
under their respective derivative contracts. Under these master netting agreements, net settlement
generally permits the company or the counterparty to determine the net amount payable for contracts due on
the same date and in the same currency for similar types of derivative transactions. The master netting
agreements generally also provide for net settlement of all outstanding contracts with a counterparty in
the case of an event of default or a termination event.

Collateral is generally not required of the counterparties or of our company under the master netting
agreements. As of September 30, 2019 and December 31, 2018, no cash collateral was received or pledged
under the master netting agreements.

20

Table of Contents

The effect of the net settlement provisions of the master netting agreements on our derivative balances
upon an event of default or termination event is as follows:

Gross Amounts Not
Offset in
the Statement of
Financial
September Position
30, 2019
Gross Net Amount of
Amounts
Gross Offset in Assets Presented
the
(Millions Amount of Statement in the Statement Cash Net
of dollars) of
Recognized Financial of Financial Financial Amount
Collateral of
Assets Position Position Instruments Assets
Received
Derivatives
Machinery, Energy & $ 28 $ - $ 28 $ (25) $ - $ 3

Transportation....... 153 -153 (39) -114

Financial
Products......

Total.................

September 30, 2019

(Millions of dollars)

Derivatives
$ 181 $ - $ 181 $ (64) $ - $ 117
Gross Amount of Gross Amounts Net Amount Gross Net
Recognized Offset in the of Amounts Not
Liabilities Statement of Liabilities Offset in
Presented in the
the Statement of Amount of

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -9-


Statement of Financial Liabilities
Financial Financial Position
Position

Position
Cash

Financial
Collateral

Instruments Pledged

Machinery, Energy & $ (45) $ - $ (45) $ 25 $ - $ (20)

Transportation........
Financial Products........ (81) -(81) 39 -(42)
Total................... $ (126) $ - $ (126) $ 64 $ - $ (62)

Gross Amounts Not
Offset in
the Statement of
Financial
December Position
31, 2018
Gross Net Amount of
Amounts
Gross Offset in Assets Presented
the
(Millions Amount of Statement in the Statement Cash Net
of dollars) of
Recognized Financial of Financial Financial Amount
Collateral of
Assets Position Position Instruments Assets
Received
Derivatives
Machinery, Energy & $ 19 $ - $ 19 $ (19) $ - $ -

Transportation....... 112 -112 (34) -78

Financial
Products......

Total.................

December 31, 2018

(Millions of dollars)

Derivatives
$ 131 $ - $ 131 $ (53) $ - $ 78
Gross Amount of Gross Amounts Net Amount Gross Net
Recognized Offset in the of Amounts Not
Liabilities Statement of Liabilities Offset in
Presented in the
the Statement of Amount of
Statement of Financial Liabilities
Financial Financial Position
Position

Position
Cash

Financial
Collateral

Instruments Pledged

Machinery, Energy &
Transportation......... $ (87) $ - $ (87) $ 19 $ - $ (68)
Financial Products........ (63) -(63) 34 -(29)
Total................... $ (150) $ - $ (150) $ 53 $ - $ (97)

21

Table of Contents

6) Inventories

Inventories (principally using the last-in, first-out (LIFO) method) are comprised of the following:

(Millions of dollars) September December
30, 31,

2019 2018
Raw 4,424 $ 4,477
materials................................................. $
Work-in-process.............................................. 1,335 1,259
Finished goods............................................... 6,177 5,562
Supplies.................................................... 244 231
Total 12,180 $ 11,529
inventories............................................... $

During the third quarter of 2019, changes were made to the classification of inventories primarily related
to purchased parts between Raw materials, Work-in-process and Finished goods. The prior year amounts have
been retrospectively adjusted to conform to the current-year classification.

1) Intangible assets and goodwill

A. Intangible assets

Intangible assets are comprised of the following:

September 30, 2019
(Millions of dollars) Weighted Gross
Amortizable Carrying Accumulated
Life Amount Amortization Net
(Years)
Customer 15 $ 2,426 $ (1,352) $
relationships............................... 1,0
74
Intellectual 12 1,500 (1,015) 485
property.................................
Other........................................... 13 190 (119) 71
Total finite-lived intangible 14 $ 4,116 $ (2,486) $
assets........................ 1,6
30

December 31, 2018

Weighted Gross Accumulated Net
Amortizable Carrying Amortizatio
Life Amount n
(Years)
Customer 15 $ 2,463 $ (1,249) $
relationships............................... 1,2
14
Intellectual 11 1,557 (965) 592
property.................................
Other........................................... 13 199 (108) 91
Total finite-lived intangible 14 $ 4,219 $ (2,322) $
assets........................ 1,8
97

Amortization expense for the three and nine months ended September 30, 2019 was $81 million and $244
million, respectively. Amortization expense for the three and nine months ended September 30, 2018 was $82
million and $248 million, respectively. Amortization expense related to intangible assets is expected to
be:

(Millions of dollars)

Remaining Three Months of 2019 2020 2021 2022 2023 Thereafter
$80 $307 $289 $271 $214 $469

B. Goodwill

No goodwill was impaired during the nine months ended September 30, 2019 or 2018.

22

Table of Contents

The changes in carrying amount of goodwill by reportable segment for the nine months ended September 30,
2019 were as follows:

(Millions of dollars) December Other September
31, 30,
2018 Adjustments 2019
1
Construction Industries
Goodwill..................................... $ 304 $ 2 $ 306
Impairments................................... (22) (22)
Net goodwill.................................. 282 2 284
Resource Industries
Goodwill..................................... 4,172 (50) 4,122
Impairments................................... (1,175) (1,175)
Net goodwill.................................. 2,997 (50) 2,947
Energy & Transportation 2,882 (28) 2,854

Goodwill....................................
All Other 2 56 1 57

Goodwill....................................
Consolidated total
Goodwill..................................... 7,414 (75) 7,339
Impairments................................... (1,197) (1,197)
Net goodwill.................................. $ 6,217 $ (75) $ 6,142

1 Other adjustments are comprised primarily of foreign currency translation.

2 Includes All Other operating segment (See Note 16).

8. Investments in debt and equity securities

We have investments in certain debt and equity securities, primarily at Insurance Services, which are
recorded at fair value and are primarily included in Other assets in the Consolidated Statement of
Financial Position.

Debt securities have been classified as available-for-sale, and the unrealized gains and losses arising
from the revaluation of these debt securities are included, net of applicable deferred income taxes, in
equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position).

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -10-


The unrealized gains and losses arising from the revaluation of the equity securities are included in Other
income (expense) in the Consolidated Statement of Results of Operations. Realized gains and losses on sales
of investments are generally determined using the specific identification method for debt and equity
securities and are included in Other income (expense) in the Consolidated Statement of Results of
Operations.

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The cost basis and fair value of debt securities with unrealized gains and losses included in equity
(Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position) were as
follows:

September 30, 2019 December 31, 2018

Government debt
U.S. treasury $ 9 $ - $ $ 9 $ - $ 9
bonds................. 9
Other U.S. and non-U.S. government 47 1 48 42 - 42
bonds.
Corporate bonds
Corporate bonds................... 823 17 840 735 (15) 720
Asset-backed 53 53 63 63
securities..............
Mortgage-backed debt securities
U.S. governmental 326 5 331 301 (4) 297
agency............
Residential....................... 6 6 7 - 7
Commercial...................... 40 1 41 14 (1) 13
Total debt $ 1,304 $ $ $ $ (20) $
securities................ 24 1,3 1,1 1,15
28 71 1

Available-for-sale investments in an unrealized loss position that are not other-than-temporarily impaired:

September 30, 2019

Less than 12 months 1 12 months or more 1 Total

Fair

(Millions of dollars) Unrealized Fair Unrealized Fair Unrealized

Value Losses Value Losses Value Losses

Corporate bonds

Corporate bonds............... $ 33 $ 1 $ 29 $ 1 $ 62 $ 2

Total....................... $ 33 $ 1 $ 29 $ 1 $ 62 $ 2

December 31, 2018

Less than 12 months 1 12 months or more 1 Total

Fair

(Millions of dollars) Unrealized Fair Unrealized Fair Unrealized

Value Losses Value Losses Value Losses

Corporate bonds

Corporate bonds................ $ 280 $ 3 $ 391 $ 11 $ 671 $ 14

Asset-backed securities ..................6 - 38 1 44 1
Mortgage-backed debt securities

U.S. governmental agency ................52 - 223 5 275 5
Commercial

Total....................... $ 338 $ 3 $ 666 $ 18 $ 1,004 $ 21

1 Indicates the length of time that individual securities have been in a continuous unrealized loss
position.

Corporate Bonds. The unrealized losses on our investments in corporate bonds relate to changes in interest
rates and credit-related yield spreads since time of purchase. We do not intend to sell the investments,
and it is not likely that we will be required to sell the investments before recovery of their amortized
cost basis. We do not consider these investments to be other-than-temporarily impaired as of September 30,
2019.

24

Table of Contents

The cost basis and fair value of the available-for-sale debt securities at September 30, 2019, by
contractual maturity, is shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to prepay and creditors may have the right to call obligations.

September 30, 2019

(Millions of dollars) Cost Basis Fair Value

Due in one year or less................................................. $ 74 $ 73

Due after one year through five years ...............................................703 716

Due after five years through ten years ...............................................137 142

Due after ten years ............................................................18 19

U.S. governmental agency mortgage-backed securities ...................................326 331

Residential mortgage-backed securities ...............................................6 6

Commercial mortgage-backed securities ..............................................40 41

Total debt securities - available-for-sale.................................... $ 1,304 $ 1,328

Sales of available-for-sale securities:

Three Months Ended Nine Months Ended

September 30 September 30

(Millions of dollars) 2019 2018 2019 2018

Proceeds from the sale of available-for-sale securities........ $ 92 $ 41 $ 237 $ 181

Gross gains from the sale of available-for-sale securities...... $ - $ - $ 1 $ -

Gross losses from the sale of available-for-sale securities..... $ - $ - $ 1 $ -

For the three and nine months ended September 30, 2019, the net unrealized gains (losses) for equity
securities held at September 30, 2019 were $2 million and $54 million, respectively. For the three and nine
months ended September 30, 2018, the net unrealized gains (losses) for equity securities held at September
30, 2018 were $18 million and $20 million, respectively.

25

Table of Contents

9. Postretirement benefits

A. Pension and postretirement benefit costs
U.S. Non-U.S. Other
Pension Pension
Benefits Benefits

Postretirement
Benefits
(Millions of dollars) September September September 30
30 30
2019 2018 2019 2018 2019 2018
For the three months ended:
Components of net periodic benefit cost:
Service cost................................ $ 29 $ 31 $ 20 $ 22 $ 19 $ 22
Interest cost................................ 150 134 23 25 34 31
Expected return on plan assets.................... (180) (202) (37) (55) (4) (9)
Amortization of prior service cost - - - - (10) (9)
(credit)............
Net periodic benefit cost (benefit) 1 $ $ 6 $ (8) $ 39 $ 35
(37)

.................................................$
(1)
For the nine months ended:
Components of net periodic benefit cost:
Service cost................................ $ 86 $ 94 $ 61 $ 67 $ 60 $ 64
Interest cost................................ 450 401 70 74 102 93
Expected return on plan assets.................... (540) (607) (112) (167) (14)

25)

Amortization of prior service cost - - - - (30)
(credit)............
1)

Net periodic benefit cost (benefit) 1 $ $ 19 $ $ 118 $ 106
(112) (26)

.................................................$
(4)

1 The service cost component is included in Operating costs in the Consolidated Statement of Results of
Operations. All other components are included in Other income (expense) in the Consolidated Statement of
Results of Operations.

We made $1,573 million and $1,771 million of contributions to our pension and other postretirement plans
during the three and nine months ended September 30, 2019, respectively. The 2019 contributions include a
$1.5 billion discretionary U.S. pension plan contribution made in September 2019. We currently anticipate
full-year 2019 contributions of approximately $1,830 million.

B. Defined contribution benefit costs

Total company costs related to our defined contribution plans were as follows:

(Millions Three Months Ended Nine Months Ended
of September 30 September 30
dollars)
2019 2018 2019 2018
U.S. $ 68 $ 97 $ 298 $ 247
Plans.....
..........
..........
..........
.
Non-U.S. 22 21 64 64
Plans.....
..........
..........
.......
$ 90 $ 118 $ 362 $ 311

26

Table of Contents

10. Leases

A. Lessee arrangements

We lease certain property, information technology equipment, warehouse equipment, vehicles and other
equipment through operating leases. We recognize a lease liability and corresponding right-of-use asset
based on the present value of lease payments. To determine the present value of lease payments for most of
our leases, we use our incremental borrowing rate based on information available on the lease commencement
date. For certain property and information technology equipment leases, we have elected to separate
payments for lease components from non-lease components. For all other leases, we have elected not to
separate payments for lease and non-lease components. Our lease agreements may include options to extend or
terminate the lease. When it is reasonably certain that we will exercise that option, we have included the
option in the recognition of right-of-use assets and lease liabilities. We have elected not to recognize
right-of-use assets or lease liabilities for leases with a term of twelve months or less.

Our finance leases are not significant and therefore are not included in the following disclosures. The
components of lease costs were as follows:

(Millions of dollars)

Three Months Ended Nine Months Ended

September 30 September 30

2019


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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -11-


Operating lease cost........................................ $ 59 $ 177

Short-term lease cost........................................ $ 11 $ 43

Operating lease right-of-use assets are recognized in Other assets in the Consolidated Statement of
Financial Position. The operating lease liabilities are recognized in Other current liabilities and Other
liabilities.

Supplemental information related to leases was as follows:

(Millions of dollars)

September 30, 2019 January 1, 2019

Operating Leases

Other assets............................................... $ 632 $ 713

Other current liabilities....................................... $ 178 $ 209

Other liabilities............................................ $ 462 $ 511

Weighted average remaining lease term

Operating leases ......................................................7 years 7 years

Weighted average discount rates

Operating leases ........................................................2% 2%

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Table of Contents

Maturities of operating lease liabilities at September 30, 2019 and minimum payments for operating leases
having initial or remaining non-cancelable terms in excess of one year at December 31, 2018 were as
follows:

(Millions of dollars) September
Amounts Due In 30, 2019

Remaining three months of $ 47
2019...........................................
2020.............................................................. 165
2021.............................................................. 124
2022.............................................................. 77
2023.............................................................. 59
Thereafter.......................................................... 205
Total lease 677
payments...................................................
Less: Imputed (37)
interest..................................................
Total............................................................. $ 640
December
31, 2018
Amounts Due In
2019.............................................................. $ 205
2020.............................................................. 154
2021.............................................................. 111
2022.............................................................. 67
2023.............................................................. 50
Thereafter.......................................................... 185
Total............................................................. $ 772

Supplemental cash flow information related to leases was as follows:

(Millions of dollars)

Nine Months Ended September 30

2019

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases..................................... $ 170
Right-of-use assets obtained in exchange for lease obligations:

Operating leases....................................................... $ 87

B. Lessor arrangements

We lease Caterpillar machinery, engines and other equipment to customers and dealers around the world,
primarily through Cat Financial. Cat Financial leases to customers primarily through sales-type (non-tax)
leases, where the lessee for tax purposes is considered to be the owner of the equipment during the term of
the lease. Cat Financial also offers tax leases that are classified as either operating or direct finance
leases for financial accounting purposes, depending on the characteristics of the lease. For tax purposes,
Cat Financial is considered the owner of the equipment. Our lease agreements may include options for the
lessee to purchase the underlying asset at the end of the lease term for either a stated fixed price or
fair market value.

28

Table of Contents

The residual values for Cat Financial's leased assets, which are an estimate of the market value of leased
equipment at the end of the lease term, are based on an analysis of historical wholesale market sales
prices, projected forward on a level trend line without consideration for inflation or possible future
pricing action. At the inception of the lease, residual values are estimated with consideration of the
following critical factors: market size and demand, any known significant market/product trends, total
expected hours of usage, machine configuration, application, location, model changes, quantities, past
remarketing experience, third-party residual guarantees and contractual customer purchase options. Many of
these factors are gathered in an application survey that is completed prior to quotation. The lease
agreement also clearly defines applicable return conditions and remedies for non-compliance, to ensure that
the leased equipment will be in good operating condition upon return. Model changes and updates, as well as
market strength and product acceptance, are monitored and adjustments are made to residual values in
accordance with the significance of any such changes. Cat Financial's sales staff work closely with
customers and dealers to manage the sale of lease returns and the recovery of residual exposure.

During the term of our operating leases, we evaluate the carrying value of our equipment on a regular basis
taking into consideration expected residual values at lease termination. Adjustments to depreciation
expense reflecting revised estimates of expected residual values at the end of the lease terms are recorded
prospectively on a straight-line basis. For finance leases, residual value adjustments are recognized
through a reduction of finance revenue.

29

Table of Contents

Contractual maturities of finance lease receivables (sales-type and direct finance leases) were as follows:

(Millions of dollars) September
30, 2019
Retail Wholesale
Amounts Due In Leases Leases 2 Total
1
Remaining three months of $ 889 $ 30 $ 919
2019......................
2020........................................ 2,798 59 2,857
2021........................................ 1,733 43 1,776
2022........................................ 857 27 884
2023........................................ 366 17 383
Thereafter..................................... 176 25 201
Total........................................ 6,819 201 7,020
Guaranteed residual 375 49 424
value..........................
Unguaranteed residual 793 37 830
value.........................
Less: Unearned (650) (34) (684)
income............................
Total........................................ $ 7,337 $ 253 $ 7,590

December
31, 2018
Retail Wholesale
Amounts Due In Leases Leases 2 Total
1
2019........................................ $ 2,981 $ 70 $ 3,051
2020........................................ 2,026 48 2,074
2021........................................ 1,073 30 1,103
2022........................................ 453 16 469
2023........................................ 166 6 172
Thereafter..................................... 56 3 59
Total........................................ 6,755 173 6,928
Guaranteed residual 392 66 458
value..........................
Unguaranteed residual 822 35 857
value.........................
Less: Unearned (628) (16) (644)
income............................
Total........................................ $ 7,341 $ 258 $ 7,599

1 Included in Receivables - finance and Long-term receivables - finance on the Consolidated Statement of
Financial Position.

2 Included in Receivables - trade and other and Long-term receivables - trade and other in the Consolidated
Statement of Financial Position. Wholesale lease receivables are receivables of Cat Financial that arise
when Cat Financial provides financing for a dealer's lease of inventory.

Our finance lease receivables generally may be repaid or refinanced without penalty prior to contractual
maturity. Accordingly, this presentation should not be regarded as a forecast of future cash collections.

The carrying amount of equipment leased to others, included in Property, plant and equipment - net in the
Consolidated Statement of Financial Position, under operating leases was as follows:

(Millions of dollars)
September 30, 2019 December 31, 2018
Equipment leased to $ 6,313 $ 6,015
others - at original
cost...................
..
Less: Accumulated (2,021) (1,744)
depreciation...........
..................
Equipment leased to $ 4,292 $ 4,271
others -
net....................
.........

30

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -12-


Payments due for operating leases at September 30, 2019 and scheduled minimum rental payments for operating
leases at December 31, 2018 were as follows:

(Millions of dollars)
September 30, 2019

Remaining Three
Months of 2019 2020 2021 2022 2023 Thereafter Total
$276 $827 $486 $250 $117 $111 $2,067
December 31, 2018
2019 2020 2021 2022 2023 Thereafter Total
$896 $574 $314 $158 $71 $69 $2,082

Revenues from finance and operating leases, primarily included in Revenues of Financial Products on the
Consolidated Statement of Results of Operations, were as follows:

(Millions of dollars)

Three Months Ended Nine Months Ended

September 30 September 30

2019
Finance lease $ 136 $ 390
revenue...................................
Operating lease 317 941
revenue..................................
Total.............................................. $ 453 $ 1,3
31

Revenues are presented net of sales and other related taxes.

11. Guarantees and product warranty

Caterpillar dealer performance guarantees

We have provided an indemnity to a third-party insurance company for potential losses related to
performance bonds issued on behalf of Caterpillar dealers. The bonds have varying terms and are issued to
insure governmental agencies against nonperformance by certain dealers. We also provided guarantees to
third parties related to the performance of contractual obligations by certain Caterpillar dealers. These
guarantees have varying terms and cover potential financial losses incurred by the third parties resulting
from the dealers' nonperformance.

In 2016, we provided a guarantee to an end user related to the performance of contractual obligations by a
Caterpillar dealer. Under the guarantee, which expires in 2025, non-performance by the Caterpillar dealer
could require Caterpillar to satisfy the contractual obligations by providing goods, services or financial
compensation to the end user up to an annual designated cap.

Customer loan guarantees

We provide loan guarantees to third-party lenders for financing associated with machinery purchased by
customers. These guarantees have varying terms and are secured by the machinery. In addition, Cat Financial
participates in standby letters of credit issued to third parties on behalf of their customers. These
standby letters of credit have varying terms and beneficiaries and are secured by customer assets.

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Table of Contents

Supplier consortium performance guarantees

We have provided guarantees to a customer in Brazil and a customer in Europe related to the performance of
contractual obligations by supplier consortiums to which our Caterpillar subsidiaries are members. The
guarantees cover potential damages incurred by the customers resulting from the supplier consortiums'
non-performance. The damages are capped except for failure of the consortiums to meet certain obligations
outlined in the contract in the normal course of business. The guarantee for the customer in Europe will
expire when the supplier consortium performs all of its contractual obligations, which are expected to be
completed in 2022. The agreement with the customer in Brazil was terminated during the second quarter of
2019. No payments were made under the guarantee.

Third-party logistics business lease guarantees

We have provided guarantees to third-party lessors for certain properties leased by a third-party logistics
business, formerly Caterpillar Logistics Services LLC, in which we sold our equity interest in 2015. The
guarantees are for the possibility that the third-party logistics business would default on real estate
lease payments. The guarantees were granted at lease inception and generally will expire at the end of the
lease terms.

We have dealer performance guarantees and third-party performance guarantees that do not limit potential
payment to end users related to indemnities and other commercial contractual obligations. In addition, we
have entered into contracts involving industry standard indemnifications that do not limit potential
payment. For these unlimited guarantees, we are unable to estimate a maximum potential amount of future
payments that could result from claims made.

No significant loss has been experienced or is anticipated under any of these guarantees. At September 30,
2019 and December 31, 2018, the related liability was $6 million and $8 million, respectively. The maximum
potential amount of future payments (undiscounted and without reduction for any amounts that may possibly
be recovered under recourse or collateralized provisions) we could be required to make under the guarantees
are as follows:

(Millions of dollars) September 30, December 31,

2019 2018
Caterpillar dealer performance 1,275 $ 1,244
guarantees.........................
.... $
Customer loan 11 31
guarantees.........................
.............
Supplier consortium performance 239 527
guarantees.........................
.
Third party logistics business 54 60
lease
guarantees.........................
Other 130 116
guarantees.........................
...................
Total 1,709 $ 1,978
guarantees.........................
..................... $

Cat Financial provides guarantees to repurchase certain loans of Caterpillar dealers from a special-purpose
corporation (SPC) that qualifies as a variable interest entity. The purpose of the SPC is to provide
short-term working capital loans to Caterpillar dealers. This SPC issues commercial paper and uses the
proceeds to fund its loan program. Cat Financial has a loan purchase agreement with the SPC that obligates
Cat Financial to purchase certain loans that are not paid at maturity. Cat Financial receives a fee for
providing this guarantee, which provides a source of liquidity for the SPC. Cat Financial is the primary
beneficiary of the SPC as its guarantees result in Cat Financial having both the power to direct the
activities that most significantly impact the SPC's economic performance and the obligation to absorb
losses, and therefore Cat Financial has consolidated the financial statements of the SPC. As of September
30, 2019 and December 31, 2018, the SPC's assets of $1,387 million and $1,149 million, respectively, were
primarily comprised of loans to dealers, and the SPC's liabilities of $1,386 million and $1,148 million,
respectively, were primarily comprised of commercial paper. The assets of the SPC are not available to pay
Cat Financial's creditors. Cat Financial may be obligated to perform under the guarantee if the SPC
experiences losses. No loss has been experienced or is anticipated under this loan purchase agreement.

Our product warranty liability is determined by applying historical claim rate experience to the current
field population and dealer inventory. Generally, historical claim rates are based on actual warranty
experience for each product by machine model/engine size by customer or dealer location (inside or outside
North America). Specific rates are developed for each product shipment month and are updated monthly based
on actual warranty claim experience.

32

Table of Contents

(Millions of dollars) 2019

Warranty liability, January 1......................................................... $ 1,391

Reduction in liability (payments) .............................................................(667)

Increase in liability (new warranties) ...........................................................759

Warranty liability, September 30..................................................... $ 1,483

(Millions of dollars) 2018

Warranty liability, January 1......................................................... $ 1,419

Reduction in liability (payments) ............................................................(783)

Increase in liability (new warranties) ...........................................................755

Warranty liability, December 31...................................................... $ 1,391

12. Profit per share

Computations of profit per share: Three Months Ended Nine Months Ended

September 30 September 30

(Dollars in millions except per share data) 2019 2018 2019 2018

Profit for the period (A) 1.................................... $ 1,494 $ 1,727 $ 4,995 $ 5,099

Determination of shares (in millions):

Weighted-average number of common shares outstanding (B) 556.3 592.1 565.2 595.3

Shares issuable on exercise of stock awards, net of shares assumed to be

purchased out of proceeds at average market price 4.9 7.3 5.6 8.5

Average common shares outstanding for fully diluted computation (C) 2 561.2 599.4 570.8 603.8

Profit per share of common stock:

Assuming no dilution (A/B)................................. $ 2.69 $ 2.92 $ 8.84 $ 8.57

Assuming full dilution (A/C) 2............................... $ 2.66 $ 2.88 $ 8.75 $ 8.45

Shares outstanding as of September 30 (in millions) 552.7 590.1

1 Profit attributable to common shareholders.

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

Stock options to purchase 2,962,190 and 1,471,071 common shares were outstanding for the three and nine
months ended September 30, 2019 and 2018, respectively. These stock options were not included in the
computation of diluted earnings per share because the effect would have been anti-dilutive.

In July 2018, the Board approved a share repurchase authorization of up to $10.0 billion of Caterpillar

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -13-


common stock effective January 1, 2019, with no expiration (the 2018 Authorization). As of September 30,
2019, approximately $6.7 billion remained available under the 2018 Authorization.

For the three and nine months ended September 30, 2019, we repurchased 10.3 million and 25.8 million shares
of our common stock, respectively, at an aggregate cost of $1.3 billion and $3.3 billion, respectively.
These purchases were made through a combination of accelerated stock repurchase agreements with third-party
financial institutions and open market transactions. For the three and nine months ended September 30,
2018, we repurchased 4.8 million and 12.8 million shares of our common stock, respectively, at an aggregate
cost of $750 million and $2.0 billion, respectively.

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Table of Contents

13. Accumulated other comprehensive income (loss)

Comprehensive income and its components are presented in the Consolidated Statement of Comprehensive
Income. Changes in Accumulated other comprehensive income (loss), net of tax, included in the Consolidated
Statement of Changes in Shareholders' Equity, consisted of the following:

(Millions of dollars) Foreign Pension and Derivative Available- Total
currency other financial for-sale
translation postretirement instruments securities
benefits
Three Months Ended September 30,
2019

Balance at June 30, $ (1,426) $ 17 $ (105) $ 15 $
2019............. (1,49
9)
Other comprehensive income (loss) (263) - 59 4 (200)
before

reclassifications..................
Amounts reclassified from (8) (76) (84)
accumulated

other comprehensive (income)
loss.....
Other comprehensive income (263) (8) (17) 4 (284)
(loss).....
Balance at September 30, $ (1,689) $ 9 $ (122) $ 19 $
2019......... (1,78
3)
Three Months Ended September 30,
2018
Balance at June 30, $ (1,432) $ 30 $ (78) $ (16) $
2018............. (1,49
6)
Other comprehensive income (loss) (65) 32 (1) (34)
before

reclassifications..................
Amounts reclassified from - (7) (31) (38)
accumulated

other comprehensive (income)
loss.....
Other comprehensive income (65) (7) 1 (1) (72)
(loss).....
Balance at September 30, $ (1,497) $ 23 $ (77) $ (17) $
2018......... (1,56
8)

34

Table of Contents

The effect of the reclassifications out of Accumulated other comprehensive income (loss) on the
Consolidated Statement of Results of Operations is as follows:

Three Months Ended September 30

Classification of

(Millions of dollars) income (expense) 2019 2018

Pension and other postretirement benefits:

Amortization of prior service credit (cost).... Other income (expense).... $ 10 $ 9

Tax (provision) benefit ....................................................(2) (2)

Reclassifications net of tax..................................... $ 8 $ 7

Derivative financial instruments:

Foreign exchange contracts...........

Foreign exchange contracts.............. Other income (expense).... 89 34

Interest expense of

Foreign exchange contracts.............. Financial Products .....................9 5

Interest rate Interest expense excluding -
contracts...................

Financial Products -
Interest rate ....................(2)
contracts...................

Interest expense of

Financial Products
....................(3)

Reclassifications before tax .................................................96 39

Tax (provision) benefit ....................................................(20) (8)

Reclassifications net of tax................................... $ 76 $ 31

Total reclassifications from Accumulated other comprehensive income (loss) .... $ 84 $ 38

36

Table of Contents

Nine Months Ended September 30

Classification of

(Millions of dollars) income (expense) 2019 2018

Foreign currency translation

Gain (loss) on foreign currency translation.. Other income (expense).... $ - $ (1)

Reclassifications net of tax................................... $ - $ (1)

Pension and other postretirement benefits:

Amortization of prior service credit (cost).... Other income (expense).... $ 30 $ 26

Tax (provision) benefit ....................................................(8) (5)

Reclassifications net of tax................................... $ 22 $ 21

Derivative financial instruments:

Sales of Machinery,

Foreign exchange contracts.............. Energy & Transportation.. $ 4 $

Foreign exchange contracts.............. Cost of goods sold (4) -

Foreign exchange contracts.............. Other income (expense).... 91 129

Foreign Interest expense of
exchange
contracts..
...........
.. Financial Products ...................23 13

Interest Interest expense excluding
rate
contracts..
...........
...... Financial Products ...................(3) (2)

Interest Interest expense of
rate
contracts..
...........
...... Financial Products ...................(2) 1

Reclassifications before tax ................................................109 141

Tax (provision) benefit ...................................................(23) (32)

Reclassifications net of tax................................... $ 86 $ 109

Total reclassifications from Accumulated other comprehensive income (loss) .... $ 108 $ 129

14. Environmental and legal matters

The Company is regulated by federal, state and international environmental laws governing its use,
transport and disposal of substances and control of emissions. In addition to governing our manufacturing
and other operations, these laws often impact the development of our products, including, but not limited
to, required compliance with air emissions standards applicable to internal combustion engines. We have
made, and will continue to make, significant research and development and capital expenditures to comply
with these emissions standards.

We are engaged in remedial activities at a number of locations, often with other companies, pursuant to
federal and state laws. When it is probable we will pay remedial costs at a site, and those costs can be
reasonably estimated, the investigation, remediation, and operating and maintenance costs are accrued
against our earnings. Costs are accrued based on consideration of currently available data and information
with respect to each individual site, including available technologies, current applicable laws and
regulations, and prior remediation experience. Where no amount within a range of estimates is more likely,
we accrue the minimum. Where multiple potentially responsible parties are involved, we consider our
proportionate share of the probable costs. In formulating the estimate of probable costs, we do not
consider amounts expected to be recovered from insurance companies or others. We reassess these accrued
amounts on a quarterly basis. The amount recorded for environmental remediation is not material and is
included in Accrued expenses. We believe there is no more than a remote chance that a material amount for
remedial activities at any individual site, or at all the sites in the aggregate, will be required.

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On January 7, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central
District of Illinois. The subpoena requested documents and information from the Company relating to, among
other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including
undistributed profits of non-U.S. subsidiaries and the movement of cash among U.S. and non-U.S.
subsidiaries). The Company has received additional subpoenas relating to this investigation requesting
additional documents and information relating to, among other things, the purchase and resale of
replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, dividend distributions of
certain non-U.S. Caterpillar subsidiaries, and Caterpillar SARL (CSARL) and related structures. On March
2-3, 2017, agents with the Department of Commerce, the Federal Deposit Insurance Corporation and the
Internal Revenue Service executed search and seizure warrants at three facilities of the Company in the
Peoria, Illinois area, including its former corporate headquarters. The warrants identify, and agents
seized, documents and information related to, among other things, the export of products from the United
States, the movement of products between the United States and Switzerland, the relationship between
Caterpillar Inc. and CSARL, and sales outside the United States. It is the Company's understanding that the

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warrants, which concern both tax and export activities, are related to the ongoing grand jury
investigation. The Company is continuing to cooperate with this investigation. The Company is unable to
predict the outcome or reasonably estimate any potential loss; however, we currently believe that this
matter will not have a material adverse effect on the Company's consolidated results of operations,
financial position or liquidity.

On March 20, 2014, Brazil's Administrative Council for Economic Defense (CADE) published a Technical
Opinion which named 18 companies and over 100 individuals as defendants, including two subsidiaries of
Caterpillar Inc., MGE - Equipamentos e Serviços Ferroviários Ltda. (MGE) and Caterpillar Brasil Ltda (CBL).
The publication of the Technical Opinion opened CADE's official administrative investigation into
allegations that the defendants participated in anticompetitive bid activity for the construction and
maintenance of metro and train networks in Brazil. While companies cannot be held criminally liable for
anticompetitive conduct in Brazil, criminal charges have been brought against one current employee of MGE
and two former employees of MGE involving the same conduct alleged by CADE. On July 8, 2019, CADE found
MGE, one of its current employees and two of its former employees liable for anticompetitive conduct. CBL
was dismissed from the proceeding without any finding of liability. MGE intends to appeal CADE's findings.
We currently believe that this matter will not have a material adverse effect on the Company's consolidated
results of operations, financial position or liquidity.

In addition, we are involved in other unresolved legal actions that arise in the normal course of business.
The most prevalent of these unresolved actions involve disputes related to product design, manufacture and
performance liability (including claimed asbestos exposure), contracts, employment issues, environmental
matters, intellectual property rights, taxes (other than income taxes) and securities laws. The aggregate
range of reasonably possible losses in excess of accrued liabilities, if any, associated with these
unresolved legal actions is not material. In some cases, we cannot reasonably estimate a range of loss
because there is insufficient information regarding the matter. However, we believe there is no more than a
remote chance that any liability arising from these matters would be material. Although it is not possible
to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will
not individually or in the aggregate have a material adverse effect on our consolidated results of
operations, financial position or liquidity.

15. Income taxes

The provision for income taxes for the first nine months of 2019 reflected an estimated annual tax rate of
26 percent, compared with 24 percent for the first nine months of 2018, excluding the discrete items
discussed in the following paragraph. The increase was largely driven by the application of U.S. tax reform
provisions to the earnings of certain non-U.S. subsidiaries, which do not have a calendar fiscal year-end.
These provisions did not apply to these subsidiaries in 2018.

As a result of final regulations received in 2019 providing additional guidance related to the calculation
of the mandatory deemed repatriation of non-U.S. earnings due to U.S. tax reform, we recorded a discrete
tax benefit of $178 million in the first nine months of 2019 to adjust unrecognized tax benefits. In
addition, a discrete tax benefit of $28 million was recorded in the first nine months of 2019, compared
with $52 million for the first nine months of 2018, 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 for the first nine months of 2018 also included:

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· a $154 million benefit to revise the estimated impact of the write-down of U.S. net deferred tax assets
to reflect the reduction in the U.S. corporate tax rate from 35 percent to 21 percent. This benefit
primarily related to the decision to make an additional discretionary pension contribution of $1.0
billion to U.S. pension plans in 2018 which was treated as deductible on the 2017 U.S. tax return.

· a $59 million charge to correct for an error which resulted in an understatement of the valuation
allowance offsetting deferred tax assets for prior years. Management has concluded that the error was not
material to any period presented.

· a $25 million benefit for the release of a valuation allowance against the deferred tax assets of a
non-U.S. subsidiary.

On January 31, 2018, we received a Revenue Agent's Report from the Internal Revenue Service (IRS)
indicating the end of the field examination of our U.S. income tax returns for 2010 to 2012. In the audits
of 2007 to 2012 including the impact of a loss carryback to 2005, the IRS has proposed to tax in the United
States profits earned from certain parts transactions by Caterpillar SARL (CSARL), based on the IRS
examination team's application of the "substance-over-form" or "assignment-of-income" judicial doctrines.
We are vigorously contesting the proposed increases to tax and penalties for these years of approximately
$2.3 billion. We believe that the relevant transactions complied with applicable tax laws and did not
violate judicial doctrines. We have filed U.S. income tax returns on this same basis for years after 2012.
Based on the information currently available, we do not anticipate a significant change to our unrecognized
tax benefits for this position within the next 12 months. We currently believe the ultimate disposition of
this matter will not have a material adverse effect on our consolidated financial position, liquidity or
results of operations.

16. Segment information

A) Basis for segment information

Our Executive Office is comprised of a Chief Executive Officer (CEO), four Group Presidents, a Chief
Financial Officer (CFO), a General Counsel & Corporate Secretary and a Chief Human Resources Officer. The
Group Presidents and CFO are accountable for a related set of end-to-end businesses that they manage. The
General Counsel & Corporate Secretary leads the Law, Security and Public Policy Division. The Chief Human
Resources Officer leads the Human Resources Organization. The CEO allocates resources and manages
performance at the Group President/CFO level. As such, the CEO serves as our Chief Operating Decision
Maker, and operating segments are primarily based on the Group President/ CFO reporting structure.

Three of our operating segments, Construction Industries, Resource Industries and Energy & Transportation,
are led by Group Presidents. One operating segment, Financial Products, is led by the CFO who also has
responsibility for Corporate Services. Corporate Services is a cost center primarily responsible for the
performance of certain support functions globally and to provide centralized services; it does not meet the
definition of an operating segment. One Group President leads one smaller operating segment that is
included in the All Other operating segment. The Law, Security and Public Policy Division and the Human
Resources Organization are cost centers and do not meet the definition of an operating segment.

B) Description of segments

We have five operating segments, of which four are reportable segments. Following is a brief description of
our reportable segments and the business activities included in the All Other operating segment:

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 asphalt pavers; backhoe loaders; compactors; cold planers;
compact track and multi-terrain loaders; mini, small, medium and large track excavators; forestry
excavators; feller bunchers; harvesters; knuckleboom loaders; motor graders; pipelayers; road reclaimers;
skidders; skid steer loaders; telehandlers; small and medium track-type tractors; track-type loaders;
utility vehicles; wheel excavators; compact, small and medium wheel loaders; and related parts and work
tools. Inter-segment sales are a source of revenue for this segment.

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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.
Inter-segment sales are a source of revenue for this segment.

Energy & Transportation: A segment primarily responsible for supporting customers using reciprocating
engines, turbines, diesel-electric locomotives and related parts across industries serving Oil and Gas,

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Power Generation, Industrial 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 turbine machinery and integrated systems and
solutions 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 Caterpillar 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.
Inter-segment sales are a source of revenue for this segment.

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. The segment also earns revenues from
Machinery, Energy & Transportation, but the related costs are not allocated to operating segments.

All Other operating segment: Primarily includes activities such as: business strategy, product management
and development, manufacturing and sourcing of filters and fluids, undercarriage, ground-engaging tools,
fluid transfer products, precision seals, rubber sealing and connecting components primarily for Cat
products; parts distribution; integrated logistics solutions, 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; and digital
investments for new customer and dealer solutions that integrate data analytics with state-of-the-art
digital technologies while transforming the buying experience. Results for the All Other operating segment
are included as a reconciling item between reportable segments and consolidated external reporting.

C. Segment measurement and reconciliations

There are several methodology differences between our segment reporting and our external reporting. The
following is a list of the more significant methodology differences:

· Machinery, Energy & Transportation segment net assets generally include inventories, receivables,
property, plant and equipment, goodwill, intangibles, accounts payable and customer advances. Beginning
in 2019, operating lease right-of-use assets are included in segment assets. In 2018, the present value
of future lease payments for certain Machinery, Energy and Transportation operating leases was included
in segment assets while the estimated financing component of the lease payments was excluded. Liabilities
other than accounts payable and customer advances are generally managed at the corporate level and are
not included in segment operations. Financial Products Segment assets generally include all categories of
assets.

· Segment inventories and cost of sales are valued using a current cost methodology. 40

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· Goodwill allocated to segments is amortized using a fixed amount based on a 20 year useful life. This
methodology difference only impacts segment assets; no goodwill amortization expense is included in
segment profit. In addition, only a portion of goodwill for certain acquisitions made in 2011 or later
has been allocated to segments.

· Currency exposures for Machinery, Energy & Transportation are generally managed at the corporate level
and the effects of changes in exchange rates on results of operations within the year are not included in
segment profit. The net difference created in the translation of revenues and costs between exchange
rates used for U.S. GAAP reporting and exchange rates used for segment reporting is reported as a
methodology difference.

· Stock-based compensation expense is not included in segment profit.

· Postretirement benefit expenses are split; segments are generally responsible for service costs, with
the remaining elements of net periodic benefit cost included as a methodology difference.

· Machinery, Energy & Transportation segment profit is determined on a pretax basis and excludes interest
expense and most other income/expense items. Financial Products Segment profit is determined on a pretax
basis and includes other income/expense items.

Reconciling items are created based on accounting differences between segment reporting and our
consolidated external reporting. Please refer to pages 44 to 52 for financial information regarding
significant reconciling items. Most of our reconciling items are self-explanatory given the above
explanations. For the reconciliation of profit, we have grouped the reconciling items as follows:

· Corporate costs: These costs are related to corporate requirements primarily for compliance and legal
functions for the benefit of the entire organization.

· Restructuring costs: May include costs for employee separation, long-lived asset impairments and
contract terminations. These costs are included in Other operating (income) expenses except for
defined-benefit plan curtailment losses and special termination benefits, which are included in Other
income (expense). Restructuring costs also include other exit-related costs which may consist of
accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project
management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities,
all of which are primarily included in Cost of goods sold. Beginning in 2019, only certain restructuring
costs are excluded from segment profit. A table, Reconciliation of Restructuring costs on page 49, has
been included to illustrate how segment profit would have been impacted by the restructuring costs. See
Note 20 for more information.

· Methodology differences: See previous discussion of significant accounting differences between segment
reporting and consolidated external reporting.

· Timing: Timing differences in the recognition of costs between segment reporting and consolidated
external reporting. For example, certain costs are reported on the cash basis for segment reporting and
the accrual basis for consolidated external reporting.

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Reportable Segments

Three Months Ended September 30
(Millions of dollars)

Construction 2019
Industries.....

Resource
Industries.......

Energy &
Transportation...

Machinery, Energy &

Transportation.......

Financial Products
Segment.

Total...............
External Inter-segment Total Depreciation Segment Segment Capital
sales and sales and sales and profit assets at expendi
revenues revenues and September tures
revenues 30

amortization
$ 5,275 $ 14 $ 5,289 $ 80 $ 940 $ 5,226 $ 48

2,179 132 2,311 106 311 6,396 31

4,562 890 5,452 158 1,021 8,779 150
12,016 1,036 13,052 344 2,272 20,401 229

865 1 - 865 209 218 35,993 388
$ 12,881 $ 1,036 $ 13,917 $ 553 $ 2,490 $ 56,394 $ 617
2018
External Inter-segment Total Depreciation Segment Segment Capital
sales and sales and sales and profit assets at expendi
revenues revenues and December tures
revenues 31

amortization
Construction Industries..... $ 5,654 $ 29 $ 5,683 $ 93 $ 1,058 $ 4,902 $ 58
Resource Industries....... 2,538 100 2,638 115 414 6,442 49
Energy & Transportation... 4,577 978 5,555 159 973 8,386 161
Machinery, Energy & 12,769 1,107 13,876 367 2,445 19,730 268

Transportation.......
Financial Products Segment. 845 1 - 845 212 201 36,002 298

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Total............... $ 13,614 $ 1,107 $ 14,721 $ 579 $ 2,646 $ 55,732 $ 566

1 Includes revenues from Machinery, Energy & Transportation of $131 million and $122 million in the three
months ended September 30, 2019 and 2018, respectively.

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Reportable Segments

Nine Months Ended September 30

(Millions of dollars)

2019
External Inter-segment Total Depreciation Segment Segment Capital
sales sales and sales and profit assets at expendi
and revenues and September tures
revenues revenues 30

amortization
Construction $ 17,573 $ 56 $ 17,629 $ 241 $ 3,272 $ 5,226 $ 117
Industries.....
Resource 7,537 344 7,881 315 1,368 6,396 91
Industries.......
Energy & 13,319 2,829 16,148 465 2,745 8,779 366
Transportation...
Machinery, Energy & 38,429 3,229 41,658 1,021 7,385 20,401 574

Transportation.......
Financial Products 2,588 1 - 2,588 622 622 35,993 1,093
Segment.
Total............... $ 41,017 $ 3,229 $ 44,246 $ 1,643 $ 8,007 $ 56,394 $ 1,667

2018
External Inter-segment Total Depreciation Segment Segment Capital
sales sales and sales and profit assets expendi
and revenues and at tures
revenues revenues December
31
amortization
Construction $ 17,450 $ 82 $ 17,532 $ 272 $ 3,329 $ 4,902 $ 162
Industries.....
Resource 7,177 296 7,473 346 1,203 6,442 111
Industries.......
Energy & 13,567 2,931 16,498 474 2,859 8,386 463
Transportation...
Machinery, Energy & 38,194 3,309 41,503 1,092 7,391 19,730 736

Transportation.......
Financial Products 2,467 1 - 2,467 627 476 36,002 1,192
Segment.
Total............... $ 40,661 $ 3,309 $ 43,970 $ 1,719 $ 7,867 $ 55,732 $ 1,928

1 Includes revenues from Machinery, Energy & Transportation of $398 million and $345 million in the nine
months ended September 30, 2019 and 2018, respectively.

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For the three and nine months ending September 30, 2019 and 2018, sales and revenues by geographic region
reconciled to consolidated sales and revenues were as follows:

Sales and Revenues by North Latin EAME Asia/ External
Geographic Region America America Pacific Sales and
Revenues

(Millions of dollars)

Three Months Ended
September 30, 2019

Construction $ 2,728 $ 413 $ 1,048 $ 1,086 $ 5,275
Industries............
...................
Resource 789 349 396 645 2,179
Industries............
.....................
Energy & 2,129 378 1,224 831 4,562
Transportation........
.....................
All Other operating 1 6 8 12 27
segment...............
............
Corporate Items and (62) 1 (1) (69)
Eliminations
7)

Machinery, Energy & 5,585 1,147 2,669 2,573 11,974
Transportation Sales
Financial Products 560 79 102 124 865 1
Segment
Corporate Items and (43) (15) (15) (81)
Eliminations
1)

Financial Products 517 64 94 109 784
Revenues..............
............
Consolidated Sales and $ 6,102 $ 1,211 $ 2,763 $ 2,682 $ 12,758
Revenues..............
.........
Three Months Ended
September 30, 2018
Construction $ 2,646 $ 369 $ 1,109 $ 1,530 $ 5,654
Industries............
...................
Resource 849 427 574 688 2,538
Industries............
.....................
Energy & 2,309 330 1,180 758 4,577
Transportation........
.....................
All Other operating 15 - 4 18 37
segment...............
............
Corporate Items and (40) 1 1 (43)
Eliminations
5)

Machinery, Energy & 5,779 1,127 2,862 2,995 12,763
Transportation Sales
Financial Products 559 68 101 117 845 1
Segment
Corporate Items and (62) (12) (18) (98)
Eliminations
2)

Financial Products 497 56 95 99 747
Revenues..............
............
Consolidated Sales and $ 6,276 $ 1,183 $ 2,957 $ 3,094 $ 13,510
Revenues..............
.........

1 Includes revenues from Machinery, Energy & Transportation of $131 million and $122 million in the three
months ended September 30, 2019 and 2018, respectively.

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Table of Contents
Sales and Revenues by North Latin EAME Asia/ External
Geographic Region America America Pacific Sales and
Revenues

(Millions of dollars)

Nine Months Ended
September 30, 2019

Construction $ 9,206 $ 1,124 $ 3,162 $ 4,081 $ 17,573
Industries...........
...................
Resource 2,798 1,220 1,310 2,209 7,537
Industries...........
.....................
.
Energy & 6,577 1,035 3,416 2,291 13,319
Transportation.......
.....................
.
All Other operating 23 7 23 45 98
segment..............
.............
Corporate Items and (142) (15) (1) (158)
Eliminations
Machinery, Energy & 18,462 3,386 7,896 8,625 38,369
Transportation Sales
Financial Products 1,681 225 306 376 2,588 1
Segment
Corporate Items and (184) (37) (26) (54) (301)
Eliminations
Financial Products 1,497 188 280 322 2,287
Revenues.............
............
Consolidated Sales $ 19,959 $ 3,574 $ 8,176 $ 8,947 $ 40,656
and
Revenues.............
.........
Nine Months Ended
September 30, 2018
Construction $ 8,005 $ 1,105 $ 3,347 $ 4,993 $ 17,450
Industries...........
...................
Resource 2,451 1,181 1,663 1,882 7,177
Industries...........
.....................
.
Energy & 7,116 897 3,425 2,129 13,567
Transportation.......
.....................
.
All Other operating 47 1 12 55 115
segment..............
.............
Corporate Items and (108) (1) (8) (117)
Eliminations
Machinery, Energy & 17,511 3,183 8,439 9,059 38,192
Transportation Sales
Financial Products 1,608 213 303 343 2,467 1
Segment
Corporate Items and (168) (36) (18) (57) (279)
Eliminations
Financial Products 1,440 177 285 286 2,188
Revenues.............
............
Consolidated Sales $ 18,951 $ 3,360 $ 8,724 $ 9,345 $ 40,380
and
Revenues.............
.........

1 Includes revenues from Machinery, Energy & Transportation of $398 million and $345 million in the nine
months ended September 30, 2019 and 2018, respectively.

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For the three and nine months ending September 30, 2019 and 2018, Energy & Transportation segment sales by
end user application were as follows:

Energy & Transportation External Sales

Three Months Ended September 30

(Millions of dollars) 2019 2018

Oil and gas............................................................ $ 1,246 $ 1,362

Power generation 1,123 1,102

Industrial ......................................................................980 863

Transportation 1,213 1,250

Energy & Transportation External Sales.................................... $ 4,562 $ 4,577

Nine Months Ended September 30

2019 2018

Oil and gas............................................................ $ 3,682 $ 4,044

Power generation 3,180 3,063

Industrial 2,841 2,738

Transportation 3,616 3,722

Energy & Transportation External Sales.................................... $ 13,319 $ 13,567

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Reconciliation of Consolidated profit before taxes:

Machinery,
(Millions of dollars) Energy & Financial Consolidated
Transportation Products Total
Three Months Ended September 30, 2019
Total profit from reportable $ 2,272 $ 218 $ 2,490
segments...........................
All Other operating (21) - (21)
segment.................................
Cost (9) - (9)
centers............................................
Corporate (168) 1 (167)
costs..........................................
Timing............................................... 6 - 6

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Restructuring - (20)
costs.......................................
20)

Methodology differences:
Inventory/cost of 25 - 25
sales....................................
Postretirement benefit 19 - 19
expense..............................
Stock-based compensation (55) (2)
expense...........................
57)

Financing (58) -
costs........................................
2)

Currency............................................ (62) - (62)
Other income/expense methodology (124) (124)
differences...................
Other methodology (47) 30 (17)
differences..............................
Total consolidated profit before $ 1,758 $ 247 $ 2,005
taxes...........................
Three Months Ended September 30, 2018
Total profit from reportable $ 2,445 $ 201 $ 2,646
segments...........................
All Other operating (10) - (10)
segment.................................
Cost 29 29
centers............................................
Corporate (134) - (134)
costs..........................................
Timing............................................... (18) - (18)
Restructuring (96) (14) (110)
costs.......................................
Methodology differences:
Inventory/cost of (20) - (20)
sales....................................
Postretirement benefit 58 - 58
expense..............................
Stock-based compensation (50) (2) (52)
expense...........................
Financing (56) - (56)
costs........................................
Currency............................................ (96) - (96)
Other income/expense methodology (88) - (88)
differences...................
Other methodology 5 (14)
differences..............................
19)

Total consolidated profit before $ 1,945 $ 190 $ 2,135
taxes...........................

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Reconciliation of Consolidated profit before taxes:

Machinery,
(Millions of dollars) Energy & Financial Consolidated
Transportation Products Total
Nine Months Ended September 30, 2019
Total profit from reportable $ 7,385 $ 622 $ 8,007
segments...........................
All Other operating 15 15
segment.................................
Cost 32 32
centers............................................
Corporate (487) (492)
costs..........................................
6)

Timing............................................... (118) (118)
Restructuring (131) (31) (162)
costs.......................................
Methodology differences:
Inventory/cost of 24 24
sales....................................
Postretirement benefit 4 4
expense..............................
Stock-based compensation (164) (170)
expense...........................
3)

Financing (173) (173)
costs........................................
Currency............................................ (110) (110)
Other income/expense methodology (374) (374)
differences...................
Other methodology (71) 35 (36)
differences..............................

Total consolidated profit before taxes........................... $ 5,832 $ 615 $ 6,447

Nine Months Ended September 30, 2018

Total profit from reportable segments............................ $ 7,391$ 476 $ 7,867

All Other operating segment ............................................70 70

Cost centers .......................................................55 55

Corporate costs ...................................................(480) (480)

Timing ........................................................(168) (168)

Restructuring costs (278) (15) (293)

Financing costs (203) (203)

Currency .....................................................(145) (145)

Other income/expense methodology differences ...........................(261) (261)

Other methodology differences

Total consolidated profit before taxes........................... $ 5,992 $ 463 $ 6,455

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Reconciliation of Restructuring costs:

As noted above, certain restructuring costs are a reconciling item between Segment profit and Consolidated
profit before taxes. Had we included the amounts in the segments' results, the profit would have been as
shown below:

Reconciliation of Restructuring costs:
Segment
profit
(Millions of dollars) Segment Restructuring
with
profit costs
restructuring
costs
Three Months Ended September 30, 2019
Construction $ 940 $ - $ 940
Industries...............................
Resource 311 (11) 300
Industries.................................
Energy & 1,021 (7) 1,014
Transportation..............................
Financial Products 218 218
Segment............................
All Other operating (21) (2) (23)
segment...........................
Total.......................................... $ 2,469 $ (20) $ 2,449
Three Months Ended September 30, 2018
Construction Industries $ 1,058 $ (19) $ 1,039
..............................
Resource 414
Industries.................................
53) 361

Energy & 973 (31) 942
Transportation..............................
Financial Products 201 201
Segment............................
All Other operating (10) (4) (14)
segment...........................
Total.......................................... $ 2,636 $ (107) $ 2,529

Reconciliation of Restructuring costs:
Segment
profit
(Millions of dollars) Segment Restructuring with
profit costs restructuring
costs
Nine Months Ended September 30, 2019
Construction $ 3,272 $ $ 3,218
Industries...............................
1)

Resource 1,368 (40) 1,328
Industries.................................
Energy & 2,745 (59) 2,686
Transportation..............................
Financial Products 622 622
Segment............................
All Other operating 15 (8) 7
segment...........................

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -18-


Total.......................................... $ 8,022 $ (161) $ 7,861
Nine Months Ended September 30, 2018
Construction $ 3,329 $ (62) $ 3,267
Industries...............................
Resource 1,203 (149) 1,054
Industries.................................
Energy & 2,859 (60) 2,799
Transportation..............................
Financial Products 476 (1) 475
Segment............................
All Other operating 70 (13) 57
segment...........................
Total.......................................... $ 7,937 $ (285) $ 7,652

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Table of Contents

Reconciliation of Assets: Machinery, Financial Consolidating Consolidated
(Millions of dollars) Energy & Products Adjustments Total
September 30, 2019 Transportation

Total assets from reportable $ 20,401 $ 35,993 $ - $ 56,394
segments....................
All Other operating 1,321 - - 1,321
segment..........................
Items not included in segment assets:
Cash and short-term 6,380 - - 6,380
investments.....................
Intercompany 919 - (919) -
receivables..........................
Investment in Financial 3,968 - (3,968) -
Products.....................
Deferred income 1,927 - (673) 1,254
taxes............................
Goodwill and intangible 4,361 - - 4,361
assets.......................
Property, plant and equipment - net and other 2,213 - - 2,213
assets.........
Inventory methodology (2,415) - - (2,415)
differences.....................
Liabilities included in segment 9,025 - - 9,025
assets....................
Other......................................... (471) 76 (145) (540)
Total $ 47,629 $ 36,069 $ (5,705) $ 77,993
assets.....................................
December 31, 2018
Total assets from reportable $ 19,730 $ 36,002 $ - $ 55,732
segments....................
All Other operating 1,279 - - 1,279
segment..........................
Items not included in segment assets:
Cash and short-term 6,968 - - 6,968
investments.....................
Intercompany 1,633 - (1,633) -
receivables..........................
Investment in Financial 3,672 - (3,672) -
Products.....................
Deferred income 2,015 - (692) 1,323
taxes............................
Goodwill and intangible 4,279 - - 4,279
assets.......................
Property, plant and equipment - net and other 1,802 - - 1,802
assets.........
Inventory methodology (2,503) - - (2,503)
differences.....................
Liabilities included in segment 9,766 - - 9,766
assets....................
Other......................................... (166) 66 (37) (137)
Total $ 48,475 $ 36,068 $ (6,034) $ 78,509
assets.....................................

50

Table of Contents

Reconciliations of Depreciation and amortization: Machinery, Financial Consolidated
Energy & Products Total
Transportation

(Millions of dollars)

Three Months Ended September 30, 2019

Total depreciation and amortization from reportable $ 344 $ 209 $ 553
segments................
Items not included in segment depreciation and
amortization:
All Other operating 53 - 53
segment....................................
Cost 35 - 35
centers...............................................
Other................................................... (4) 8 4
Total depreciation and $ 428 $ 217 $ 645
amortization.................................
Three Months Ended September 30, 2018
Total depreciation and amortization from reportable $ 367 $ 212 $ 579
segments................
Items not included in segment depreciation and
amortization:
All Other operating 55 - 55
segment....................................
Cost 33 - 33
centers...............................................
Other................................................... 22 9 31
Total depreciation and $ 477 $ 221 $ 698
amortization.................................

Reconciliations of Depreciation and amortization: Machinery, Financial Consolidated
Energy & Products Total
Transportation

(Millions of dollars)

Nine Months Ended September 30, 2019

Total depreciation and amortization from reportable $ 1,021 $ 622 $ 1,643
segments...............
Items not included in segment depreciation and 0 0
amortization:
All Other operating 158 - 158
segment....................................
Cost 100 - 100
centers...............................................
Other................................................... 4 28 32
Total depreciation and $ 1,283 $ 650 $ 1,933
amortization.................................
Nine Months Ended September 30, 2018
Total depreciation and amortization from reportable $ 1,092 $ 627 $ 1,719
segments...............
Items not included in segment depreciation and
amortization:
All Other operating 170 - 170
segment....................................
Cost 96 - 96
centers...............................................
Other................................................... 52 28 80
Total depreciation and $ 1,410 $ 655 $ 2,065
amortization.................................

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Table of Contents

Reconciliations of Capital expenditures:

(Millions of Machinery, Financial Consolidating Consolidated
dollars) Energy & Products Adjustments Total
Transportati
on

Three Months Ended September 30, 2019

Total capital expenditures from reportable segments........... $ 229 $ 388 $ - $ 617
Items not included in segment capital expenditures:

All Other operating segment ..................................34 - - 34

Cost centers .............................................22 - - 22

Timing

Other ................................................(26) 41 (36) (21)

Total capital expenditures........................... $ 238 $ 429 $ (36) $ 631

Three Months Ended September 30, 2018

Total capital expenditures from reportable segments........... $ 268 $ 298 $ - $ 566
Items not included in segment capital expenditures:

All Other operating segment ..................................63 - - 63

Cost centers .............................................30 - - 30

Timing

Other ................................................(65) 45 (33) (53)

Total capital expenditures........................... $ 291 $ 343 $ (33) $ 601

Reconciliations of Capital expenditures:

(Millions of Machinery, Financial Consolidating Consolidated
dollars) Energy & Products Adjustments Total
Transportati
on

Nine Months Ended September 30, 2019

Total capital expenditures from reportable segments........... $ 574$ 1,093 $ - $ 1,667
Items not included in segment capital expenditures:

All Other operating segment ..................................69- - 69

Cost centers .............................................71- - 71

Timing ...............................................108 - - 108

Other (92) 72 (39) (59)

Total capital expenditures........................... $ 730 $ 1,165 $ (39) $ 1,856

Nine Months Ended September 30, 2018


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Total capital expenditures from reportable segments........... $ 736 $ 1,192 $ - $ 1,928
Items not included in segment capital expenditures:

All Other operating segment .................................101 - - 101

Cost centers .............................................70 - - 70

Timing ...............................................152 - - 152

Other (214) 165 (73) (122)

Total capital expenditures........................... $ 845 $ 1,357 $ (73) $ 2,129

52

Table of Contents

17. Cat Financial financing activities
Allowance for credit losses

The allowance for credit losses is an estimate of the losses inherent in Cat Financial's finance receivable
portfolio and includes consideration of accounts that have been individually identified as impaired, as
well as pools of finance receivables where it is probable that certain receivables in the pool are impaired
but the individual accounts cannot yet be identified. In identifying and measuring impairment, management
takes into consideration past loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, estimated value of underlying collateral and
current economic conditions.

Accounts are identified for individual review based on past-due status and information available about the
customer, such as financial statements, news reports and published credit ratings, as well as general
information regarding industry trends and the economic environment in which Cat Financial's customers
operate. The allowance for credit losses attributable to finance receivables that are individually
evaluated and determined to be impaired is based on the present value of expected future cash flows
discounted at the receivables' effective interest rate, the fair value of the collateral for
collateral-dependent receivables or the observable market price of the receivable. In determining
collateral value, Cat Financial estimates the current fair market value of the collateral less selling
costs. Cat Financial also considers credit enhancements such as additional collateral and contractual
third-party guarantees. The allowance for credit losses attributable to the remaining accounts not yet
individually identified as impaired is estimated based on loss forecast models utilizing probabilities of
default, our estimate of the loss emergence period and the estimated loss given default. In addition,
qualitative factors not able to be fully captured in the loss forecast models including industry trends,
macroeconomic factors and model imprecision are considered in the evaluation of the adequacy of the
allowance for credit losses. These qualitative factors are subjective and require a degree of management
judgment.

Cat Financial's allowance for credit losses is segregated into two portfolio segments:

· Customer - Finance receivables with retail customers.

· Dealer - Finance receivables with Caterpillar dealers.

A portfolio segment is the level at which the company develops a systematic methodology for determining its
allowance for credit losses.

Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as
a level of information (below a portfolio segment) in which the finance receivables have the same initial
measurement attribute and a similar method for assessing and monitoring credit risk. Typically, Cat
Financial's finance receivables within a geographic area have similar credit risk profiles and methods for
assessing and monitoring credit risk. Cat Financial's classes, which align with management reporting for
credit losses, are as follows:

· North America - Finance receivables originated in the United States or Canada.

· EAME - Finance receivables originated in Europe, Africa, the Middle East and the Commonwealth of
Independent States.

· Asia Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia
and India.

· Mining - Finance receivables related to large mining customers worldwide.

· Latin America - Finance receivables originated in Mexico, and Central and South American countries.

· Caterpillar Power Finance - Finance receivables originated worldwide related to marine vessels with
Caterpillar engines and Caterpillar electrical power generation, gas compression and co-generation
systems and non-Caterpillar equipment that is powered by these systems.

53

Table of Contents

An analysis of the allowance for credit losses was as follows:

(Millions of dollars) September
30, 2019

Allowance for Credit Losses:

Balance at beginning of
year........................

Receivables written
off...........................
Customer Dealer Total
$ 486 $ 21 $ 507

(238) - (238)
Recoveries on receivables previously written 31 - 31
off..........
Provision for credit 120 24 144
losses.........................
Other....................................... (14) (14)
Balance at end of $ 385 $ 45 $ 430
period...........................
Individually evaluated for $ 182 $ 39 $ 221
impairment..................
Collectively evaluated for 203 6 209
impairment..................
Ending $ 385 $ 45 $ 430
Balance.................................
Recorded Investment in Finance Receivables:
Individually evaluated for $ 665 $ 78 $ 743
impairment..................
Collectively evaluated for 17,622 3,656 21,27
impairment.................. 8
Ending $ 18,287 $ 3,734 $ 22,02
Balance................................. 1

(Millions of dollars) December
31, 2018
Allowance for Credit Losses: Customer Dealer Total
Balance at beginning of $ 353 $ 9 $ 362
year........................
Receivables written (235) - (235)
off...........................
Recoveries on receivables previously written 46 - 46
off..........
Provision for credit 337 12 349
losses.........................
Other....................................... (15) (15)
Balance at end of $ 486 $ 21 $ 507
year.............................
Individually evaluated for $ 288 $ 14 $ 302
impairment..................
Collectively evaluated for 198 7 205
impairment..................
Ending $ 486 $ 21 $ 507
Balance.................................
Recorded Investment in Finance Receivables:
Individually evaluated for $ 858 $ 78 $ 936
impairment..................
Collectively evaluated for 18,152 3,338 21,49
impairment.................. 0
Ending $ 19,010 $ 3,416 $ 22,42
Balance................................. 6

Credit quality of finance receivables

At origination, Cat Financial evaluates credit risk based on a variety of credit quality factors including
prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value
ratios and other internal metrics. On an ongoing basis, Cat Financial monitors credit quality based on
past-due status and collection experience as there is a meaningful correlation between the past-due status
of customers and the risk of loss.

In determining past-due status, Cat Financial considers the entire recorded investment in finance
receivables past due when any installment is over 30 days past due. The tables below summarize the recorded
investment in finance receivables by aging category.

54

Table of Contents

(Millions of dollars) September
Customer 30, 2019
31-60 61-90 91+ Total Current Recorded 91+
Days Days Days Past Investment Still
Past Past Past Due in Accruing
Due Due Due Finance
Receivables

North America........ $ 73 $ 16 $ 48 $ 137 $ 7,773 $ 7,910 $ 15
EAME............. 33 10 136 179 2,853 3,032 4
Asia 36 21 24 81 2,437 2,518 6
Pacific..........
Mining............. 1 24 19 44 1,810 1,854 -
Latin America........ 43 29 93 165 1,110 1,275 1
Caterpillar Power 1 1 241 243 1,455 1,698 14
Finance
Dealer
North America........ - - - - 2,109 2,109 -
EAME............. - - - - 346 346 -
Asia - - - - 434 434 -
Pacific..........
Mining............. - - - - 4 4 -
Latin America........ - - 81 81 759 840 -
Caterpillar Power - - - - 1 1 -
Finance

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -20-


Total................ $ 187 $ 101 $ $ 930 $ $ 22,021 $ 40
642 21,091

December 31,
2018
Recorded
(Millions of dollars) 31-60 61-90 91+ Total Investment 91+
Days Days Days Past in Still
Finance
Past Past Past Due Current Receivables Accruing
Due Due Due
Customer
North America........ $ 65 $ 18 $ 84 $ 167 $ $ $ 14
7,8 7,9
25 92
EAME............. 19 9 153 181 2,8 3,0 5
50 31
Asia Pacific.......... 24 9 8 41 2,4 2,4 5
09 50
Mining............. 28 1 9 38 1,6 1,6 -
42 80
Latin America........ 38 29 71 138 1,4 1,5 -
21 59
Caterpillar Power Finance. 10 1 384 395 1,9 2,2 -
03 98
Dealer
North America........ - - - - 1,8 1,8 -
95 95
EAME............. - - - - 333 333 -
Asia Pacific.......... - - - - 466 466 -
Mining............. - - - - 4 4 -
Latin America........ - - 78 78 638 716 -
Caterpillar Power Finance. - - - - 2 2 -
Total................ $ 184 $ 67 $ 787 $ 1,038 $ $ $ 24
21, 22,
388 426

Impaired finance receivables

For all classes, a finance receivable is considered impaired, based on current information and events, if
it is probable that Cat Financial will be unable to collect all amounts due according to the contractual
terms. Impaired finance receivables include finance receivables that have been restructured and are
considered to be troubled debt restructurings.

55

Table of Contents

There were $78 million of impaired finance receivables with a related allowance of $39 million and $14
million as of September 30, 2019 and December 31, 2018, respectively, for the Dealer portfolio segment, all
of which was in Latin America. Cat Financial's recorded investment in impaired finance receivables and the
related unpaid principal balances and allowance for the Customer portfolio segment were as follows:

September 30, 2019 December 31, 2018

(Millions of dollars) Recorded Unpaid Related Unpaid Related
Investme Principal Recorded Principal Allowance
nt Balance Balance

Impaired Finance Receivables
With No Allowance
Investmen
t

Allowance Recorded
North $ 9 $ 9 $ - $ 10 $ 10 $
America.................
EAME...................... - - - 1 1
Asia - - - - -
Pacific...................
Mining...................... 23 23 - 33 33
Latin 25 25 - 29 29
America.................
Caterpillar Power 71 113 - 69 83
Finance.........
Total........................ $ 128 $ 170 $ - $ 142 $ 156 $
Impaired Finance Receivables
With An
Allowance Recorded
North $ 31 $ 30 $ 9 $ 40 $ 41 $ 14
America.................
EAME...................... 60 60 27 92 92 57
Asia 10 10 4 4 4 2
Pacific...................
Mining...................... 61 59 18 56 55 26
Latin 66 64 22 75 75 25
America.................
Caterpillar Power 309 322 102 449 455 164
Finance.........
Total........................ $ 537 $ 545 $ 182 $ $ 722 $ 288
716
Total Impaired Finance
Receivables
North $ 40 $ 39 $ 9 $ 50 $ 51 $ 14
America.................
EAME...................... 60 60 27 93 93 57
Asia 10 10 4 4 4 2
Pacific...................
Mining...................... 84 82 18 89 88 26
Latin 91 89 22 104 104 25
America.................
Caterpillar Power 380 435 102 518 538 164
Finance.........
Total........................ $ 665 $ 715 $ 182 $ $ 878 $ 288
858

56

Table of Contents

Three Months Ended September 30, Three Months
Ended September
30,

2019

2018
Average Recorded Interest Average Interest
Income Recorde Income
Recogniz d Recogniz
ed Investm ed
(Millions of dollars) Investment ent
Impaired Finance Receivables With $ - $ 19 $ -
No Allowance Recorded
North America..............$ 10
EAME ...............................................15 4 -

......................................................-
Asia Pacific 29 1
............................................... -

......................................................-
Mining...............................................26 35 -

......................................................-
Latin - 37 1
America...............................................
22
Caterpillar Power 1 94 2
Finance...............................................
57
Total.....................$ 130 $ 1 $ 218 $ 4
Impaired Finance Receivables With
An Allowance Recorded
North America..............$ 30 $ - $ 47 $ -
EAME ...............................................80 59 -

.......................................................1
Asia Pacific 2 -
...............................................12

.......................................................1
Mining...............................................65 60 1

.......................................................1
Latin 1 51 1
America...............................................
69
Caterpillar Power 1 374 4
Finance...............................................
376
Total.....................$ 632 $ 5 $ 593 $ 6
Total Impaired Finance Receivables
North America..............$ 40 $ - $ 66 $ -
EAME ...............................................95 63 -

.......................................................1
Asia Pacific 31 1
...............................................12

.......................................................1
Mining...............................................91 95 1

.......................................................1
Latin 1 88 2
America...............................................
91
Caterpillar Power 2 468 6
Finance...............................................
433
Total.....................$ 762 $ 6 $ 811 $ 10

57

Table of Contents

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018

(Millions of dollars) Average Interest Average Interest
Recorded Income Recorded Income
Investment Recognized Investment Recognized

Impaired Finance
Receivables With

No Allowance Recorded
Customer
North America.............. $ 10 $ - $ 17 $ 1
EAME................... 7 - 17 -
Asia - - 30 2
Pacific................
Mining................... 29 1 65 2
Latin America.............. 22 1 41 2

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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -21-


Caterpillar Power 53 2 149 5
Finance.......
Total...................... $ 121 $ 4 $ 319 $ 12
Impaired Finance
Receivables With
An Allowance Recorded
Customer
North America.............. $ 36 $ 1 $ 51 $ 1
EAME................... 88 2 41 1
Asia 9 1 4 -
Pacific................
Mining................... 49 2 43 2
Latin America.............. 73 4 69 3
Caterpillar Power 422 8 364 8
Finance.......
Total...................... $ 677 $ 18 $ 572 $ 15
Total Impaired Finance
Receivables
Customer
North America.............. $ 46 $ 1 $ 68 $ 2
EAME................... 95 2 58 1
Asia 9 1 34 2
Pacific................
Mining................... 78 3 108 4
Latin America.............. 95 5 110 5
Caterpillar Power 475 10 513 13
Finance.......
Total..................... $ 798 $ 22 $ 891 $ 27

Recognition of income is suspended and the finance receivable is placed on non-accrual status when
management determines that collection of future income is not probable (generally after 120 days past due).
Recognition is resumed and previously suspended income is recognized when the finance receivable becomes
current and collection of remaining amounts is considered probable. Payments received while the finance
receivable is on non-accrual status are applied to interest and principal in accordance with the
contractual terms.

As of September 30, 2019 and December 31, 2018, there were $81 million and $78 million, respectively, in
finance receivables on non-accrual status for the Dealer portfolio segment, all of which was in Latin
America. The recorded investment in customer finance receivables on non-accrual status was as follows:

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Table of Contents

(Millions of dollars) September December
30, 2019 31, 2018
North $ 38 $ 77
America...........................................
EAME................................................ 168 154
Asia 19 4
Pacific.............................................
Mining................................................ 44 50
Latin 103 106
America...........................................
Caterpillar Power 372 416
Finance...................................
Total.................................................. $ 744 $ 807

Troubled Debt Restructurings

A restructuring of a finance receivable constitutes a troubled debt restructuring (TDR) when the lender
grants a concession it would not otherwise consider to a borrower experiencing financial difficulties.
Concessions granted may include extended contract maturities, inclusion of interest only periods, below
market interest rates, extended skip payment periods and reduction of principal and/or accrued interest.

As of September 30, 2019 and December 31, 2018, there were no additional funds committed to lend to a
borrower whose terms have been modified in a TDR.

There were no finance receivables modified as TDRs during the three and nine months ended September 30,
2019 or 2018 for the Dealer portfolio segment. Cat Financial's investment in finance receivables in the
Customer portfolio segment modified as TDRs during the three and nine months ended September 30, 2019 and
2018 was as follows:

Three Months Ended September 30, 2019 Three Months Ended September 30, 2018

Number Pre-TDR Post-TDR Number Pre-TDR Post-TDR

(Millions of dollars) of Recorded Recorded of Recorded Recorded

Contracts Investment Investment Contracts Investment Investment

North America........... 4 $ - $ - 4 $ - $ -
Caterpillar Power Finance.... 4 56 55 2 40 40
Total.................. 8 $ 56 $ 55 6 $ 40 $ 40

Nine Months Ended September Nine Months Ended September
30, 2019 30, 2018
Number Pre-TDR Post-TDR Number Pre-TDR Post-TDR
of Recorded Recorded of Recorded Recorded
Investment Investment Investment Investment

Contracts Contracts
North 12 $ 5 $ 4 34 $ 13 $ 13
America...........
EAME................ 21 21 17 - - -
Mining................ 1 6 6 1 29 29
Latin 4 2 2 1 3 3
America...........
Caterpillar Power 19 154 152 7 93 60
Finance....
Total.................. 57 $ 188 $ 181 43 $ 138 $ 105

59

Table of Contents

TDRs in the Customer portfolio segment with a payment default (defined as 91+ days past due) which had been
modified within twelve months prior to the default date, were as follows:

Three Months Ended September 30, 2019 Three Months Ended September 30, 2018

Post-TDR Post-TDR

(Millions of dollars) Number of Recorded Number of Recorded

Contracts Investment Contracts Investment

Customer
North America ..................- $ - 7 $ 9

Latin America ..................- - 1 -

Caterpillar Power Finance ..........- - 3 33
Total ...........................- $ - 11 $ 42

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018

Post-TDR Post-TDR

Number of Recorded Number of Recorded

Contracts Investment Contracts Investment

Customer
North America ..................- $ - 10 $ 10

Latin America ...................- - 3 1

Caterpillar Power Finance ...........- - 3 33
Total ...........................- $ - 16 $ 44

18. Fair value disclosures

A. Fair value measurements

The guidance on fair value measurements defines fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants. This guidance also specifies
a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable
inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs
(lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair
value measurements are classified under the following hierarchy:

· Level 1 - Quoted prices for identical instruments in active markets.

· Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived valuations in which all significant
inputs or significant value-drivers are observable in active markets.

· Level 3 - Model-derived valuations in which one or more significant inputs or significant value-drivers
are unobservable.

When available, we use quoted market prices to determine fair value, and we classify such measurements
within Level 1. In some cases where market prices are not available, we make use of observable market based
inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or
observable market prices are not available, fair value is based upon valuations in which one or more
significant inputs are unobservable, including internally developed models that use, where possible,
current market-based parameters such as interest rates, yield curves and currency rates. These measurements
are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is
significant to the valuation. A measurement may therefore be classified within Level 3 even though there
may be significant inputs that are readily observable.

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Table of Contents

Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the
risk that an obligation (either by a counterparty or Caterpillar) will not be fulfilled. For financial
assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the
market price. For certain other financial assets and liabilities (certain Level 2 and Level 3), our fair
value calculations have been adjusted accordingly.

Investments in debt and equity securities

We have investments in certain debt and equity securities, primarily at Insurance Services, that are
recorded at fair value. Fair values for our U.S. treasury bonds and large capitalization value and smaller
company growth equity securities are based upon valuations for identical instruments in active markets.
Fair values for other government bonds, corporate bonds and mortgage-backed debt securities are based upon
models that take into consideration such market-based factors as recent sales, risk-free yield curves and
prices of similarly rated bonds.


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In addition, Insurance Services has an equity investment in a real estate investment trust (REIT) which is
recorded at fair value based on the net asset value (NAV) of the investment and is not classified within
the fair value hierarchy.

See Note 8 for additional information on our investments in debt and equity securities.

61

Table of Contents

Derivative financial instruments

The fair value of interest rate contracts is primarily based on models that utilize the appropriate
market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows. The
fair value of foreign currency and commodity forward, option and cross currency contracts is based on a
valuation model that discounts cash flows resulting from the differential between the contract price and
the market-based forward rate.

Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial
Products, included in our Consolidated Statement of Financial Position as of September 30, 2019 and
December 31, 2018 are summarized below:

(Millions of dollars) September 30,
2019

Assets

Debt securities

Government debt
Level Level 2 Total
1 Level 3

Measured Assets
/ Liabilities,

at NAV at Fair
Value

U.S. treasury $ 9 $ - $ - $ - $ 9
bonds...............
Other U.S. and non-U.S. - 48 - - 48
government bonds
Corporate bonds
Corporate - 840 - - 840
bonds..................
Asset-backed - 53 - - 53
securities.............
Mortgage-backed debt securities
U.S. governmental - 331 - - 331
agency...........
Residential..................... - 6 - - 6
Commercial.................... 41 - - 41
Total debt 9 1,319 - - 1,328
securities...................
Equity securities
Large capitalization 310 - - - 310
value...........
Smaller company 47 - 8 - 55
growth............
REIT......................... 124 124
Total equity 357 - 8 124 489
securities..................
Derivative financial - 55 - - 55
instruments, net........
Total $ 366 $ 1,374 $ 124 $ 1,872
assets......................... $ 8

62

Table of Contents

(Millions of dollars) December 31,
2018

Assets

Debt securities

Government debt
Level Level Level Measured Total
1 2 3 at NAV

Assets
/
Liabil
ities,
at
Fair
Value

U.S. treasury $ 9 $ $ $ $ 9
bonds.................
Other U.S. and non-U.S. government
bonds.
42 42
Corporate bonds
Corporate bonds................... 720 720
Asset-backed 63 63
securities...............
Mortgage-backed debt securities
U.S. governmental 297 297
agency.............
Residential....................... 7 7
Commercial...................... 13 13
Total debt 9 1,142 1,1
securities..................... 51
Equity securities
Large capitalization 260 260
value.............
Smaller company 46 46
growth.............
REIT.......................... 119 119
Total equity 306 119 425
securities....................
Total $ 315 $ $ $ 119 $ 1,5
assets.......................... 1,142 76
Liabilities
Derivative financial instruments, $ $ 19 $ $ $ 19
net..........
Total $ $ 19 $ $ $ 19
liabilities.......................
.

In addition to the amounts above, Cat Financial impaired loans are subject to measurement at fair value on
a nonrecurring basis and are classified as Level 3 measurements. A loan is considered impaired when
management determines that collection of contractual amounts due is not probable. In these cases, an
allowance for credit losses may be established based either on the present value of expected future cash
flows discounted at the receivables' effective interest rate, the fair value of the collateral for
collateral-dependent receivables, or the observable market price of the receivable. In determining
collateral value, Cat Financial estimates the current fair market value of the collateral less selling
costs. Cat Financial had impaired loans with a fair value of $373 million and $469 million as of September
30, 2019 and December 31, 2018, respectively.

B. Fair values of financial instruments

In addition to the methods and assumptions we use to record the fair value of financial instruments as
discussed in the Fair value measurements section above, we used the following methods and assumptions to
estimate the fair value of our financial instruments:

Cash and short-term investments

Carrying amount approximated fair value.

Restricted cash and short-term investments

Carrying amount approximated fair value. Restricted cash and short-term investments are included in Prepaid
expenses

and other current assets in the Consolidated Statement of Financial Position.

Finance receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of
receivables with

similar remaining maturities.

63

Table of Contents

Wholesale inventory receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of
receivables with

similar remaining maturities.

Short-term borrowings

Carrying amount approximated fair value.

Long-term debt

Fair value for fixed and floating rate debt was estimated based on quoted market prices.

Guarantees

The fair value of guarantees is based upon our estimate of the premium a market participant would require
to issue the same guarantee in a stand-alone arms-length transaction with an unrelated party. If quoted or
observable market prices are not available, fair value is based upon internally developed models that
utilize current market-based assumptions.

Please refer to the table below for the fair values of our financial instruments.

Fair Value of Financial Instruments

(Millions of dollars) September 30, December 31, Fair Reference
Assets 2019 2018 Value
Levels
Carrying Fair Carrying Fair
Amount Value Amount Value

Cash and short-term $ 7,906 $ $ 7,857 $ 1
investments........ 7,906 7,857
Restricted cash and short-term $ 30 $ 30 $ 33 $ 33 1
investments.
Investments in debt and equity $ 1,817 $ $ 1,576 $ 1, 2 & 3 Note 8
securities... 1,817 1,576
Finance receivables - net $ 14,218 $ $ 14,714 $ 3 Note 17
(excluding finance 14,35 14,79
1 8

leases
1)..............................
..
Wholesale inventory receivables $ 1,118 $ $ 1,050 $ 3
- net 1,090 1,025

(excluding finance leases 1)
.............
Foreign currency contracts - $ 116 $ 116 $ 47 $ 47 2 Note 5
net........
Liabilities
Short-term $ 4,268 $ $ 5,723 $ 1
borrowings............... 4,268 5,723
Long-term debt (including
amounts due within one year)
Machinery, Energy & $ 9,159 $ $ 8,015 $ 2
Transportation... 11,41 9,046
2
Financial $ 24,479 $ $ 22,815 $ 2
Products............... 24,79 22,68
8 4
Interest rate contracts - $ 54 $ 54 $ 36 $ 36 2 Note 5
net............
Commodity contracts - $ 7 $ 7 $ 30 $ 30 2 Note 5
net............
Guarantees...................... $ 6 $ 6 $ 8 $ 8 3 Note 11

1 Represents finance leases and failed sales leasebacks of $7,668 million at September 30, 2019 and finance
leases of $7,463 million at December 31, 2018, respectively.

64


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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -23-


Table of Contents

19) Other income (expense)

Three Nine
Months Months
Ended Ended
Septembe September
r 30 30
(Millions of dollars) 2019 2018 2019 2018
Investment and interest $ 50 $ 59 $ $ 139
income................................ 156
Foreign exchange gains (losses) 1 (5) (81) (34) (160)
License fee 31 29 87 96
income........................................
Net periodic pension and OPEB income (cost), excluding 24 85 74 257
service cost......
Gains (losses) on 2 13 55 18
securities..................................
Miscellaneous income (14) (3) (22) -
(loss).................................
Total................................................. $ 88 $ $ $ 350
102 316

1 Includes gains (losses) from foreign exchange derivative contracts. See Note 5 for further details.

1) Restructuring costs

Our accounting for employee separations is dependent upon how the particular program is designed. For
voluntary programs, eligible separation costs are recognized at the time of employee acceptance unless the
acceptance requires explicit approval by the company. For involuntary programs, eligible costs are
recognized when management has approved the program, the affected employees have been properly notified and
the costs are estimable.

Restructuring costs for the three and nine months ended September 30, 2019 and 2018 were as follows:

(Millions of dollars) Three Months Ended September 30

2019 2018

Employee separations 1............................................. $ 8 $ 44

Long-lived asset impairments 1 3 18

Other 2 13 48

Total restructuring costs.......................................... $ 24 $ 110

Nine Months Ended September 30

2019 2018

Employee separations 1............................................. $ 33 $ 121

Long-lived asset impairments 1 39 49

Other 2 110 123

Total restructuring costs.......................................... $ 182 $ 293

1 Recognized in Other operating (income) expenses.

2 Represents costs related to our restructuring programs, primarily for inventory write-downs, project
management costs, accelerated depreciation, building demolition and equipment relocation, all of which are
primarily included in Cost of goods sold.

For the nine months ended September 30, 2019, the restructuring costs were primarily related to
restructuring actions in Construction Industries and Energy & Transportation. For the nine months ended
September 30, 2018, the restructuring costs were primarily related to ongoing facility closures across the
company.

Certain restructuring costs are a reconciling item between Segment profit and Consolidated profit before
taxes. See Note 16 for more information.

65

Table of Contents

The following table summarizes the 2018 and 2019 employee separation activity:

(Millions of dollars)
Liability balance at December 31, $ 249
2017................................................
Increase in liability (separation 112
charges)..............................................
Reduction in liability (276)
(payments)..............................................
....
Liability balance at December 31, 85
2018................................................
Increase in liability (separation 33
charges)..............................................
Reduction in liability (73)
(payments)..............................................
....
Liability balance at September 30, $ 45
2019...............................................

Most of the liability balance at September 30, 2019 is expected to be paid in 2019 and 2020.

In September 2015, we announced a large scale restructuring plan (the Plan) including a voluntary
retirement enhancement program for qualifying U.S. employees, several voluntary separation programs outside
of the United States, additional involuntary programs throughout the company and manufacturing facility
consolidations and closures that occurred through 2018. The largest action among those included in the Plan
was related to our European manufacturing footprint, which led to the Gosselies, Belgium, facility closure.
In the first nine months of 2019, we incurred $30 million of restructuring costs related to the Plan. Total
restructuring costs incurred since the inception of the Plan were $1,818 million. The remaining costs of
approximately $20 million related to the Plan are expected to be recognized in 2019.

66

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview

Third-quarter 2019 sales and revenues were $12.758 billion, a decrease of $752 million, or 6 percent,
compared with $13.510 billion in the third quarter of 2018. The decline was due to lower sales volume
driven by the unfavorable impact from changes in dealer inventories, partially offset by higher end-user
demand across the three primary segments. Dealers decreased machine and engine inventories about $400
million during the third quarter of 2019, compared with an increase of about $800 million during the third
quarter of 2018. Sales decreased across the three primary segments and in all regions except for Latin
America, which was about flat. Unfavorable currency impacts were offset by favorable price realization and
higher Financial Products' revenues.

Third-quarter 2019 profit per share was $2.66, a decrease of $0.22, or 8 percent, compared with $2.88
profit per share in the third quarter of 2018. Profit was $1.494 billion in the third quarter of 2019, a
decrease of $233 million, or 13 percent, compared with $1.727 billion in the third quarter of 2018. The
decrease was primarily due to lower sales volume. This decrease was partially offset by favorable price
realization and lower selling, general and administrative (SG&A) and research and development (R&D)
expenses. Lower SG&A/R&D expenses were mostly due to a reduction in short-term incentive compensation
expense. In addition, the favorable impact of Financial Products' profit and favorable other operating
(income) expense were mostly offset by higher manufacturing costs and unfavorable currency impacts.
Favorable price continued to offset manufacturing costs in the quarter.

Sales and revenues for the nine months ended September 30, 2019, were $40.656 billion, an increase of $276
million, or 1 percent, from $40.380 billion for the nine months ended September 30, 2018. Profit per share
for the nine months ended September 30, 2019, was $8.75, an increase of $0.30, or 4 percent, from $8.45 for
the same period last year. Profit was $4.995 billion for the nine months ended September 30, 2019, down
$104 million, or 2 percent, from $5.099 billion for the nine months ended September 30, 2018.

Highlights for the third quarter of 2019 include:

· Third-quarter sales and revenues were $12.758 billion, compared with $13.510 billion in the third
quarter of 2018. Sales decreased across the three primary segments, while Financial Products' revenues
increased. The decline was due to lower sales volume driven by the unfavorable impact from changes in
dealer inventories, partially offset by higher end-user demand. Dealers decreased machine and engine
inventories about $400 million during the third quarter of 2019, compared with an increase of about $800
million during the third quarter of 2018.

· Operating profit as a percent of sales and revenues was 15.8 percent for both the third quarters of
2019 and 2018.

· Profit per share was $2.66 in the third quarter of 2019, compared with $2.88 in the third quarter of
2018.

· During the third quarter of 2019, the company made a $1.5 billion discretionary pension contribution
financed from proceeds of a debt issuance. As a result, Machinery, Energy & Transportation (ME&T)
operating cash flow was negative $188 million. The company also repurchased $1.2 billion of Caterpillar
common stock and paid dividends of $0.6 billion in the third quarter of 2019. The enterprise cash balance
at the end of the third quarter of 2019 was $7.9 billion.

Highlights for the nine months ended September 30, 2019, include:

· Sales and revenues for the nine months ended September 30, 2019, were $40.656 billion, compared with
$40.380 billion for the nine months ended September 30, 2018. Sales increased in Resource Industries and
Construction Industries, while Energy & Transportation decreased. Financial Products' revenues also
increased.

· Operating profit as a percent of sales and revenues was 15.8 percent for the nine months ended
September 30, 2019, compared with 15.9 percent for the nine months ended September 30, 2018.

· Profit per share was $8.75 for the nine months ended September 30, 2019, compared with $8.45 for the
nine months ended September 30, 2018.

· ME&T operating cash flow was $2.632 billion for the nine months ended September 30, 2019, compared to
$3.880 billion for the nine months ended September 30, 2018.

Notes:

· Glossary of terms is included on pages 79 - 81; first occurrence of terms shown in bold italics.

· Information on non-GAAP financial measures is included on page 86.

67

Table of Contents

Consolidated Results of Operations


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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -24-


THREE MONTHS ENDED SEPTEMBER 30, 2019 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2018

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between
the third quarter of 2018 (at left) and the third quarter of 2019 (at right). Caterpillar management
utilizes these charts internally to visually communicate with the company's Board of Directors and
employees.

Total sales and revenues in the third quarter of 2019 were $12.758 billion, a decrease of $752 million, or
6 percent, compared with $13.510 billion in the third quarter of 2018. The decline was due to lower sales
volume driven by the unfavorable impact from changes in dealer inventories, partially offset by higher
end-user demand across the three primary segments. Dealers decreased machine and engine inventories about
$400 million during the third quarter of 2019, compared with an increase of about $800 million during the
third quarter of 2018, led by Construction Industries and Resource Industries. Unfavorable currency impacts
were offset by favorable price realization and higher Financial Products' revenues. Sales decreased across
the three primary segments, while Financial Products' revenues increased.

North America sales declined 3 percent driven by the unfavorable impact from changes in dealer inventories,
partially offset by higher end-user demand and favorable price realization. Dealers increased inventories
during the third quarter of 2018, compared with a decrease during the third quarter of 2019.

Sales increased 2 percent in Latin America due to improved demand in a few countries, while the region
remains at low levels.

EAME sales decreased 7 percent driven by the unfavorable impact from changes in dealer inventories and
unfavorable currency impacts, partially offset by higher end-user demand. The unfavorable currency impacts
were due to a weaker euro and British pound. Dealers increased inventories during the third quarter of 2018
and were about flat during the third quarter of 2019.

Asia/Pacific sales decreased 14 percent driven by lower demand across several countries in the region,
including unfavorable changes in dealer inventories. Dealers increased inventories during the third quarter
of 2018, compared with a decrease during the third quarter of 2019. The lower demand was primarily in China
amid continued competitive pressures.

68

Table of Contents

Sales and Third Sales Price Currency Inter- Third $ %
Revenues by Quarter Volume Reali Segment Quarter Chang
Segment zatio / e
n Other
Change
2018 2019
(Millions of
dollars)
Construction $ 5,683 $ $ 26 $ (47) $ (15) $ 5,289 $ (7%)
Industries.. (358) (394)
............
.
Resource 2,638 (389) 50 (20) 32 2,311 (327) (12%)
Industries..
............
....
Energy & 5,555 31 11 (57) (88) 5,452 (103) (2%)
Transportati
on..........
....
All Other 113 (9) (1) 8 111 (2) (2%)
Segment.....
............
.
Corporate (1,226) (26) (1) 1 63 (1,189) 37
Items and
Eliminations
.......
Machinery, 12,763 (751) 86 (124) - 11,974 (789) (6%)
Energy &
Transportati
on Sales.
Financial 845 - - - 20 865 20 2%
Products
Segment.....
......
Corporate (98) - - - 17 (81) 17
Items and
Eliminations
........
Financial 747 - - - 37 784 37 5%
Products
Revenues....
......
Consolidated $ $ $ 86 $ (124) $ 37 $ $ (6%)
Sales and 13,510 (751) 12,758 (752)
Revenues....
...

Sales and Revenues by Geographic Region

External Sales and Total Sales and

North America Latin America EAME Asia/Pacific Revenues Inter-Segment Revenues

(Millions of $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg
dollars)

Third Quarter
2019

Construction $ 3% $ 12% $ (6%) $ (29%) $ (7%) $ (52%) $ (7%)
Industries.... 2,72 413 1,0 1,08 5,27 14 5,28
..... 8 48 6 5 9
Resource 789 (7%) 349 (18%) 396 (31%) 645 (6%) 2,17 (14%) 132 32% 2,31 (12%)
Industries.... 9 1
........
Energy & 2,12 (8%) 378 15% 1,2 4% 831 10% 4,56 -% 890 (9%) 5,45 (2%)
Transportation 9 24 2 2
........
All Other 1 (93%) 6 -% 8 100% 12 (33%) 27 (27%) 84 11% 111 (2%)
Segment.......
.....
Corporate (62) 1 (1) (69) (1, (1,1
Items and 120 89)
Eliminations.. 7) )
.
Machinery,
Energy &
Transportation 5,58 (3%) 1,14 2% 2,6 (7%) 2,57 (14%) 11,9 (6%) - - 11,9 (6%)
Sales......... 5 7 69 3 74 74
.
Financial 560 -% 79 16% 102 1% 124 6% 865 2% - - 865 2%
Products 1
Segment......
Corporate (43) (15) (15) (81) - (81)
Items and
Eliminations.. 1)
.
Financial 517 4% 64 14% 94 (1%) 109 10% 784 5% - - 784 5%
Products
Revenues....
Consolidated $ (3%) $ 2% $ (7%) $ (13%) $ (6%) $ - - $ (6%)
Sales and 6,10 1,21 2,7 2,68 12,7 12,7
Revenues . 2 1 63 2 58 58
Third Quarter
2018
Construction $ $ $ $ $ $ $
Industries.... 2,64 369 1,1 1,53 5,65 29 5,68
..... 6 09 0 4 3
Resource 849 427 574 688 2,53 100 2,63
Industries.... 8 8
........
Energy & 2,30 330 1,1 758 4,57 978 5,55
Transportation 9 80 7 5
........
All Other 15 - 4 18 37 76 113
Segment.......
.....
Corporate (40) 1 1 (43) (1, (1,2
Items and 183 26)
Eliminations.. 5) )
.
Machinery,
Energy &
Transportation 5,77 1,12 2,8 2,99 12,7 - 12,7
Sales......... 9 7 62 5 63 63
.
Financial 559 68 101 117 845 - 845
Products 1
Segment......
Corporate (62) (12) (18) (98) - (98)
Items and
Eliminations.. 2)
.
Financial 497 56 95 99 747 - 747
Products
Revenues....
Consolidated $ $ $ $ $ $ - $
Sales and 6,27 1,18 2,9 3,09 13,5 13,5
Revenues . 6 3 57 4 10 10

1 Includes revenues from Machinery, Energy & Transportation of $131 million and $122 million in the third
quarter of 2019 and 2018, respectively.

69

Table of Contents

CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the
third quarter of 2018 (at left) and the third quarter of 2019 (at right). Caterpillar management utilizes
these charts internally to visually communicate with the company's Board of Directors and employees. The
bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other
operating (income) expenses.

Operating profit for the third quarter of 2019 was $2.020 billion, a decrease of $115 million, or 5
percent, compared with $2.135 billion in the third quarter of 2018. The decrease was primarily due to lower
sales volume. This decrease was partially offset by favorable price realization and lower selling, general
and administrative (SG&A) and research and development (R&D) expenses.

Favorable price realization continued to offset manufacturing costs. The increase in manufacturing costs
was primarily due to higher warranty expense, and unfavorable cost absorption, partially offset by lower
period manufacturing costs primarily due to lower short-term incentive compensation expense. Cost
absorption was unfavorable as inventory increased more significantly in the third quarter of 2018, than in
the third quarter of 2019. Lower SG&A/R&D expenses were mostly due to a reduction in short-term incentive
compensation expense.

Short-term incentive compensation expense was about $130 million in the third quarter of 2019, compared
with about $350 million in the third quarter of 2018.

Operating profit margin was 15.8 percent for the third quarters of both 2019 and 2018.

Profit (Loss) Third Quarter Third Quarter $ %
by Segment 2019 2018 Change
(Millions of
dollars)
Change

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Construction $ 940 $ 1,058 $ (118) (11%)
Industries...
.............
.........
Resource 311 414 (103) (25%)
Industries...
.............
............
Energy & 1,021 973 48 5%
Transportatio
n............
............
All Other (21) (10) (11) (110%)
Segment......
.............
.........
Corporate (363) (371) 8
Items and
Eliminations.
.............
....
Machinery, 1,888 2,064 (176) (9%)
Energy &
Transportatio
n............
..
Financial 218 201 17 8%
Products
Segment......
.............
...
Corporate 21 (30) 51
Items and
Eliminations.
.............
....
Financial 239 171 68 40%
Products.....
.............
.........
Consolidating (107) (100) (7)
Adjustments..
.............
........
Consolidated $ 2,020 $ 2,135 $ (115) (5%)
Operating
Profit.......
............

70

Table of Contents

Other Profit/Loss and Tax Items

Interest expense excluding Financial Products in the third
quarter of 2019 was $103 million, compared with $102 million
in the third quarter of 2018.

Other income/expense in the third quarter of 2019 was income
of $88 million, compared with income of $102 million in the
third quarter of 2018.

The provision for income taxes for the third quarter of 2019
reflected an estimated annual tax rate of 26 percent, compared
with 24 percent for the third quarter of 2018, excluding the
discrete item discussed in the following paragraph. The
increase was largely driven by the application of U.S. tax
reform provisions to the earnings of certain non-U.S.
subsidiaries, which do not have a calendar fiscal year-end.
These provisions did not apply to these subsidiaries in 2018.

The provision for income taxes in the third quarter of 2018
also included a $95 million net benefit to adjust deferred tax
balances. See Note 15 of Part 1, Item 1 of this Form 10-Q for
more information.

Construction Industries

Construction Industries' total sales were $5.289 billion in the third quarter of 2019, a decrease of $394
million, or 7 percent, compared with $5.683 billion in the third quarter of 2018. The decrease was due to
lower sales volume driven by the unfavorable impact from changes in dealer inventories, partially offset by
higher end-user demand for construction equipment. Dealers increased inventories during the third quarter
of 2018, compared with a decrease during the third quarter of 2019.

In North America, sales increased primarily due to favorable price realization and higher demand for
equipment, mostly to support road and non-residential building construction activities.

Sales were higher in Latin America, but construction activities remained at low levels.

In EAME, the sales decrease was primarily due to currency impacts related to the euro. Unfavorable price
realization and lower sales volume also contributed to the decrease.

Sales in Asia/Pacific were lower across most of the region primarily due to lower demand in China,
including unfavorable changes in dealer inventories, amid continued competitive pressures.

Construction Industries' profit was $940 million in the third quarter of 2019, a decrease of $118 million,
or 11 percent, compared with $1.058 billion in the third quarter of 2018. The decrease was primarily due to
lower sales volume, partially offset by lower SG&A/R&D expenses and favorable price realization. Lower
SG&A/R&D expenses were primarily due to lower short-term incentive compensation expense.

Construction Industries' profit as a percent of total sales was 17.8 percent in the third quarter of 2019,
compared with 18.6 percent in the third quarter of 2018.

Resource Industries

Resource Industries' total sales were $2.311 billion in the third quarter of 2019, a decrease of $327
million, or 12 percent, compared with $2.638 billion in the third quarter of 2018. The decrease was due to
lower sales volume driven by the unfavorable impact from changes in dealer inventories, partially offset by
higher end-user demand for equipment and favorable price realization. Dealers decreased inventories during
the third quarter of 2019, compared with an increase during the third quarter of 2018. While commodity
prices are generally supportive of reinvestment, the company believes mining customers are cautious due to
economic uncertainty. Mining sales were also impacted by lower thermal coal prices. In addition, sales
decreased for equipment supporting non-residential construction and quarry and aggregates driven by a
reduction in dealer inventories.

Resource Industries' profit was $311 million in the third quarter of 2019, a decrease of $103 million, or
25 percent, compared with $414 million in the third quarter of 2018. The decrease was primarily due to
lower sales volume, partially offset by favorable price realization. Manufacturing costs were about flat as
higher warranty expense was offset by lower period manufacturing costs, primarily due to lower short-term
incentive compensation expense.

Resource Industries' profit as a percent of total sales was 13.5 percent in the third quarter of 2019,
compared with 15.7 percent in the third quarter of 2018.

71

Table of Contents

Energy & Transportation

Sales by Application Third Third $ %
(Millions of dollars) Quarter Quarter Change

Change
2019 2018
Oil and Gas................................................ $ 1,246 $ 1,362 $ (9%)
(116)
Power Generation............................................ 1,123 1,102 21 2%
Industrial................................................. 980 863 117 14%
Transportation.............................................. 1,213 1,250 (37) (3%)
External Sales.............................................. 4,562 4,577 (15) -%
Inter-segment......................................... 890 978 (88) (9%)
Total Sales................................................ $ 5,452 $ 5,555 $ (2%)
(103)

Energy & Transportation's total sales were $5.452 billion in the third quarter of 2019, a decrease of $103
million, or 2 percent, compared with $5.555 billion in the third quarter of 2018. Sales decreased primarily
due to lower inter-segment engine sales.

Oil and Gas - Sales decreased for reciprocating engines in North America primarily due to lower demand in
well servicing applications. This was partially offset by higher sales of turbines and turbine-related
services.

Power Generation - Sales increased mostly due to higher deliveries in North America for large diesel
reciprocating engines and turbines, partially offset by lower sales of reciprocating engines in EAME.

Industrial - Sales improved primarily in EAME and Asia/Pacific driven by higher end-user demand.
Transportation - Sales were lower primarily due to timing of locomotive deliveries.

Energy & Transportation's profit was $1.021 billion in the third quarter of 2019, an increase of $48
million, or 5 percent, compared with $973 million in the third quarter of 2018. Lower sales volume,
including an unfavorable mix of products, was more than offset by favorable other operating income/expense
and SG&A/R&D expenses mostly due to a reduction in short-term incentive compensation expense.

Energy & Transportation's profit as a percent of total sales was 18.7 percent in the third quarter of 2019,
compared with 17.5 percent in the third quarter of 2018.

Financial Products Segment

Financial Products' segment revenues were $865 million in the third quarter of 2019, an increase of $20
million, or 2 percent, from the third quarter of 2018. The increase was primarily due to higher average
financing rates in North America and Asia/Pacific, partially offset by an unfavorable impact due to the
absence of fees associated with an intercompany credit facility in North America.

Financial Products' segment profit was $218 million in the third quarter of 2019, up 8 percent compared
with $201 million in the third quarter of 2018. The favorable change was primarily due to an increase in
net yield on average earning assets and a decrease in the provision for credit losses at Cat Financial,
partially offset by unfavorable impacts from higher SG&A expenses, the mark-to-market on equity securities
in Insurance Services and the absence of the intercompany credit facility.

At the end of the third quarter of 2019, past dues at Cat Financial were 3.19 percent, compared with 3.47
percent at the end of the third quarter of 2018. Write-offs, net of recoveries, were $103 million for the
third quarter of 2019, compared with $40 million for the third quarter of 2018. The increase in write-offs,
net of recoveries, was primarily driven by Caterpillar Power Finance, concentrated in the marine portfolio,
and EAME, mostly in the Middle East. As of September 30, 2019, Cat Financial's allowance for credit losses
totaled $434 million, or 1.57 percent of finance receivables, compared with $523 million, or 1.81 percent
of finance receivables at June 30, 2019. The allowance for credit losses at year-end 2018 was $511 million,
or 1.80 percent of finance receivables.

Corporate Items and Eliminations


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DJ Caterpillar Inc.: Files Form 10-Q FQE 30 Sept -26-


Expense for corporate items and eliminations was $342 million in the third quarter of 2019, a decrease of
$59 million from the third quarter of 2018, primarily due to lower restructuring costs, partially offset by
methodology differences.

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NINE MONTHS ENDED SEPTEMBER 30, 2019 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2018 CONSOLIDATED SALES
AND REVENUES

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between
the nine months ended September 30, 2018 (at left) and the nine months ended September 30, 2019 (at right).
Caterpillar management utilizes these charts internally to visually communicate with the company's Board of
Directors and employees.

Total sales and revenues were $40.656 billion for the nine months ended September 30, 2019, an increase of
$276 million, or 1 percent, compared with $40.380 billion for the nine months ended September 30, 2018. The
increase was primarily due to favorable price realization, mostly offset by unfavorable currency impacts,
primarily from a weaker euro, Australian dollar and Chinese yuan. Sales increased in Resource Industries
and Construction Industries, while Energy & Transportation decreased. Financial Products' revenues also
increased.

North America sales improved 5 percent driven by higher demand, including a favorable impact from changes
in dealer inventories, and favorable price realization. Dealers increased inventories more significantly
during the nine months ended September 30, 2019, than during the nine months ended September 30, 2018.

Sales increased 6 percent in Latin America due to improved demand in a few countries, while the region
remains at low levels.

EAME sales decreased 6 percent primarily driven by the unfavorable impact from changes in dealer
inventories and unfavorable currency impacts, partially offset by favorable price realization. The
unfavorable currency impacts were due to a weaker euro and British pound. Dealers increased inventories
more significantly during the nine months ended September 30, 2018, than during the nine months ended
September 30, 2019.

Asia/Pacific sales decreased 5 percent mostly due to unfavorable currency impacts and lower demand,
including unfavorable changes in dealer inventories, partially offset by favorable price realization. The
unfavorable currency impacts were due to a weaker Australian dollar and Chinese yuan. Dealers increased
inventories more during the nine months ended September 30, 2018, than during the nine months ended
September 30, 2019. The lower demand was primarily in China due to continued competitive pressures, which
was partially offset by higher demand in other countries in the region.

During the nine months ended September 30, 2018, dealer machine and engine inventories increased about $2.1
billion, compared to an increase of about $1.4 billion during the nine months ended September 30, 2019.
Dealers are independent, and there could be many reasons for changes in their inventory levels, including
their expectations of future demand and product delivery times. Dealers' demand expectations take into
account seasonal changes, macroeconomic conditions, machine rental rates and other factors. Delivery times
can vary based on availability of product from Caterpillar factories and product distribution centers.
Based on current dealer inventory levels and global economic uncertainty, we now expect dealer inventories
will increase for the full year by about $500 million compared to prior year end.

73

Table of Contents

Sales and Nine Nine
Revenues by Months Months
Segment
Ended Inter- Ended
September Sales Price Segment September $ %
/
(Millions of 30, 2018 Volume Realization Currency Other 30, 2019 Change Change
dollars)
Construction $ 17,532 $ 5 $ 435 $ (317) $ (26) $ 17,629 $ 97 1%
Industries..
............
.
Resource 7,473 170 289 (99) 48 7,881 408 5%
Industries..
............
....
Energy & 16,498 (91) 82 (239) (102) 16,148 (350) (2%)
Transportati
on..........
....
All Other 353 - (3) 21 357 4 1 %
Segment.....
............ 14)
.
Corporate (3,664) (41) (1) 1 59 (3,646) 18
Items and
Eliminations
........
Machinery, 38,192 29 805 (657) - 38,369 177 -%
Energy &
Transportati
on Sales.
Financial 2,467 - - - 121 2,588 121 5%
Products
Segment.....
.......
Corporate (279) - - - (22) (301) (22)
Items and
Eliminations
........
Financial 2,188 - - - 99 2,287 99 5%
Products
Revenues....
......
Consolidated $ 40,380 $ 29 $ 805 $ (657) $ 99 $ 40,656 $ 276 1%
Sales and
Revenues....
...

Sales and Revenues by Geographic Region

(Millions of North Latin EAME Asia/Pacific External Inter-Segment Total
dollars) America America Sales and Sales and
Revenues Revenues

Nine Months
Ended
September 30,
$ % Chg $ % $ % Chg $ % Chg $ % Chg $ % Chg $ %
Chg Chg

2019
Construction $ 15% $ 2% $ (6%) $ (18%) $ 1% $ 56 (32%) $ 1%
Industries.... 9,206 1,12 3,16 4,081 17,57 17,62
...... 4 2 3 9
Resource 2,798 14% 1,22 3% 1,31 (21%) 2,209 17% 7,537 5% 344 16% 7,881 5%
Industries.... 0 0
........
Energy & 6,577 (8%) 1,03 15% 3,41 -% 2,291 8% 13,31 (2%) 2,829 (3%) 16,14 (2%)
Transportation 5 6 9 8
........


(END) Dow Jones Newswires

November 01, 2019 03:02 ET ( 07:02 GMT)

DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q FQE 30 Sept 2019


All Other 23 (51%) 7 600% 23 92% 45 (18%) 98 (15%) 259 9% 357 1%
Segment.......
......
Corporate (142) - (1) (158) (3,488) (3,64
Items and 6)
Eliminations.. 1)
.
Machinery,
Energy &
Transportation 18,46 5% 3,38 6% 7,89 (6%) 8,625 (5%) 38,36 -% - -% 38,36 -%
Sales......... 2 6 6 9 9
.
Financial 1,681 5% 225 6% 306 1% 376 10% 2,588 5% - -% 2,588 5%
Products 1
Segment.......
Corporate (184) (37) (26) (54) (301) - (301)
Items and
Eliminations..
.
Financial 1,497 4% 188 6% 280 (2%) 322 13% 2,287 5% - -% 2,287 5%
Products
Revenues.....
Consolidated $ 5% $ 6% $ (6%) $ (4%) $ 1% $ - -% $ 1%
Sales and 19,95 3,57 8,17 8,947 40,65 40,65
Revenues.. 9 4 6 6 6
Nine Months
Ended
September 30,
2018
Construction $ $ $ $ $ $ 82 $
Industries.... 8,005 1,10 3,34 4,993 17,45 17,53
...... 5 7 0 2
Resource 2,451 1,18 1,66 1,882 7,177 296 7,473
Industries.... 1 3
........
Energy & 7,116 897 3,42 2,129 13,56 2,931 16,49
Transportation 5 7 8
........
All Other 47 1 12 55 115 238 353
Segment.......
......
Corporate (108) (1) (8) - (117) (3,547) (3,66
Items and 4)
Eliminations..
.
Machinery,
Energy &
Transportation 17,51 3,18 8,43 9,059 38,19 - 38,19
Sales......... 1 3 9 2 2
.
Financial 1,608 213 303 343 2,467 - 2,467
Products 1
Segment.......
Corporate (168) (36) (18) (57) (279) - (279)
Items and
Eliminations..
.
Financial 1,440 177 285 286 2,188 - 2,188
Products
Revenues.....
Consolidated $ $ $ $ $ $ - $
Sales and 18,95 3,36 8,72 9,345 40,38 40,38
Revenues.. 1 0 4 0 0

1 Includes revenues from Machinery, Energy & Transportation of $398 million and $345 million in the nine
months ended September 30, 2019 and 2018, respectively.

74

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CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the
nine months ended September 30, 2018 (at left) and the nine months ended September 30, 2019 (at right).
Caterpillar management utilizes these charts internally to visually communicate with the company's Board of
Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy &
Transportation's other operating (income) expenses.

Operating profit for the nine months ended September 30, 2019, was $6.440 billion, compared with $6.410
billion for the nine months ended September 30, 2018. The increase of $30 million was primarily due to
favorable price realization mostly offset by higher manufacturing costs. In addition, lower SG&A/R&D
expenses, higher Financial Products' operating profit and favorable other operating (income) expense were
more than offset by lower sales volume and unfavorable currency impacts.

The lower sales volume was the result of an unfavorable mix of products primarily within Construction
Industries and Energy & Transportation partially offset by favorable sales volume in Resource Industries.

The increase in manufacturing costs was primarily due to higher variable labor and burden, warranty expense
and material costs. SG&A/R&D expenses were lower primarily due to lower short-term incentive compensation
expense, partially offset by increased targeted investments and timing of corporate-level expenses.

Short-term incentive compensation expense is directly related to financial and operational performance,
measured against targets set annually. Expense for the nine months ended September 30, 2019, was about $560
million, compared with about $1.070 billion for the nine months ended September 30, 2018. For 2019,
short-term incentive compensation expense is expected to be about $750 million, compared with $1.4 billion
in 2018.

Profit by Nine Months Nine Months $ %
Segment Ended September Ended Change
(Millions of 30, 2019 September 30,
dollars) 2018
Change
Construction $ 3,272 $ 3,329 $ (57) (2)%
Industries...
.............
.......
Resource 1,368 1,203 165 14 %
Industries...
.............
..........
Energy & 2,745 2,859 (114) (4)%
Transportatio
n............
..........
All Other 15 70 (55) (79)%
Segment......
.............
.......
Corporate (1,179) (1,208) 29
Items and
Eliminations.
.............
..
Machinery, 6,221 6,253 (32) (1)%
Energy &
Transportatio
n............
Financial 622 476 146 31 %
Products
Segment......
.............
.
Corporate (75) (37) (38)
Items and
Eliminations.
.............
..
Financial 547 439 108 25 %
Products.....
.............
.......
Consolidating (328) (282) (46)
Adjustments..
.............
......
Consolidated $ 6,440 $ 6,410 $ 30 - %
Operating
Profit.......
..........

75

Table of Contents

Other Profit/Loss and Tax Items

Interest expense excluding Financial Products for the nine months ended September 30, 2019, was $309
million, compared with $305 million for the nine months ended September 30, 2018.

Other income/expense for the nine months ended September 30, 2019, was income of $316 million, compared
with income of $350 million for the nine months ended September 30, 2018. The unfavorable change was
primarily a result of the impact from pension and other postemployment benefits (OPEB) plans, mostly offset
by lower currency translation and hedging net losses.

The provision for income taxes for the first nine months of 2019 reflected an estimated annual tax rate of
26 percent, compared with 24 percent for the first nine months of 2018, excluding the discrete items
discussed in the following paragraph. The increase was largely driven by the application of U.S. tax reform
provisions to the earnings of certain non-U.S. subsidiaries, which do not have a calendar fiscal year-end.
These provisions did not apply to these subsidiaries in 2018.

As a result of final regulations received in 2019 providing additional guidance related to the calculation
of the mandatory deemed repatriation of non-U.S. earnings due to U.S. tax reform, we recorded a discrete
tax benefit of $178 million in the first nine months of 2019 to adjust unrecognized tax benefits. In
addition, a discrete tax benefit of $28 million was recorded in the first nine months of 2019, compared
with $52 million for the first nine months of 2018, 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 for the first nine months of 2018 also included a $120 million net benefit to adjust deferred
tax balances. See Note 15 of Part 1, Item 1 of this Form 10-Q for more information.

Construction Industries

Construction Industries' total sales were $17.629 billion for the nine months ended September 30, 2019, an
increase of $97 million, or 1 percent, compared with $17.532 billion for the nine months ended September
30, 2018. The increase was mostly due to favorable price realization, partially offset by unfavorable
currency impacts, primarily from a weaker euro, Chinese yuan and Australian dollar.

· Sales volume was about flat as higher end-user demand for construction equipment was offset by
unfavorable changes in dealer inventories. Dealer inventories increased significantly more during the
nine months ended September 30, 2018, than during the nine months ended September 30, 2019.

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

· In North America, the sales increase was primarily due to higher demand for construction equipment,
including favorable changes in dealer inventories, and favorable price realization. Dealer inventories
increased significantly more in the nine months ended September 30, 2019, than during the nine months
ended September 30, 2018.

· Sales were higher in Latin America, but construction activities remained at low levels.


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DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q -2-


· Sales decreased in EAME primarily due to unfavorable currency impacts, mostly from a weaker euro, and
lower sales volume partially offset by favorable price realization. Sales volume declined primarily due
to unfavorable impacts of changes in dealer inventories, partially offset by higher end-user demand.
Dealer inventories increased more significantly during the nine months ended September 30, 2018, than
during the nine months ended September 30, 2019.

· Sales in Asia/Pacific decreased mostly due to lower demand, including unfavorable changes in dealer
inventories and unfavorable currency impacts. The unfavorable currency impacts were due to a weaker
Chinese yuan and Australian dollar. Dealers increased inventories during the nine months ended September
30, 2018 and decreased inventories during the nine months ended September 30, 2019. The lower demand was
primarily in China due to continued competitive pressures.

Construction Industries' profit was $3.272 billion for the nine months ended September 30, 2019, a decrease
of $57 million, or 2 percent, compared with $3.329 billion for the nine months ended September 30, 2018.
The decrease was primarily due to favorable price realization and lower SG&A/R&D expenses, which were more
than offset by higher manufacturing costs and lower sales volume, including an unfavorable mix of products.
Manufacturing costs increased primarily due to unfavorable variable labor and burden and higher material
costs. Lower SG&A/R&D expenses were due to lower short-term incentive compensation expense, partially
offset by increased targeted investments.

Construction Industries' profit as a percent of total sales was 18.6 percent for the nine months ended
September 30, 2019, compared with 19.0 percent for the nine months ended September 30, 2018.

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Resource Industries

Resource Industries' total sales were $7.881 billion for the nine months ended September 30, 2019, an
increase of $408 million, or 5 percent, compared with $7.473 billion from the nine months ended September
30, 2018. The increase was primarily due to higher equipment end-user demand and favorable price
realization, partially offset by unfavorable changes in dealer inventories. Higher sales were driven by
increased capital investment by mining customers to support ongoing mine site operations. In addition,
sales increased for our non-residential construction and quarry and aggregate customers. Dealers increased
inventories more significantly during the nine months ended September 30, 2018, than during the nine months
ended September 30, 2019.

Resource Industries' profit was $1.368 billion for the nine months ended September 30, 2019, an increase
$165 million, or 14 percent, compared with $1.203 billion for the nine months ended September 30, 2018. The
improvement was mostly due to favorable price realization and higher sales volume, partially offset by
higher manufacturing costs. Manufacturing costs increased due to higher warranty expense, variable labor
and burden and material costs.

Resource Industries' profit as a percent of total sales was 17.4 percent for the nine months ended
September 30, 2019, compared with 16.1 percent for the nine months ended September 30, 2018.

Energy & Transportation

Sales by Application
(Millions of dollars) Nine Nine
Months Months
Ended Ended $ %
Septem Septem
ber ber
30, 30, Change Change
2019 2018
Oil and Gas...................................... $ 3,6 $ 4,0 $ (9%)
82 44 (362)
Power Generation.................................. 3,1 3,0 117 4%
80 63
Industrial....................................... 2,8 2,7 103 4%
41 38
Transportation.................................... 3,6 3,7 (106) (3%)
16 22
External Sales.................................... 13, 13, (248) (2%)
319 567
Inter-Segment................................ 2,8 2,9 (102) (3%)
29 31
Total Sales................................. $ 16, $ 16, $ (2%)
148 498 (350)

Energy & Transportation's total sales were $16.148 billion for the nine months ended September 30, 2019, a
decrease of $350 million, or 2 percent, compared with $16.498 billion for the nine months ended September
30, 2018. The decrease was primarily due to unfavorable currency impacts and lower sales volume, including
inter-segment sales, partially offset by favorable price realization.

Oil and Gas - Sales decreased in North America primarily due to lower new equipment demand for well
servicing and timing of turbine project deliveries that occurred in the nine months ended September 30,
2018. Lower sales in North America were partially offset by increases in all other regions.

Power Generation - Sales increased mostly due to higher deliveries in North America for both diesel
reciprocating engines and turbines. The increase was partially offset by lower diesel reciprocating engine
sales in EAME driven by gas power generation applications and unfavorable currency impacts.

Industrial - Sales improved primarily in Asia/Pacific and North America driven by higher end-user demand.
Transportation - Sales were slightly lower primarily due to the timing of locomotive deliveries.

Energy & Transportation's profit was $2.745 billion for the nine months ended September 30, 2019, a
decrease of $114 million, or 4 percent, compared with $2.859 billion for the nine months ended September
30, 2018. The decrease was mostly due to lower sales volumes, including an unfavorable mix of applications,
and higher manufacturing costs. This was partially offset by favorable price realization, lower SG&A/R&D
expenses and favorable other operating income/expense. Manufacturing costs increased due to higher variable
labor and burden, targeted investments, material costs and warranty expense, partially offset by lower
short-term incentive compensation expense. Lower SG&A/R&D expenses were primarily due to lower short-term
incentive compensation expense, partially offset by increased targeted investments.

Energy & Transportation's profit as a percent of total sales was 17.0 percent for the nine months ended
September 30, 2019, compared with 17.3 percent for the nine months ended September 30, 2018.

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Financial Products Segment

Financial Products' segment revenues were $2.588 billion for the nine months ended September 30, 2019, an
increase of $121 million, or 5 percent, compared with $2.467 billion for the nine months ended September
30, 2018. The increase was primarily due to higher average financing rates in North America and
Asia/Pacific, higher average earning assets in North America and a favorable impact from Insurance Services
revenues across all regions. These favorable impacts were partially offset by the absence of fees
associated with an intercompany credit facility in North America.

Financial Products' segment profit was $622 million for the nine months ended September 30, 2019, up 31
percent compared with $476 million for the nine months ended September 30, 2018. The favorable change was
primarily due to a decrease in the provision for credit losses at Cat Financial, an increase in net yield
on average earning assets, and favorable impacts from the mark-to-market on equity securities in Insurance
Services and Insurance Services margin. These favorable impacts were partially offset by higher SG&A
expenses and the absence of the intercompany credit facility.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $1.254 billion for the nine months ended September 30,
2019, compared with $1.245 billion for the nine months ended September 30, 2018.

RESTRUCTURING COSTS

Restructuring costs for the three and nine months ended September 30, 2019 and 2018 were as follows:

(Millions of dollars) Three
Months
Ended
Septemb
er 30
2019
2018
Employee separations 1 8 $ 44

...................................................................$
Long-lived asset impairments 1 3 18
Other 2 13 48
Total restructuring $ 24 $ 110
costs................................................
Nine
Months
Ended
Septemb
er 30

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DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q -3-


2019
2018
Employee separations 1 33 $ 121

...................................................................$
Long-lived asset impairments 1 39 49
Other 2 110 123
Total restructuring $ 182 293
costs................................................ $

1 Recognized in Other operating (income) expenses.

2 Represents costs related to our restructuring programs, primarily for inventory write-downs, project
management costs, accelerated depreciation, building demolition and equipment relocation, all of which are
primarily included in Cost of goods sold.

For the nine months ended September 30, 2019, the restructuring costs were primarily related to
restructuring actions in Construction Industries and Energy & Transportation. For the nine months ended
September 30, 2018, the restructuring costs were primarily related to ongoing facility closures across the
company.

Certain restructuring costs are a reconciling item between Segment profit and Consolidated profit before
taxes. The following table summarizes the 2018 and 2019 employee separation activity:

78

Table of Contents

(Millions of dollars)
Liability balance at December 31, $ 249
2017....................................................
..
Increase in liability (separation 112
charges)................................................
....
Reduction in liability (276)
(payments)..............................................
...........
Liability balance at December 31, 85
2018....................................................
..
Increase in liability (separation 33
charges)................................................
....
Reduction in liability (73)
(payments)..............................................
...........
Liability balance at September 30, $ 45
2019....................................................
..

Most of the liability balance at September 30, 2019 is expected to be paid in 2019 and 2020.

In September 2015, we announced a large scale restructuring plan (the Plan) including a voluntary
retirement enhancement program for qualifying U.S. employees, several voluntary separation programs outside
of the United States, additional involuntary programs throughout the company and manufacturing facility
consolidations and closures that occurred through 2018. The largest action among those included in the Plan
was related to our European manufacturing footprint, which led to the Gosselies, Belgium, facility closure.
In the first nine months of 2019, we incurred $30 million of restructuring costs related to the Plan. Total
restructuring costs incurred since the inception of the Plan were $1,818 million. The remaining costs of
approximately $20 million related to the Plan are expected to be recognized in 2019.

We expect that restructuring actions will result in an incremental benefit to operating costs, primarily
Cost of goods sold and SG&A expenses of about $300 million in 2019 compared with 2018.

GLOSSARY OF TERMS

1) All Other Segment - Primarily includes activities such as: business strategy, product management and
development, manufacturing and sourcing of filters and fluids, undercarriage, ground-engaging tools,
fluid transfer products, precision seals, rubber sealing and connecting components primarily for Cat(R)
products; parts distribution; integrated logistics solutions, 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; and
digital investments for new customer and dealer solutions that integrate data analytics with
state-of-the-art digital technologies while transforming the buying experience.

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

3) Construction Industries - A segment primarily responsible for supporting customers using machinery in
infrastructure, forestry and building construction applications. Responsibilities include business
strategy, product design, product management and development, manufacturing, marketing and sales and
product support. The product portfolio includes asphalt pavers; backhoe loaders; compactors; cold
planers; compact track and multi-terrain loaders; mini, small, medium and large track excavators;
forestry excavators; feller bunchers; harvesters; knuckleboom loaders; motor graders; pipelayers; road
reclaimers; skidders; skid steer loaders; telehandlers; small and medium track-type tractors; track-type
loaders; utility vehicles; wheel excavators; compact, small and medium wheel loaders; and related parts
and work tools.

4) Corporate Items and Eliminations - Includes corporate-level expenses; timing differences, as some
expenses are reported in segment profit on a cash basis; methodology differences between segment and
consolidated external reporting; restructuring costs; and inter-segment eliminations.

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

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

79

Table of Contents

8) Energy & Transportation - A segment primarily responsible for supporting customers using reciprocating
engines, turbines,
diesel-electric locomotives and related parts across industries serving Oil and Gas, Power Generation,
Industrial 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 turbine machinery and integrated systems and
solutions 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 Caterpillar 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.

1) 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. The segment also
earns revenues from Machinery, Energy & Transportation, but the related costs are not allocated to
operating segments. Financial Products' segment profit is determined on a pretax basis and includes other
income/expense items.

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

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

4) Machinery, Energy & Transportation's Other Operating (Income) Expenses - Comprised primarily of
gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements and
accruals.

5) Manufacturing Costs - Manufacturing costs exclude the impacts of currency and represent the
volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs.

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DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q -4-


Variable manufacturing costs are defined as having a direct relationship with the volume of production.
This includes material costs, direct labor and other costs that vary directly with production volume such
as freight, power to operate machines and supplies that are consumed in the manufacturing process. Period
manufacturing costs support production but are defined as generally not having a direct relationship to
short-term changes in volume. Examples include machinery and equipment repair, depreciation on
manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and
operations management.

6) 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.

7) 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.

8) Restructuring Costs - May include costs for employee separation, long-lived asset impairments and
contract terminations. These costs are included in Other operating (income) expenses except for
defined-benefit plan curtailment losses and special termination benefits, which are included in Other
income (expense). Restructuring costs also include other exit-related costs which may consist of
accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project
management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities,
all of which are primarily included in Cost of goods sold.

9) 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 sales impact of new
product introductions, including emissions-

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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.

18. Services - Enterprise services include, but are not limited to, aftermarket parts, Financial Products'
revenues and other service-related revenues. Machinery, Energy & Transportation segments exclude Financial
Products' revenues.

LIQUIDITY AND CAPITAL RESOURCES
Sources of funds

We generate significant capital resources from operating activities, which are the primary source of
funding for our ME&T operations. Funding for these businesses is also available from commercial paper and
long-term debt issuances. Financial Products' operations are funded primarily from commercial paper, term
debt issuances and collections from its existing portfolio. During the first nine months of 2019, we
experienced favorable global liquidity conditions in both our ME&T and Financial Products' operations. On a
consolidated basis, we ended the first nine months of 2019 with $7.91 billion of cash, an increase of $49
million from year-end 2018. We intend to maintain a strong cash and liquidity position.

Consolidated operating cash flow for the first nine months of 2019 was $4.48 billion, which was the same as
the first nine months of 2018. Compared to the first nine months of 2018, we experienced favorable changes
in working capital in 2019, which were offset by lower profit excluding accruals for short-term incentive
compensation, a higher discretionary pension contribution and higher cash payments for income taxes. Within
working capital, changes to accounts receivable, inventories, accrued expenses and customer advances
favorably impacted cash flow, but were partially offset by changes in accounts payable. See further
discussion of operating cash flow under ME&T and Financial Products.

Total debt as of September 30, 2019 was $37.91 billion, an increase of $1.35 billion from year-end 2018.
Debt related to Financial Products increased $209 million. Debt related to ME&T increased $1.14 billion in
the first nine months of 2019, primarily due to the issuance of debt to finance a discretionary pension
contribution, which was partially offset by the impact of new accounting guidance on a previously failed
sale-leaseback transaction in Japan. In the first nine months of 2019, we repurchased $3.28 billion of
Caterpillar common stock.

We have three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility)
available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes. Based on
management's allocation decision, which can be revised from time to time, the portion of the Credit
Facility available to ME&T as of September 30, 2019 was $2.75 billion. Information on our Credit Facility
is as follows:

· In September 2019, we entered into a new 364-day facility. The 364-day facility of $3.15 billion (of
which $0.82 billion is available to ME&T) expires in September 2020.

· In September 2019, we amended and restated the 2015 three-year facility (as amended and restated, the
"three-year facility"). The three-year facility of $2.73 billion (of which $0.72 billion is available to
ME&T) expires in September 2022.

· In September 2019, we amended and restated the 2015 five-year facility (as amended and restated, the
"five-year facility"). The five-year facility of $4.62 billion (of which $1.21 billion is available to
ME&T) expires in September 2024.

At September 30, 2019, Caterpillar's consolidated net worth was $14.98 billion, which was above the $9.00
billion required under the Credit Facility. The consolidated net worth is defined as the consolidated
shareholders' equity including preferred stock but excluding the pension and other postretirement benefits
balance within Accumulated other comprehensive income (loss).

At September 30, 2019, Cat Financial's covenant interest coverage ratio was 1.62 to 1. This is above the
1.15 to 1 minimum ratio calculated as (1) profit excluding income taxes, interest expense and net
gain/(loss) from interest rate derivatives to (2) interest expense calculated at the end of each calendar
quarter for the rolling four quarter period then most recently ended, required by the Credit Facility.

In addition, at September 30, 2019, Cat Financial's six-month covenant leverage ratio was 8.01 to 1. This
is below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the
average of the leverage ratios determined on the last day of each of the six preceding calendar months and
(2) at each December 31, required by the Credit Facility.

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In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants
under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of
banks may terminate the commitments allocated to the party that does not meet its covenants. Additionally,
in such event, certain of Cat Financial's other lenders under other loan agreements where similar financial
covenants or cross default provisions are applicable may, at their election, choose to pursue remedies
under those loan agreements, including accelerating the repayment of outstanding borrowings. At September
30, 2019, there were no borrowings under the Credit Facility.

Our total credit commitments and available credit as of September 30, 2019 were:

September 30, 2019

(Millions of dollars) Consolidated Machinery, Financial
Credit lines available: Energy & Products
Transportation

Global credit $ 10,500 $ 2,751 $ 7,749
facilities..............
.......................
Other 4,685 - 4,685
external................
........................
...
Total credit lines 15,185 2,751 12,434
available...............
....................
Less: Commercial paper (3,444) - (3,444)
outstanding.............
...............
Less: Utilized (1,059) - (1,059)
credit..................
.....................
Available $ 10,682 $ 2,751 $ 7,931
credit..................
........................

The other external consolidated credit lines with banks as of September 30, 2019 totaled $4.69 billion.
These committed and uncommitted credit lines, which may be eligible for renewal at various future dates or

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have no specified expiration date, are used primarily by our subsidiaries for local funding requirements.
Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines.

We receive debt ratings from the major credit rating agencies. Moody's currently rates our debt as "low-A",
while Fitch and S&P maintain a "mid-A" debt rating. To date, this split rating has not had a material
impact on our borrowing costs or our overall financial health. However, a downgrade of our credit ratings
by any of the major credit rating agencies would result in increased borrowing costs and could make access
to certain credit markets more difficult. In the event economic conditions deteriorate such that access to
debt markets becomes unavailable, ME&T's operations would rely on cash flow from operations, use of
existing cash balances, borrowings from Cat Financial and access to our Credit Facility. Our Financial
Products' operations would rely on cash flow from its existing portfolio, existing cash balances, access to
our Credit Facility and other credit line facilities of Cat Financial and potential borrowings from
Caterpillar. In addition, we maintain a support agreement with Cat Financial, which requires Caterpillar to
remain the sole owner of Cat Financial and may, under certain circumstances, require Caterpillar to make
payments to Cat Financial should Cat Financial fail to maintain certain financial ratios.

Machinery, Energy & Transportation

Net cash provided by operating activities was $2.63 billion in the first nine months of 2019, compared with
$3.88 billion for the same period in 2018. The decrease was primarily due to lower profit excluding
accruals for short-term incentive compensation expense, higher cash payments for income taxes and a higher
discretionary pension contribution, which was partially offset by favorable working capital. Within working
capital, inventory grew at a slower rate during the first nine months of 2019 compared to the same period
of 2018, which positively impacted cash flow. However, during the third quarter of 2019, material purchases
have declined due to our inventory reduction efforts resulting in lower accounts payable. In addition,
changes to accrued expenses, customer advances and accounts receivable favorably impacted cash flow.

Net cash provided by investing activities in the first nine months of 2019 was $138 million, compared with
net cash used of $836 million in the first nine months of 2018. The change was primarily due to decreased
ME&T lending activity with Financial Products during 2019 and the acquisitions of ECM S.p.A. and Downer
Freight Rail in the first nine months of 2018.

Net cash used for financing activities during the first nine months of 2019 was $3.32 billion, compared
with net cash used of $3.13 billion in the same period of 2018. In the first nine months of 2019, we
repurchased $3.28 billion of Caterpillar common stock, an increase of $1.28 billion compared to the first
nine months of 2018. Additionally, proceeds from common stock issued from stock options exercised decreased
$230 million and dividends paid increased $120 million in the first nine months of 2019 compared to the
prior period. This activity was mostly offset by an increase in debt proceeds of $1.43 billion to finance a
discretionary pension contribution in the first nine months of 2019.

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While our short-term priorities for the use of cash may vary from time to time as business needs and
conditions dictate, our long­term 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. Additional
information on cash deployment is as follows:

Strong financial position - Our top priority is to maintain a strong financial position in support of a
mid-A rating. We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow
and margins which align with our cash deployment actions and the various methodologies used by the major
credit rating agencies.

Operational excellence and commitments - Capital expenditures were $730 million during the first nine
months of 2019, compared to $845 million for the same period in 2018. We expect ME&T's capital expenditures
in 2019 to be about $1.2 billion. We made $1.77 billion of contributions to our pension and other
postretirement benefit plans during the first nine months of 2019, including a $1.5 billion discretionary
U.S. pension plan contribution made in September 2019. We currently anticipate full-year 2019 contributions
of approximately $1.83 billion. In comparison, we made $1.29 billion of contributions to our pension and
other postretirement benefit plans during the first nine months of 2018, including a $1.0 billion
discretionary contribution made to our U.S. pension plans in September 2018.

Fund strategic growth initiatives and return capital to shareholders - We intend to utilize our liquidity
and debt capacity to fund targeted investments that drive long-term profitable growth focused in the areas
of expanded offerings and services, including acquisitions.

As part of our new capital allocation strategy, ME&T free cash flow is a liquidity measure we will use
going forward to determine the cash generated and available for financing activities including debt
repayments, dividends and share repurchases. We define ME&T free cash flow as cash from ME&T operations
excluding discretionary pension and other postretirement benefit plan contributions less capital
expenditures. A goal of our new capital allocation strategy is to return substantially all ME&T free cash
flow to shareholders in the form of dividends and share repurchases, while maintaining our mid-A rating.

Our share repurchase plans are subject to the company's cash deployment priorities and are evaluated on an
ongoing basis considering the financial condition of the company and the economic outlook, corporate cash
flow, the company's liquidity needs, and the health and stability of global credit markets. The timing and
amount of future repurchases may vary depending on market conditions and investing priorities. In July
2018, the Board of Directors approved an authorization to repurchase up to $10 billion of Caterpillar
common stock (the 2018 Authorization) effective January 1, 2019, with no expiration. In the first nine
months of 2019, we repurchased $3.28 billion of Caterpillar common stock, with $6.72 billion remaining
under the 2018 Authorization as of September 30, 2019. Our basic shares outstanding as of September 30,
2019 were approximately 553 million.

Each quarter, our Board of Directors reviews the company's dividend for the applicable quarter. The Board
evaluates the financial condition of the company and considers the economic outlook, corporate cash flow,
the company's liquidity needs, and the health and stability of global credit markets to determine whether
to maintain or change the quarterly dividend. Dividends totaled $1.56 billion in the first nine months of
2019, representing 86 cents per share paid in each of the first and second quarters and $1.03 per share
paid in the third quarter.

Financial Products

Financial Products operating cash flow was $1.18 billion in the first nine months of 2019, compared with
$1.08 billion for the same period a year ago. Net [1] cash used for investing activities was $101 million
for the first nine months of 2019, compared with cash used of $2.00 billion for the same period in 2018.
The change was primarily due to the impact of net intercompany purchased receivables and higher collections
of finance receivables. Net [2] cash used for financing activities was $433 million for the first nine
months of 2019, compared with cash provided by financing activities of $846 million for the same period in
2018. The change was primarily due to lower portfolio funding requirements.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Part I, Item 1. Note 2 - "New accounting
guidance." CRITICAL ACCOUNTING POLICIES

For a discussion of the company's critical accounting policies, see Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations in our 2018 Annual Report on Form
10-K. There have been no significant changes to our critical accounting policies since our 2018 Annual
Report on Form 10-K.

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OTHER MATTERS

Environmental and Legal Matters

The Company is regulated by federal, state and international environmental laws governing its use,
transport and disposal of substances and control of emissions. In addition to governing our manufacturing
and other operations, these laws often impact the development of our products, including, but not limited
to, required compliance with air emissions standards applicable to internal combustion engines. We have
made, and will continue to make, significant research and development and capital expenditures to comply
with these emissions standards.

We are engaged in remedial activities at a number of locations, often with other companies, pursuant to
federal and state laws. When it is probable we will pay remedial costs at a site, and those costs can be
reasonably estimated, the investigation, remediation, and operating and maintenance costs are accrued
against our earnings. Costs are accrued based on consideration of currently available data and information
with respect to each individual site, including available technologies, current applicable laws and
regulations, and prior remediation experience. Where no amount within a range of estimates is more likely,
we accrue the minimum. Where multiple potentially responsible parties are involved, we consider our

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proportionate share of the probable costs. In formulating the estimate of probable costs, we do not
consider amounts expected to be recovered from insurance companies or others. We reassess these accrued
amounts on a quarterly basis. The amount recorded for environmental remediation is not material and is
included in Accrued expenses. We believe there is no more than a remote chance that a material amount for
remedial activities at any individual site, or at all the sites in the aggregate, will be required.

On January 7, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central
District of Illinois. The subpoena requested documents and information from the Company relating to, among
other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including
undistributed profits of non-U.S. subsidiaries and the movement of cash among U.S. and non-U.S.
subsidiaries). The Company has received additional subpoenas relating to this investigation requesting
additional documents and information relating to, among other things, the purchase and resale of
replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, dividend distributions of
certain non-U.S. Caterpillar subsidiaries, and Caterpillar SARL (CSARL) and related structures. On March
2-3, 2017, agents with the Department of Commerce, the Federal Deposit Insurance Corporation and the
Internal Revenue Service executed search and seizure warrants at three facilities of the Company in the
Peoria, Illinois area, including its former corporate headquarters. The warrants identify, and agents
seized, documents and information related to, among other things, the export of products from the United
States, the movement of products between the United States and Switzerland, the relationship between
Caterpillar Inc. and CSARL, and sales outside the United States. It is the Company's understanding that the
warrants, which concern both tax and export activities, are related to the ongoing grand jury
investigation. The Company is continuing to cooperate with this investigation. The Company is unable to
predict the outcome or reasonably estimate any potential loss; however, we currently believe that this
matter will not have a material adverse effect on the Company's consolidated results of operations,
financial position or liquidity.

On March 20, 2014, Brazil's Administrative Council for Economic Defense (CADE) published a Technical
Opinion which named 18 companies and over 100 individuals as defendants, including two subsidiaries of
Caterpillar Inc., MGE - Equipamentos e Serviços Ferroviários Ltda. (MGE) and Caterpillar Brasil Ltda. The
publication of the Technical Opinion opened CADE's official administrative investigation into allegations
that the defendants participated in anticompetitive bid activity for the construction and maintenance of
metro and train networks in Brazil. While companies cannot be held criminally liable for anticompetitive
conduct in Brazil, criminal charges have been brought against one current employee of MGE and two former
employees of MGE involving the same conduct alleged by CADE. On July 8, 2019, CADE found MGE, one of its
current employees and two of its former employees liable for anticompetitive conduct. CBL was dismissed
from the proceeding without any finding of liability. MGE intends to appeal CADE's findings. We currently
believe that this matter will not have a material adverse effect on the Company's consolidated results of
operations, financial position or liquidity.

In addition, we are involved in other unresolved legal actions that arise in the normal course of business.
The most prevalent of these unresolved actions involve disputes related to product design, manufacture and
performance liability (including claimed asbestos exposure), contracts, employment issues, environmental
matters, intellectual property rights, taxes (other than income taxes) and securities laws. The aggregate
range of reasonably possible losses in excess of accrued liabilities, if any, associated with these
unresolved legal actions is not material. In some cases, we cannot reasonably estimate a range of loss
because there is insufficient information regarding the matter. However, we believe there is no more than a
remote chance that any liability arising from these matters would be material. Although it is not possible
to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will
not individually or in the aggregate have a material adverse effect on our consolidated results of
operations, financial position or liquidity.

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Retirement Benefits

We recognize mark-to-market gains and losses immediately through earnings upon the remeasurement of our
pension and OPEB plans. Mark-to-market gains and losses represent the effects of actual results differing
from our assumptions and the effects of changing assumptions. We will record a mark-to-market adjustment as
of the measurement date, December 31, 2019. Based on market conditions as of September 30, 2019, we would
recognize a decrease to the funded status of our plans of approximately $1.3 billion. This would result in
an increase in our Liability for postemployment benefits and the recognition of a net mark-to-market loss
in earnings of approximately $1.3 billion pre-tax, $1.0 billion net of tax or $1.83 per share. The loss
would be primarily due to lower discount rates at September 30, 2019 (approximately 3.1 percent for our
U.S. pension plans) as compared to the discount rates used at December 31, 2018 (approximately 4.2 percent
for our U.S. pension plans), partially offset by gains resulting from higher than expected returns on plan
assets. It is difficult to predict the December 31, 2019 adjustment amount, as it is dependent on several
factors including the discount rate, actual returns on plan assets and other actuarial assumptions.

Order Backlog

At the end of the third quarter of 2019, the dollar amount of backlog believed to be firm was approximately
$14.6 billion, about $400 million lower than the second quarter of 2019. The order backlog decreased in
Resource Industries and Construction Industries, while Energy & Transportation was about flat. We believe
that dealers have placed fewer machine orders as we expect dealers to reduce their inventory levels based
on global economic uncertainty. Compared with the third quarter of 2018, the order backlog decreased about
$2.7 billion with decreases across the three primary segments. Of the total backlog at September 30, 2019,
approximately $3.8 billion was not expected to be filled in the following twelve months.

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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 for
these items to be considered in isolation or as a substitute for the related GAAP measures.

We believe it is important to separately quantify the profit impact of several significant items in order
for our results to be meaningful to our readers. These items consist of (i) a discrete tax benefit related
to U.S. tax reform in the first quarter of 2019, (ii) 2018 restructuring costs, which were incurred to
generate longer-term benefits and (iii) a net tax benefit to adjust deferred tax balances in the third
quarter of 2018. We do not consider these items indicative of earnings from ongoing business activities and
believe the non-GAAP measures will provide investors with useful perspective on underlying business results
and trends and aids with assessing our period-over-period results. In addition, we provide a calculation of
ME&T free cash flow as we believe it is an important measure for investors to determine the cash generation
available for financing activities including debt repayments, dividends and share repurchases.

Reconciliations of adjusted operating profit margin to the most directly comparable GAAP measure, operating
profit as a percent of sales and revenues are as follows:

Three Months Ended September

30

Nine Months Ended September

30

2019 2018 2019 2018
Operating profit as a percent of total 15.8% 15.8% 15.8% 15.9%
sales and revenues.....
Restructuring costs 1 - 0.8% - 0.7%
Adjusted operating profit 15.8% 16.6% 15.8% 16.6%
margin....................

1 2019 restructuring costs are not material.

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

Three Months
Ended Nine
Months Ended
September

September 30
30
2019 2019
2018 2018
Profit per share - $ 2.66 8.75 $
diluted.......................... $ 8.45
2.88
$
Per share U.S. tax reform $ - $ - (0.31) $
impact..................... $ -
Per share restructuring costs1 - $ - $ 0.37
0.14
$

.............................................$
Per share deferred tax balance $ - $ - $

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adjustment............... (0.16 (0.16)
) $
Adjusted profit per $ 2.66 8.44 $
share.......................... $ 8.66
2.86
$

1 At estimated annual tax rate of 24 percent. 2019 restructuring costs are not material.

Reconciliations of ME&T free cash flow to the most directly comparable GAAP measure, net cash provided by
operating activities are as follows:

Nine
Months
Ended
Millions of dollars September
30
2019 2018
ME&T net cash provided by operating activities 1 $
3,880

........................................................................$
2,632
ME&T discretionary pension $ $
contributions........................................ 1,500 1,000
ME&T capital $ $
expenditures.................................................. (730) (845)
ME&T free cash flow...................................................... $ $
3,402 4,035

1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by
operating activities on pages 94-95.

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Supplemental Consolidating Data

We are providing supplemental consolidating data for the purpose of additional analysis. The data has been
grouped as follows:

Consolidated - Caterpillar Inc. and its subsidiaries.

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,
manufacturing and marketing of our products. Financial Products' information relates to the financing to
customers and dealers for the purchase and lease of Caterpillar and other equipment. The nature of these
businesses is different, especially with regard to the financial position and cash flow items. Caterpillar
management utilizes this presentation internally to highlight these differences. We also believe this
presentation will assist readers in understanding our business.

Financial Products - Our finance and insurance subsidiaries, primarily Cat Financial and Insurance
Services.

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

Pages 88 to 95 reconcile Machinery, Energy & Transportation with Financial Products on the equity basis to
Caterpillar Inc. consolidated financial information.

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Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended September 30, 2019
(Unaudited)
(Millions of dollars)

Sales and revenues: Consolidated Supplemental Consolidating Data
Machinery, Financial Consolidating
Energy & Products Adjustments
Transportation
1

Sales of Machinery, Energy & $ 11,974 $ 11,974 $ - $
Transportation..........
Revenues of Financial 784 - 920 (136) 2
Products....................
Total sales and 12,758 11,974 920 (136)
revenues........................
Operating costs:
Cost of goods 8,569 8,569 -
sold............................
Selling, general and administrative 1,251 1,095 163 (7) 3
expenses...........
Research and development 431 431 -
expenses................
Interest expense of Financial 189 - 198 (9) 4
Products...............
Other operating (income) 298 (9) 320 (13) 3
expenses.................
Total operating 10,738 10,086 681 (29)
costs...........................
Operating 2,020 1,888 239 (107)
profit................................
Interest expense excluding Financial 103 103
Products..........
Other income 88 (27) 8 107 5
(expense).........................
Consolidated profit before 2,005 1,758 247
taxes.....................
Provision (benefit) for income 518 457 61
taxes.................
Profit of consolidated 1,487 1,301 186
companies...................
Equity in profit (loss) of unconsolidated 7 7
affiliated companies
Equity in profit of Financial Products' - 180 (180) 6
subsidiaries.......
Profit of consolidated and affiliated 1,494 1,488 186 (180)
companies...........
Less: Profit (loss) attributable to (6) 6 -
noncontrolling interests......
Profit 7 $ 1,494 $ 180 $ (180)

............................................
$ 1,494

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.

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Caterpillar Inc.
Supplemental Data for Results of Operations
For the Nine Months Ended September 30, 2019
(Unaudited)
(Millions of dollars)

Sales and revenues: Consolidated Supplemental
Consolidating Data
Machinery, Financial
Energy & Consolida
Transportation ting
1

Products
Adjustmen
ts

Sales of Machinery, Energy & $ 38,369 $ 38,369 $ - $
Transportation..........
Revenues of Financial 2,287 - 2,684
Products................... (397) 2
Total sales and 40,656 38,369 2,684
revenues........................ (397)
Operating costs:
Cost of goods 27,513 27,515 (2) 3
sold............................
Selling, general and administrative 3,879 3,324 564 (9) 3
expenses...........
Research and development 1,307 1,307 - -
expenses................
Interest expense of Financial 571 - 599 (28)
Products............... 4
Other operating (income) 946 2 974 (30)
expenses................. 3
Total operating 34,216 32,148 2,137
costs........................... (69)
Operating 6,440 6,221 547 (328)
profit................................
Interest expense excluding Financial 309 318 - (9) 4
Products..........
Other income 316 (71) 68 319 5
(expense).........................
Consolidated profit before 6,447 5,832 615
taxes.....................
Provision (benefit) for income 1,470 1,294 176

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taxes.................
Profit of consolidated 4,977 4,538 439
companies...................
Equity in profit (loss) of unconsolidated 20 20
affiliated companies
Equity in profit of Financial Products' - 422 (422) 6
subsidiaries.......
Profit of consolidated and affiliated 4,997 4,980 439 (422)
companies...........
Less: Profit (loss) attributable to 2 (15) 17 -
noncontrolling interests......
Profit 7 $ 4,995 $ 422 $
(422)

............................................
$ 4,995

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.

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Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended September 30, 2018
(Unaudited)
(Millions of dollars)

Sales and revenues: Consolidated Supplemental Consolidating Data
Machinery, Financial Consolidating
Energy & Products Adjustments
Transportation
1

Sales of Machinery, Energy & $ 12,763 $ 12,763 $ - $
Transportation..........
Revenues of Financial 747 - 867 (120) 2
Products...................
Total sales and 13,510 12,763 867 (120)
revenues........................
Operating costs:
Cost of goods 9,022 9,022 -
sold............................
Selling, general and administrative 1,299 1,135 169
expenses...........
5) 3

Research and development 479 479
expenses................
Interest expense of Financial 185 - 194 (9) 4
Products...............
Other operating (income) 390 63 333
expenses.................
1) 3

Total operating 11,375 10,699 696 (20)
costs...........................
Operating 2,135 2,064 171 (100)
profit................................
Interest expense excluding Financial 102 114 - (12) 4
Products..........
Other income 102 19 88 5
(expense).........................
5)

Consolidated profit before 2,135 1,945 190
taxes.....................
Provision (benefit) for income 415 376 39
taxes.................
Profit of consolidated 1,720 1,569 151
companies...................
Equity in profit (loss) of unconsolidated 7 7
affiliated companies
Equity in profit of Financial Products' - 145 (145) 6
subsidiaries.......
Profit of consolidated and affiliated 1,727 1,721 151 (145)
companies...........
Less: Profit (loss) attributable to 6 -
noncontrolling interests......
1)

Profit 7 $ 1,727 $ 145 $ (145)

............................................
$ 1,727

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.

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Table of Contents

Caterpillar Inc.
Supplemental Data for Results of Operations
For the Nine Months Ended September 30, 2018
(Unaudited)
(Millions of dollars)

Sales and revenues: Consolidated Supplemental Consolidating Data
Machinery, Financial Consolidating
Energy & Products Adjustments
Transportation
1

Sales of Machinery, Energy & $ 38,192 $ 38,192 $ - $
Transportation..........
Revenues of Financial 2,188 - 2,527 (339) 2
Products...................
Total sales and 40,380 38,192 2,527 (339)
revenues........................
Operating costs:
Cost of goods 27,010 27,010 -
sold............................
Selling, general and administrative 4,015 3,445 581 (11) 3
expenses...........
Research and development 1,384 1,384 - -
expenses................
Interest expense of Financial 533 - 558 (25) 4
Products...............
Other operating (income) 1,028 100 949 (21) 3
expenses.................
Total operating 33,970 31,939 2,088 (57)
costs...........................
Operating 6,410 6,253 439 (282)
profit................................
Interest expense excluding Financial 305 337 - 4
Products..........

(32)
Other income 350 76 24 250 5
(expense).........................
Consolidated profit before 6,455 5,992 463
taxes.....................
Provision (benefit) for income 1,377 1,274 103
taxes.................
Profit of consolidated 5,078 4,718 360
companies...................
Equity in profit (loss) of unconsolidated 21 21
affiliated companies
Equity in profit of Financial Products' - 345 (345) 6
subsidiaries.......
Profit of consolidated and affiliated 5,099 5,084 360 (345)
companies...........
Less: Profit (loss) attributable to (15) 15 -
noncontrolling interests......
Profit 7 $ 5,099 $ 345 $ (345)

............................................
$ 5,099

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.

91

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Caterpillar Inc.
Supplemental Data for Financial Position
At September 30, 2019
(Unaudited)
(Millions of dollars)

Assets Consolidated Supplemental Consolidating Data

Current assets:
Machinery, Financial Consolidating

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DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q -9-


Energy & Products Adjustments
Transportation
1

Cash and short-term $ 7,906 $ 6,380 $ 1,526 $ -
investments......................
Receivables - trade and 8,275 3,787 487 4,001 2
other........................ ,
3
Receivables - 9,192 - 14,107 (4,915) 3
finance.............................
Prepaid expenses and other current 1,607 1,226 448 (67) 4
assets................
Inventories.................................... 12,180 12,180 - -
Total current 39,160 23,573 16,568 (981)
assets..................................
Property, plant and equipment - 12,842 8,499 4,343 -
net.......................
Long-term receivables - trade and 1,193 313 212 668 2
other.................... ,
3
Long-term receivables - 12,412 - 13,091 (679) 3
finance.........................
Investments in Financial Products - 3,968 - (3,968) 5
subsidiaries................
Noncurrent deferred and refundable income 1,372 1,927 118 (673) 6
taxes..............
Intangible 1,630 1,630 - -
assets....................................
Goodwill........................................ 6,142 6,142 - -
Other 3,242 1,577 1,737 (72) 7
assets.......................................
Total $ 77,993 $ 47,629 $ 36,069 $ (5,705)
assets.......................................
Liabilities
Current liabilities:
Short-term $ 4,268 $ - $ 4,268 $ -
borrowings.............................
Short-term borrowings with consolidated - - 779 (779) 8
companies.........
Accounts payable................................ 6,141 6,083 193 (135) 9
Accrued expenses................................ 3,727 3,337 390 -
Accrued wages, salaries and employee 1,518 1,477 41 -
benefits.............
Customer advances............................... 1,309 1,309 - -
Dividends payable............................... - - - -
Other current 2,188 1,734 536 (82) 6
liabilities............................ ,
1
0
Long-term debt due within one 8,050 25 8,025 -
year....................
Total current 27,201 13,965 14,232 (996)
liabilities...............................
8
Long-term debt due after one 25,588 9,145 16,454 (11)
year........................
Liability for postemployment 5,900 5,900 - -
benefits.....................
Other 4,311 3,626 1,415 (730) 6
liabilities....................................
Total 63,000 32,636 32,101 (1,737)
liabilities.....................................
Commitments and contingencies
Shareholders' equity
Common 5,951 5,951 919 (919) 5
stock.....................................
Treasury (23,693) (23,693) - -
stock.....................................
Profit employed in the 34,477 34,477 3,869 (3,869) 5
business..........................
Accumulated other comprehensive income (1,783) (1,783) (985) 985 5
(loss)..............
Noncontrolling 41 41 165 (165) 5
interests...............................
Total shareholders' 14,993 14,993 3,968 (3,968)
equity.............................
Total liabilities and shareholders' $ 77,993 $ 47,629 $ 36,069 $ (5,705)
equity...................

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

2 Elimination of receivables between Machinery, Energy & Transportation and Financial Products.

3 Reclassification of Machinery, Energy & Transportation's trade receivables purchased by Financial
Products and Financial Products' wholesale inventory receivables.

4 Elimination of Machinery, Energy & Transportation's insurance premiums that are prepaid to Financial
Products.

5 Elimination of Financial Products' equity which is accounted for by Machinery, Energy & Transportation on
the equity basis.

6 Reclassification reflecting required netting of deferred tax assets / liabilities by taxing jurisdiction.

7 Elimination of other intercompany assets between Machinery, Energy & Transportation and Financial
Products.

8 Elimination of debt between Machinery, Energy & Transportation and Financial Products.

9 Elimination of payables between Machinery, Energy & Transportation and Financial Products.

10 Elimination of prepaid insurance in Financial Products' other liabilities.

92

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Caterpillar Inc.
Supplemental Data for Financial Position
At December 31, 2018
(Unaudited)
(Millions of dollars)

Assets Consolidated Supplemental Consolidating
Data

Current assets:
Machinery, Financial Consolidating
Energy & Products Adjustments
Transportation
1

Cash and short-term $ 7,857 $ 6,968 $ 889 $ -
investments..........................
Receivables - trade and 8,802 4,677 401 2,3
other............................

3,724
Receivables - 8,650 - 13,989 3
finance.................................

(5,339)
Prepaid expenses and other current 1,765 1,227 583 4
assets....................

(45)
Inventories........................................ 11,529 11,529 - -
Total current 38,603 24,401 15,862 (1,660)
assets.....................................
Property, plant and equipment - 13,574 9,085 4,489 -
net..........................
Long-term receivables - trade and 1,161 302 204 2,3
other........................

655
Long-term receivables - 13,286 - 13,951 3
finance.............................

(665)
Investments in Financial Products - 3,672 - 5
subsidiaries...................

(3,672)
Noncurrent deferred and refundable income 1,439 2,015 116 6
taxes.................

(692)
Intangible assets 1,897 1,897 - -
.......................................

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DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q -10-


Goodwill............................................ 6,217 6,217 - -
Other 2,332 886 1,446 -
assets..........................................
Total $ 78,509 $ 48,475 $ 36,068 $ (6,034)
assets...........................................
Liabilities
Current liabilities:
Short-term $ 5,723 $ - $ 5,723 $ -
borrowings................................
Short-term borrowings with consolidated - - 1,500 7
companies.............

(1,500)
Accounts payable.................................... 7,051 6,972 194 8

(115)
Accrued expenses................................... 3,573 3,212 361 -
Accrued wages, salaries and employee 2,384 2,350 34 -
benefits................
Customer advances................................... 1,243 1,243 - -
Dividends payable................................... 495 495 - -
Other current 1,919 1,532 433 6,9
liabilities................................

(46)
Long-term debt due within one 5,830 10 5,820 -
year........................
Total current 28,218 15,814 14,065 (1,661)
liabilities...................................
7
Long-term debt due after one 25,000 8,015 16,995 (10)
year............................
Liability for postemployment 7,455 7,455 - -
benefits.........................
Other 3,756 3,111 1,336 6
liabilities........................................

(691)
Total 64,429 34,395 32,396 (2,362)
liabilities.........................................
Commitments and contingencies
Shareholders' equity
Common stock........................................ 5,827 5,827 919 5

(919)
Treasury (20,531) (20,531 - -
stock........................................ )
Profit employed in the 30,427 30,427 3,543 5
business.............................

(3,543)
Accumulated other comprehensive income (1,684) (1,684) (943) 5
(loss)..................

943
Noncontrolling 41 41 153 5
interests..................................

(153)
Total shareholders' 14,080 14,080 3,672 (3,672)
equity................................
Total liabilities and shareholders' $ 78,509 $ 48,475 $ 36,068 $ (6,034)
equity.......................

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

2 Elimination of receivables between Machinery, Energy & Transportation and Financial Products.

3 Reclassification of Machinery, Energy & Transportation's trade receivables purchased by Financial
Products and Financial Products' wholesale inventory receivables.

4 Elimination of Machinery, Energy & Transportation's insurance premiums that are prepaid to Financial
Products.

5 Elimination of Financial Products' equity which is accounted for by Machinery, Energy & Transportation on
the equity basis.

6 Reclassification reflecting required netting of deferred tax assets / liabilities by taxing jurisdiction.

7 Elimination of debt between Machinery, Energy & Transportation and Financial Products.

8 Elimination of payables between Machinery, Energy & Transportation and Financial Products.

9 Elimination of prepaid insurance in Financial Products' other liabilities.

93

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Caterpillar Inc.
Supplemental Data for Cash Flow
For the Nine Months Ended September 30, 2019
(Unaudited)
(Millions of dollars)

Cash flow from operating activities: Consolidated Supplemental Consolidating
Data
Machinery, Financial Consolidating
Energy & Products Adjustments
Transportation
1

Profit of consolidated and affiliated $ 4,997 $ 4,980 $ 439 2
companies....................

$ (422)
Adjustments for non-cash items:
Depreciation and 1,933 1,283 650 -
amortization............................
Undistributed profit of Financial - (422) - 3
Products....................

422
Other............................................ 627 395 (111) 4

343
Changes in assets and liabilities, net of
acquisitions and divestitures:
Receivables - trade and 427 125 (16) 4,
other............................

318
Inventories........................................ (676) (702) - 4

26
Accounts payable.................................... (669) (651) 6 4

(24)
4
Accrued expenses.................................... 114 105 11 (2)
Accrued wages, salaries and employee (858) (865) 7
benefits.................
Customer advances................................... 169 171 - 4

(2) 4
Other assets - 3 (47) 47 3
net....................................
Other liabilities - (1,589) (1,740) 144 4
net..................................

7
Net cash provided by (used for) operating 4,478 2,632 1,177 669
activities.................
Cash flow from investing activities:
Capital expenditures - excluding equipment leased to (723) (709) (14) -
others...........
Expenditures for equipment leased to others (1,133) (21) (1,151) 4
.....................

39
Proceeds from disposals of leased assets and 812 149 766 4
property, plant and equipment.

(103)
Additions to finance (9,453) - (10,633) 5
receivables.............................

1,180
Collections of finance 9,144 - 10,166 5
receivables............................

(1,022)
Net intercompany purchased - - 763 5

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DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q -11-


receivables........................

(763)
Proceeds from sale of finance 183 - 183 -
receivables.......................
Net intercompany - 721 1 6
borrowings...............................

(722)
Investments and acquisitions (net of cash (6) (6) - -
acquired).................
Proceeds from sale of businesses and investments (net 3 3 - -
of cash sold)......
Proceeds from sale of 281 16 265 -
securities..............................
Investments in (425) (16) (409) -
securities..................................
Other - (37) 1 (38) -
net...........................................
Net cash provided by (used for) investing (1,354) 138 (101) (1,391)
activities..................
Cash flow from financing activities:
Dividends (1,564) (1,564)
paid.........................................
Common stock issued, including treasury shares 59 59
reissued.............
Common shares (3,283) (3,283)
repurchased................................
Net intercompany (1) (721) 6
borrowings...............................

722
Proceeds from debt issued (original maturities 8,827 1,479 7,348 -
greater than three months)..
Payments on debt (original maturities greater than (6,062) (8) (6,054) -
three months)........
Short-term borrowings - net (original maturities (1,006) - (1,006) -
three months or less) ....
Other - (2) (2) - -
net...........................................
Net cash provided by (used for) financing (3,031) (3,320) (433) 722
activities.................
Effect of exchange rate changes on (47) (38) (9) -
cash.........................
Increase (decrease) in cash and short-term 46 (588) 634 -
investments and restricted

cash.................................................
Cash and short-term investments and restricted cash 7,890 6,994 896 -
at beginning of period
Cash and short-term investments and restricted cash $ 7,936 $ 6,406 $ 1,530 $ -
at end of period......

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.

94

Table of Contents

Caterpillar Inc.
Supplemental Data for Cash Flow
For the Nine Months Ended September 30, 2018
(Unaudited)
(Millions of dollars)

Cash flow from operating activities: Consolidated Supplemental Consolidating
Data
Machinery, Financial Consolidating
Energy & Products Adjustments
Transportation
1

Profit of consolidated and affiliated $ 5,099 $ 5,084 $ 360 $ (345) 2
companies...................
Adjustments for non-cash items:
Depreciation and 2,065 1,410 655 -
amortization...........................
Undistributed profit of Financial - (345) - 345 3
Products....................
Other............................................ 630 327 36 267 4
Changes in assets and liabilities, net of
acquisitions and divestitures:
Receivables - trade and (725) 19 (33) (711) 4
other............................ ,
5
Inventories........................................ (1,822) (1,774) - (48) 4
Accounts payable.................................... 496 544 (55) 7 4
Accrued expenses.................................... (32) (63) 31 -
Accrued wages, salaries and employee (418) (403) (15) -
benefits................
Customer advances................................... 59 59 - -
Other assets - 394 343 (9) 60 4
net....................................
Other liabilities - (1,271) (1,321) 110 (60) 4
net..................................
Net cash provided by (used for) operating 4,475 3,880 1,080 (485)
activities.................
Cash flow from investing activities:
Capital expenditures - excluding equipment leased to (921) (822) (99) -
others..........
Expenditures for equipment leased to (1,208) (23) (1,258) 73 4
others.....................
Proceeds from disposals of leased assets and 732 122 632 (22) 4
property, plant and equipment
Additions to finance (9,092) - (10,151) 1,059 5
receivables............................. ,
7
Collections of finance 8,032 - 9,135 (1,103) 5
receivables............................
Net intercompany purchased - - (484) 484 5
receivables.......................
Proceeds from sale of finance 416 - 416 -
receivables.......................
Net intercompany - 66 - (66) 6
borrowings..............................
Investments and acquisitions (net of cash (357) (357) - -
acquired)................
7
Proceeds from sale of businesses and investments 14 20 - (6)
(net of cash sold)......
Proceeds from sale of 363 154 209 -
securities.............................
Investments in (417) (21) (396) -
securities..................................
Other - 24 25 (2) 1 8
net...........................................
Net cash provided by (used for) investing (2,414) (836) (1,998) 420
activities.................
Cash flow from financing activities:
Dividends (1,444) (1,444) -
paid........................................
Common stock issued, including treasury shares 292 292 1 (1) 8
reissued............
Common shares (2,000) (2,000) - -
repurchased...............................
Net intercompany - - (66) 66 6
borrowings..............................
Proceeds from debt issued (original maturities 7,073 47 7,026 -
greater than three months)..
Payments on debt (original maturities greater than (5,642) (6) (5,636) -
three months)........
Short-term borrowings - net (original maturities (465) 14 (479) -
three months or less)....
Other - (32) (32) - -

(MORE TO FOLLOW) Dow Jones Newswires

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DJ (Continued-2) Caterpillar Inc.: Files Form 10-Q -12-


net...........................................
Net cash provided by (used for) financing (2,218) (3,129) 846 65
activities.................
Effect of exchange rate changes on (117) (106) (11) -
cash.........................
Increase (decrease) in cash and short-term (274) (191) (83) -
investments and restricted

cash................................................
Cash and short-term investments and restricted cash 8,320 7,416 904 -
at beginning of period..
Cash and short-term investments and restricted cash $ 8,046 $ 7,225 $ 821 $ -
at end of period......

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 proceeds received from Financial Products related to Machinery, Energy & Transportation's
sale of businesses and investments.

8 Elimination of change in investment and common stock related to Financial Products.

95

Table of Contents

Forward-looking Statements

Certain statements in this Form 10-Q 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," "forecast," "target,"
"guide," "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) international trade policies and their impact on
demand for our products and our competitive position, including the imposition of new tariffs or changes in
existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our
customers' needs; (vii) the impact of the highly competitive environment in which we operate on our sales
and pricing; (viii) information technology security threats and computer crime; (ix) inventory management
decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay
in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi)
union disputes or other employee relations issues; (xii) adverse effects of unexpected events including
natural disasters; (xiii) disruptions or volatility in global financial markets limiting our sources of
liquidity or the liquidity of our customers, dealers and suppliers; (xiv) 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; (xv) our Financial Products segment's
risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity
conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial's customers;
(xviii) currency fluctuations; (xix) our or Cat Financial's compliance with financial and other restrictive
covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual
violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure,
including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or
government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv)
compliance with environmental laws and regulations; and (xxvi) other factors described in more detail in
Caterpillar's Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this Item is incorporated by reference from Note 5 - "Derivative financial
instruments and risk management" included in Part I, Item 1 and Management's Discussion and Analysis
included in Part I, Item 2 of this Form 10-Q.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of the company's management,
including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the
design and operation of the company's disclosure controls and procedures, as that term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by
this quarterly report. Based on that evaluation, the CEO and CFO concluded that the company's disclosure
controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in internal control over financial reporting

During the third quarter of 2019, there has been no change in the company's internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect, the company's
internal control over financial reporting.

96

Table of Contents

PART II. OTHER INFORMATION
Item 1. Legal Proceedings

The information required by this Item is incorporated by reference from Note 14 - "Environmental and legal
matters" included in Part I, Item 1 of this Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities

Approximate
Dollar
Total Total Value of
Number Number Shares that
of Shares may yet be
Purchased Purchased
of Shares Average as Part under the
Price of Program
Publicly
Period Purchased2 Paid per Announced (in
,3,4 Share2,3,4 Program billions)1
July 1-31, 6,619,309 $ 126.20 6,619,309 $ 7.128
2019......................
August 1-31, 2,437,000 $ 119.45 2,437,000 $ 6.837
2019....................
September 1-30, 1,279,101 $ 124.72 1,279,101 $ 6.677
2019.................
Total........................... 10,335,410 $ 124.43 10,335,41
0

1 In July 2018, the Board approved a share repurchase authorization of up to $10.0 billion of Caterpillar
common stock effective January 1, 2019, with no expiration (the 2018 Authorization). As of September 30,
2019, approximately $6.7 billion remained available under the 2018 Authorization.

2 During the second quarter of 2019, we entered into an accelerated stock repurchase (ASR) with a
third-party financial institution to purchase $750 million of our common stock. In July 2019, upon final
settlement of the ASR, we received an additional 0.8 million shares at an average price per share of
$128.29.

3 During the third quarter of 2019, we entered into an ASR with a third-party financial institution to
purchase $500 million of our common stock. In July

2019, upon payment of the $500 million to the financial institution, we received 3.4 million shares. In
August 2019, upon final settlement of the ASR, we received an additional 0.8 million shares. In total, we
repurchased 4.2 million shares under this ASR at an average price per share of $119.23.

4 In July, August and September of 2019, we repurchased 2.4 million, 1.6 million and 1.3 million shares,
respectively, for an aggregate of $678 million in open market transactions at an average price per share of
$135.46, $119.56 and $124.72, respectively.

Non-U.S. Employee Stock Purchase Plans

As of September 30, 2019, we had 26 employee stock purchase plans (the "EIP Plans") that are administered
outside the United States for our non-U.S. employees, which had approximately 12,000 active participants in
the aggregate. During the third quarter of 2019, approximately 107,000 shares of Caterpillar common stock
were purchased by the EIP Plans pursuant to the terms of such plans.

97

Table of Contents

Item 6. Exhibits


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4.1 Form of 2.600% Senior Note due 2029 (incorporated by reference from Exhibit 4.1 to the Company's
Current Report on Form 8-K filed September 19, 2019).

4.2 Form of 3.250% Senior Note due 2049 (incorporated by reference from Exhibit 4.2 to the Company's
Current Report on Form 8-K filed September 19, 2019).

10.1 364-Day Credit Agreement (incorporated by reference from Exhibit 10.1 to the Company's Current Report
on Form 8-K filed September 10, 2019).

10.2 Local Currency Addendum to the 364-Day Credit Agreement (incorporated by reference from Exhibit 10.2
to the Company's Current Report on Form 8-K filed September 10, 2019).

10.3 Japan Local Currency Addendum to the 364-Day Credit Agreement (incorporated by reference from Exhibit
10.3 to the Company's Current Report on Form 8-K filed September 10, 2019).

10.4 Second Amended and Restated Three-Year Credit Agreement (incorporated by reference from Exhibit 10.4
to the Company's Current Report on Form 8-K filed September 10, 2019).

10.5 Local Currency Addendum to the Second Amendment and Restated Three-Year Credit Agreement (incorporated
by reference from Exhibit 10.5 to the Company's Current Report on Form 8-K filed September 10, 2019).

10.6 Japan Local Currency Addendum to the Second Amended and Restated Three-Year Credit Agreement

(incorporated by reference from Exhibit 10.6 to the Company's Current Report on Form 8-K filed September
10, 2019).

10.7 Second Amended and Restated Five-Year Credit Agreement (incorporated by reference from Exhibit 10.7 to
the Company's Current Report on Form 8-K filed September 10, 2019).

10.8 Local Currency Addendum to the Second Amended and Restated Five-Year Credit Agreement (incorporated by
reference from Exhibit 10.8 to the Company's Current Report on Form 8-K filed September 10, 2019).

10.9 Japan Local Currency Addendum to the Second Amended and Restated Five-Year Credit Agreement
(incorporated
by reference from Exhibit 10.9 to the Company's Current Report on Form 8-K filed September 10, 2019).

31.1 Certification of D. James Umpleby III, Chief Executive Officer of Caterpillar Inc., as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Andrew R.J. Bonfield, Chief Financial Officer of Caterpillar Inc., as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certification of D. James Umpleby III, Chief Executive Officer of Caterpillar Inc. and Andrew R.J.
Bonfield, Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document (the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document)

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive File (embedded within the Inline XBRL document and included in Exhibit 101)

98

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.

CATERPILLAR INC.

October 31, 2019 /s/ D. James Umpleby III Chairman & Chief Executive Officer

October 31, 2019

October 31, 2019

October 31, 2019

D. James Umpleby III

/s/ Andrew R.J. Bonfield

Andrew R.J. Bonfield

/s/ Suzette M. Long

Suzette M. Long

/s/ G. Michael Marvel

G. Michael Marvel

Chief Financial Officer

General Counsel & Corporate Secretary

Chief Accounting Officer

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, D. James Umpleby III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Caterpillar Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent function):

e) all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and

f) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.

October 31, 2019 /s/ D. James Umpleby III Chief Executive Officer

D. James Umpleby III

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Andrew R.J. Bonfield, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Caterpillar Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material

fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly

present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

g) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

h) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

i) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and

j) disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control

over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

k) all significant deficiencies and material weaknesses in the design or operation of internal control

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over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and

l) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.

October 31, 2019 /s/ Andrew R.J. Bonfield Chief Financial Officer

Andrew R.J. Bonfield

EXHIBIT 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Caterpillar Inc. (the "Company") on Form 10-Q for the period
ending September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

October 31, 2019 /s/ D. James Umpleby III Chief Executive Officer

D. James Umpleby III

October 31, 2019 /s/ Andrew R.J. Bonfield Chief Financial Officer

Andrew R.J. Bonfield

A signed original of this written statement required by Section 906 has been provided to Caterpillar Inc.
and will be retained by Caterpillar Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.

Fichier PDF dépôt réglementaire

Titre du document : Caterpillar Inc.: Files Form 10-Q FQE 30 Sept 2019
Document : http://n.eqs.com/c/fncls.ssp?u=XQXYUGHJXX [3]

Langue : Français
Entreprise : Caterpillar Inc.
510 Lake Cook Road, Suite 100
60015 Deerfield, Illinois
??tats-Unis
Téléphone : 224-551-4000
Internet : www.caterpillar.com
ISIN : US1491231015
Ticker Euronext : CATR
Catégorie AMF : Informations réglementées supplémentaires devant être
rendues publiques en vertu de la législation d'un état
membre / Information financière du troisième trimestre
EQS News ID : 902263

Fin du communiqué EQS News-Service

902263 31-Oct-2019 CET/CEST


1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=9fa28db4249ebec56eda6c820c646e84&application_id=902263&site_id=vwd&application_name=news
2: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=d0ed1eaf4ed0ecbb86542e2875c6047a&application_id=902263&site_id=vwd&application_name=news
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