Caterpillar Inc. - S25.q4cdn

7CONSTRUCTION INDUSTRIES(Millions of dollars)Segment SalesFourthQuarter 2018Total Sales 5,705SalesVolume PriceRealization(565) (86)InterSegmentCurrency (32) FourthQuarter 2019(2) 5,020 Change(685)%Change(12%)Sales by Geographic RegionFourthQuarter 2019North AmericaLatin America EAME2,249409FourthQuarter 2018 2,749374 Change c1,4751,480(5)—%External 685)(12%)Total Sales 5,020 5,705 Segment ProfitFourthQuarter 2019Segment ProfitSegment Profit Margin FourthQuarter 2018659 13.1 %845 14.8 %Change(186)(1.7pts)%Change(22%)Construction Industries’ total sales were 5.020 billion in the fourth quarter of 2019, a decrease of 685 million, or12%, compared with 5.705 billion in the fourth quarter of 2018. The decrease was due to lower sales volume,driven mostly by the impact from changes in dealer inventories. Dealers decreased inventories during the fourthquarter of 2019, compared with dealer inventories that were about flat during the fourth quarter of 2018.Unfavorable price realization also contributed to the decline in sales. In North America, sales decreased due to lower demand driven by the impact from changes in dealerinventories, while end-user demand was about flat. Dealers decreased inventories during the fourth quarterof 2019, compared with an increase during the fourth quarter of 2018. Sales were higher in Latin America. While construction activities remained at low levels, the increase wasdriven by road and residential construction activities. In EAME, the sales decrease was primarily due to the impact from changes in dealer inventories and lowerend-user demand across most of the region. Dealers decreased inventories more during the fourth quarterof 2019 than during the fourth quarter of 2018. Sales in Asia/Pacific were about flat as unfavorable price realization was mostly offset by a few countries’higher sales volume.Construction Industries’ profit was 659 million in the fourth quarter of 2019, a decrease of 186 million, or 22%,compared with 845 million in the fourth quarter of 2018. The decrease was primarily due to lower sales volume.In addition, favorable manufacturing costs were mostly offset by unfavorable price realization. Manufacturing costsdecreased due to lower period manufacturing and material costs. Period manufacturing costs declined mainly dueto the favorable impact of restructuring and cost-reduction actions as well as lower short-term incentivecompensation.(more)

8RESOURCE INDUSTRIES(Millions of dollars)Segment SalesFourthQuarter 2018Total Sales 2,797SalesVolume PriceRealization(430) 17InterSegmentCurrency (22) FourthQuarter 201933 2,395 Change%Change(402)(14%)Sales by Geographic RegionFourthQuarter 2019North AmericaLatin America EAME External SalesInter-segment 16%)38%(402)(14%) 2,797 %Change(8%)(33%)2,395906466 Change(72)(153)526Asia/PacificTotal Sales834313FourthQuarter 2018 Segment ProfitFourthQuarter 2019Segment ProfitSegment Profit Margin FourthQuarter 2018261 10.9 %400 14.3 %Change(139)(3.4pts)%Change(35%)Resource Industries’ total sales were 2.395 billion in the fourth quarter of 2019, a decrease of 402 million, or14%, compared with 2.797 billion in the fourth quarter of 2018. The decrease was due to lower sales volume,driven by changes in dealer inventories and lower end-user demand. Dealers increased inventories during thefourth quarter of 2018, compared with a decrease during the fourth quarter of 2019. While commodity prices aregenerally supportive of reinvestment, the company continues to believe mining customers remained disciplined intheir capital expenditures due to economic uncertainty, resulting in lower sales in the quarter. In addition, end-userdemand decreased for equipment supporting non-residential construction.Resource Industries’ profit was 261 million in the fourth quarter of 2019, a decrease of 139 million, or 35%,compared with 400 million in the fourth quarter of 2018. The decrease was mainly due to lower sales volume,partially offset by lower SG&A/R&D expenses and favorable price realization. The decrease in SG&A/R&Dexpenses reflected a reduction in short-term incentive compensation expense and timing of R&D expenses.(more)

9ENERGY & TRANSPORTATION(Millions of dollars)Segment SalesFourthQuarter 2018Total Sales 6,287SalesVolume PriceRealization(25) (27)InterSegmentCurrency (47) FourthQuarter 2019(239) 5,949 Change%Change(338)(5%)Sales by ApplicationFourthQuarter 2019Oil and GasPower Generation Industrial1,5231,294FourthQuarter 2018 1,7191,271 Change ,373685%External 23%)(338)(5%)Total Sales 5,949 6,287 Segment ProfitFourthQuarter 2019Segment ProfitSegment Profit Margin FourthQuarter 20181,165 19.6 %1,079 17.2 %Change862.4pts%Change8%Energy & Transportation’s total sales were 5.949 billion in the fourth quarter of 2019, a decrease of 338 million, or5%, compared with 6.287 billion in the fourth quarter of 2018. Sales declined primarily due to lower inter-segmentengine sales and unfavorable currency impacts. Oil and Gas – Sales were lower mainly in North America. The sales decline was largely due to lowerdemand for reciprocating engines used in gas compression and lower turbine project deliveries. Power Generation – Sales increased slightly primarily due to higher deliveries for turbines in EAME. Industrial – Sales were about flat as slightly higher sales in North America were partially offset by lowersales in Latin America and EAME. Transportation – Sales were higher mainly due to stronger marine demand in EAME.Energy & Transportation’s profit was 1.165 billion in the fourth quarter of 2019, an increase of 86 million, or 8%,compared with 1.079 billion in the fourth quarter of 2018. The increase was mostly due to lower SG&A/R&Dexpenses, primarily due to a reduction in short-term incentive compensation expense and lower R&D projectexpenses. Lower manufacturing costs were mostly offset by lower sales volume.(more)

10FINANCIAL PRODUCTS SEGMENT(Millions of dollars)Revenues by Geographic RegionFourthQuarter 2019North AmericaLatin America FourthQuarter 2018554 74 Change545 846 812 344%Total Revenues Segment ProfitFourthQuarter 2019Segment Profit FourthQuarter 2018210 29 Change181%Change624%Financial Products’ segment revenues were 846 million in the fourth quarter of 2019, an increase of 34 million, or4%, from the fourth quarter of 2018. The increase was primarily due to a favorable impact from returned orrepossessed equipment in Europe and higher average financing rates in North America.Financial Products’ segment profit was 210 million in the fourth quarter of 2019, compared with 29 million in thefourth quarter of 2018. Most of the increase was due to lower provision for credit losses at Cat Financial, driven by alower allowance rate compared with 2018. The lower allowance rate was due to write-offs of accounts in 2019 thatwere reserved for in 2018, primarily in the Cat Power Finance portfolio. In addition, there was a favorable impactfrom equity securities in Insurance Services, as well as favorable impacts from an increase in net yield on averageearning assets and returned or repossessed equipment. These favorable impacts were partially offset by higherSG&A expenses.At the end of 2019, past dues at Cat Financial were 3.14%, compared with 3.55% at the end of 2018. Write-offs, netof recoveries, were 237 million for 2019, an increase from 189 million for 2018, primarily due to Mining,Caterpillar Power Finance and EAME, partially offset by a decrease in Latin America. The increase in Mining wasdue to a small number of customer balances written off in 2019, while the increases in Caterpillar Power Financeand EAME were concentrated in the marine portfolio and the Middle East, respectively. As of December 31, 2019,Cat Financial's allowance for credit losses totaled 424 million, or 1.50% of finance receivables, compared with 511 million, or 1.80% of finance receivables, at December 31, 2018.Dealer Inventories and Order BacklogDealers decreased machine and engine inventories about 700 million during the fourth quarter of 2019, comparedwith an increase of about 200 million during the fourth quarter of 2018. The changes in dealer inventories mostlyimpacted sales in Construction Industries and Resource Industries. For the full year of 2019, dealer inventoriesincreased about 800 million, compared with an increase of about 2.3 billion during 2018.At the end of the fourth quarter of 2019, the order backlog was 13.7 billion, about 900 million lower than the thirdquarter of 2019, primarily in Energy & Transportation. The order backlog decreased across the three primarysegments by about 2.9 billion since the end of 2018.(more)

11Notesi.ii.iii.iv.Glossary of terms is included on the Caterpillar website at http://www.caterpillar.com/investors/.Information on non-GAAP financial measures is included in the appendix on page 12.Some amounts within this report are rounded to the millions or billions and may not add. In addition, the sum ofthe components reported across periods may not equal the total amount reported year-to-date due to rounding.Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 7:30 a.m.Central Time on Friday, January 31, 2020, to discuss its 2019 fourth-quarter and full-year financial results. Theaccompanying slides will be available before the webcast on the Caterpillar website presentations.About CaterpillarSince 1925, Caterpillar Inc. has been helping our customers build a better world – making sustainable progress possible and drivingpositive change on every continent. With 2019 sales and revenues of 53.8 billion, Caterpillar is the world’s leading manufacturer ofconstruction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Servicesoffered throughout the product life cycle, cutting-edge technology and decades of product expertise set Caterpillar apart, providingexceptional value to help our customers succeed. The company principally operates through three primary segments – ConstructionIndustries, Resource Industries and Energy & Transportation – and provides financing and related services through its Financial Productssegment. For more information, visit caterpillar.com. To connect on social media, visit caterpillar.com/social-media.Caterpillar’s latest financial results and outlook are also available -results.html (live broadcast/replays of quarterly conference call)Caterpillar investor relations contact: Jennifer Driscoll, 1 224-551-4382 or Driscoll Jennifer@cat.comCaterpillar media contact: Kate Kenny, 1 224-551-4133 or Kenny Kate@cat.comForward-Looking StatementsCertain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the PrivateSecurities 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 thanstatements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trenddescriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update ourforward-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, materialprice increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political andeconomic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impacton 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 oursales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of ourdealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures ordivestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events including natural disasters; (xiii) disruptionsor volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain ourcredit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and accessto capital markets; (xv) our Financial Products segment’s risks associated with the financial services industry; (xvi) changes in interest rates or marketliquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xviii) currency fluctuations; (xix) our orCat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) allegedor 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 filingswith the Securities and Exchange Commission.(more)

12APPENDIXNON-GAAP FINANCIAL MEASURESThe following definitions are provided for the non-GAAP financial measures. These non-GAAP financial measureshave no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to thecalculation of similar measures for other companies. Management does not intend these items to be considered inisolation or as a substitute for the related GAAP measures.Adjusted ProfitThe company believes it is important to separately quantify the profit impact of four significant items in order for thecompany’s results to be meaningful to readers. These items consist of (i) pension and OPEB mark-to-market lossesresulting from plan remeasurements, (ii) U.S. tax reform impact, (iii) restructuring costs in 2018, which wereincurred to generate longer-term benefits and (iv) certain deferred tax valuation allowance adjustments. Thecompany does not consider these items indicative of earnings from ongoing business activities and believes thenon-GAAP measure provides investors with useful perspective on underlying business results and trends and aidswith assessing the company’s period-over-period results.Reconciliations of adjusted profit before taxes to the most directly comparable GAAP measure, consolidated profitbefore taxes, are as follows:(Millions of dollars)Profit before taxes .Mark-to-market losses.Restructuringcosts.Adjustedprofit before taxes Fourth Quarter201920181,365 1,367 468495—931,833 1,955 Full Year20197,812 468—8,280 20187,8224953868,703.Reconciliations of adjusted profit per share to the most directly comparable GAAP measure, diluted profit per share,are as follows:Fourth Quarter2019Profit per share .1Per share mark-to-market losses .Per share U.S. tax reform impact 20181.970.65———2.63.Pershare restructuring costs2 .

DEERFIELD, Ill. - Caterpillar Inc. (NYSE: CAT) today announced fourth-quarter and full-year results for 2019. Sales and revenues for the fourth quarter of 2019 were 13.1 billion, an 8% decrease compared with 14.3 billion in the fourth quarter of 2018. Fourth-quarter 2019 profit per share was 1.97, compared with 1.78 profit per share in