4th Quarter & Final Results

Caterpillar Inc 21 January 2000 CATERPILLAR REPORTS 1999 PROFIT PER SHARE OF $2.63 PEORIA, Ill. -- Caterpillar Inc. (NYSE: CAT) today reported full year sales and revenues of $19.70 billion, 6 percent less than 1998. The decrease was primarily due to a 6 percent decline in physical sales volume, partially offset by a 14 percent increase in Financial Products revenues. Profit of $946 million or $2.63 per share was $567 million less than 1998. The decrease was due primarily to lower sales volume, an unfavorable change in product sales mix and lower price realization (primarily geographic mix and the impact of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars). Lower selling, general and administrative (SG&A) and research and development (R&D) costs partially offset these unfavorable items. Sales and revenues for fourth-quarter 1999 were $5.02 billion, $387 million lower than fourth-quarter 1998. The decrease was primarily due to a 7 percent decrease in physical sales volume, partially offset by an 11 percent increase in Financial Products revenues. Profit of $239 million was $62 million less than fourth-quarter 1998. The decrease was due primarily to lower sales volume and price realization (primarily geographic mix and the impact of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars) as well as an unfavorable change in product sales mix. Lower SG&A costs and higher other income (primarily foreign exchange) partially offset these unfavorable items. Profit per share of 67 cents was down 16 cents from fourth-quarter 1998. 'Profit in 1999 was significantly lower than we anticipated at the beginning of the year due to weaker machine demand in the second half and on-going price competition. However, our actions to manage costs in this environment, together with strong performances by our engine business and Cat Financial contributed to our overall performance,' said Caterpillar Chairman and CEO Glen Barton. 'In 2000, we anticipate sales and revenues and profits will improve, with higher sales expected in every region of the world except North America. We'll continue to carefully manage costs and move forward with our growth initiatives while delivering solid financial results,' Barton said. -2- HIGHLIGHTS 1999 COMPARED WITH 1998 - Sales and revenues of $19.70 billion were $1.28 billion or 6 percent lower. Revenues from Financial Products increased 14 percent. Sales inside the United States were 50 percent of worldwide sales compared with 51 percent a year ago. - Truck engine sales reached an all-time high as the company continued to be the industry leader for combined medium and heavy-duty truck engine sales in North America. - Machinery and Engines' SG&A and R&D expenses declined $148 million fom 1998. - Profit of $946 million was down $567 million, reflecting 13 percent lower machine sales and an unfavorable sales mix. - Profit per share of $2.63 was down 36 percent. - 4.96 million shares were repurchased during the year under the program announced in October 1998 to reduce the number of shares outstanding to 320 million within the next three to five years. On December 31, 1999 there were 353.8 million shares outstanding. FOURTH-QUARTER 1999 COMPARED WITH FOURTH-QUARTER 1998 - Sales and revenues of $5.02 billion were $387 million or 7 percent lower. Revenues from Financial Products increased 11 percent. Sales inside the United States were 44 percent of worldwide sales compared with 49 percent a year ago, - Profit of $239 million was down 21 percent. - Profit per share of $.67 was down 19 percent. - 848 thousand shares were repurchased during the quarter. OUTLOOK We expect full-year 2000 sales and revenues to be slightly higher than 1999 and profit to increase in line with sales. (Complete outlook begins on page 13) -3- DETAILED ANALYSIS 1999 COMPARED WITH 1998 Sales and revenues for 1999 were $19.70 billion, $1.28 billion lower than 1998. The decrease was primarily due to a 6 percent decrease in physical sales volume, partially offset by a 14 percent increase in Financial Products revenues. Profit of $946 million was $567 million less than 1998. The decrease was due primarily to lower sales volume, an unfavorable change in product sales mix and slightly lower price realization (primarily geographic mix and the impact of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars). Lower SG&A and R&D costs partially offset these unfavorable items. Profit per share of $2.63 was down $1.48 from 1998. MACHINERY AND ENGINES Sales Table (Millions of dollars) North Latin Asia/ Total America EAME* America Pacific 1999 Machinery $11,705 $6,725 $2,955 $851 $1,174 Engines ** 6,854 3,690 1,899 621 644 $18,559 $10,415 $4,854 $1,472 $1,818 1998 Machinery $13,448 $8,352 $2,871 $1,252 $973 Engines ** 6,524 3,097 2,134 666 627 $19,972 $11,449 $5,005 $1,918 $1,600 * Europe, Africa & Middle East and Commonwealth of Independent States **Does not include internal engine transfers of $1,234 million and $1,268 million in 1999 and 1998, respectively. Internal engine transfers are valued at prices comparable to those for unrelated parties. -4- Machinery sales were $11.71 billion, a decrease of $1.74 billion or 13 percent from 1998. The lower sales resulted primarily from an 11 percent decrease in physical sales volume. Price realization also declined primarily due to unfavorable geographic mix and the continued effect of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars. Sales were lower in North America and Latin America, which more than offset higher sales in Asia/Pacific and EAME. Sales in North America were lower reflecting reductions in dealer inventory, especially in the last half of the year, and declines in industry demand. Sales were down in both the United States and Canada. In EAME, sales were higher in Europe due to improved industry demand. This was partially offset by significantly lower sales in Africa & Middle East, where industry demand declined due to weak commodity prices. Sales in Asia/Pacific improved because of higher sales to developing Asia as dealers began rebuilding inventories in response to improved retail demand. This improvement in developing Asia more than offset lower sales in Australia. Latin American sales fell sharply in 1999 due to recessions in a number of countries and low commodity prices. Engine sales were $6.85 billion, an increase of $330 million or 5 percent from 1998. This increase was primarily due to 4 percent higher physical sales volume resulting from improved end user and Original Equipment Manufacturer (OEM) demand. Price realization also improved slightly in 1999. Sales increased in North America and Asia/Pacific, which more than offset declines in EAME and Latin America. Sales in the power generation segment were up in every region of the world, while sales in the petroleum segment declined in every region. Sales in North America also benefited from extremely strong sales in the truck segment. -5- Operating Profit Table (Millions of dollars) 1999 1998 Machinery $867 $1,584 Engines 506 504 $1,373 $2,088 Caterpillar operations are highly integrated; therefore, the company uses a number of allocations to determine lines of business operating profit. Machinery operating profit decreased $717 million, or 45 percent from 1998. Margin (sales less cost of goods sold) declined primarily due to the lower sales volume, an unfavorable change in product sales mix, the impact of lower production volumes on manufacturing efficiencies and lower price realization. SG&A and R&D expenses were lower reflecting the impact of ongoing cost reduction actions. Total pension and other postretirement benefit costs were about the same in 1999 as in 1998. However, SG&A and R&D expenses were favorably impacted by approximately $60 million due to favorable returns on plan assets, and cost of sales was unfavorably impacted by a like amount due to plan amendments, Engine operating profit increased $2 million from 1998 due to the higher sales volume and slightly better price realization, partially offset by an unfavorable sales mix. Sales into the petroleum segment declined 35 percent, while sales into the lower margin truck engine market increased 40 percent. SG&A and R&D expenses were slightly higher. Interest expense was $5 million higher than a year ago. Other income/expense reflects a net increase in income of $20 million primarily related to currency exchange. -6- FINANCIAL PRODUCTS Revenues for 1999 were a record $1.28 billion, up $160 million or 14 percent compared with 1998. The increase resulted primarily from continued growth in Cat Financial's portfolio. Before tax profit decreased $53 million or 17 percent from 1998. Profit at Caterpillar Insurance Co. Ltd. (Cat Insurance) was lower due to less favorable reserve adjustments. This was partially offset by record profits at Cat Financial as a result of portfolio growth. INCOME TAXES 1999 tax expense reflects an effective tax rate of 32 percent. The 1998 effective tax rate was 31 percent and included a favorable adjustment to recognize deferred tax assets at certain European subsidiaries. UNCONSOLIDATED AFFILIATED COMPANIES The company's share of unconsolidated affiliated companies' results declined $24 million from a year ago, primarily due to weaker results at Shin Caterpillar Mitsubishi Ltd. and the conversion of F.G. Wilson from an affiliated company to a consolidated subsidiary effective June 1999. SUPPLEMENTAL INFORMATION Dealer Machine Sales to End Users and Deliveries to Dealer Rental Operations Sales (including both sales to end users and deliveries to rental operations) in North America were down in 1999 due to weaker industry demand in both the United States and Canada. Sales fell in all eight key market segments. Sales in mining, forestry and agriculture were depressed by low commodity prices. Sales of paving related equipment were up considerably, but total machine sales in the heavy construction segment (primarily highways and pipelines) were lower because of delays in getting major highway capital projects underway. Sales also were lower in the other segments -7- including general construction (residential, commercial and public), quarry & aggregates, waste and industrial. Sales in the EAME region remained near 1998 levels as higher sales in Europe were offset by lower sales to Africa & Middle East and the Commonwealth of Independent States (CIS). Stronger industry demand in Europe resulted in higher sales to most European countries, with significant increases in the United Kingdom, Germany, France and Italy. In Africa & Middle East, low commodity prices reduced industry demand and sales in 1999, Sales to users were lower in most countries with significant sales declines in Turkey, Saudi Arabia and South Africa. In the CIS, sales were sharply lower due to the continued weakness in Russia. For the EAME region as a whole, sales were higher in heavy construction, general construction and quarry & aggregates, which offset lower sales in mining, agriculture and industrial segments. Sales in Asia/Pacific were down slightly in 1999 as higher sales in developing Asia and Japan were offset by declines in Australia. For the region, sales increased in the forestry and quarry & aggregates segments, and declined in mining, heavy construction and industrial segments. Sales in Latin America were significantly lower in 1999 due to recessions in a number of countries and low commodity prices. Sales were down in most major countries with sharp declines in Brazil, Argentina and Chile. For the region, sales were down in all segments, particularly heavy construction, general construction and industrial. Dealer Inventories of New Machines Worldwide dealer new machine inventories at year end were down compared to year-end 1998 and at normal levels relative to current selling rates. Higher inventories in Asia/Pacific were more than offset by declines in North America, Latin America and EAME. At year end, North American dealer inventories were normal compared to current selling rates. EAME dealer inventories were slightly below normal and Asia/Pacific dealer inventories were moderately below normal when compared to current selling rates. -8- Dealer inventories in Latin America ended the year significantly above levels needed to support current selling rates. Engine Sales to End Users and OEMs Sales in North America were up primarily due to very strong demand for on-highway truck engines and higher share of industry sales, which strengthened Caterpillar's position as the industry leader for combined medium and heavy-duty truck engine sales. Sales were also significantly higher in the power generation segment. These offset significantly lower sales in the petroleum segment and lower sales in the marine segment. Sales in the industrial segment were flat with 1998. Sales were up in Canada as well as the United States. Sales in EAME were lower as weaker sales in petroleum and industrial segments more than offset higher sales in power generation and marine segments. Sales in Latin America were down primarily due to weaker petroleum and truck segment sales, which more than offset gains in power generation sales. Sales in Asia/Pacific were down as sales gains in marine and power generation segments were more than offset by declines in the petroleum segment. FOURTH-QUARTER 1999 COMPARED WITH FOURTH-QUARTER 1998 Sales and revenues for fourth-quarter 1999 were $5.02 billion, $387 million lower than fourth-quarter 1998. The decrease was primarily due to a 7 percent decrease in physical sales volume, partially offset by an 11 percent increase in Financial Products revenues. Profit of $239 million was $62 million less than fourth-quarter 1998. The decrease was due primarily to lower sales volume, lower price realization (primarily geographic mix and the impact of the stronger U.S. dollar on sales denominated in currencies other than U.S. dollars) and an unfavorable change in product sales mix. Lower SG&A costs, as well as higher other income (primarily foreign exchange) partially offset these unfavorable items. Profit per share of 67 cents was down 16 cents from fourth-quarter 1998. -9- MACHINERY AND ENGINES Sales Table (Millions of dollars) North Latin Asia/ Total America EAME America Pacific Fourth-Quarter 1999 Machinery $2,537 $1,260 $734 $241 $302 Engines*** 2,181 1,076 676 235 194 $4,718 $2,336 $1,410 $476 $496 Fourth-Quarter 1998 Machinery $3,111 $1,942 $674 $267 $228 Engines*** 2,025 858 662 262 243 $5,136 $2,800 $1,336 $529 $471 *** Does not include internal engine transfers of $323 million and $304 million in 1999 and 1998, respectively. Internal engine transfers are valued at prices comparable to those for unrelated parties. Machinery sales were $2.54 billion, a decrease of $574 million or 18 percent from fourth-quarter 1998. The lower sales resulted primarily from a 15 percent decrease in physical sales volume reflecting lower demand in North America and Latin America. Price realization was lower as price increases taken over the past year were more than offset by higher discounts. Sales were down significantly in North America due primarily to sharp reductions in dealer inventories and lower industry demand. In EAME, sales increased as higher sales in Europe more than offset significantly lower sales to Africa & Middle East. Sales in Asia/Pacific were higher as dealers in developing Asia rebuilt inventories and sales to end users improved, more than offsetting sales declines in Australia. In Latin America, sales were lower reflecting weak industry demand and reductions in dealer inventories. Engine sales were $2.18 billion, an increase of $156 million above fourth-quarter 1998, reflecting a 5 percent increase in physical sales volume resulting from improved end user and OEM demand and slightly better price realization (primarily geographic mix). -10- Sales were up in North America due primarily to significantly higher sales in the power generation and truck segments. Sales in EAME were higher due primarily to growth in power generation and marine segments. Latin American sales declined primarily because of sharp declines in the petroleum segment. Asia/Pacific sales declined primarily because of declines in petroleum, power generation and marine segments. Operating Profit Table (Millions of dollars) Fourth-Quarter Fourth-Quarter 1999 1998 Machinery $131 $235 Engines 217 165 $348 $400 Caterpillar operations are highly integrated; therefore, the company uses a number of allocations to determine lines of business operating profit. Machinery operating profit decreased $104 million, or 44 percent from fourth-quarter 1998. Margin (sales less cost of goods sold) declined primarily due to the lower sales volume and price realization, as well as the impact of lower production volumes on manufacturing efficiencies. SG&A expenses were lower reflecting the impact of ongoing cost reduction actions. Engine operating profit increased $52 million, or 32 percent from fourth-quarter 1998 due to the higher sales volume and slightly better price realization. SG&A and R&D expenses were about the same. Interest expense was the same as a year ago. Other income/expense reflects a net increase in income of $41 million due mostly to a favorable change in foreign exchange gains and losses. -11- FINANCIAL PRODUCTS Revenues for the fourth quarter were $333 million, up $28 million or 9 percent compared with fourth-quarter 1998. The increase resulted primarily from continued growth in Cat Financial's portfolio. Before tax profit decreased $26 million or 33 percent from fourth-quarter 1998 primarily due to less favorable reserve adjustments at Caterpillar Insurance. INCOME TAXES Fourth-quarter 1999 tax expense reflects an effective annual tax rate of 32 percent. The fourth-quarter 1998 effective tax rate was 24 percent and included a favorable adjustment to recognize deferred tax assets at certain European subsidiaries. UNCONSOLIDATED AFFILIATED COMPANIES The company's share of unconsolidated affiliated companies' results declined $6 million from a year ago, primarily due to weaker results at Shin Caterpillar Mitsubishi Ltd. and the conversion of F.G. Wilson from an affiliated company to a consolidated subsidiary effective June 1999. -12- CONDENSED CASH FLOW Net free cash flow (profit after tax adjusted for depreciation, changes in working capital, capital expenditures, and dividends) for Machinery and Engines was $908 million for 1999, a decrease of $798 million from 1998. This decrease was primarily due to lower profit after tax and an unfavorable change in working capital, partially offset by a decrease in capital expenditures. Net free cash flow in 1998 benefited by $1.2 billion from the initiation of a revolving sale of receivables program with Cat Financial. Excluding this, 1999 net free cash flow would have been higher than 1998 as reductions in inventory and receivables more than offset the impact of lower profit. For the Twelve Months Ended Consolidated Machinery & Financial Products (Millions of dollars) Engines Dec.31, Dec.31, Dec.31, Dec,31, Dec.31, Dec.31, 1999 1998 1999 1998 1999 1998 Profit after tax $946 $1,513 $946 $1,513 $159 $193 Depreciation and amortization 945 865 745 697 200 168 Change in working capital - excluding cash, debt and dividends payable (220) (1,442) 423 806 (707) (2,253) Capital expenditures excluding equipment leased to others (790) (925) (770) (918) (20) (7) Expenditures for equipment leased to others, net of disposals (275) (203) 9 8 (284) (211) Dividends paid (445) (400) (445) (400) (36) (49) Net Free Cash Flow 161 (592) 908 1,706 (688) (2,159) Other significant cash flow items: Treasury shares purchased (260) (567) (260) (567) - - Net (increase) decrease in long-term finance receivables (530) (1,177) - - (530) (1,177) Net increase (decrease)in debt 1,350 3,884 215 628 1,234 3,224 Investments and acquisitions - (net of cash acquired) (302) (1,428) (275) (1,428) (27) - Prefunding of employee benefit Plans - (200) - (200) - - Other (231) 148 (451) (77) 62 118 Change in cash and short-term Investments $188 $68 $137 $62 $51 $6 * Represents Caterpillar Inc. and its subsidiaries, except for Financial Products which is accounted for on the equity basis. Note: Lines titled 'Change in working capital - excluding cash, debt and dividends payable' and 'Capital Expenditures excluding equipment leased to others' exclude $88 million and $106 million, respectively, included in the 'Investments and acquisitions - (net of cash acquired)' and 'Other' lines for the twelve months ended December 31, 1999; Lines titled 'Change in working capital - excluding cash, debt and dividends payable' and 'Capital expenditures excluding equipment leased to others' exclude $74 million and $368 million, respectively, included in the Investments and acquisitions - (net of cash acquired)' line for the twelve months ended December 31, 1998. -13- EMPLOYMENT At the end of 1999, Caterpillar's worldwide employment was 66,896 compared with 65,824 one year ago. Acquisitions added 2,517 during this period. OUTLOOK Summary World economic growth in 2000 is forecast to improve as stronger growth in Europe, Africa & Middle East and Latin America more than offsets slightly slower growth in North America. Better world growth should lead to higher prices for most commodities although agricultural prices are expected to remain weak and oil prices are expected to retreat slightly from recent very high levels. In this environment, company sales and revenues are forecast to increase in 2000 with higher sales expected in each region of the world except North America. In the United States, we expect industry demand for machines to decline, but company sales are expected to be about flat as machine shipments come back into line with retail demand. Engine sales in North America also are expected to remain near 1999 levels as higher commercial engine sales offset lower industry demand for on-highway truck engines, Elsewhere, stronger economic growth and higher commodity prices should lead to higher retail demand and higher company sales. We estimate the growth initiatives discussed in previous public statements unfavorably impacted 1999 profit by about 20 percent. Benefits from these initiatives have been delayed due largely to slower than expected sales growth. These growth initiatives are expected to unfavorabIy impact profit in 2000 by approximately 10 percent. For Machinery and Engines, SG&A and R&D are expected to remain in the same range as 1999 as a percentage of sales. In addition, capital expenditures are expected to be up about $100 million in 2000. In summary, company sales are forecast to improve slightly in 2000 due to better worldwide growth, higher commodity prices and less dealer inventory reduction. Profit is expected to increase in line with sales. -14- North America In the United States, Gross Domestic Product (GDP) growth is forecast to slow from 4 percent in 1999 to 3 to 3.5 percent in 2000 as the Federal Reserve raises interest rates. Higher rates, slower economic growth and fewer housing starts are expected to result in lower sales into the general construction sector. The heavy construction segment, however, should provide a partial offset since sales into the highway sector are forecast to increase as states accelerate contracts for highway construction. Sales into the commodity segments should begin to stabilize with the exception of agriculture where sales are forecast to decline for another year. Overall, retail industry demand for machines is expected to decline because of the drop in general construction, continued weakness in agriculture and a drop in replacement buying due to the age of the current expansion. Company machine sales, however, are expected to be about flat as shipments come back into line with retail demand. Higher interest rates, slower growth and less replacement buying also are expected to impact the engine business resulting in lower industry demand for on-highway truck engines. Demand for other engines, though, should continue to grow. Overall, company engine sales are forecast to remain near 1999 levels. In Canada, good economic growth should lead to higher sales for both machines and engines. For the North American region as a whole, company sales of machines and engines are forecast to remain near last year's level. EAME In Western Europe, GDP growth is expected to accelerate from 2 percent in 1999 to 3 percent in 2000 leading to stronger demand for both machines and engines. Growth is also expected to improve in Africa & Middle East, which combined with higher oil prices, should lead to better demand for both machines and engines. Sales in Russia and elsewhere in the CIS, however, are likely to remain depressed. For the region as a whole, better growth and improved business confidence should lead to higher company sales. -15 - Asia/Pacific In developing Asia, economic recovery is forecast to continue with GDP growth remaining in the 5 to 6 percent range which should lead to better sales of both machines and engines. Good economic growth is also expected to continue in Australia resulting in sales near or slightly above 1999 levels. In Japan, demand should continue to improve from very depressed levels. For the region as a whole, company sales should be higher. Latin America GDP growth for the region is forecast to improve from flat in 1999 to 3 to 4 percent in 2000 as countries begin to recover from last year's recessions. While this improvement should result in higher machine and reciprocating engine sales, consolidation by large oil companies is expected to result in much lower turbine engine sales. In total, company sales for the region are forecast to be up as higher machine sales more than offset lower engine sales. -16- The information included in the Outlook section is forward looking and involves risks and uncertainties that could significantly affect expected results. A discussion of these risks and uncertainties is contained in Form 8-K filed with the Securities & Exchange Commission (SEC) on January 21, 2000. That filing is available from the SEC web site at http://www.sec.gov/cgi-bin/srch-edgar Caterpillar's latest financial results and current outlook are also available via: Telephone: (800) 228-7717 (Inside the United States and Canada) (760) 704-4377 (Outside the United States and Canada) Internet: http://www.CAT.com Caterpillar contact: Marsha Hausser Corporate Public Affairs (309) 675-1307 E-mail: hausser_marsha_m@cat.com Note: Information contained on our website is not incorporated by reference into this release. Financial Pages Follow -17- CATERPILLAR INC. CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED (Millions of dollars except per share data) Consolidated Machinery & Financial Products Engines * Dec.31, Dec.31, Dec.31, Dec.31, Dec.31, Dec.31, 1999 1998 1999 1998 1999 1998 Sales and revenues: Sales of Machinery & Engines $4,718 $5,136 $4,718 $5,136 $ - $ - Revenues of Financial Products 301 270 - - 333 305 Total sales& revenues 5,019 5,406 4,718 5,136 333 305 Operating costs: Cost of goods sold 3,690 3,971 3,690 3,971 - - Selling, general,& Administrative expenses 640 709 512 605 137 110 Research and development Expenses 168 160 168 160 - - Interest expense of Financial Products 153 132 - - 160 136 Total operating costs 4,651 4,972 4,370 4,736 297 246 Operating Profit 368 434 348 400 36 59 Interest expense excluding Financial Products 66 66 66 66 - - Other income (expense) 69 40 35 (6) 18 21 Consolidated profit before taxes 371 408 317 328 54 80 Provision for income taxes 119 100 98 72 21 28 Profit of consolidated companies 252 308 219 256 33 52 Equity in profit of Unconsolidated affiliates (13) (7) (14) (7) 1 - Equity in profit of Financial Products subsidiaries - - 34 52 - - Profit $239 $301 $239 $301 $34 $52 EPS of common stock $0.67 $O.84 EPS of common stock - assuming dilution $0.67 $0.83 Weighted average shares outstanding (thousands) Basic 354,236 358,073 Assuming dilution 357,864 362,586 * Represents Caterpillar Inc. and its subsidiaries, except for Financial Products which is accounted for on the equity basis. Transactions between Machinery and Engines and Financial Products have been eliminated to arrive at the Consolidated data. -18- CATERPILLAR INC. CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE YEAR ENDED (Millions of dollars except per share data) Consolidated Machinery & Financial Products Engines * Dec.31, Dec.31, Dec.31, Dec.31, Dec.31, Dec.31 1999 1998 1999 1998 1999 1998 Sales and revenues: Sales of Machinery& Engines $18,559 $19,972 $18,559 $19,972 $ - $ - Revenues of Financial Products 1,143 1,005 - - 1,277 1,117 Total sales and revenues 19,702 20,977 18,559 19,972 1,277 1,117 Operating costs: Cost of goods sold 14,481 15,031 14,481 15,031 - - Selling, general, and administrative expenses 2,541 2,561 2,079 2,210 493 377 Research and development expenses 626 643 626 643 - - Interest expense of Financial Products 560 489 - - 585 501 Total operating costs 18,208 18,724 17,186 17,884 1,078 878 Operating Profit 1,494 2,253 1,373 2,088 199 239 Interest expense excluding Financial Products 269 264 269 264 - - Other income (expense) 196 185 66 46 52 65 Consolidated profit before taxes 1,421 2,174 1,170 1,870 251 304 Provision for income taxes 455 665 362 554 93 111 Profit of consolidated companies 966 1,509 808 1,316 158 193 Equity in profit of unconsolidated affiliates (20) 4 (21) 4 1 -Equity in profit of Financial Products subsidiaries - - 159 193 - - Profit $946 $1,513 $946 $1,513 $159 $193 EPS of common stock $2.66 $4.17 EPS of common stock - assuming dilution $2.63 $4,11 Weighted average shares outstanding (thousands) Basic 355,392 363,189 Assuming dilution 359,367 368,130 * Represents Caterpillar Inc. and its subsidiaries, except for Financial Products which is accounted for on the equity basis. Transactions between Machinery and Engines and Financial Products have been eliminated to arrive at the Consolidated data. -19- CATERPILLAR INC. CONDENSED FINANCIAL POSITION (Millions of dollars) Consolidated (Caterpillar Inc. and Subsidiaries) Dec. 31, Dec 31, 1999 1998 Assets Current assets: Cash and short-term investments $548 $360 Receivables - trade and other 3,233 3,660 Receivables - finance 4,206 3,516 Deferred income taxes 405 474 Prepaid expenses 748 607 Inventories 2,594 2,842 Total current assets 11,734 11,459 Property, plant, and equipment - net 5,201 4,866 Long-term receivables - trade and other 95 85 Long-term receivables - finance 5,588 5,058 Investments in unconsolidated affiliated companies 553 773 Deferred income taxes 954 955 Intangible assets 1,543 1,241 Other assets 967 691 Total Assets $26,635 $25,128 Liabilities Current labilities: Short-term borrowings: Machinery & Engines $51 $49 Financial Products 719 760 Accounts payable 2,003 2,250 Accrued expenses 1,048 928 Accrued wages, salaries, and employee benefits 1,115 1,217 Dividends payable 115 107 Deferred and current income taxes payable 23 15 Long-term debt due within one year: Machinery & Engines 167 60 Financial Products 2,937 2,179 Total current liabilities 8,178 7,565 Long-term debt due after one year: Machinery & Engines 3,099 2,993 Financial Products 6,829 6,411 Liability for post-employment benefits 2,536 2,590 Deferred income taxes and other liabilities 528 438 Total Liabilities 21,170 19,997 Stockholders' Equity Common stock 1,045 1,063 Profit employed in the business 6,617 6,123 Accumulated other comprehensive income 78 1 Treasury stock (2,275) (2,056) Total Stockholders' Equity 5,465 5,131 Total Liabilities and Stockholders' Equity $26,635 $25,128 Certain amounts for 1998 have been reclassified to conform with the 1999 financial statement presentation.

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