Caterpillar Inc. 2017 2016 5 S 51,822 2,900 54,722 42,676 2,786 45,462 35,773 2,764 38,537 STATEMENT 1 Consolidated Results of Operations for the Years Ended December 31 Dollar is willions cat pershare dal Sales and revenues Sales of Machinery, Energy & Transportation Revenues of Financial Products Total sales and revenues Operating costs Cost of goods sold Selling, general and administrative expenses Research and development expenses Interest expense of Financial Products Goodwill impairment charge Other operating incomel expenses Total operating costs Operating profit Interest expense excluding Financial Products Other income expense) Consolidated profit before taxes Provision benefit for income taxes Profit loss of consolidated companies Equity in profit loss) of unconsolidated affiliated companies Profit (loss) of consolidated and affiliated companies Loss: Profit loss) attributable to noncontrolling interests Profit (loss) 36,997 5,478 1,850 722 31,260 4,999 1,842 646 28,044 4,383 1,853 596 595 1,382 1,904 2.255 41,002 37.375 8.293 4.460 1,162 531 153 505 ( 518) 7.822 4.082 3.339 743 6,148 759 754 (67) (0.11) 1.275 1.26 $ (0.11) Profit (los) per common share 10.395 Profit (los) per common share-diluted 10.26 $ Weighted average common shares outstanding (millions) - Basic 591.4 - Diluted 599.4 1 Profit loss attributable to common shareholders. 2 Diluted by assumed exercise of stock based compersation awards, using the treasury sed method 2016, the sum of stock band compensation award was not considered because the impact would be antide See accompanying notes to Consolidated Financial Statements 591.8 599.3 584.3 584.3 Caterpillar Inc STATEMENT 3 Donsolidated R ecial Position at December 31 Aset Current Cash and short-term investments Receivables-trade and other Rece n ance Prepaid expenses and other 7.85 LES Total current Property, plant and equipment Long-term trade and other Long-term -finance Noncurentered und wurde eine rangi Goodwill Other Totte 5.723 7,051 23 0,487 Current Short-term borrowings Machinery, Energy & Transportatio Finance Products Accounts payable Accrued espero Accred wages, alories and employee benefits Customer advance Dividenda peable Other current Long-term det due within one year Machinery, Energy Transportation France Products Total current Long term dat de fer on your Machinery Energy Transportation France Products by for postm entbeneta Comendon te 21 and 22 Common wo of $100 Authord 2.000.000.000 dhe DO 200 - 20.591) OT 17 101 Pot played in the Acum other comprehensive income Noncong Total hard ly 2 CATERPILLAR 151 2877 (1.151) STATEMENT 5 Caterpillar Inc Consolidated Statement of Cash Row for the Years Ended December 31 Million dollar Cash flow from operating activities: Profit loss of consolidated and affiliated companies Adjustments for non-cash items: Depreciation and amortization 301 Actuarial (gain lose on pension and postretirement benefits Provision (benefit for deterred income taxes 1.213 Goodwill impairment charge Other 750 Changes in assets and liabilities, net of acquisitions and divestituras Receivables-trade and other Inventories (1.295) Accounts payable Accrued expenses Accrued wages, salaries and employee benefits Customer advances Other assets-net (182) Other liabilities -net (388) Net cash provided by used for operating activities 5.558 5.7065 Cash flow from resting activities: Capital expenditures-excluding equipment leased to others (1.276) (809) (1.109) Expenditures for equipment leased to others 11.640) (1.438) (1.8191 Proceeds from disposals of leased assets and property, plant and equipment 936 1.184 899 Additions to finance receivables (12,183) (11.853) (9.339) Collections of finance receivables 10.01 12.018 Proceeds from sale of finance receivables Investments and acquisitions thet of cash acquired) 3923 Proceeds from sale of businesses and investment inet of cash sold Proceeds from sale of securities Investments in securities (506) (1.048) Othernet Net cash provided by used for investing activities 2.212) Cash flow from financing activities Dividends paid (1.351) Common stock issued, including treasury shares ressed Common shares repurchased Proceeds from debt issued foriginal maturities greater than three - Machinery, Energy & Transportation - Financial Products Payments on debt original maurities greater than three months - Machinery, Energy & Transportation 1.485 - Financial Products 10.923) Short-term borrowings-net foriginal mature three months or le 3.058) Othernet Net cash provided by used for financing activities 3.867) Effect of exchange rate changes on canh Ingrosso decrease in cash and short-term investments and restricted cash 100) 1.121 Cash and short-term investments and restricted cash at beginning of period 120 7,199 Cash and short-term investments and restricted cash at end of period $ 7.090 5 8 .320 S 7.190 A short-term invest , which conset primarily of high quid imestants with orginal matures of the more or be cash equivalent recorded Non-cash activities in September 2016, 8381 milion of medium-term not with varying interests and maturity dates were exchanged for $365 million of 193% medium-term notas due in 2021 and $15 million of cash. In addition de change premium of 50 million was paid and is included in the operating activities section of the Consolidated Statement of Cash Flow 47 21. Guarantees and product warranty Supplier.consortium performance guarantees Caterpillar dealer performance guarantees We have provided guarantees to a customer in Brazil and a customer in Europe related to the performance of contractual obligations We have provided an indemnity to a third party insurance company by supplier consortiums to which our Caterpillar subsidiaries are for potential losses related to performance bonds issued on behar members. The guarantees cover potential damages incurred by the of Caterpillar dealers. The bonds have varying terms and are issued customers resuhing from the supplier consortium non performance to insure governmental agences a minst nonperformance by certain The damages are capped except for failure of the consortiums to meet dealers We also provided guarantees to third parties related to the certain obligations outlined in the contract in the normal course of performance of contractual obligations by certain Caterpillar dealers business. The guarantees wilapin when the supplier consortiums These quarantees have varying torms and cover potential financial perform all their contractual obligations which are expected to be losses incurred by the third-partios resulting from the dealers completed in 2022 for the customer in Europe and 2025 for the nonperformance customer in Brazil In 2016, we provided a guarantee to an end user related to the Third party logistics business las guarantees performance of contractual obligations by a Caterpillar dealer. Under the guarantee, which expiros in 2025, non performance by the We have provided guarantees to third party lessons for certain Caterpillar dealer could require Caterpillar to satisfy the contractual properties leased by a third party logistics business, formerly obligations by providing goods, services or financial compensation Caterpillar Logistics Services LCC, in which we sold our equity to the end user up to an annual designated cap. interest in 2015. The guarantees are for the possibility that the third party logistics business would default on real estate lease Customer loan quarantees payments. The guarantees were granted at lease inception and We provide loan quarantees to third-party lenders for financing generally wil expire at the end of the lease terms. associated with machinery purchased by customers. Those We have dealer performance guarantees and third party quarantees have varying torms and are secured by the machinery performance guarantees that do not limit potential payment to In addition, Cat Financial participates in standby letters of credit and users related to indemnities and other commercial contractual issued to third parties on behalf of their customers. These standby obligations. In addition, we have entered into contracts involving lotters of credit have varying terms and beneficiaries and are industry standard Indemnifications that do not limit potential secured by customer assets payment for those 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 both December 31, 2018 and 2017 the related liability was $8 million. The maximum potential amount of future payments lundiscounted 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 at December 31 are as follows 12445 1 313 Caterpilldeler performance guarantees Customer lan guarantee Supplier consortium performance guarantee Third party logistics business lease guarantees Other grantes Totalguns 2,105 No loss has been experienced or is anticipated under this loon purchase agreement Cat Financial provides guarantees to purchase certain loans of Caterpillar dealers from a special purpose corporation (SPC that qualities as a variable interest antity The purpose of the SPC is to provide short-term working capital loans to Caterpillar dolor This SPC Ses commercial paper and uses the proceeds to fund its can program. Cat Financial has a loan purchase agreement with the SPC that obligatos Cat Financial to purchase certain loans that are not paid at maturity Cat Financial receives a foo 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 consoldated the financial statements of the SPC. As of December 31, 2018 and 2017 the SPC's assets of $1,149 million and $1,107 million, respectively wore primarily comprised of loans to dealers and the SPC's abilities of $1,148 million and $1,106 milion, respectively, ware primarily comprised of commercial paper. The assets of the SPC we not available to pay Cat Financials creditors Cat Financial may be obligated to perform under the guarantee if the SPC experiences losses Cat Financial is party to agreements in the normal course of business with selected customers and Caterpillar dealers in which thay commit to provide a sat dollar amount of finanang on a pre approved basis. They also provide lines of credit to certain customers and Caterpillar dealers, of which a portion rorrains unused as of the and of the period Commitments and lines of credit generally have foxed operation dates or other termination clauses. It has been Cat Financials experience that not all commitments and lines of credit will be used. Management applies the same credit policies when making commitments and granting lines of credit as it does for any other financing Cat Financial does not require collateral for these commitments lines, but if credit is extended collateral may be required upon funding. The amount of the unused commitments and lines of credit for dealers as of December 31, 2018 and 2017 was $11.853 million and $10,000 million, respectively. The amount of the unused commitments for customers as of December 31, 2018 and 2017 Was $815 milion and $715 million, respectively Our product warrantybity is determined by applying historical claim to experience to the current field population and dealer Inventory Generally, historical claim rates are based on actual Warranty experience for each product by machine modellengine si by customer order location inside Grid North Americal Specificates are developed for each produc e nt month and are updated monthly based on actual warranty dan perence Reduction in bly by In the went Varanty December 31 22. E t and legales The Company is regulated by federal, state and international environmental laws governing our use bansport and disposal of substances and control of omissions in addition to govering our manufacturing and other spections, these laws han impact the dovolment of our products, including but not limited to required compliance with a missions 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 in 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 individuals, including able technologies, current applicable laws and regulations, and prior remediation experience. Where no amount within a range of estimates is more likely, we acue 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 covered from insurance companies or others. We s these accrued amounts on a quarterly basis The amount recorded for environmental remediation is not material and is included in Aconued expenses. We believe there is no more than a remote dance that a material amount for remedial activities at any individual site or at all the sites in the aggregate will be required On January 2 2015, the Comparciedaganjury subpoena from the US District Court for the Contra District of inos. The subpoena documents and information from the Company ating to among other things financial information concerning US and non- US Caterpillar idans including unistutad profits of non- US. Subsidiaries and the movement of cash among US and non- US subwool The Company has received additional subpoenas rolating to this investigation Hosting additional documents and information rating to among other things the purchase and re p lacement parts by Caterpillar Inc and non-US Caterpillar subsidiaries, dividend distributions of certain on US Caterpillard s and Car SARL and tad structure on March 23, 2017 aunts with the Department of Commerce, the Federal Deposit Insurance Corporation and the Internal Revenue Service t ed arch and secure woman at the foot of the Company in the Peorianos e Induding is former corpor a ter. The wants identify and an d documents and information tad among other things the export of products from the United States, the movement of products between the United States and Sw a nd the moonship between Caterpillar inc. and Caterpillar SARL, and s out the United States. It is the company's understanding that he wants, which concem both tax and export active are related to the ongoing grand jury investigation. The Company continuing to cooperate with this investigation The Companys unable to predict the outcome ornables m ay potent 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 ICADE published a Technical Opinion which named 18 companies and over 100 individuals as defendants including two subsidiaries of Caterpillar Inc, MGE-Equipamentos e Servios Perroviarios Ltda. MGE) and Caterpillar Brasil Lda. The publication of the Technical Opinion opened CADE official administrative investigation into allegations that the defendants participated in anticompetitive bid activity for the construction and martorance of metro and train networks in Braun While companies cannot be held animally able for anticompetitive conduct in Baloriminal charges have been brought against two current employees of MGE and one former employee of MGE involving the same conduct alleged by CADE The Company has responded to all requests for Information from the authorities. The Company is unable to predict the outcome or reasonably estimate the potential loss how , WO Currently believe that this matter will not have a motor 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 counse of business. The most prolont of these unresolved actions involve r ted to product design, manufacture and performande n inching med asbestos and welding fures pour contract, omployment issues, environmental ma n tellectual property right s other than income and securitas The aggregange of reasonably possible losses in N S of accrueda any amciated with these unresolved action is not m a l In some cases, we cannot reasonably m a nge of loss because there is insufficient information regarding the matar However, we believe there is no more than a remote chance that ny a nsing from these maton would be maal Athough it is not possible to predict with certainty the outcome of these Unsolved local actions we believe that those actions will not Individually or in the agregova mutandlade afect on our consolidated results of action financial gowo rudy 2. Sagan formation A Ristoran ti Our Executive Office is comprised of a Chief Executive Officer ICEOIL four Group Presidente, a Chief Financial Officer (CFOI a General Counsel & Corporate Secretary and a Chef Human Resources Office The Group Pudents and CFO for a read set of end-to-end businesses that they manage. The General Counsel & Corporate Secretary leads the Law Security and Public Policy Division. The Human Resour c e s the Hur Resource Digimon The CEO w ater Question 5 1.5 points According to the Accrued abilities note, how much had the company incurred in accrued warranties that was unpaid at the most recent balance sheet date (in millions) 5130 amount is not disclosed Question 6 For the most recent reporting period, Caterpillar paid interest expense of $404 (in millions). True False Question 7 Caterpillar received cash from issuances of debt in the most recent reporting period. a. True b. False Question 8 Caterpillar had cash outflows of $7,822 (in millions) for repayments of Financial Products debt during the most recent accounting perio True False uestion 9 Based on the current ratio (current assets/ current liabilities). Caterpillar was more liquid in 2018 than it was in 2017. Round answers to two decimal places (for example, 3.12743 -3.13). True O False QueSLIUI IU Over the last two reporting periods, Caterpillar's current liabilities as a percentage of total liabilities: a. increased b. decreased c. stayed the same d. cannot be determined