STATEMENT 1 Caterpillar Inc. Consolidated Results of Operations for the Years Ended December 31 (Dollars in millions except per share data) 2007 2006 2005 Sales and revenues: Sales of Machinery and Engines . $41,962 $38.869 $34,006 Revenues of Financial Products. . 2,996 2,648 2,333 Total sales and revenues ...... 44,958 41,517 36,339 Operating costs: Cost of goods sold......................". 32,626 29,549 26,558 Selling, general and administrative expenses . 3,821 3,706 3,190 Research and development expenses.. 1,404 1,347 1,084 Interest expense of Financial Products . 1,132 1,023 768 Other operating expenses 1,054 971 955 Total operating costs 40,037 36,596 32,555 Operating profit . . . . . . 4,921 4.921 3,784 Interest expense excluding Financial Products. . 288 274 260 Other income (expense) .. . . . . . 320 214 377 Consolidated profit before taxes .. . . . . . 4,953 4.861 3,901 Provision for income taxes . 1,485 1,405 1,120 Profit of consolidated companies . 3,468 3,456 2,781 Equity in profit (loss) of unconsolidated affiliated companies. 73 81 73 Profit . $ 3,541 $ 3,537 $ 2,854 Profit per common share.........- $ 5.55 5.37 4.21 Profit per common share - diluted" 5.37 $ 5.17 $ 4.04 Weighted-average common shares outstanding (millions) - Basic. 638.2 658.7 678.4 - Diluted") 659.5 683.8 705.8 Cash dividends declared per common share. $ 1.38 $ 1.15 $ .96 " Diluted by assumed exercise of stock-based compensation awards, using the treasury stock method.\fCNH GLOBAL N.V. CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 2007, 2006 and 2005 Supplemental Information Consolidated Equipment Operations Financial Services 2007 2006 2005 2007 2006 2005 2007 2006 2005 (in millions, except per share data) Revenues: Net sales $14,971 $12,115 $11,806 $14,971 $12,115 $11,806 $ $- Finance and interest income 993 883 769 190 177 129 1,131 952 801 15,964 12,998 12,575 15,161 12,292 11,935 1,131 952 801 Costs and Expenses: Cost of goods sold 12,154 9,933 9,934 12,154 9,933 9,934 Selling, general and administrative 1,436 1,248 1,177 1,183 1,015 964 253 233 213 Research, development and engineering 409 367 303 409 367 303 Restructuring 85 96 73 85 94 71 2 2 Interest expense-Fiat affiliates 140 66 99 39 49 72 101 17 27 Interest expense-other 561 512 452 319 272 269 378 323 240 Interest compensation to Financial Services 247 235 159 Other, net 349 359 280 224 233 188 70 54 36 15,134 12,581 12,318 14,660 12,198 11,960 802 629 518 Income (loss) before income taxes, minority interest and equity in income of unconsolidated subsidiaries and affiliates 830 417 257 501 94 (25) 329 323 283 Income tax provision 354 165 116 245 56 24 109 109 92 Minority interest 15 16 26 15 16 27 Equity in income of unconsolidated subsidiaries and affiliates: Financial Services 9 8 9 229 222 200 Equipment Operations 89 48 39 89 48 39 Net income $ 659 $ 292 $ 163 $ 559 $ 292 $ 163 $ 229 $222 $200 Per Share Data: Basic earnings per share $ 2.36 $ 1.37 $ 0.77 Diluted earnings per share $ 2.36 $ 1.23 $ 0.70CNH GLOBAL N.V. CONSOLIDATED BALANCE SHEETS As of December 31, 2007 and 2006 Supplemental Information Equipment Financial Consolidated 2007 Operations Services 2006 2007 2006 2007 2006 (in millions, except share data] ASSETS Current Assets: Cash and cash equivalents $1,025 $ 1,174 $ 405 S 703 $ 620 $ 471 Deposits in Fiat affiliates cash management pools 1,231 497 1,157 496 74 Accounts and notes receivable, net 6,720 3,677 1 542 1,311 5,439 2,475 Intersegment notes receivable 1.831 1348 Inventories, net 3.488 2.735 3.488 2,735 Deferred income taxes 584 587 377 424 163 Prepayments and other 220 114 200 110 207 20 Total current assets 13,268 8,784 9,000 7,127 6,360 3,114 Long-term receivables 3,873 2.872 3,871 2,869 Intersegment long-term notes receivable 97 Property, plant and equipment, net 1,510 1,306 1,505 1,297 Other Assets: Investments in unconsolidated subsidiaries and affiliates 528 457 420 354 108 103 Investment in Financial Services .,099 1, 788 Equipment on operating leases, net 511 254 511 254 Good will 2.382 2.365 2,231 742 2,220 151 Other intangible assets, net 760 780 776 18 145 Other assets 913 1,456 638 852 275 604 Total other assets 5,094 5,312 6,130 5,990 1,063 1,110 Total $23,745 $18,274 $16,637 $14,514 $11,299 $7.102 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt-Fiat affiliates $ 153 S 5 153 Current maturities of long-term debt-other 1,334 33 1,027 33 Short-term debt-Fiat affiliates 2.562 438 53 1,332 974 Short-term debt-other 1,70 832 263 465 260 228 2,299 1,242 178 604 Intersegment short-term debt and current maturities of long-term debt 1,831 161 1,348 Accounts payable 1.907 1,881 2.989 1.939 47 Restructuring liability 10 85 10 82 Other accrued liabilities 2,575 2,144 2.160 Total current liabilities 11,248 6,440 5,889 1,879 4,441 433 274 7,451 3,456 Long-term debt-Fiat affiliates 1,515 19 800 715 19 Long-term debt-other 2,365 4,053 1, 377 2,36 988 1,687 Intersegment long-term debt 97 Other Liabilities Pension, postretirement and other postemployment benefits 1,810 2,288 1,804 2,279 Other liabilities 388 245 349 199 46 Total other liabilities 2,198 2.533 2,153 2,478 55 Commitments and contingencies Minority interest 117 109 116 109 1 Shareholders' equity: Preference shares, $1.00 par value; authorized and issued 74,800,000 shares in 2007 and 2006 35 35 Common shares, (2.25 par value; authorized 400,000,000 shares in 2007 and 2006, issued 237,324,183 in 2007 and 236,319,791 shares in 2006 595 592 Paid-in capital 6,117 595 592 205 205 5,168 6,168 6,117 1,224 1.205 Treasury stock, 154,813 shares in 2007 and 2006, at cost (8) (8) (B) (8) Retained earnings (deficit) 311) (763) (311) 763) 359 Accumulated other comprehensive income (loss) (142) (818) (142) (818) 276 211 132 Total shareholders' equity 6,302 5,120 6,302 5,120 2,099 1,788 Total $23,745 $18,274 $16,637 514,514 $11,299 $7,102f. You want to compare Caterpillar's operations for fiscal 2007 to those of an international competitor, CNH Global, headquartered in the Netherlands. (CNH Global financial statements follow the Caterpillar financial statements at the end of the case.) In particular you want to compare a number of inventory-related metrics. However, the two companies do not use the same inventory costing methods: Caterpillar uses LIFO for a large portion of its inventory whereas CNH Global uses FIFO to cost all of its inventory. International financial reporting standards (IFRS) do not permit companies to use the LIFO method. To compare the two companies, you first must restate Caterpillar's relevant balance sheet and income statement numbers from LIFO to FIFO. To do this, we assume that Caterpillar had instead always used the FIFO method of inventory costing. Use the table below to aggregate the data you need to covert LIFO to FIFO for Caterpillar. For these calculations, assume that the marginal tax rate for Caterpillar is 35%. Caterpillar, Inc. 2007 2006 2005 Sales LIFO Cost of goods sold (COGS) LIFO Net income LIFO Inventory from the balance sheet LIFO Reserve from financial statement notes Total Assets from the balance sheet Calculations to convert LIFO to FIFO: 2007 2006 2005 FIFO Inventory = LIFO Inventory + LIFO Reserve FIFO Assets = LIFO Assets + LIFO Reserve Increase in LIFO Reserve during the year FIFO COGS = LIFO COGS - Increase in LIFO Reserve After-tax effect of LIFO = (1- Marginal tax rate) x Increase in LIFO Reserve FIFO Net income = LIFO Net income + After- tax effect of LIFO methodComplete the table belotlir using information from the nancial statements and from the table you completed above. Comment on the resulls comparing CNH Global with Cabelpillar's \"As Reported' and "As if FIFD' income statement and balance sheet information. summon-512mm Notes: 1 To common size items from the income statement, divide by total revenue attributable to equipment sales {that is, do not include revenues from each company's nancing operations}. 2 To common size items from the balance sheet, divide by total assets