EX-13 7 ex_13.htm 2008 GENERAL & FINANCIAL INFORMATION ex_13.htm
 
 
EXHIBIT 13


 
CATERPILLAR INC.
GENERAL AND FINANCIAL INFORMATION
2008

 
 
Page A-1

 
 
 
Page A-2

 
 
INTERNAL CONTROL OVER FINANCIAL REPORTING
   
 
The management of Caterpillar Inc. (company) is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment we concluded that, as of December 31, 2008, the company's internal control over financial reporting was effective based on those criteria.
 
Management has excluded Caterpillar Japan Ltd. from our assessment of internal control over financial reporting as of December 31, 2008 because Caterpillar Japan Ltd. was consolidated by the company on August 1, 2008.  Caterpillar Japan Ltd. is a 67 percent owned subsidiary of the company with  total assets and total revenues representing 5% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2008.  Prior to consolidation, the company accounted for its investment in this entity under the equity method.

The effectiveness of the company's internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their report appears on page A-4.
 
 
     
        /s/ James W. Owens     
       
James W. Owens
Chairman of the Board
and Chief Executive Officer
 
   
     
        /s/ David B. Burritt     
       
David B. Burritt
Vice President and
 Chief Financial Officer
 
   
       
 
February 19, 2009
   
 
 
Page A-3

 
 
PWC logo
 
 
To the Board of Directors and Stockholders of Caterpillar Inc.:
 
In our opinion, the accompanying consolidated statement of financial position and the related statements of consolidated results of operations, changes in stockholders' equity, and cash flow, including pages A-5 through A-60, present fairly, in all material respects, the financial position of Caterpillar Inc. and its subsidiaries at December 31, 2008, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing on page A-3.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
 
As discussed in Note 1K to the consolidated financial statements, the Company changed the manner in which it measures certain assets and liabilities at fair value in 2008, the manner in which it accounts for uncertainty in income taxes in 2007, and the manner in which it accounts for defined benefit pension and other postretirement plans, effective December 31, 2006.
 
A company’s internal control over financial reporting is a process designed 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.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
As described in Management's Report on Internal Control Over Financial Reporting, management has excluded Caterpillar Japan Ltd. from its assessment of internal control over financial reporting as of December 31, 2008 because Caterpillar Japan Ltd. was consolidated by the Company on August 1, 2008.  We have also excluded Caterpillar Japan Ltd. from our audit of internal control over financial reporting.  Caterpillar Japan Ltd. is a 67 percent owned subsidiary of the Company with total assets and total revenues representing 5% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2008.  Prior to consolidation, the Company accounted for its investment in this entity under the equity method.
 

/s/ PricewaterhouseCoopers LLP 
Peoria, Illinois
February 19, 2009
 
 
Page A-4

 
STATEMENT 1
Caterpillar Inc.
Consolidated Results of Operations for the Years Ended December 31
(Dollars in millions except per share data)
 
 
2008
 
2007
 
2006
Sales and revenues:
                     
 
Sales of Machinery and Engines
$
48,044
   
$
41,962
   
$
38,869
 
 
Revenues of Financial Products
 
3,280
     
2,996
     
2,648
 
 
Total sales and revenues
 
51,324
     
44,958
     
41,517
 
                         
Operating costs:
                     
 
Cost of goods sold
 
38,415
     
32,626
     
29,549
 
 
Selling, general and administrative expenses
 
4,399
     
3,821
     
3,706
 
 
Research and development expenses
 
1,728
     
1,404
     
1,347
 
 
Interest expense of Financial Products
 
1,153
     
1,132
     
1,023
 
 
Other operating (income) expenses
 
1,181
     
1,054
     
971
 
 
Total operating costs
 
46,876
     
40,037
     
36,596
 
                         
Operating profit
 
4,448
     
4,921
     
4,921
 
                         
 
Interest expense excluding Financial Products
 
274
     
288
     
274
 
 
Other income (expense)
 
299
     
320
     
214
 
                         
Consolidated profit before taxes
 
4,473
     
4,953
     
4,861
 
                         
 
Provision for income taxes
 
953
     
1,485
     
1,405
 
 
Profit of consolidated companies
 
3,520
     
3,468
     
3,456
 
                         
 
Equity in profit (loss) of unconsolidated affiliated companies
 
37
     
73
     
81
 
                       
Profit
$
3,557
   
$
3,541
   
$
3,537
 
                         
                       
Profit per common share
$
5.83
   
$
5.55
   
$
5.37
 
                         
Profit per common share – diluted 1
$
5.66
   
$
5.37
   
$
5.17
 
                         
Weighted-average common shares outstanding (millions)
                     
 
- Basic
 
610.5
     
638.2
     
658.7
 
 
- Diluted 1
 
627.9
     
659.5
     
683.8
 
                       
Cash dividends declared per common share
$
1.62
   
$
1.38
   
$
1.15
 

1
Diluted by assumed exercise of stock-based compensation awards, using the treasury stock method.
See accompanying notes to Consolidated Financial Statements.
 
Page A-5

 
 
STATEMENT 2
Caterpillar Inc.
Consolidated Financial Position at December 31
(Dollars in millions)
 
2008
 
2007
 
2006
Assets
                     
 
Current assets:
                     
   
Cash and short-term investments
$
2,736
   
$
1,122
   
$
530
 
   
Receivables – trade and other
 
9,397
     
8,249
     
8,607
 
   
Receivables – finance
 
8,731
     
7,503
     
6,804
 
   
Deferred and refundable income taxes
 
1,223
     
816
     
733
 
   
Prepaid expenses and other current assets
 
765
     
583
     
638
 
   
Inventories
 
8,781
     
7,204
     
6,351
 
 
Total current assets
 
31,633
     
25,477
     
23,663
 
                         
 
Property, plant and equipment – net
 
12,524
     
9,997
     
8,851
 
 
Long-term receivables – trade and other
 
1,479
     
685
     
860
 
 
Long-term receivables – finance
 
14,264
     
13,462
     
11,531
 
 
Investments in unconsolidated affiliated companies
 
94
     
598
     
562
 
 
Noncurrent deferred and refundable income taxes
 
3,311
     
1,553
     
1,949
 
 
Intangible assets
 
511
     
475
     
387
 
 
Goodwill
 
2,261
     
1,963
     
1,904
 
 
Other assets
 
1,705
     
1,922
     
1,742
 
Total assets
$
67,782
   
$
56,132
   
$
51,449
 
                       
Liabilities
                     
 
Current liabilities:
                     
   
Short-term borrowings:
                     
     
Machinery and Engines
$
1,632
   
$
187
   
$
165
 
     
Financial Products
 
5,577
     
5,281
     
4,990
 
   
Accounts payable
 
4,827
     
4,723
     
4,085
 
   
Accrued expenses
 
4,121
     
3,178
     
2,923
 
   
Accrued wages, salaries and employee benefits
 
1,242
     
1,126
     
938
 
   
Customer advances
 
1,898
     
1,442
     
921
 
   
Dividends payable
 
253
     
225
     
194
 
   
Other current liabilities
 
1,027
     
951
     
1,145
 
   
Long-term debt due within one year:
                     
     
Machinery and Engines
 
456
     
180
     
418
 
     
Financial Products
 
5,036
     
4,952
     
4,043
 
 
Total current liabilities
 
26,069
     
22,245
     
19,822
 
                         
 
Long-term debt due after one year:
                     
   
Machinery and Engines
 
5,736
     
3,639
     
3,694
 
   
Financial Products
 
17,098
     
14,190
     
13,986
 
 
Liability for postemployment benefits
 
9,975
     
5,059
     
5,879
 
 
Other liabilities
 
2,293
     
2,116
     
1,209
 
Total liabilities
 
61,171
     
47,249
     
44,590
 
Commitments and contingencies (Notes 22 and 23)
                     
Redeemable noncontrolling interest (Note 25)
 
524
     
     
 
Stockholders’ equity
                     
 
Common stock of $1.00 par:
                     
   
Authorized shares:  900,000,000
Issued shares:  (2008, 2007 and 2006 – 814,894,624) at paid-in amount
 
3,057
     
2,744
     
2,465
 
 
Treasury stock (2008 – 213,367,983 shares; 2007 – 190,908,490 shares
   and 2006 – 169,086,448 shares) at cost
 
(11,217
)
   
(9,451
)
   
(7,352
)
 
Profit employed in the business
 
19,826
     
17,398
     
14,593
 
 
Accumulated other comprehensive income
 
(5,579
)
   
(1,808
)
   
(2,847
)
Total stockholders’ equity
 
6,087
     
8,883
     
6,859
 
Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
67,782
   
$
56,132
   
$
51,449
 
 
See accompanying notes to Consolidated Financial Statements.
 
Page A-6

 
 
STATEMENT 3
Caterpillar Inc.
Changes in Consolidated Stockholders’ Equity for the Years Ended December 31
(Dollars in millions)
                 
             
Accumulated other comprehensive income (loss)
   
 
Common
 
Treasury
 
Profit
employed
in the
 
Foreign
currency
 
Pension &
other post-
retirement
 
Derivative
financial
instruments
 
Available-
for-sale
   
 
stock 
 
stock
 
business
 
translation
 
benefits1
 
and other
 
securities
 
Total
Balance at December 31, 2005
$
1,859
   
$
(4,637
)
 
$
11,808
   
$
302
   
$
(934
)
 
$
18
   
$
16
   
$
8,432
 
Profit
 
     
     
3,537
     
     
     
     
     
3,537
 
Foreign currency translation
 
     
     
     
169
     
     
     
     
169
 
Minimum pension liability adjustment, net of tax of $97
 
     
     
     
     
229
     
     
     
229
 
Derivative financial instruments and other
                                                             
 
Gains (losses) deferred, net of tax of $40
 
     
     
     
     
     
73
     
     
73
 
 
(Gains) losses reclassified to earnings, net of tax of $26
 
     
     
     
     
     
(43
)
   
     
(43
)
Available-for-sale securities
                                                             
 
Gains (losses) deferred, net of tax of $8
 
     
     
     
     
     
     
17
     
17
 
 
(Gains) losses reclassified to earnings, net of tax of $12
 
     
     
     
     
     
     
(23
)
   
(23
)
   
Comprehensive income
                                                         
3,959
 
Incremental adjustment to adopt SFAS 158, net of tax of $1,494
 
     
     
     
     
(2,671
)
   
     
     
(2,671
)
Dividends declared
 
     
     
(752
)
   
     
     
     
     
(752
)
Common shares issued from treasury stock
   for stock-based compensation:  15,207,055
 
73
     
341
     
     
     
     
     
     
414
 
Stock-based compensation expense
 
137
     
     
     
     
     
     
     
137
 
Tax benefits from stock-based compensation
 
170
     
     
     
     
     
     
     
170
 
Shares repurchased:  45,608,000
 
     
(3,208
)
   
     
     
     
     
     
(3,208
)
Shares issued for Progress Rail Services, Inc.
   acquisition: 5,341,902
 
226
     
152
     
     
     
     
     
     
378
 
Balance at December 31, 2006
$
2,465
   
$
(7,352
)
 
$
14,593
   
$
471
   
$
(3,376
)
 
$
48
   
$
10
   
$
6,859
 
Adjustment to adopt FIN 48
 
     
     
141
     
     
     
     
     
141
 
Balance at January 1, 2007
 
2,465
     
(7,352
)
   
14,734
     
471
     
(3,376
)
   
48
     
10
     
7,000
 
Profit
 
     
     
3,541
     
     
     
     
     
3,541
 
Foreign currency translation
 
     
     
     
278
     
     
     
     
278
 
Pension and other postretirement benefits
                                                             
 
Current year actuarial gain/(loss), net of tax of $271
 
     
     
     
     
537
     
     
     
537
 
 
Amortization of actuarial (gain)/loss, net of tax of $123
 
     
     
     
     
228
     
     
     
228
 
 
Current year prior service cost, net of tax of $1
 
     
     
     
     
(2
)
   
     
     
(2
)
 
Amortization of prior service cost, net of tax of $10
 
     
     
     
     
17
     
     
     
17
 
 
Amortization of transition asset/obligation, net of tax of $1
 
     
     
     
     
2
     
     
     
2
 
Derivative financial instruments and other
                                                             
 
Gains (losses) deferred, net of tax of $27
 
     
     
     
     
     
51
     
     
51
 
 
(Gains) losses reclassified to earnings, net of tax of $45
 
     
     
     
     
     
(80
)
   
     
(80
)
Available-for-sale securities
                                                             
 
Gains (losses) deferred, net of tax of $8
 
     
     
     
     
     
     
14
     
14
 
 
(Gains) losses reclassified to earnings, net of tax of $3
 
     
     
     
     
     
     
(6
)
   
(6
)
   
Comprehensive income
                                                         
4,580
 
Dividends declared
 
     
     
(877
)
   
     
     
     
     
(877
)
Common shares issued from treasury stock
   for stock-based compensation:  11,710,958
 
22
     
306
     
     
     
     
     
     
328
 
Stock-based compensation expense
 
146
     
     
     
     
     
     
     
146
 
Tax benefits from stock-based compensation
 
167
     
     
     
     
     
     
     
167
 
Shares repurchased:  33,533,000
 
     
(2,405
)
   
     
     
     
     
     
(2,405
)
Stock repurchase derivative contracts
 
(56
)
   
     
     
     
     
     
     
(56
)
Balance at December 31, 2007
$
2,744
   
$
(9,451
)
 
$
17,398
   
$
749
   
$
(2,594
)
 
$
19
   
$
18
   
$
8,883
 
 
(Continued)
Page A-7

 
 
STATEMENT 3
Caterpillar Inc.
Changes in Consolidated Stockholders’ Equity for the Years Ended December 31 (Continued)
(Dollars in millions)
                 
             
Accumulated other comprehensive income (loss)
   
 
Common
 
Treasury
 
Profit
employed
in the
 
Foreign
currency
 
Pension &
other post-
retirement
 
Derivative
financial
instruments
 
Available-
for-sale
   
 
stock
 
stock
 
business
 
translation
 
benefits1
 
and other
 
securities
 
Total
Balance at December 31, 2007
$
2,744
   
$
(9,451
)
 
$
17,398
   
$
749
   
$
(2,594
)
 
$
19
   
$
18
   
$
8,883
 
Adjustment to adopt measurement date
                                                             
   provisions of FAS 158, net of tax 2
 
     
     
(33
)
   
     
17
     
     
     
(16
)
Balance at January 1, 2008
 
2,744
     
(9,451
)
   
17,365
     
749
     
(2,577
)
   
19
     
18
     
8,867
 
Profit
 
     
     
3,557
     
     
     
     
     
3,557
 
Foreign currency translation, net of tax of $133
 
     
     
     
(488
)     
     
     
     
(488
)
Pension and other postretirement benefits
                                                             
 
Current year actuarial gain/(loss), net of tax of $1,854
 
     
     
     
     
(3,415
)
   
     
     
(3,415
)
 
Amortization of actuarial (gain)/loss, net of tax of $84
 
     
     
     
     
150
     
     
     
150
 
 
Current year prior service cost, net of tax of $5
 
     
     
     
     
(9
)
   
     
     
(9
)
 
Amortization of transition asset/obligation, net of tax of $1
 
     
     
     
     
2
     
     
     
2
 
Derivative financial instruments and other
                                                             
 
Gains (losses) deferred, net of tax of $54
 
     
     
     
     
     
78
     
     
78
 
 
(Gains) losses reclassified to earnings, net of tax of $6
 
     
     
     
     
     
(9
)
   
     
(9
)
Available-for-sale securities
                                                             
 
Gains (losses) deferred, net of tax of $67
 
     
     
     
     
     
     
(125
)
   
(125
)
 
(Gains) losses reclassified to earnings, net of tax of $15
 
     
     
     
     
     
     
28
     
28
 
   
Comprehensive income
                                                         
(231
)
Dividends declared
 
     
     
(981
)
   
     
     
     
     
(981
)
Common shares issued from treasury stock
   for stock-based compensation:  4,807,533
 
7
     
128
     
     
     
     
     
     
135
 
Stock-based compensation expense
 
194
     
     
     
     
     
     
     
194
 
Tax benefits from stock-based compensation
 
56
     
     
     
     
     
     
     
56
 
Shares repurchased:  27,267,026 3
 
     
(1,894
)
   
     
     
     
     
     
(1,894
)
Stock repurchase derivative contracts
 
56
     
     
     
     
     
     
     
56
 
Cat Japan share redemption 4
 
     
     
(115
)
   
 
     
     
     
     
(115
)
Balance at December 31, 2008
$
3,057
   
$
(11,217
)
 
$
19,826
   
$
261
   
$
(5,849
)
 
$
88
   
$
(79
)
 
$
6,087
 
 
1
Pension and other postretirement benefits include net adjustments for Cat Japan Ltd, while they were an unconsolidated affiliate, of $(9) million and $(6) million in 2007 and 2006, respectively.   The ending balances are $(52) million and $(43) million as of December 31, 2007 and 2006, respectively.  See Note 25 regarding the Cat Japan share redemption.
2
Adjustments to profit employed in the business and pension and other postemployment benefits were net of tax of $(17) million and $9 million, respectively.
3
Amount consists of $1,800 million of cash-settled purchases and $94 million of derivative contracts.
4
See Note 25 regarding the Cat Japan share redemption.
See accompanying notes to Consolidated Financial Statements.
 
Page A-8

 
 
STATEMENT 4
Caterpillar Inc.
Consolidated Statement of Cash Flow for the Years Ended December 31
(Millions of dollars)
 
2008
 
2007
 
2006
Cash flow from operating activities:
                     
   
Profit
$
3,557
   
$
3,541
   
$
3,537
 
   
Adjustments for non-cash items:
                     
       
Depreciation and amortization
 
1,980
     
1,797
     
1,602
 
       
Other
 
383
     
199
     
197
 
   
Changes in assets and liabilities:
                     
       
Receivables trade and other
 
(545
)
   
899
     
(148
)
       
Inventories
 
(833
)
   
(745
)
   
(827
)
       
Accounts payable and accrued expenses
 
656
     
618
     
670
 
       
Customer advances
 
286
     
576
     
511
 
       
Other assets – net
 
(470
)
   
66
     
(262
)
       
Other liabilities – net
 
(227
)
   
984
     
519
 
Net cash provided by (used for) operating activities
 
4,787
     
7,935
     
5,799
 
                       
Cash flow from investing activities:
                     
   
Capital expenditures excluding equipment leased to others
 
(2,445
)
   
(1,700
)
   
(1,593
)
   
Expenditures for equipment leased to others
 
(1,566
)
   
(1,340
)
   
(1,082
)
   
Proceeds from disposals of property, plant and equipment
 
982
     
408
     
572
 
   
Additions to finance receivables
 
(14,031
)
   
(13,946
)
   
(10,522
)
   
Collections of finance receivables
 
9,717
     
10,985
     
8,094
 
   
Proceeds from sale of finance receivables
 
949
     
866
     
1,067
 
   
Investments and acquisitions (net of cash acquired)
 
(117
)
   
(229
)
   
(513
)
   
Proceeds from release of security deposit
 
     
290
     
 
   
Proceeds from sale of available-for-sale securities
 
357
     
282
     
539
 
   
Investments in available-for-sale securities
 
(339
)
   
(485
)
   
(681
)
   
Other – net
 
197
     
461
     
323
 
Net cash provided by (used for) investing activities
 
(6,296
)
   
(4,408
)
   
(3,796
)
                       
Cash flow from financing activities:
                     
   
Dividends paid
 
(953</