Basis of Presentation, Nature of Operations and Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2011

Basis of Presentation, Nature of Operations and Accumulated Other Comprehensive Income (Loss)

Basis of Presentation, Nature of Operations and Accumulated Other Comprehensive Income (Loss)

1. A.  Basis of Presentation

In the opinion of management, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated results of operations for the three and six month periods ended June 30, 2011 and 2010, (b) the consolidated financial position at June 30, 2011 and December 31, 2010, (c) the consolidated changes in stockholders’ equity for the six month periods ended June 30, 2011 and 2010, and (d) the consolidated statement of cash flow for the six month periods ended June 30, 2011 and 2010.  The financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.

Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our Company’s annual report on Form 10-K for the year ended December 31, 2010, as supplemented by the Company’s current report on Form 8-K filed on May 23, 2011 (2010 Form 10-K) to reflect the change in our reportable segments as discussed in Note 14.

The Company revised previously reported cash flows from operating and investing activities for the six month period ended June 30, 2010 to adjust for the impact of accrued but unpaid capital expenditures.  Cash provided by operating activities increased from the amount previously reported by $168 million for the six month period ended June 30, 2010, and cash flow from investing activities decreased by the same amount.  Management has concluded that the impact was not material to the six month period.

The December 31, 2010 financial position data included herein is derived from the audited consolidated financial statements included in the 2010 Form 10-K but does not include all disclosures required by U.S. GAAP.

B.  Nature of Operations

Information in our financial statements and related commentary are presented in the following categories:

Machinery and Power Systems – Represents the aggregate total of Construction Industries, Resource Industries, Power Systems, and All Other segments and related corporate items and eliminations.

Financial Products – Primarily includes the company’s Financial Products Segment.  This category includes Caterpillar Financial Services Corporation (Cat Financial), Caterpillar Insurance Holdings Inc. (Cat Insurance) and their respective subsidiaries.

As discussed in Note 14 – Segment Information, during the first quarter of 2011, we revised our reportable segments in line with the changes to our organizational structure that were announced during 2010.  The 2010 financial information has been retrospectively adjusted to conform to the 2011 presentation.

C.  Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) and its components are presented in Consolidated Statement of Changes in Stockholders’ Equity.   Accumulated other comprehensive income (loss), net of tax, consisted of the following:

(Millions of dollars)	June 30, 2011	June 30, 2010
Foreign currency translation	$863	$175
Pension and other postretirement benefits	(4,499)	(4,293)
Derivative financial instruments	36	43
Available-for-sale securities	56	30
Total accumulated other comprehensive income (loss)	$(3,544)	$(4,045)