Caterpillar, Inc. (CAT) October 9, 2016 Industrials Heavy Machinery Stock Rating Hold

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1 The Henry Fund Henry B. Tippie School of Management Casey Farrier Spoden Caterpillar, Inc. (CAT) October 9, 2016 Industrials Heavy Machinery Stock Rating Hold A weak global economy has created headwinds across the majority of industries in which Caterpillar operates. The company has proactively focused on cost reduction to improve margins even as revenues continue to decrease. Caterpillar is a market leader that will provide value to shareholders if they are willing to hold long-term. Drivers of Thesis Caterpillar is market leader in all segments in which they participate and even though they are experiencing double digit sales declines they have managed to decrease costs and improve margins. The company has maintained dividend through the downturn and is projected to maintain a high payout ratio as they focus on returning cash to shareholder despite revenue decline. As energy and commodity prices rebound, the company will be in a favorable position due to restructuring efforts and their large dealer network. Risks to Thesis Investment Thesis Target Price $ Henry Fund DCF $80.72 Henry Fund DDM $56.16 Relative Multiple $60.14 Price Data Current Price $ wk Range $ Consensus 1yr Target $78.19 Key Statistics Market Cap (B) $50.98 Shares Outstanding (M) 582,322 Institutional Ownership 66.6% Five Year Beta 1.40 Dividend Yield 3.50% Est. 5yr Growth 5.56% Price/Earnings (TTM) Price/Earnings (FY1) Price/Sales (TTM) 1.22 Price/Book (mrq) 3.55 Profitability Operating Margin 8.17% Profit Margin 4.47% Return on Assets (TTM) 2.58% Return on Equity (TTM) 13.32% Revenues are projected to decline through 2017, down nearly 30% from its peak year in Slow recovery of commodity and energy prices could prolong sales declines could further decline the stock price. 40 GOOG Industry Sector Consolidation (M&A) is a large driver of growth in the industry, where companies can grow to similar size and scale of CAT more directly compete for market share. Earnings Estimates Year E 2017E 2018E 0 EPS $5.87 $5.99 $3.54 $3.55 $3.65 $4.45 growth -32.6% 2.04% % -5.58% -3.28% 1.23% 12 Month Performance Company Description 30% 20% 10% 0% -10% -20% CAT S&P 500 O N D J F M A M J J A S Important disclosures appear on the last page of this report P/E ROE EV/EBITDA Caterpillar, Inc. is a global manufacturer of construction and mining equipment, engines both diesel and natural gas, industrial gas turbines, and diesel-electric locomotives. Its business segments consist of Energy & Transportation, Construction, Resource industries. The company also offers financing solutions through its financial services & products division. Caterpillar operates in 36 countries and is headquartered in Peoria, Illinois. Data Sources: Yahoo Finance, Bloomberg

2 EXECUTIVE SUMMARY Caterpillar is a leading competitor in the heavy machinery and equipment manufacturing industry and would be considered a blue-chip American company. Over the last four years, the company has experienced a period of extreme declines in revenue due to global macroeconomic factors including great international and commodity price exposure. Financial Products The Financial Products division of Caterpillar that provides financing options for customers purchasing equipment. This segment includes both Caterpillar Financial Services, and Caterpillar Insurance Services. Although small, the financial products segment is strategically vital as it provides financing option to customer who may not otherwise be able to secure it elsewhere. Although revenues have greatly declined, the company has had a strong focus on cutting costs to maintain or increase margins. Caterpillar continues to invest in the research and development of new product lines, many specifically designed to meet higher fuel emission standards and emerging technology. We have modeled top line growth of just over 1% over the next 5 years, giving a price of $ We are giving Caterpillar a hold rating due to the company focus on margin increases, lean operations management, and the maintenance of dividends throughout the recent downturn in company revenues. COMPANY DESCRIPTION Caterpillar, Inc. is an industry leader in manufacturing of heavy equipment and machinery for used in construction, transportation, and mining. The company has existed for over 90 years and is headquartered in Peoria, IL. In its best year, the company generated revenues of over $60 billion although recent sales declines showed revenues of approximately $44 billion in fiscal year Caterpillar reports revenues in two major categories: Machinery, Energy & Transportation and Financial Products. Machinery, Energy & Transportation Machinery, Energy & Transportation represents the majority of Caterpillar s revenues and is comprised of all manufactured equipment and products. This unit is further divided into categories of: Energy & Transportation, Construction Industries, Resource Industries, and All other segments. Source: Caterpillar 10K 2015 As shown in the chart above, Energy & Transportation and Construction Industries make up the largest portion of revenues for the company. Since 2010 the company has continued to increase investments in developing mining equipment which largely contributed to its leading market share in the industry. However, this has also contributed greatly to poor sales performance since 2011 as the mining industry experienced decline. Caterpillar also competes in 36 countries worldwide. Historically, the company has enjoyed strong growth in emerging markets, however with the world economy slowing recently, there is less international growth. Domestic sales in 2015 increased 2% over 2014 reported numbers as a percent of sales. Geographic revenue breakdown is shown below: Page 2

3 allows Caterpillar to focus more specifically on its manufacturing operations and product improvements. Energy & Transportation Source: Caterpillar, Inc. 10K 2015 Company Analysis Caterpillar is a market leader or at a minimum, a strong competitor in the majority of its product lines. Although currently experiencing declines, CAT has historically exhibited strong growth potential through both acquisitions and organic growth. In the last decade, the company has acquired nearly 20 small companies worldwide most notably the $8.8B deal to acquire Bucyrus International. CAT competes in the heavy machinery division of the industrials segment. Remaining competitive in this industry requires significant and steady investment in research and development. In 2015, R&D expenses were over $2.1B and 4.6% of total sales revenue and we have forecasted R&D to grow slightly over the forecast period. The company has stated a strong commitment to developing new lower emission equipment and keeping abreast of technological advances in the industry. One thing that provides Caterpillar with a strong competitive advantage over its peers is the strength and reach of their dealer network. CAT machines are sold primarily through this worldwide network of dealers that includes 48 locations in the US and 127 internationally. These dealers serve over 182 countries globally. Caterpillar works very closely with its dealers and the relationship is managed through sales and service agreements. The dealers are given the right to buy and sell Caterpillar brand equipment and in return, they are responsible for the marketing, promoting, and selling that equipment in the region they serve. This arrangement Energy and Transportation at 38% percent of revenues, makes up the largest portion of Caterpillar business. This segment includes sales of reciprocating engines, turbines, diesel-electric locomotives, integrated solutions. It also includes various manufactured parts for sale in the oil and gas, power generation, industrial, marine and rail related industries. We have projected negative growth in this segment for the remainder of 2016 and 2017 at -8.0% and -5.0% respectively. This is due primarily to the recent drop in energy prices and the pressure that puts on this segment in the subsequent years before prices begin to rebound significantly. Construction Industries Caterpillar s construction industries segment sells products including tractors, loaders, and shovels to customers in the heavy construction, general construction, rental, mining, and quarry markets. In 2015, the construction industries segment revenue has declined over 14%. We have modeled a negative outlook in this segment over the next two year, with slow growth returning in The recent decline in this segment is due primarily to lower end-user demand as much of the sales revenue is attributed to international customers mainly China. The overall slowing of the global economy has been damaging to Caterpillar, but little construction growth in China and other emerging markets have been detrimental to the construction segment. Resource Industries The resource industries segment of Caterpillar focuses mainly on selling products and machinery for use in the mining industry. These products include trucks, tractors, loaders, and drills. The decline in commodity prices related to mining operations has severely impacted sales in the division. Over the past 3 years, sales in this segment have declined 28.00% per year on average. We are forecasting another Page 3

4 decline of % for 2016, with negative growth rates of -8.00% and -5.00% the next two years before returning to positive growth in All Other Industries Remaining products related to forestry, paving, industrial and waste customers represent the other industries revenue segment. This is the smallest segment of Caterpillar business operations by revenue although these products are important in regard to market position and strategic operations. We have forecasted flat growth for 2016 and moderate positive increases for the remaining five years of the forecast period. This is in line with management guidance and assumes a spur in global economic activity over the next few years. Financial Products The financial products segment of Caterpillar includes financial and insurance services and products. The segment makes up 6% of total revenue. Historically, financial services has been extremely important strategically as it allows access to equipment for customers that may not have other funds/loans available to them. Growth in the segment has remained steady at an average of 1.2% per year for the last 5 years although it did record a decline of almost 6% in The overall decline in the economy and subsequent tightening of the credit market has allowed Caterpillar to maintain growth in this segment as consumers have fewer outside options for financing. CAT lowered full year 2016 guidance from $40.5 billion to $39 billion in revenues with an EPS drop from $3.55 to $3.25. The company also issued a disappointing outlook stating that they do not expect sales/revenues to be much different from the 2016 number, which are the lowest the company has seen in almost a decade. CAT did state however, that there is larger negative risk in the first portion of the year due to the start of commodity price increases as well as general yearly cyclicality of revenues in industrials. CEO Retirement At the end of 2016 Caterpillar CEO, Doug Oberhelman will step down. Oberhelman has been CEO since When he began his tenure, he was focused on a strategic goal of becoming the leader in every market that Caterpillar competes. In order to help realize that goal, he pushed for bigger investments in mining, railroads, and sustainable, eco-friendly engines. This included investing large amounts of capital in areas like China, Brazil, and other high growth (at the time) markets. After making it through the financial crisis relatively unscathed this high-risk, high-reward strategy was wellreceived by investors and analysts. However, in the last 4 years, growth in China has steeply declined as shown in the graph below: We have projected slightly negative growth for the next two years, followed by steady increase of 2% annually for the remainder of the forecast period - which is in line with overall product sales revenue. RECENT DEVELOPMENTS Q3 Earnings (will announce 10/25) Caterpillar announced its third quarter earnings results on 10/15/16. The company posted EPS of $.85 with revenues of $9.16 billion. Consensus targets projected $.86 EPS for Q3 and $9.87 billion in revenues. Due to the earning miss, Page 4

5 caused in Resource Industries segment which houses the mining and quarry equipment sales. Mining industry growth is slowing also as shown in the chart below, and as a result Caterpillar sales have suffered. Source: AMP Capital Similarly, Brazil experienced significant declines as well as shown in the graph above. As a result of these declines and the very low commodity price trends, Caterpillar has suffered greatly. Revenues have dropped from $63B in 2012 to less than $40B expected for With a change in management typically comes a change in strategic direction. A new CEO may be able to better help Caterpillar overcome the negative headwinds they are currently experiencing. INDUSTRY TRENDS Low Commodity Prices We expect overall sales to reach positive growth numbers by 2019 driven by evidence of a slight rise in commodity prices since We expect this trend to continue slowly which will spur sales growth for CAT in all divisions, but especially resource industries as companies begin to reinvest in machinery following the downturn. Caterpillar has identified one positive related to low commodity prices in that it creates a lower cost environment for many of their raw materials. This creates a sort of natural hedge, although not nearly enough to offset the huge sales decline. However, lower input costs for materials like steel have helped CAT mitigate pressure on margins due to the low sales. Globalization Mergers and acquisitions in the heavy machinery industry have paved the way for increased globalization and competitor consolidation. As previously mentioned, Caterpillar alone has been part of close to 20 acquisitions in the last decade. The recent extreme drop in commodity prices has caused severe revenue declines for Caterpillar the majority The trend toward consolidation have led to large international firms who compete with each other on quality, price, performance, and customer service. Given the reach of Caterpillar s dealer network, the company has a distinct advantage of many of its competitors. The strength of the dollar compared to other currencies right now has hurt Caterpillar somewhat. As the dollar Page 5

6 strengthens, it makes international imports more attractive and often decreases exports of domestic good. This means that Caterpillar competitors are able to sell their goods for relatively cheaper in the United States, while Caterpillar goods seem relatively more expensive. Overall, the currency effect will continue to drag earnings down as the dollar remains strong. Caterpillar reported an almost $1.7B decrease in sales due to currency exposure. However, the strength of Caterpillars position in the US and the slight uptick in economic growth with allow the company to mitigate much of this risk. Although there are still some smaller players in the heavy equipment market, there is definitely a trend toward consolidation. This leads to development of large international corporations like Caterpillar, John Deere, and Komatsu. Caterpillar is the market leader for construction equipment and machinery in the United States, controlling over 30% of the overall market. John Deere controls just over 10% of the market, with all other companies making up the remaining portion as shown in the chart below. MARKETS AND COMPETITION Caterpillar competes in a variety of markets and industries but generally competes in a mature, competitive environment with medium to high barriers to entry. Primarily, competition within these markets is focused on 4 items price, quality, performance and customer service. Efficient production processes, flexible labor agreements and access to materials at competitive costs are also major competitive advantages for Caterpillar and its competitors. In addition, customers choose products by assessing the total costs during the life of equipment, including up-front purchase costs, maintenance costs and the cost of downtime. So companies that are able to keep input costs low, while maintain high performance and price differentiation will likely have high customer retention. Historically, Caterpillar is able leverage its wide product offerings and additional value-added services like rental/leasing services and financing options, to improve revenue. Source: IBIS World Industry Data Another sub-industry in which Caterpillar competes is Mining, Oil and Gas. Market share data for this industry can be seen below. Even though CAT competes across many industries, they are a market leader in most and historically this has been recognized through strong sales growth both domestically and internationally. Customers of the heavy machinery industry vary greatly and range from small municipal governments and contractors to multinational construction conglomerates. Typically, Caterpillar is focused on the larger end of that scale, due largely to their expanded dealer network serving over 182 countries. They have a farther global reach than many of their competitors. Source: IBIS World Industry Data Page 6

7 Price-based competition, especially with international competitors has forced Caterpillar to increase operational efficiencies over the past five years. This has happened through major restructuring and cost cutting initiatives that has come in part through a reduction in work force. Though there are few direct substitutes for this industry's machinery and equipment, so the as global GDP and commodity prices rebound, Caterpillar will be well positioned to take advantage of the uptick. Peer Comparisons Direct peer comparisons are difficult to find for Caterpillar as their products and services span a large number of different industries and each revenue segment often has separate competitors. We have analyzed metrics for the two major competitors in the majority of industries in which CAT competes, John Deere and Komatsu. COMPARISON CAT DE KMTUF Market Cap P/E P/B P/S Div Yield % yr Rev CAGR Op. Margin D/E Source: Morningstar Financial Caterpillar is currently trading at a multiple much higher than its peers. A high PE is often an indicator of growth estimates and increasing demand for a stock. Although consensus estimates are below the current stock price, 2 major firms have recently upgraded their ratings for CAT, possibly spurring higher demand. ECONOMIC OUTLOOK Both revenue and earnings have been on the decline for Caterpillar for the last 2-3 years. This is due primarily to low commodity prices, low energy prices and stagnant global economy as measure by global GDP growth. This slowdown in the economy has decreased demand for transportation and construction products globally which has been damaging for Caterpillar equipment sales. The chart below shows the decline in the world GDP over the last five years. The IMF expects growth for this year of 2.4%, down from early 2016 estimates of 2.9%, and expect 2017 growth to increase to 3.5%. As a result, we have forecasted Caterpillar sales to pick up shortly after in CATALYSTS FOR GROWTH The heavy machinery manufacturing industry is generally cyclical in nature. So while our short term (2-3 year) outlook for Caterpillar is forecasting decreasing declines, we return to positive growth rates in year four. The company has made strides toward accomplishing goals related to better margins achieved primarily by cost cutting measures. The company is focused on restructuring and cutting costs in order to become a more streamline and lean organization with plants that are as efficient as possible. When economic growth rebounds, Caterpillar will be very well-positioned because if it s leaner operations in conjunction with increasing revenues. Overall, the biggest growth catalyst for Caterpillar would a strong rebound in commodity and energy prices. We expect an uptick in prices over the 5 year forecast period, although low growth is projected. INVESTMENT POSITIVES During this period of downturn, Caterpillar is committed to cutting costs to increase margins. They have maintained positive cash flows during 3 of 5 years of decline. Caterpillar Page 7

8 is on track for just over $2 billion in cost reduction efforts throughout the company. Energy prices are starting to slowly rebound and if the trend continues, Caterpillar stock price will respond positively. The firm has maintained dividends throughout the sales decline and continues to have a high payout ratio. INVESTMENT NEGATIVES Revenue forecasts continue to decline through We are projecting revenues of under $40B for 2016 and $39B in 2017 which is in line with analyst estimates. Commodity (agriculture and metals) prices are not rebounding to previously high levels and if the trend continues, the stock price will likely continue to decline as well. Market consolidation is paving the way for competitors to gain size and scale and more directly compete with Caterpillar. Revenue Growth VALUATION We have forecasted over a 5 year period through 2021 for both the DCF and DDM valuation methods. Revenue growth is projected at $40B for 2016 and $39B for 2017 which is in line with analyst consensus estimates. This represents overall sales declines of 8% and 4% respectively. The largest portion of this decline is attributed to Resource Industries with segment declines over the next three years of -10%, -7%, and -5% respectively. In addition, the Energy & Transportation division is projected negatively over the next two years as well, seeing slight positive growth of 1% beginning in These projections are due to the large exposure to weak economic conditions. Especially as the effects of the drop in commodity and energy continue to negatively affect operations. The positive outlook beginning in 2018 is depended on an upswing in energy and mining production/activity. Research and Development Research and development investments are forecasted at steady levels over the next 5 years while Caterpillar works to stay on top of development initiatives during the downtown. The focus remains on eco-friendlier engines and improved technology in both the manufacturing and performance of their equipment. SG & A Selling, general, and administrative costs are expected to be reduced by almost $1B in 2016 and will increase relative to sales revenue beginning in For the next two years, this expense will continue to decline as Caterpillar stays focused on reducing costs through restructuring and management reductions in order to more closely reflect the current weak economic conditions. The company has incurred one-time restructuring expenses of $908M in 2015, $441M in The company expects to spend approximately $400M on restructuring before the end of Dividend and payout ratio Until Caterpillar is able to rebound and deploy more of its free cash flow toward operation expansion, we expect the company to maintain its high payout ratio. In 2015 the payout ratio was close to 85% as the company refused to cut dividends. We are projecting 90-95% payout ratios over the duration of the forecast period as the company returns the majority of its earnings back to shareholders. Beta & WACC We used a Beta of 1.35 in the valuation analysis, which is reflective of the current volatile climate in the heavy manufacturing industry and accurately reflects the risk environment for an industry so reliant on commodity and the general health of the global economy. Henry Fund consensus gives a market risk premium of 5.0%, which combined with the current 30 year risk free rate of 2.46% yields a total cost of equity of 9.21%. The cost of debt was modeled at 3.81% which is the current yield to maturity of the Caterpillar bond whose length most closely matches that of the risk free rate horizon. Caterpillar is currently funded at 58% equity and 42% debt. The above calculations yielded a final WACC of 6.47%. Page 8

9 Valuation methods The DCF model valuation yielded a final price of $ As the stock is currently fluctuating near $83, there is no upside in the near term. This was calculated after adjusting Operating Assets for excess cash, debt, operating leases, and ESOP. This price represents a terminal growth rate of 4% which we believe reflects both the mature industry in which CAT participates and also the relative strength of the company in the more favorably projected economic climate. The DDM valuation yielded a price of $57.99 much lower than our DCF valuation. This was calculated using a CV growth rate of 4.5% and a CV ROE of 23.08% The relative PE valuation yielded a price of $ The comparable firms used include: John Deere, CNH Industrial NV, Cummins, Inc., and General Electric. Currently, Caterpillar is trading slightly higher than many of its peers which we believe is a reflection of recent upgrades by analyst firms. Also, the high PE could be indicative of growth potential due to CAT s market leader position, diversified product offering, and relatively high dividend yield compared to its peers. KEYS TO MONITOR Global GDP growth, commodity price, and energy price trends are the main drivers of Caterpillar success so they are very important to monitor. These have begun to increase slightly, and we expect this trend to continue slowly over the next 2-3 years. We expect both the US and word economies to maintain low growth rates going forward. Continued effects of Brexit on the European and global economy will be extremely important to monitor going forward as over 50% of revenues are recognized in international markets, and 25% in EMEA. Page 9

10 REFERENCES 1. Caterpillar, Inc. 10k filings ( ) 2. Mergent Online reported data 3. IBISWorld Industry Overview 4. Caterpillar, Inc. Investor Presentation. 11 Aug Robert Bono & Stephen Pillsbury Industrial Manufacturing Trends. PwC Strategy&. 6. The Top 10 Issues Mining Companies will face in Deloitte publication Non-Road Engines, Equipment, and Vehicles Regulations. EPA.gov 8. IMF Economic Outlook Data 9. GE Evolution Series Tier 4 Locomotive 10. Financial Times online equities data 11. Spross, Jeff. The US Dollar is Stronger than it s been in 13 years. 1 June Colvin, Geoff. Why Caterpillar s Doug Oberhelman is Leaving. Fortune Magazine. 18 October 2016 IMPORTANT DISCLAIMER Henry Fund reports are created by student enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa s Tippie School of Management. These reports are intended to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report. Page 10

11 CATERPILLAR Revenue Decomposition Fiscal Years Ending Dec E 2017E 2018E 2019E 2020E 2021E TOTAL SEGMENT REVENUES Construction Industries 18,445,000 19,362,000 16,568,000 13,420,080 13,151,678 13,809,262 14,775,911 16,253,502 17,553,782 Resource Industries 13,270,000 8,921,000 7,551,000 6,191,820 5,882,229 5,882,229 6,117,518 6,606,920 7,003,335 Energy & Transportation 20,155,000 21,727,000 17,938,000 14,888,540 14,590,769 15,028,492 15,930,202 17,204,618 18,064,849 All other Segments 886,000 2,251,000 2,197,000 1,977,300 1,977,300 2,076,165 2,200,735 2,354,786 2,472,526 Corporate Items & Eliminations (62,000) (119,000) (107,000) (98,440) (98,440) (99,424) (101,413) (104,455) (107,589) Machinery, Energy & Transportation sales 52,694,000 52,142,000 44,147,000 36,379,300 35,503,537 36,696,724 38,922,953 42,315,370 44,986,902 Financial Products Revenues 2,962,000 3,042,000 2,864,000 2,634,880 2,582,182 2,659,648 2,792,630 2,960,188 3,108,197 Consolidated Sales & Revenues 55,656,000 55,184,000 47,011,000 39,014,180 38,085,719 39,356,372 41,715,583 45,275,558 48,095,100 % Revenue Construction Industries 33.14% 35.09% 35.24% 34.40% 34.53% 35.09% 35.42% 35.90% 36.50% Resource Industries 23.84% 16.17% 16.06% 15.87% 15.44% 14.95% 14.66% 14.59% 14.56% Energy & Transportation 36.21% 39.37% 38.16% 38.16% 38.31% 38.19% 38.19% 38.00% 37.56% All other Segments 1.59% 4.08% 4.67% 5.07% 5.19% 5.28% 5.28% 5.20% 5.14% Corporate Items & Eliminations 0.11% 0.22% 0.23% 0.25% 0.26% 0.25% 0.24% 0.23% 0.22% Machinery, Energy & Transportation sales 94.68% 94.49% 93.91% 93.25% 93.22% 93.24% 93.31% 93.46% 93.54% Financial Products Revenues 5.32% 5.51% 6.09% 6.75% 6.78% 6.76% 6.69% 6.54% 6.46% Consolidated Sales & Revenues % % % % % % % % % GROWTH Construction Industries 4.60% 4.97% 14.43% 19.00% 2.00% 5.00% 7.00% 10.00% 8.00% Resource Industries 37.28% 32.77% 15.36% 18.00% 5.00% 0.00% 4.00% 8.00% 6.00% Energy & Transportation 4.58% 7.80% 17.44% 17.00% 2.00% 3.00% 6.00% 8.00% 5.00% All other Segments 40.97% % 2.40% 10.00% 0.00% 5.00% 6.00% 7.00% 5.00% Corporate Items & Eliminations 31.91% 91.94% 10.08% 8.00% 0.00% 1.00% 2.00% 3.00% 3.00% Financial Products Segment 5.52% 2.70% 5.85% 8.00% 2.00% 3.00% 5.00% 6.00% 5.00% TOTAL 15.51% 0.85% 14.81% 17.01% 2.38% 3.34% 5.99% 8.53% 6.23%

12 CATERPILLAR Income Statement Fiscal Years Ending E 2017E 2018E 2019E 2020E 2021E Revenue Sales of machinery, energy & transportation 52,694,000 52,142,000 44,147,000 36,379,300 35,503,537 36,696,724 38,922,953 42,315,370 44,986,902 Revenues of financial products 2,962,000 3,042,000 2,864,000 2,634,880 2,582,182 2,659,648 2,792,630 2,960,188 3,108,197 Total sales & revenues 55,656,000 55,184,000 47,011,000 39,014,180 38,085,719 39,356,372 41,715,583 45,275,558 48,095,100 Operating expenses Cost of goods sold 40,727,000 39,767,000 33,742,000 28,161,029 27,490,852 28,408,029 30,110,943 32,680,588 34,715,776 Selling, general & administrative expenses 5,547,000 5,697,000 5,199,000 3,822,321 3,731,357 3,855,847 4,086,985 4,435,765 4,712,003 Research & development expenses 2,046,000 2,135,000 2,165,000 1,538,199 1,501,593 1,551,691 1,644,707 1,785,065 1,896,230 Interest expense of financial products 727, , , , , , , , ,018 Other operating expenses (income) 981,000 1,633,000 2,062, , , ,660 1,044,745 1,133,903 1,204,517 Total operating costs 50,028,000 49,856,000 43,755,000 34,987,801 34,155,160 35,294,678 37,410,411 40,602,987 43,131,543 Operating Income 5,628,000 5,328,000 3,256,000 4,026,379 3,930,559 4,061,694 4,305,172 4,672,572 4,963,557 Interest expense 465, , , , , , , , ,927 Other income (expense) (68,000) 478, , , , , , , ,856 Consolidated profit (loss) before taxes 5,128,000 5,083,000 2,855,000 3,288,044 3,223,199 3,351,602 3,575,891 3,911,518 4,172,773 Provision (benefit) for income taxes 1,319,000 1,380, ,000 1,127,386 1,100,556 1,137,274 1,205,448 1,308,320 1,389,796 Profit (loss) of consolidated & affiliated companies 3,803,000 3,711,000 2,113,000 1,753,568 1,711,836 1,768,948 1,874,987 2,034,997 2,161,727 Less: profit (loss) attributable to noncontrolling interests (14,000) (16,000) (11,000) (9,129) (8,912) (9,209) (9,761) (10,594) (11,254) Net Income 3,789,000 3,695,000 2,102,000 1,744,439 1,702,924 1,759,739 1,865,226 2,024,403 2,150,473 Weighted average shares outstanding basic 645, , , , , , , , ,365 EPS Cash dividends declared per common share

13 CATERPILLAR Balance Sheet In thousands Fiscal Years Ending Dec E 2017E 2018E 2019E 2020E 2021E ASSETS Cash & short term investments 6,081,000 7,341,000 6,460,000 13,395,027 11,358,671 9,381,535 7,473,309 5,339,147 3,855,506 Receivables 17,176,000 16,764,000 15,686,000 11,956,182 11,671,649 12,061,050 12,784,047 13,875,028 14,739,097 Deferred & refundable income taxes 1,553,000 1,739,000 1,526,000 1,179,467 1,151,398 1,189,812 1,261,135 1,368,759 1,453,999 Prepaid expenses & other current assets 900, ,000 1,046, , , , , , ,412 Inventory 12,625,000 12,205,000 9,700,000 8,834,333 8,624,093 8,911,818 9,446,036 10,252,153 10,890,607 Total current assets 38,335,000 38,867,000 34,418,000 36,026,462 33,451,521 32,211,469 31,671,779 31,602,696 31,754,621 Total property, plant & equipment, at cost 31,316,000 31,572,000 31,977,000 26,820,956 24,039,224 23,048,205 23,243,728 24,363,431 25,720,799 Less: accumulated depreciation 14,241,000 14,995,000 15,887,000 15,595,022 13,080,445 11,723,809 11,240,494 11,335,850 11,881,923 Property, plant & equipment, net 17,075,000 16,577,000 16,090,000 11,225,934 10,958,778 11,324,396 12,003,235 13,027,582 13,838,876 Long term receivables 16,323,000 16,008,000 14,821,000 10,526,355 10,275,848 10,618,681 11,255,216 12,215,727 12,976,463 Investments in unconsolidated affiliated companies 272, , , , , , , , ,132 Deferred & refundable income taxes 594,000 1,404,000 1,654,000 1,156,011 1,128,500 1,166,150 1,236,055 1,341,539 1,425,084 Intangible assets 3,596,000 3,076,000 2,821,000 2,480,000 2,150,000 1,826,000 1,505,000 1,191, ,000 Goodwill 6,956,000 6,694,000 6,615,000 6,615,000 6,615,000 6,615,000 6,615,000 6,615,000 6,615,000 Other assets 1,745,000 1,798,000 1,832,000 1,287,762 1,257,116 1,299,057 1,376,929 1,494,435 1,587,501 Total assets 84,896,000 84,681,000 78,497,000 69,482,301 65,997,620 65,226,977 65,839,401 67,679,202 69,201,677 LIABILITIES Short term debt & current portion of long term debt 11,031,000 11,501,000 12,846,000 8,024,408 7,833,443 8,094,790 8,580,031 9,312,244 9,892,165 Accounts payable 6,942,000 6,939,000 5,471,000 4,759,906 4,646,630 4,801,655 5,089,490 5,523,823 5,867,820 Accrued expenses 7,475,000 7,683,000 6,256,000 5,287,321 5,161,493 5,333,696 5,653,424 6,135,882 6,517,995 Other current liabilities 1,849,000 1,754,000 1,730,000 1,293,008 1,262,237 1,304,349 1,382,538 1,500,522 1,593,967 Total current liabilities 27,297,000 27,877,000 26,303,000 19,364,644 18,903,803 19,534,490 20,705,482 22,472,472 23,871,948 Long term debt 26,719,000 27,784,000 25,247,000 27,861,666 26,423,794 26,099,183 26,312,357 26,796,963 27,444,654 Liability for postemployment benefits 6,973,000 8,963,000 8,843,000 6,447,225 6,293,794 6,503,773 6,893,641 7,481,939 7,947,878 Other liabilities 3,029,000 3,231,000 3,219,000 2,257,593 2,203,866 2,277,394 2,413,912 2,619,913 2,783,069 Total liabilities 64,018,000 67,855,000 63,612,000 55,931,128 53,825,257 54,414,840 56,325,392 59,371,286 62,047,548 Redeemable noncontrolling interest Common stock 4,709,000 5,016,000 5,238,000 5,788,218 6,338,436 6,888,653 7,438,871 7,989,089 8,539,307 Treasury stock, at cost (11,854,000) (15,726,000) (17,640,000) (19,479,750) (21,319,500) (23,159,250) (24,999,000) (26,838,750) (28,678,500) Retained Earnings 31,854,000 33,887,000 34,208,000 34,163,706 34,074,428 34,003,733 33,995,138 34,078,577 34,214,322 Accumulated other comprehensive income (loss) (3,898,000) (6,431,000) (6,997,000) (6,997,000) (6,997,000) (6,997,000) (6,997,000) (6,997,000) (6,997,000) Non controlling interests 67,000 80,000 76,000 76,000 76,000 76,000 76,000 76,000 76,000 Total stockholders' equity 20,878,000 16,826,000 14,885,000 13,551,173 12,172,363 10,812,136 9,514,009 8,307,916 7,154,128 Total Liabilities & Stockholders Equity 84,896,000 84,681,000 78,497,000 69,482,301 65,997,620 65,226,977 65,839,401 67,679,202 69,201,677

14 CATERPILLAR Cash Flow Statement Fiscal Years Ending Dec OPERATING ACTIVITES Profit (loss) of consolidated & affiliated companies 4,981,000 5,722,000 3,803,000 3,711,000 2,113,000 Depreciation & amortization 2,527,000 2,813,000 3,087,000 3,163,000 3,046,000 Loss (gain) from sale of businesses & investments (630,000) (68,000) 4,000 Goodwill impairment charge 580,000 Other adjustments for noncash items 457, , , , ,000 Receivables trade & other (1,345,000) (173,000) 835, , ,000 Inventories (2,927,000) (1,149,000) 2,658, ,000 2,274,000 Accounts payable 1,555,000 (1,868,000) 134, ,000 (1,165,000) Accrued expenses 308, ,000 (108,000) (10,000) (199,000) Accrued wages, salaries & employee benefits 619,000 (490,000) (279,000) 901,000 (389,000) Customer advances 173, ,000 (301,000) (593,000) (501,000) Other assets, net (91,000) 252,000 (49,000) (300,000) (220,000) Other liabilities, net 753,000 (679,000) (71,000) 146, ,000 Net cash flows from operating activities 7,010,000 5,241,000 10,191,000 8,057,000 6,675,000 INVESTING ACTIVITIES Capital expenditures excluding equipment leased to others (2,515,000) (3,350,000) (2,522,000) (1,539,000) (1,388,000) Expenditures for equipment leased to others (1,409,000) (1,726,000) (1,924,000) (1,840,000) (1,873,000) Proceeds from disposal of leased assets & property, plant & equipment 1,354,000 1,117, , , ,000 Additions to finance receivables (10,001,000) (12,010,000) (11,422,000) (11,278,000) (9,929,000) Collections of finance receivables 8,874,000 8,995,000 9,567,000 9,841,000 9,247,000 Proceeds from sale of finance receivables 207, , , , ,000 Investments & acquisitions, net of cash acquired (8,184,000) (618,000) (195,000) (30,000) (400,000) Proceeds from sale of business & investments, net of cash sold 376,000 1,199, , , ,000 Proceeds from sale of securities 247, , , , ,000 Investments in securities (336,000) (402,000) (402,000) (825,000) (485,000) Other investing activities net (40,000) 167,000 (26,000) (46,000) (114,000) Net cash flows from investing activities (11,427,000) (6,190,000) (5,046,000) (3,627,000) (3,517,000) FINANCING ACTIVITIES Dividends paid (1,159,000) (1,617,000) (1,111,000) (1,620,000) (1,757,000) Distributions to noncontroliing interests (3,000) (6,000) (13,000) (7,000) (7,000) Contribution from noncontrolling interests 4,000 Common stock issued, including treasury shares reissued 123,000 52, , ,000 33,000 Treasury shares repurchased (2,000,000) (4,238,000) (2,025,000) Excess tax benefit from stock based compensation 189, ,000 96, ,000 24,000 Acquisition of redeemable noncontrolling interests (444,000) Acquisition of noncontrolling interests (8,000) (5,000) Proceeds from debt issued machinery, energy & transportation 4,587,000 2,209, ,000 1,994,000 3,000 Proceeds from debt issued financial products 10,873,000 13,806,000 9,133,000 8,655,000 5,129,000 Payments on debt machinery, energy & transportation (2,269,000) (1,107,000) (1,769,000) (785,000) (517,000) Payments on debt financial products (8,324,000) (9,992,000) (9,101,000) (8,463,000) (7,775,000) Short term borrowings, net (43,000) 461,000 (69,000) 1,043,000 3,022,000 Net cash flows from financing activities 3,966,000 3,549,000 (4,511,000) (2,996,000) (3,870,000) Effect of exchange rate changes on cash (84,000) (167,000) (43,000) (174,000) (169,000) Increase (decrease) in cash & short term investments (535,000) 2,433, ,000 1,260,000 (881,000) Cash & short term investments at beginning of period 3,592,000 3,057,000 5,490,000 6,081,000 7,341,000 Cash & short term investments at end of period 3,057,000 5,490,000 6,081,000 7,341,000 6,460,000 Income taxes paid 1,369,000 2,396,000 1,544,000 1,595,000 1,143,000 Interest expense paid 1,208,000 1,404,000 1,141,000 1,109,000 1,047,000

15 CATERPILLAR Cash Flow Statement Fiscal Years Ending Dec E 2017E 2018E 2019E 2020E 2021E OPERATING ACTIVITES Net Income 1,744,439 1,702,924 1,759,739 1,865,226 2,024,403 2,150,473 Change in Accounts Receivable 3,729, ,534 (389,401) (722,998) (1,090,981) (864,069) Change in Deferred & refundable income taxes 844,522 55,580 (76,064) (141,228) (213,108) (168,784) Change in Prepaid expenses & other current assets 384,548 15,741 (21,543) (39,998) (60,356) (47,803) Change in Inventory 865, ,240 (287,725) (534,217) (806,117) (638,454) Accrued expenses (968,679) (125,828) 172, , , ,113 Accounts payable (711,094) (113,276) 155, , , ,997 Net cash flow from operating activities 5,889,221 2,029,915 1,312,234 1,034, ,633 1,157,473 INVESTING ACTIVITIES Capital Expenditures 4,864, ,155 (365,617) (678,839) (1,024,347) (811,294) Change in Investments in unconsolidated affiliated companies 81,222 3,921 (5,367) (9,964) (15,036) (11,908) Change in Intangible assets 341, , , , , ,000 Change invother assets 544,238 30,646 (41,941) (77,872) (117,506) (93,066) Change in other current liabilities (436,992) (30,771) 42,112 78, ,985 93,445 Change in other liabilities (961,407) (53,726) 73, , , ,155 Liability for postemployment benefits (2,395,775) (153,431) 209, , , ,939 Net cash flow from investing activities 2,036, , , ,900 69, ,270 FINANCING ACTIVIES Short term debt & current portion of long term debt (4,821,592) (190,965) 261, , , ,921 Long term receivables 4,294, ,507 (342,833) (636,535) (960,511) (760,736) Long term debt 2,614,666 (1,437,873) (324,611) 213, , ,692 Common stock 550, , , , , ,218 Repurchase of Common stock (1,839,750) (1,839,750) (1,839,750) (1,839,750) (1,839,750) (1,839,750) Dividend Payment (1,788,733) (1,792,202) (1,830,434) (1,873,821) (1,940,965) (2,014,728) Net cash flow from financing activities (990,545) (4,460,066) (3,526,063) (3,101,473) (2,974,190) (2,837,384) Increase (decrease) in cash & cash equivalent 6,935,027 (2,036,357) (1,977,135) (1,908,226) (2,134,162) (1,483,641) Change in cash 6,935,027 (2,036,357) (1,977,135) (1,908,226) (2,134,162) (1,483,641) Plus beginning cash 6,460,000 13,395,027 11,358,671 9,381,535 7,473,309 5,339,147 Cash at end of year 13,395,027 11,358,671 9,381,535 7,473,309 5,339,147 3,855,506

16 CATERPILLAR Common Size Income Statement Fiscal Years Ending Dec E 2017E 2018E 2019E 2020E 2021E Sales of machinery, energy & transportation 94.68% 94.49% 93.91% 93.25% 93.22% 93.24% 93.31% 93.46% 93.54% Revenues of financial products 5.32% 5.51% 6.09% 6.75% 6.78% 6.76% 6.69% 6.54% 6.46% Total sales & revenues % % % % % % % % % Cost of goods sold 73.18% 72.06% 71.77% 72.18% 72.18% 72.18% 72.18% 72.18% 72.18% Selling, general & administrative expenses 9.97% 10.32% 11.06% 9.80% 9.80% 9.80% 9.80% 9.80% 9.80% Research & development expenses 3.68% 3.87% 4.61% 3.94% 3.94% 3.94% 3.94% 3.94% 3.94% Interest expense of financial products 1.31% 1.13% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% Other operating expenses (income) 1.76% 2.96% 4.39% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% Total operating costs 89.89% 90.35% 93.07% 89.68% 89.68% 89.68% 89.68% 89.68% 89.68% Operating profit (loss) 10.11% 9.65% 6.93% 10.32% 10.32% 10.32% 10.32% 10.32% 10.32% Interest expense excluding financial products 0.84% 0.88% 1.08% 1.59% 1.56% 1.50% 1.45% 1.38% 1.34% Other income (expense) 0.12% 0.87% 0.45% 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% Consolidated profit (loss) before taxes 9.21% 9.21% 6.07% 8.43% 8.46% 8.52% 8.57% 8.64% 8.68% Provision (benefit) for income taxes 2.37% 2.50% 1.58% 2.89% 2.89% 2.89% 2.89% 2.89% 2.89% Profit (loss) of consolidated & affiliated companies 6.83% 6.72% 4.49% 4.49% 4.49% 4.49% 4.49% 4.49% 4.49% Less: profit (loss) attributable to noncontrolling interests 0.03% 0.03% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% Profit (loss) attributable to common stockholders 6.81% 6.70% 4.47% 4.47% 4.47% 4.47% 4.47% 4.47% 4.47%

17 CATERPILLAR Common Size Balance Sheet Fiscal Years Ending Dec E 2017E 2018E 2019E 2020E 2021E Cash & short-term investments 10.93% 13.30% 13.74% 34.33% 29.82% 23.84% 17.91% 11.79% 8.02% Receivables 30.86% 30.38% 33.37% 30.65% 30.65% 30.65% 30.65% 30.65% 30.65% Deferred & refundable income taxes 2.79% 3.15% 3.25% 3.02% 3.02% 3.02% 3.02% 3.02% 3.02% Prepaid expenses & other current assets 1.62% 1.48% 2.23% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% Inventory 22.68% 22.12% 20.63% 22.64% 22.64% 22.64% 22.64% 22.64% 22.64% Total current assets 68.88% 70.43% 73.21% 92.34% 87.83% 81.85% 75.92% 69.80% 66.02% Total property, plant & equipment, at cost 56.27% 57.21% 68.02% 68.75% 63.12% 58.56% 55.72% 53.81% 53.48% Less: accumulated depreciation 25.59% 27.17% 33.79% 39.97% 34.34% 29.79% 26.95% 25.04% 24.71% Property, plant & equipment, net 30.68% 30.04% 34.23% 28.77% 28.77% 28.77% 28.77% 28.77% 28.77% Long-term receivables 29.33% 29.01% 31.53% 26.98% 26.98% 26.98% 26.98% 26.98% 26.98% Investments in unconsolidated affiliated companies 0.49% 0.47% 0.52% 0.42% 0.42% 0.42% 0.42% 0.42% 0.42% Non-current deferred & refundable income taxes 1.07% 2.54% 3.52% 2.96% 2.96% 2.96% 2.96% 2.96% 2.96% Intangible assets 6.46% 5.57% 6.00% 6.36% 5.65% 4.64% 3.61% 2.63% 1.67% Goodwill 12.50% 12.13% 14.07% 16.96% 17.37% 16.81% 15.86% 14.61% 13.75% Other assets 3.14% 3.26% 3.90% 3.30% 3.30% 3.30% 3.30% 3.30% 3.30% Total assets % % % % % % % % % Short-term debt * current portion LT debt 19.82% 20.84% 27.33% 20.57% 20.57% 20.57% 20.57% 20.57% 20.57% Accounts payable 12.47% 12.57% 11.64% 12.20% 12.20% 12.20% 12.20% 12.20% 12.20% Accrued expenses 13.43% 13.92% 13.31% 13.55% 13.55% 13.55% 13.55% 13.55% 13.55% Other current liabilities 3.32% 3.18% 3.68% 3.31% 3.31% 3.31% 3.31% 3.31% 3.31% Total current liabilities 49.05% 50.52% 55.95% 49.63% 49.63% 49.63% 49.63% 49.63% 49.63% Long term debt 48.01% 50.35% 53.70% 71.41% 69.38% 66.32% 63.08% 59.19% 57.06% Liability for postemployment benefits 12.53% 16.24% 18.81% 16.53% 16.53% 16.53% 16.53% 16.53% 16.53% Other liabilities 5.44% 5.85% 6.85% 5.79% 5.79% 5.79% 5.79% 5.79% 5.79% Total liabilities % % % % % % % % % Redeemable noncontrolling interest 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Common stock 8.46% 9.09% 11.14% 14.84% 16.64% 17.50% 17.83% 17.65% 17.76% Treasury stock, at cost 21.30% 28.50% 37.52% 49.93% 55.98% 58.84% 59.93% 59.28% 59.63% Profit employed in the business 57.23% 61.41% 72.77% 87.57% 89.47% 86.40% 81.49% 75.27% 71.14% Foreign currency translation 0.32% 1.79% 4.15% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Pension & other post-retirement benefits 7.46% 9.80% 10.70% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Derivative financial instruments 0.14% 0.07% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Accumulated other comprehensive income (loss) 7.00% 11.65% 14.88% 17.93% 18.37% 17.78% 16.77% 15.45% 14.55% Non-controlling interests 0.12% 0.14% 0.16% 0.19% 0.20% 0.19% 0.18% 0.17% 0.16% Total stockholders' equity 37.51% 30.49% 31.66% 34.73% 31.96% 27.47% 22.81% 18.35% 14.87%

18 CATERPILLAR Value Driver Estimation Fiscal Years Ending Dec E 2017E 2018E 2019E 2020E 2021E Revenue Sales of machinery, energy & transportation 52,694,000 52,142,000 44,147,000 36,379,300 35,503,537 36,696,724 38,922,953 42,315,370 44,986,902 Revenues of financial products 2,962,000 3,042,000 2,864,000 2,634,880 2,582,182 2,659,648 2,792,630 2,960,188 3,108,197 Total sales & revenues 55,656,000 55,184,000 47,011,000 39,014,180 38,085,719 39,356,372 41,715,583 45,275,558 48,095,100 Operating expenses Cost of goods sold 40,727,000 39,767,000 33,742,000 28,161,029 27,490,852 28,408,029 30,110,943 32,680,588 34,715,776 Selling, general & administrative expenses 5,547,000 5,697,000 5,199,000 3,822,321 3,731,357 3,855,847 4,086,985 4,435,765 4,712,003 Research & development expenses 2,046,000 2,135,000 2,165,000 1,538,199 1,501,593 1,551,691 1,644,707 1,785,065 1,896,230 Interest expense of financial products 727, , , , , , , , ,018 Other operating expenses (income) 981,000 1,633,000 2,062, , , ,660 1,044,745 1,133,903 1,204,517 Total operating costs 50,028,000 49,856,000 43,755,000 34,987,801 34,155,160 35,294,678 37,410,411 40,602,987 43,131,543 Operating Income 5,628,000 5,328,000 3,256,000 4,026,379 3,930,559 4,061,694 4,305,172 4,672,572 4,963,557 Amortization of goodwill Implied Interest on Operating Leases 115, , ,677 52,896 36,906 36,027 37,229 39,461 42,829 EBITA 5,743,371 5,448,773 3,436,677 4,079,275 3,967,465 4,097,721 4,342,401 4,712,033 5,006,385 Tax Provision 1,319,000 1,380, ,000 1,127,386 1,100,556 1,137,274 1,205,448 1,308,320 1,389,796 Marginal Tax Rate 28.50% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% Tax Shield on Interest Expense 132, , , , , , , , ,860 Tax Shield on Implied Lease Interest 32,881 33,816 50,590 14,811 10,334 10,088 10,424 11,049 11,992 Total Adjusted Taxes 1,484,406 1,549, ,550 1,316,029 1,276,832 1,312,998 1,384,891 1,494,282 1,582,647 Chang in Deferred Tax Liability 1,380, , , ,522 55,580 (76,064) (141,228) (213,108) (168,784) NOPLAT NOPLAT=EBITA adj tax+change in def tax 5,638,965 4,460,437 3,002,128 3,607,768 2,746,212 2,708,660 2,816,282 3,004,642 3,254,954 Operating Current Assets Average of cash on BS % 10.02% 10.02% 10.02% 10.02% 10.02% 10.02% 10.02% 10.02% x revenue 55,656,000 55,184,000 47,011,000 39,014,180 38,085,719 39,356,372 41,715,583 45,275,558 48,095,100 Normal Cash 5,576,731 5,529,437 4,710,502 3,909,221 3,816,189 3,943,508 4,179,901 4,536,611 4,819,129 Cash and Cash equivalent 6,081,000 7,341,000 6,460,000 13,395,027 11,358,671 9,381,535 7,473,309 5,339,147 3,855,506 lower of normal or actual cash 5,576,731 5,529,437 4,710,502 3,909,221 3,816,189 3,943,508 4,179,901 4,536,611 3,855,506 Receivables 33,499,000 32,772,000 30,507,000 22,482,537 21,947,497 22,679,730 24,039,263 26,090,755 27,715,560 Prepaid and other current assets 900, ,000 1,046, , , , , , ,412 Inventory 12,625,000 12,205,000 9,700,000 8,834,333 8,624,093 8,911,818 9,446,036 10,252,153 10,890,607 Operating Current Assets 52,600,731 51,324,437 45,963,502 35,887,543 35,033,490 36,202,311 38,372,452 41,647,128 43,277,085 OPERATING CURRENT LIABILITY Accounts Payable 6,942,000 6,939,000 5,471,000 4,759,906 4,646,630 4,801,655 5,089,490 5,523,823 5,867,820 Accrued Expenses 7,475,000 7,683,000 6,256,000 5,287,321 5,161,493 5,333,696 5,653,424 6,135,882 6,517,995 Other current liabilities 1,849,000 1,754,000 1,730,000 1,293,008 1,262,237 1,304,349 1,382,538 1,500,522 1,593,967 Operating Current Liabilities 16,266,000 16,376,000 13,457,000 11,340,235 11,070,360 11,439,700 12,125,451 13,160,228 13,979,782 NET OPERATING WORKING CAP Operating CA Operating CL 36,334,731 34,948,437 32,506,502 24,547,307 23,963,130 24,762,611 26,247,001 28,486,900 29,297,303 + NET PPE Plant, Property, Equipment 17,075,000 16,577,000 16,090,000 11,225,934 10,958,778 11,324,396 12,003,235 13,027,582 13,838,876 + OTHER OPERATING ASSETS Intangible Assets 3,596,000 3,076,000 2,821,000 2,480,000 2,150,000 1,826,000 1,505,000 1,191, ,000 PV of Operating Leases 843, , , , , , , , ,181 Other assets 1,745,000 1,798,000 1,832,000 1,287,762 1,257,116 1,299,057 1,376,929 1,494,435 1,587,501 Other operating assets 6,184,629 5,646,718 5,470,565 4,338,174 3,963,953 3,700,472 3,491,837 3,347,392 3,091,682 OTHER OPERATING LIABILITIES Liability for post employment benefit 6,973,000 8,963,000 8,843,000 6,447,225 6,293,794 6,503,773 6,893,641 7,481,939 7,947,878 Other long term liabilities 3,029,000 3,231,000 3,219,000 2,257,593 2,203,866 2,277,394 2,413,912 2,619,913 2,783,069 Other operating liabilities 10,002,000 12,194,000 12,062,000 8,704,818 8,497,660 8,781,167 9,307,553 10,101,852 10,730,946 INVESTED CAPITAL Invested Capital 49,592,360 44,978,155 42,005,067 31,406,598 30,388,201 31,006,312 32,434,521 34,760,022 35,496,914 VALUE DRIVERS NOPLAT 5,638,965 4,460,437 3,002,128 3,607,768 2,746,212 2,708,660 2,816,282 3,004,642 3,254,954 / Beginning IC 47,835,227 49,592,360 44,978,155 42,005,067 31,406,598 30,388,201 31,006,312 32,434,521 34,760,022 ROIC 11.79% 8.99% 6.67% 8.59% 8.74% 8.91% 9.08% 9.26% 9.36% Beginning IC 47,835,227 49,592,360 44,978,155 42,005,067 31,406,598 30,388,201 31,006,312 32,434,521 34,760,022 x (ROIC WACC) 5.32% 2.52% 0.20% 2.12% 2.27% 2.44% 2.61% 2.79% 2.89% Economic Profit (EP) 2,544,026 1,251,811 92, , , , , ,129 1,005,980 NOPLAT 5,638,965 4,460,437 3,002,128 3,607,768 2,746,212 2,708,660 2,816,282 3,004,642 3,254,954 Capital Expenditures 1,757,133 (4,614,206) (2,973,087) (10,598,470) (1,018,396) 618,111 1,428,209 2,325, ,892 Free Cash Flow (FCF) 3,881,832 9,074,642 5,975,215 14,206,238 3,764,609 2,090,549 1,388, ,141 2,518,061