2017 ANNUAL REPORTOUR SOLUTIONSHELP OURCUSTOMERSBUILD A
BETTER WORLDOPERATIONAL
EXCELLENCE

EXPANDED
OFFERINGSSERVICES

How We’re Fulfilling Our Purpose toHelp Our Customers Build a Better WorldIn 2017, we developed a clear statement reflecting Caterpillar’slong-standing purpose: Our solutions help our customers build
a better world. We also developed and began implementing
a new enterprise strategy to support that purpose and achieve
long-term profitable growth. With Our Values in Action as afoundation, we leverage a data-driven approach, known as the

Operating & Execution (O&E) Model, to identify and prioritize
business opportunities that offer the greatest potential for
profitable growth. Through strategic focus on operational
excellence, expanded product offerings and services, we
better understand our customers’ needs. That helps us deliver
the industry-leading solutions they use to build a better world.

To Our Shareholders

Jim Umpleby
Chief Executive Officer

Caterpillar’s resilient global team delivered
excellent results in 2017. As demand
improved during the year, they capitalizedon the opportunities to serve our customers
around the world.
They also introduced new products, further
developed our digital capabilities and moved
forward with the changes inherent in our
new strategy.
In 2017, our sales and revenues increased
18 percent to $45.5 billion. Profit improved
from a loss of $0.11 per share in 2016 to a
profit of $1.26 per share, and 2017 adjusted
profit per share more than doubled to $6.88.
We ended 2017 with a strong balance sheet
and more than $8 billion in cash. Our dividend
remains a high priority, and we have paid higher
dividends for 24 consecutive years. Since 2007,
our cash dividend has more than doubled.

We Provide the Solutions
Our Customers Use to Builda Better WorldOne of my first initiatives after becoming CEO
in January 2017 was to appoint a diverse,
cross-functional team of Caterpillar leaders
to develop a strategy for long-term profitable
growth. We never lost sight of the fact that
our customers have been using our equipment
to help improve living standards around theworld for more than 90 years.
We wanted a clear statement to capturethat historic and enduring purpose andfound nine simple words: Our Solutions

01

CATERPILLAR 2017 ANNUAL REPORTHelp Our Customers Build a Better World. Our
customers are at the center of our purpose andhelping them to build a better world motivates
our employees every day.

A New Enterprise Strategy for
Profitable Growth
We introduced the new enterprise strategy
in September. Our overriding objective is to
grow profitably by reinvesting in our strengths,
which will deliver value for our shareholders.
At the foundation of the strategy and all we
do is our long-standing Code of Conduct, Our
Values in Action. These values – Integrity,
Excellence, Teamwork, Commitment andSustainability – define who we are andhow we behave with our stakeholders
and with one another.
Equally fundamental to our strategy is the
Operating & Execution (O&E) Model, a
powerful methodology to gain a granular
understanding of our financial performanceby product, region and application. With
the O&E Model, we also evaluate market
economics and assess our capabilities towin. Then we work to address areas where
we are not producing acceptable returns andto invest in areas with the best opportunity
for future profitable growth.

02

CATERPILLAR 2017 ANNUAL REPORT

We identified three areas of strategic focus:
services, expanded product offerings andoperational excellence.
We’ll further develop our services, emphasizing
digital technologies and the aftermarket.
We’re expanding our product offerings tomeet our customers’ diverse needs and help
reach new customers as well. We intend todeliver operational excellence by continuing ourcommitment to world-class safety levels, thehighest product quality, Lean manufacturing
principles and a competitive, flexible cost structure. We also must attract, retain and develop
the most talented team of global employees.
To maintain Caterpillar’s industry leadership,
we know our customers need to be more
successful working with Caterpillar than they
are working with our competitors. Our strategy
includes better alignment with our business
partners, including the global network of
171 Cat® dealers serving 192 of the world’s
countries. When our customers buy ourOur customers
are at the centerof our purposeand helping themto build a betterworld motivates
our employees
every day.

products, they know they will be supportedby this most extensive, capable and reliable
service network in our industries.
These essential components of our strategy
are well underway. Here are some examples
from 2017:• We introduced our first major excavator
redesign in 25 years. The next generationof excavators is just one example of how
we are expanding product offerings to better
serve the diverse needs of our customers.
• We increased our focus on services. We
grew our connected asset population by
24 percent and invested in solutions that
help our customers operate more efficiently,
sustainably and safely on their job sites.

The Foundation also invests in and matches
contributions to the Red Cross Annual Disaster
Giving Program, making funds immediately
available for global disaster response. In 2017,
this included an additional $300,000 donation
for American Red Cross Hurricane Harvey
relief in recognition of our employees andfacilities affected by that storm.
We also continued to emphasize and invest in
sustainability, both in our products and how
we manufacture them. We were pleased tobe named to the Dow Jones Sustainability
World and North America indices, for our
18th year. Extensive information about thoseefforts can be found in Caterpillar’s 2017
Sustainability Report.

Our overriding
objective is to
grow profitably
by reinvesting in
our strengths,
which will deliver
value for ourshareholders.

• We made organizational changes todecentralize and increase the speed ofdecision-making, giving our leaders moreauthority and accountability to successfullycompete in their industries.
In 2018, we expect to make additional
investments to expand product offeringsand services. We’ll become a more agile
company and use the O&E Model to bias
resources to areas that represent the greatest
opportunity for profitable growth.

A Better World:
One Community at a TimeThe Caterpillar Foundation is making progress
toward our goal of alleviating extreme poverty.
Since 1952, the Foundation has invested
more than $715 million in communities
around the world and invested more than
$33 million in 2017 alone. By investing inwater, shelter, access to food, energy andeducation, disaster relief and preparedness,
and a cleaner environment, the Foundation’s
grants empower people to develop resilientand sustainable communities.

We have many competitive advantages and,with a solid strategy and disciplined execution,
there are tremendous opportunities in theyears ahead. It’s an honor for me to lead thisgreat company.

Jim Umpleby
Chief Executive Officer

03

CATERPILLAR 2017 ANNUAL REPORTOUR CUSTOMERSARE BUILDINGA BETTER WORLD
Population growth, an increasingly urbanized society and an emerging
middle class are driving continued investment in infrastructure, energy
and mining to meet the needs of people everywhere. With a company
purpose to help our customers build a better world, Caterpillar plays
a vital role in assisting our customers as they respond to thesechanging demands.
By 2040,
world energy
consumption is
expected to

INCREASE

28%

1

Through 2030,$3.3 TRILLION

in annual global
infrastructure investment
is needed to keep pacewith expected growth.2

By 2025,
global construction
market growth isexpected to be$15 TRILLION3

1 IEA World Energy Outlook 2017
2 McKinsey & Company – Bridging Global

Infrastructure Gaps, Our Insights

04

CATERPILLAR 2017 ANNUAL REPORT3 PwC Global Construction 2025

Population Growth

2050

2028

2030

GlobalPopulation

2022

2017

7.6 8.6 9.8

BILLIONBILLION BILLION(UN Estimates)

GlobalMiddle Class

4.2
BILLION

5.2
BILLION(Brookings Institute Estimates)

By 2020, emerging
markets will account for63%of global construction.3

By 2020, Chinaplans to build

Nearly 300
construction projects
valued in total≈US$324
BILLION
are underwayin Africa.4

60 NEW

AIRPORTS.

6

India’s national
railway is laying

9.5
KILOMETERSof track daily.5

4 Africa Construction Trends Report 2016
5 Economic Times – Railways’ target: Laying 9.5km of tracks every day, 20176 NY Times – China Builds Out the Air as Frustrations Mount Below, 2016

CONSTRUCTION
INDUSTRIES
Better Machines to Build a Growing World
Caterpillar’s Construction Industries
segment is primarily responsible forsupporting customers using machineryin infrastructure, forestry and building
construction. The majority of machinesales in this segment are made in the heavy
and general construction, rental, quarry andaggregates markets and mining. Together
with our independent dealers, we support
more than 1.4 million active earthmoving,
excavation and building construction
machines in the field, with over 100,000 new
customers since 2014. Global trends likepopulation growth and urbanization point
to increasing needs for infrastructure,
particularly in developing markets such as
China. In 2017, more than half of our sales
came from outside North America. We
expect global growth to continue.

Operational Excellence• Decreased the number of defects customers see in the field by anaverage of 30 percent.*• Reduced assets by $2.8 billion.*• Utilized Lean principles to synchronize our value chain –improving our inventory turns by over 50 percent andright-sizing our manufacturing footprint.*• Together with our partners in China, we implemented innovative
solutions to improve velocity and flexibility that allowed us to capture
tremendous excavator industry growth opportunities and meetincreasing customer demand.
*Since 2013

SERVICES
Caterpillar is increasingly using technology to help our customers
be more successful – whether through improved efficiency, safety
or intelligence. Cat® Payload on wheel loaders, for example, allows
customers to improve efficiency of quarry sites by bringing onboard
weighing systems to the cab to improve operator accuracy and speed

06

by reducing error and rework. Similarly, Cat GRADE with Assist on
excavators automates boom and bucket movements to deliver precise
cuts with less effort. And, Cat Compact for asphalt, landfill and soil
compaction equipment brings advanced measurement and real-time
guidance together to help operators hit compaction targets every time.

Cat® Link

Cat GRADE

Cat Command

Tracks asset and fleet
performance to increase
uptime and lower costs

Boosts grading efficiency
by up to 50 percent

Improves operator safety,
equipment availability andsite productivity with remotecontrol technology

CATERPILLAR 2017 ANNUAL REPORTNext Generation Excavator 320 GC

Expanded Offerings
A portfolio of Next Generation 20-ton-size class excavators – the320 GC, 320 and 323 – represent our first major excavator redesignin 25 years. Each model is designed to meet the unique needs of different
application profiles, from heavy to medium to light duty. The new machines
increase operating efficiency, reduce fuel and maintenance costs, andimprove operator comfort compared to previous models. As a further
productivity boost, the Cat® 320 and 323 have the highest level of standard
factory-equipped technology in the industry.

07

CATERPILLAR 2017 ANNUAL REPORTRESOURCE
INDUSTRIESAdvanced Solutions to Meet
Customers’ Toughest Challenges
Cat® machines and technologies operate
in some of the toughest environments on
Earth – from the deserts of Australia tothe oil sands of Canada, from 4,500 meters
above sea level to nearly a mile underground. Today, more than 80,000 machinesprovided by the Resource Industries
segment work around the clock inmines and quarries to meet the world’s
need for mined materials. As population
growth continues and the demand forenergy, infrastructure, transportationand household goods increases, we
expect the demand for our products toincrease as well.

Operational Excellence• Achieved record best safety performance with 59 percent
reduction in recordable injury frequency.*• Decreased assets by $3.9 billion (38 percent reduction).*• Improved quality through 17 percent reduction in defects
experienced by customers.*• Optimized global manufacturing footprint through closure
or restructuring of 25 facilities.**• Strengthened the integrated supply chain by focusing on
acceleration of Lean principles across the enterprise.
*Since 2013**Since 2012

Caterpillar Autonomy
Moved

700

Traveled

MILLION TONNES

13

MILLION MILESCat Command for Hauling in 2017

Expanded Offerings
As we’re supporting our customers aboveand below ground, we always have an
eye on the future. We’re making significant
advancements in engineering – from fullelectric-drive and battery-electric options
to more wear-resistant components.
And we continue to bring new products
to market across mining applications,
including additions to our truck lineup thatcan provide the ideal loading and haulage
system for every surface application.

08

CATERPILLAR 2017 ANNUAL REPORTT he new Cat® 794 ACelectric-drive truck

SERVICES

Automation
We continue to lead the industry
in mining automation, with the world’s
largest single autonomous fleet of
haul trucks and proven solutions
for drills, dozers, undergroundloaders and longwall systems.

New Technologies
We’re focused on the future,
combining our OEM core, mining
experience and technology expertise todeliver new solutions that no other provider
can offer. By collaborating with otherindustry leaders, we are increasing
the velocity with which we bringnew products to market.

Aftermarket
Together with our independent
dealers, we make sure our customers
get the most from their investment inCat® equipment through rebuilds, retrofits
and upgrades, as well as quick
delivery of new, used, exchangeor remanufactured parts.

Site Solutions
We work alongside customers
to help them improve performanceacross the site – leveraging machines,
technologies, services and our combined
expertise to create holistic solutions
that optimize operations, improvesafety and reduce costs.

09

CATERPILLAR 2017 ANNUAL REPORTENERGY &TRANSPORTATIONPowering the World’s Energy Needs
Caterpillar’s Energy & Transportation(E&T) segment helps move goods by
sea and rail and powers buildings andequipment, including our own machines.
Our multiple strong brands have a long
history of success: Since 1925, we havebuilt over 20 million engines and haveinstalled 750,000 generator sets. We havegrown through acquisitions that allow
us to expand our offerings to customers.
And we still have plenty of distance totravel. With 15 percent of the world’s
population without electricity, and2 billion people wanting access to powerby 2040, Caterpillar delivers energy andtransportation solutions that keep theworld powered.**IEA World Energy Outlook 201710

CATERPILLAR 2017 ANNUAL REPORT

Operational Excellence• Decreased manufacturing space byapproximately 13 percent.**• Reduced assets by more than $1 billion.**• Realized significant material cost savings andperiod cost reductions in the past three years.****Since 2013

Since 1925, we’ve built over20   Mengines
ILLION
Expanded Offerings
Thanks to our acquisition of Kemper Valves & Fittings,
we now offer a 3500 engine, transmission, well stimulation
pump and high-pressure flow iron as an integrated solution
to our oil and gas customers.

SERVICES

Sustainability
Through Reman

Rail
Infrastructure

Caterpillar is a global leader inremanufacturing technology,
with E&T recycling more than
1.5 billion pounds annually.

The Rail division is a complete
rail industry solutions provider. Ourrail services go beyond the train to
the surrounding infrastructure.
We supply track work andsignals to the railroads.

Solar Turbines’
Service SuccessSolar provides 24/7 field service
support along with a suite ofofferings throughout the entire
life cycle of the equipment.

11

CATERPILLAR 2017 ANNUAL REPORTCUSTOMER &DEALER SUPPORT
Using Technology to Drive
Value in the Aftermarket
Caterpillar’s dealer network is one ofour greatest competitive advantages.
The 150,000+ employees who work for
171 global dealers at more than 2,100 dealer
branches do much more than sell machines
and engines. The dealer employees serve
our customers for the entire life cycle of a
product, from choosing the right equipment
for job sites to providing parts replacement
and rebuilds. Parts availability is a top
consideration for customers across industries.
Caterpillar is meeting this need better throughdata, determining, for example, when eachof the hundreds of parts in a mining truck
may need support. These capabilities makeus easier to do business with – which in turndrives value for our customers.

600,000+
connected assets
Operational Excellence• Using Lean and an engineered value chain to get parts tocustomers on time.
• Applying data analytics to better plan availability of parts and support.
• Delivering better efficiency and productivity to our customers throughaftermarket services and customer support agreements.

Customer Solutions
Meeting customer needs is the driving force behind
everything we do. Customers of all sizes can look to
us to provide solutions, like fast and conveniente-Commerce purchasing options that fit theirpreferences. With customer support agreements,
our customers receive tailored solutions that fit
individual needs based on their industry andequipment. Customers can also optimize uptime
and productivity with condition monitoring whereexperts at the dealer watch what’s happening withthe asset and give advice on repair options. These
are important ways we achieve profitable growth.

12

CATERPILLAR 2017 ANNUAL REPORTSERVICES

In-Field Support
More than half of the dealer employees
focus on in-field support, going the
distance to maintain equipment and ensure
uptime at remote mine sites, marine
harbors, farms and more. An on-sitepresence allows timely service and advice
that considers a site’s precise
specifications.

Financing& Rental
Equipment leasing and financing by
Cat Financial with payment plans to meetcustomer cash flow needs are an importantpart of dealer offerings.
To meet the expanded and growing needsof our customers, Caterpillar and our
independent dealers have reinvigorated
our rental strategy and continue toinvest in rental offerings.

Rebuild
Capabilities
It is roughly 30 percent cheaper to rebuild
a component than it is to replace it – so it’s
no wonder that many customers depend
on independent Cat® dealers for rebuild
support, whether for engines, hydraulicsystems or transmissions.

13

CATERPILLAR 2017 ANNUAL REPORT2017 Performance At-a-Glance
In 2017 many of our key markets improved. Caterpillar
capitalized on this opportunity and achieved strong
financial results. To further improve our competitiveness, we developed and began to implement a new
strategy to deliver profitable growth using the O&E

Sales &
Revenues

Model as our guide. We’re focusing our efforts on
operational excellence, expanded offerings and services.
Dividends remain important; Caterpillar has paid increasing
dividends to its shareholders for 24 consecutive years, andsince 2007, our cash dividend has more than doubled.

Adjusted Profit
Per Share

Profit (Loss)
Per Share($ in millions)(in dollars)(in dollars)$55,656 $55,184$47,011$6.88$45,462$4.18$38,537

$5.35
$3.42

$(0.11)

Shareholder Returns
Dividends Declared(per share)

$2.70

$3.01

$3.08

Closing Stock Price(in dollars)$3.11$157.58$2.32$92.74$90.81 $91.53

14

CATERPILLAR 2017 ANNUAL REPORT

2017

2016

2015

2014

2013

2017

2016

2015

2014

2013

$67.96

2017

2016

2015

2017

2016

2015

2017

2016

2015

2014

2013

$1.26

CONSTRUCTION
INDUSTRIESSalesRESOURCE
INDUSTRIES

Sales($ in millions)($ in millions)$19,133$7,739$7,504

Segment Profit

2016

2015

$5,7262017

2016

Segment Profit (Loss)($ in millions)($ in millions)$3,2582016$1$1,650

2017

2016

2015

2015

$1,865

$690

2017

2015

$15,6122017$17,797$(1,047)

ENERGY &TRANSPORTATIONSales

FINANCIALPRODUCTS

Revenues($ in millions)

Segment Profit$3,093

Segment Profit($ in millions)$2,883

$809

2015

2017

2016

$2,222

2016

$702

$792

2017

$3,3902015($ in millions)$2,993

2015

2017

2016

2015

$14,411$3,078$15,9642017$18,5192016($ in millions)

15

CATERPILLAR 2017 ANNUAL REPORTCorporate Governance
Caterpillar’s governance structure provides leadership, accountability and transparency to management of thecompany and its businesses. Our corporate governance framework serves the interests of shareholders with thehighest standards of responsibility, integrity and commitment to enhance shareholder value over the long-term.
These standards are developed and implemented by our Board of Directors and the Executive Office, whooversee the company’s performance and governance policies. Learn more at www.caterpillar.com/investors.

BOARD OF DIRECTORS
Kelly Ayotte
Former U.S. Senator andFormer Attorney Generalof New Hampshire
David Calhoun
Senior Managing Director
The Blackstone Group;
Independent Chairmanof the Caterpillar Board

OFFICERS
Debra Reed
Chairman and CEO
Sempra Energy
Edward Rust, Jr.
Former Chairman and CEO
State Farm Mutual
Automobile Insurance
Company

Daniel Dickinson
Managing Partner
HCI Equity Partners

Susan Schwab
Professor
University of Maryland
School of Public Policy

Juan Gallardo
Former CEO
Organización Cultiba

Jim Umpleby
Chief Executive Officer
Caterpillar Inc.

Dennis Muilenburg
Chairman, President
and CEO
The Boeing Company
William Osborn
Former Chairman and CEO
Northern Trust Corporation

Miles White
Chairman and CEO
Abbott Laboratories
Rayford Wilkins, Jr.
Former CEO
Diversified Businesses
AT&T Inc.

Chief Executive Officer
Jim Umpleby
Group Presidents
Robert Charter*
Bob De Lange
Denise Johnson
Thomas PelletteRamin Younessi**
Group President &Chief Financial Officer
Bradley Halverson*
General Counsel andCorporate Secretary
Suzette Long
Chief Human
Resources Officer
Cheryl Johnson
Senior Vice President
William AinsworthVice Presidents
Thomas Bluth
Wai Man (Raymond) Chan
Qihua Chen
Joseph Creed
Anthony Fassino
Thomas Frake
Damien Giraud
Frederic Istas
Kathryn Karol

Zachary KaukPhilip Kelliher
Pablo Koziner
Julie Lagacy
Nigel Lewis
Jean Savage
Christopher Snodgrass
Tana Utley
David Walton
Karl Weiss
Chief Accounting Officer
Jananne Copeland
Corporate Controller
Kyle Epley
Corporate Treasurer
Richard Moore
Chief Audit Officer
Jill Daugherty
Chief Compliance Officer
Michael McGuire
Assistant Treasurer
Chad Withers
Assistant Secretary
Chad Wiener
Assistant Secretary
Joni FunkAs of April 1, 2018
*Retiring 2018**As of June 1, 2018

Learn More about our Corporate Governance initiatives and voting on
matters for the annual meeting in Caterpillar’s Proxy Statement: caterpillar.com/proxy16

CATERPILLAR 2017 ANNUAL REPORTLearn Moreabout how Caterpillar is helping customers
build a better world:2017 Annual Reportcaterpillar.com/annual-report

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2017 Sustainability Reportcaterpillar.com/sustainability-report