Overview

We reported third-quarter 2012 sales and revenues of $16.445 billion, a 5 percent increase from third-quarter 2011 sales and revenues of $15.716 billion. Profit per share for the third quarter of 2012 was $2.54, a 49 percent increase from third-quarter 2011 profit per share of $1.71. Third-quarter 2012 profit includes a pretax gain of $273 million from the sale of a majority interest in Caterpillar's third party logistics business. Profit was $1.699 billion in the quarter, an increase of 49 percent from $1.141 billion in the third quarter of 2011.

Sales and revenues for the nine months ended September 30, 2012 were $49.800 billion, up $6.905 billion, or 16 percent, from $42.895 billion for the nine months ended September 30, 2011. Profit per share for the nine months ended September 30, 2012 was $7.44 per share, an increase of $2.36 per share from a profit of $5.08 per share for the nine months ended September 30, 2011. Profit of $4.984 billion was 47 percent higher than profit of $3.381 billion for the nine months ended September 30, 2011.

Highlights for the third quarter of 2012 include:

? Third-quarter sales and revenues of $16.445 billion, an all-time third-quarter record, were 5 percent higher than the third quarter of 2011.

? Profit per share was $2.54 in the third quarter of 2012, an all-time third-quarter record, and was an increase of $0.83 from the third quarter of 2011.

? Third-quarter 2012 profit included a pretax gain of $273 million related to the sale of a majority interest in Caterpillar's third party logistics business.

? Machinery and Power Systems (M&PS) operating cash flow was $994 million in the third quarter of 2012, compared with $2.037 billion in the third quarter of 2011. The decrease was primarily due to unfavorable changes in working capital.

? M&PS debt-to-capital ratio was 38.0 percent at the end of the third quarter of 2012, down from 40.9 percent at the end of the second quarter of 2012.

? The liquidity position remained strong in the third quarter. Total cash on a consolidated basis was $5.7 billion, up from $5.1 billion at the end of the second quarter of 2012.

Notes:
? Glossary of terms is included on pages 72-74; first occurrence of terms shown in bold italics.

? Information on non-GAAP financial measures is included on page 83.

Consolidated Results of Operations

THREE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2011

CONSOLIDATED SALES AND REVENUES

[[Image Removed]]
The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the third quarter of 2011 (at left) and the third quarter of 2012 (at right). Items favorably impacting sales and revenues appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting sales and revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees.

Sales and revenues were $16.445 billion in the third quarter of 2012, an increase of $729 million, or 5 percent, from the third quarter of 2011. When reviewing the change in sales and revenues, we focus on the following perspectives:
? Reason for the change: Sales volume improved $622 million, price realization was favorable $305 million, the net impact of acquisitions and divestitures added $36 million, and Financial Products revenues were up $13 million. Currency partially offset these increases by $247 million, primarily due to the strengthening of the U.S. dollar relative to the euro and Brazilian real. Sales of new equipment increased, and sales of aftermarket parts were about flat.

Dealer reported new machine inventory increased about $400 million during the third quarter of 2012 compared with an increase of about $675 million during the third quarter of 2011. Dealer machine inventories at the end of the third quarter of 2012 are higher than historic averages relative to dealer deliveries to end users. Dealers have substantially lowered order rates below machine deliveries to end users, which we expect will result in dealer inventory reductions in the fourth quarter and continue into 2013. As a result of the anticipated reductions in dealer inventories as well as global economic conditions that are weaker than previously expected, we are lowering production in many facilities around the world. Lower production levels will continue until inventories decline and dealer order rates increase and are more in line with end-user demand.

? Sales by geographic region: Sales in North America were up 9 percent, sales in Asia/Pacific increased 8 percent and sales in EAME and Latin America were about flat. The increase in North America was primarily driven by improvements in the United States. Within Asia/Pacific, declines in China were more than offset by increases in Australia and other parts of Asia/Pacific. While sales in Europe were down, sales in Africa, the Middle East and CIS increased.

? Segment: Most of the sales and revenues increase was in Resource Industries, with sales up 13 percent from the third quarter of 2011. Power Systems' sales were up 5 percent, Construction Industries' sales were about flat, and Financial Products' revenues were up 3 percent. All Other segment sales were down 31 percent, primarily a result of the sale of a majority interest in our third party logistics business.

CONSOLIDATED OPERATING PROFIT

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The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the third quarter of 2011 (at left) and the third quarter of 2012 (at right). Items favorably impacting operating profit appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting operating profit appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees. The bar entitled Other includes consolidating adjustments and Machinery and Power Systems other operating (income) expenses.

Operating profit for the third quarter of 2012 was $2.596 billion compared with $1.759 billion for the third quarter of 2011. The increase was primarily the result of the impact of acquisitions and divestitures, higher sales volume and improved price realization.
The improvements were partially offset by higher manufacturing costs and increased SG&A and R&D expenses. Manufacturing costs were up $259 million primarily due to higher period manufacturing costs. Period manufacturing costs include wages and benefits, depreciation and other period costs that support production. SG&A and R&D expenses increased $109 million primarily due to growth-related initiatives, increased costs to support product programs and unfavorable changes in mark-to-market deferred compensation expense. These cost increases were partially offset by lower incentive compensation expense. Short-term incentive compensation expense related to 2012 was $130 million in the third quarter of 2012 compared with $315 million in the third quarter of 2011.
The impact of currency was favorable to profit by $81 million, as the benefit to costs of $328 million more than offset the negative impact to sales of $247 million.
The sale of a majority interest in our third party logistics business during the third quarter of 2012 resulted in a pre-tax gain, net of dealer-related costs and incremental short-term incentive compensation expense, of $273 million. The following table summarizes the impact of Bucyrus on third-quarter 2012 and 2011 results.

                                  Impact of Bucyrus on Profit
(Millions of dollars)

Impact Excluding Divestitures Gain/(Loss)         Third Quarter 2012       Third Quarter 2011
Sales                                           $            1,090        $           1,135
Cost of goods sold                                            (853 )                 (1,019 )
SG&A                                                          (143 )                   (155 )
R&D                                                            (45 )                    (12 )
Other operating income (costs)                                   3                      (77 )
Operating profit (loss)                                         52                     (128 )

Interest expense                                               (31 )                    (33 )
Other income (expense)                                         (16 )                    (24 )

Profit (loss) before tax                                         5                     (185 )
Income tax (provision)/benefit                                  (2 )                     48
Profit (loss) after tax of consolidated
companies                                                        3                     (137 )
Less: Profit (loss) attributable to
noncontrolling interest                                          1                        -
Profit/(loss)                                   $                2        $            (137 )


Distribution Business Divestitures Gain/(Loss)
SG&A                                            $              (50 )      $             (15 )
Other operating income (costs)                                  31                        -
Impact on operating profit (loss)                              (19 )                    (15 )
Income tax (provision)/benefit                                   1                        6
Profit/(loss)                                   $              (18 )      $              (9 )

Other Profit/Loss Items
? Interest expense excluding Financial Products increased $17 million from the third quarter of 2011 primarily due to underwriting expense related to our debt exchange in the third quarter of 2012 and higher average borrowings.

? Other income/expense was expense of $17 million compared with expense of $13 million in the third quarter of 2011.

? The provision for income taxes in the third quarter of 2012 reflects an estimated annual effective tax rate of 30.5 percent, excluding the item discussed below, compared with 29 percent for the third quarter of 2011 and 26.5 percent for the full-year 2011. The increase from 26.5 percent to 30.5 percent is primarily due to expected changes in our geographic mix of profits from a tax perspective and the expiration of the U.S. research and development tax credit.

The tax provision in the third quarter of 2012 also includes a negative impact of $6 million from goodwill not deductible for tax purposes related to the divestiture of portions of the Bucyrus distribution business.

Segment Information

Sales and Revenues by Geographic Region


                                           %         North           %          Latin          %                       %         Asia/          %
(Millions of dollars)       Total        Change      America       Change       America      Change      EAME        Change      Pacific      Change
Third Quarter 2012
Construction Industries1  $  4,904          -  %   $  1,910         23  %     $    629        (23 )%   $ 1,186          7  %   $  1,179        (18 )%
Resource Industries2         5,214         13  %      1,421          8  %        1,001         18  %       936         (4 )%      1,856         27  %
Power Systems3               5,317          5  %      2,175          -  %          543          2  %     1,564          2  %      1,035         24  %
All Other Segment4             318        (31 )%        182         (3 )%           11        (45 )%        68        (55 )%         57        (45 )%
Corporate Items and
Eliminations                   (14 )        -           (14 )                        -                       -                        -
Machinery & Power Systems
Sales                       15,739          5  %      5,674          9  %        2,184         (1 )%     3,754          -  %      4,127          8  %

Financial Products
Segment                        776          3  %        420          2  %          100          2  %        99        (10 )%        157         15  %
Corporate Items and
Eliminations                   (70 )                    (46 )                       (7 )                    (6 )                    (11 )
Financial
Products Revenues              706          2  %        374         (1 )%           93          8  %        93        (10 )%        146         14  %

Consolidated Sales and
Revenues                  $ 16,445          5  %   $  6,048          8  %     $  2,277         (1 )%   $ 3,847         (1 )%   $  4,273          8  %

Third Quarter 2011
Construction Industries1  $  4,900                 $  1,549                   $    812                 $ 1,104                 $  1,435
Resource Industries2         4,599                    1,318                        845                     980                    1,456
Power Systems3               5,075                    2,173                        534                   1,536                      832
All Other Segment4             461                      188                         20                     150                      103
Corporate Items and
Eliminations                   (12 )                    (12 )                        -                       -                        -
Machinery & Power Systems
Sales                       15,023                    5,216                      2,211                   3,770                    3,826

Financial Products
Segment                        757                      413                         98                     110                      136
Corporate Items and
Eliminations                   (64 )                    (37 )                      (12 )                    (7 )                     (8 )
Financial
Products Revenues              693                      376                         86                     103                      128

Consolidated Sales and
Revenues                  $ 15,716                 $  5,592                   $  2,297                 $ 3,873                 $  3,954

1 Does not include inter-segment sales of $102 million and $162 million in the third quarter 2012 and 2011, respectively.
2 Does not include inter-segment sales of $253 million and $290 million in the third quarter 2012 and 2011, respectively.
3 Does not include inter-segment sales of $597 million and $600 million in the third quarter 2012 and 2011, respectively.
4 Does not include inter-segment sales of $885 million and $913 million in the third quarter 2012 and 2011, respectively.

Sales and Revenues by Segment
                         Third Quarter      Sales            Price                                                                    Third Quarter       $           %
(Millions of dollars)        2011           Volume        Realization       Currency       Acquisitions/Divestitures       Other          2012          Change      Change

Construction Industries  $     4,900     $       99     $          32     $     (127 )   $                   -           $      -     $     4,904     $      4         -  %
Resource Industries            4,599            471               169            (33 )                       8                  -           5,214          615        13  %
Power Systems                  5,075            101                79            (81 )                     143                  -           5,317          242         5  %
All Other Segment                461            (22 )               -             (6 )                    (115 )                -             318         (143 )     (31 )%
Corporate Items and              (12 )          (27 )              25              -                         -                  -             (14 )         (2 )
Eliminations
Machinery & Power
Systems Sales                 15,023            622               305           (247 )                      36                  -          15,739          716         5  %

Financial Products               757              -                 -              -                         -                 19             776           19         3  %
Segment
Corporate Items and              (64 )            -                 -              -                         -                 (6 )           (70 )         (6 )
Eliminations
Financial                        693              -                 -              -                         -                 13             706           13         2  %
Products Revenues

Consolidated Sales and   $    15,716     $      622     $         305     $     (247 )   $                  36           $     13     $    16,445     $    729         5  %
Revenues




Operating Profit by Segment
                                                                                                        %
(Millions of dollars)             Third Quarter 2012      Third Quarter 2011        $ Change          Change
Construction Industries          $             459       $             496       $        (37 )           (7 )%
Resource Industries                          1,113                     745                368             49  %
Power Systems                                  943                     794                149             19  %
All Other Segment                              482                     234                248            106  %
Corporate Items and Eliminations              (512 )                  (589 )               77
Machinery & Power Systems                    2,485                   1,680                805             48  %

Financial Products Segment                     190                     145                 45             31  %
Corporate Items and Eliminations                (9 )                     -                 (9 )
Financial Products                             181                     145                 36             25  %
Consolidating Adjustments                      (70 )                   (66 )               (4 )
Consolidated Operating Profit    $           2,596       $           1,759       $        837             48  %

Construction Industries
Construction Industries' sales were $4.904 billion in the third quarter of 2012, about flat compared with the third quarter of 2011.
Higher sales in North America and EAME were about offset by declines in Asia/Pacific and Latin America. Sales for both new equipment and aftermarket parts were about flat.
While sales overall were about flat with the third quarter of 2011, volume and price realization were slightly favorable but were about offset by the unfavorable impact of currency.
Construction Industries' profit of $459 million in the third quarter of 2012 was slightly lower than the $496 million in the third quarter of 2011.

Resource Industries
Resource Industries' sales were $5.214 billion in the third quarter of 2012, an increase of $615 million, or 13 percent, from the third quarter of 2011. The sales increase was primarily due to higher sales volume and improved price realization. Sales increases for new equipment more than offset slightly lower sales of aftermarket parts.
Over the past two years we have added capacity for mining products to better align production with expected demand. As a result of the increase in production capability, coupled with our existing mining order backlog, sales were higher than the third quarter of 2011. While sales were up in the quarter compared with the third quarter of 2011, new orders declined significantly. Slow global growth and commodity prices that are off their 2012 highs have resulted in some reductions, delays and cancellation of orders for mining products.

Bucyrus, which was acquired on July 8, 2011, had sales of $1.090 billion in the third quarter of 2012 compared with $1.135 billion in third quarter of 2011. Resource Industries' profit of $1.113 billion in the third quarter of 2012 was $368 million higher than the third quarter of 2011. Acquisitions and divestitures were favorable $150 million, primarily due to Bucyrus acquisition-related costs in the third quarter of 2011.
Excluding acquisitions and divestitures, Resource Industries' profit increased by $218 million, primarily due to higher sales volume and improved price realization. The improvement was partially offset by higher manufacturing costs primarily related to increased production volume.

Power Systems
Power Systems' sales were $5.317 billion in the third quarter of 2012, an increase of $242 million, or 5 percent, from the third quarter of 2011. The improvement was the result of the acquisition of MWM Holding GmbH (MWM), higher volume and improved price realization, partially offset by the impact of currency.
Excluding the acquisition of MWM, Power Systems' sales were about flat. Sales increased in Asia/Pacific and were partially offset by decreases in EAME. Worldwide demand for energy, at prices that encouraged investment, resulted in higher sales of engines and turbines for petroleum applications. Sales for electric power products also increased due to higher demand for large applications. These increases were offset by lower sales for industrial power applications.
Power Systems' profit was $943 million in the third quarter of 2012 compared with $794 million in the third quarter of 2011. The increase was primarily due to higher sales volume, which includes the impact of a favorable mix of products, and improved price realization. The improvements were partially offset by increased SG&A and R&D expenses. Manufacturing costs were about flat. MWM, acquired during the fourth quarter of 2011, added sales of $143 million, primarily in EAME, and increased segment profit by $17 million.

Financial Products Segment
Financial Products' revenues were $776 million, an increase of $19 million, or 3 percent, from the third quarter of 2011. The increase was primarily due to the favorable impact from higher average earning assets, partially offset by an unfavorable impact from lower average financing rates on new and existing finance receivables and operating leases.
Financial Products' profit was $190 million in the third quarter of 2012, compared with $145 million in the third quarter of 2011. The increase was primarily due to a $26 million favorable impact from higher average earning assets and an $18 million favorable impact due to lower claims experience at Cat Insurance.
At the end of the third quarter of 2012, past dues at Cat Financial were 2.80 percent compared with 3.35 percent at the end of the second quarter of 2012, 2.89 percent at the end of 2011 and 3.54 percent at the end of the third quarter of 2011. Past dues improved in all geographical regions. Write-offs, net of recoveries, were $29 million for the third quarter of 2012, down from $50 million for the third quarter of 2011.
As of September 30, 2012, Cat Financial's allowance for credit losses totaled $404 million or 1.47 percent of net finance receivables, compared with $369 million or 1.47 percent of net finance receivables at year-end 2011. The allowance for credit losses as of September 30, 2011, was $362 million or 1.49 percent of net finance receivables.

All Other Segment
All Other segment includes groups that provide services such as component manufacturing, remanufacturing and logistics to both Caterpillar and external customers. The increase in profit from the third quarter of 2011 was primarily due to the gain from the sale of a majority interest in our third party logistics business.

Corporate Items and Eliminations
Expense for corporate items and eliminations was $521 million in the third quarter of 2012, a decrease of $68 million from the third quarter of 2011. Corporate items and eliminations include: corporate-level expenses; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences, as segment profit is reported using annual fixed exchange rates; and inter-segment eliminations.

The decrease in expense from the third quarter of 2011 was primarily due to the favorable impact from currency differences, partially offset by unfavorable changes in mark-to-market deferred compensation expense, increased corporate costs and timing differences.

NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2011

CONSOLIDATED SALES AND REVENUES
[[Image Removed]]
The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the nine months ended September 30, 2011 (at left) and the nine months ended September 30, 2012 (at right). Items favorably impacting sales and revenues appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting sales and revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees.

Total sales and revenues were $49.800 billion for the nine months ended September 30, 2012, an increase of $6.905 billion, or 16 percent, from the nine months ended September 30, 2011. When reviewing the change in sales and revenues, we focus on the following perspectives:
• Reason for the change: Sales volume improved $3.714 billion, the net impact of acquisitions and divestitures was $2.552 billion, price realization was favorable $1.110 billion and Financial Products revenues increased $29 million. Currency partially offset these increases by $500 million, primarily driven by the strengthening of the U.S. dollar relative to the euro and the Brazilian real. Sales for both new equipment and aftermarket parts increased.

• Sales by geographic region: Excluding acquisitions and divestitures, sales increased in all geographic regions except Latin America, with the most significant improvement in North America. Sales increased in North America 18 percent, sales in Asia/Pacific improved 12 percent, and sales in EAME were favorable 6 percent. Sales in Latin America were about flat. The sales increase in North America was primarily driven by improvements in the United States. Within Asia/Pacific, increases in Australia and other parts of Asia/Pacific more than offset decreases in China. While sales in Europe were down, sales in Africa, the Middle East and CIS increased.

• Segment: Excluding acquisitions and divestitures, a significant amount of the sales increase was in Resource Industries, with sales up 28 percent from the nine months ended September 30, 2011. Construction Industries' sales improved 7 percent, Power Systems' sales increased 6 percent, and Financial Products' revenues were about flat.

. . .