10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to

Commission File Number:  1-768

CATERPILLAR INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)	37-0602744 (IRS Employer I.D. No.)
100 NE Adams Street, Peoria, Illinois (Address of principal executive offices)	61629 (Zip Code)

Registrant’s telephone number, including area code:

(309) 675-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

At June 30, 2012, 653,268,696 shares of common stock of the registrant were outstanding.

Table of Contents

Part I. Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	55
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	89
Item 4.	Controls and Procedures	89
Part II. Other Information
Item 1.	Legal Proceedings	90
Item 1A.	Risk Factors	*
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	*
Item 6.	Exhibits	91

* Item omitted because no answer is called for or item is not applicable.

2

Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Caterpillar Inc.

Consolidated Statement of Results of Operations

(Unaudited)

(Dollars in millions except per share data)

	Three Months Ended June 30,
	2012		2011
Sales and revenues:
Sales of Machinery and Power Systems	$	16,684	$	13,535
Revenues of Financial Products	690		695
Total sales and revenues	17,374		14,230
Operating costs:
Cost of goods sold	12,280		10,303
Selling, general and administrative expenses	1,517		1,257
Research and development expenses	632		584
Interest expense of Financial Products	198		209
Other operating (income) expenses	131		276
Total operating costs	14,758		12,629
Operating profit	2,616		1,601
Interest expense excluding Financial Products	110		90
Other income (expense)	70		(161		)
Consolidated profit before taxes	2,576		1,350
Provision for income taxes	872		318
Profit of consolidated companies	1,704		1,032
Equity in profit (loss) of unconsolidated affiliated companies	5		(10		)
Profit of consolidated and affiliated companies	1,709		1,022
Less: Profit attributable to noncontrolling interests	10		7
Profit1	$	1,699	$	1,015
Profit per common share	$	2.60	$	1.57
Profit per common share — diluted2	$	2.54	$	1.52
Weighted-average common shares outstanding (millions)
– Basic	652.9		645.5
– Diluted 2	669.6		667.2
Cash dividends declared per common share	$	0.98	$	0.90

¹    Profit attributable to common stockholders.

²   Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

See accompanying notes to Consolidated Financial Statements.

3

Caterpillar Inc.

Consolidated Statement of Comprehensive Income

(Unaudited)

(Dollars in millions)

	Three Months Ended June 30,
	2012			2011
Profit of consolidated and affiliated companies	$	1,709		$	1,022
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax (expense)/benefit of: 2012 - ($33); 2011 - $21	(339		)	97
Pension and other postretirement benefits:
Current year actuarial gain (loss), net of tax (expense)/benefit of: 2012 - ($2); 2011 - $0	5			—
Amortization of actuarial (gain) loss, net of tax (expense)/benefit of: 2012 - ($60); 2011 - ($59)	113			108
Amortization of prior service (credit) cost, net of tax (expense)/benefit of: 2012 - $4; 2011 - $3	(7		)	(5		)
Derivative financial instruments:
Gains (losses) deferred, net of tax (expense)/benefit of: 2012 - $0; 2011 - $16	(2		)	(30		)
(Gains) losses reclassified to earnings, net of tax (expense)/benefit of: 2012 - ($2); 2011 - ($5)	3			11
Available-for-sale securities:
Gains (losses) deferred, net of tax (expense)/benefit of: 2012 - $4; 2011 - ($2)	(5		)	4
(Gains) losses reclassifed to earnings, net of tax (expense)/benefit of: 2012 - $0; 2011 - $0	—			(1		)
Total other comprehensive income (loss), net of tax	(232		)	184
Comprehensive income	1,477			1,206
Less: comprehensive income attributable to the noncontrolling interests	(2		)	(11		)
Comprehensive income attributable to the company	$	1,475		$	1,195

See accompanying notes to Consolidated Financial Statements.

4

Caterpillar Inc.

Consolidated Statement of Results of Operations

(Unaudited)

(Dollars in millions except per share data)

	Six Months Ended June 30,
	2012		2011
Sales and revenues:
Sales of Machinery and Power Systems	$	31,972	$	25,812
Revenues of Financial Products	1,383		1,367
Total sales and revenues	33,355		27,179
Operating costs:
Cost of goods sold	23,517		19,360
Selling, general and administrative expenses	2,857		2,356
Research and development expenses	1,219		1,109
Interest expense of Financial Products	402		412
Other operating (income) expenses	421		508
Total operating costs	28,416		23,745
Operating profit	4,939		3,434
Interest expense excluding Financial Products	223		177
Other income (expense)	158		(144		)
Consolidated profit before taxes	4,874		3,113
Provision for income taxes	1,561		830
Profit of consolidated companies	3,313		2,283
Equity in profit (loss) of unconsolidated affiliated companies	7		(18		)
Profit of consolidated and affiliated companies	3,320		2,265
Less: Profit attributable to noncontrolling interests	35		25
Profit1	$	3,285	$	2,240
Profit per common share	$	5.04	$	3.48
Profit per common share — diluted2	$	4.90	$	3.36
Weighted-average common shares outstanding (millions)
– Basic	651.3		643.3
– Diluted 2	669.9		666.0
Cash dividends declared per common share	$	0.98	$	0.90

¹    Profit attributable to common stockholders.

²   Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

See accompanying notes to Consolidated Financial Statements.

5

Caterpillar Inc.

Consolidated Statement of Comprehensive Income

(Unaudited)

(Dollars in millions)

	Six Months Ended June 30,
	2012			2011
Profit of consolidated and affiliated companies	$	3,320		$	2,265
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax (expense)/benefit of: 2012 - ($16); 2011 - $84	(158		)	322
Pension and other postretirement benefits:
Current year actuarial gain (loss), net of tax (expense)/benefit of: 2012 - ($8); 2011 - $0	15			—
Amortization of actuarial (gain) loss, net of tax (expense)/benefit of: 2012 - ($120); 2011 - ($112)	226			207
Current year prior service credit (cost), net of tax (expense)/benefit of: 2012 - $2; 2011 - $0	(3		)	—
Amortization of prior service (credit) cost, net of tax (expense)/benefit of: 2012 - $8; 2011 - $6	(15		)	(10		)
Amortization of transition (asset) obligation, net of tax (expense)/benefit of: 2012 - $0; 2011 - $0	1			1
Derivative financial instruments:
Gains (losses) deferred, net of tax (expense)/benefit of: 2012 - $16; 2011 - $6	(28		)	(13		)
(Gains) losses reclassified to earnings, net of tax (expense)/benefit of: 2012 - ($1); 2011 - $0	1			4
Available-for-sale securities:
Gains (losses) deferred, net of tax (expense)/benefit of: 2012 - ($5); 2011 - ($5)	16			9
(Gains) losses reclassifed to earnings, net of tax (expense)/benefit of: 2012 - $0; 2011 - $0	(2		)	(1		)
Total other comprehensive income (loss), net of tax	53			519
Comprehensive income	3,373			2,784
Less: comprehensive income attributable to the noncontrolling interests	(17		)	(37		)
Comprehensive income attributable to the company	$	3,356		$	2,747

See accompanying notes to Consolidated Financial Statements.

6

Caterpillar Inc.

Consolidated Statement of Financial Position

(Unaudited)

(Dollars in millions)

	June 30, 2012			December 31, 2011
Assets
Current assets:
Cash and short-term investments	$	5,103		$	3,057
Receivables – trade and other	10,443			10,285
Receivables – finance	8,383			7,668
Deferred and refundable income taxes	1,685			1,580
Prepaid expenses and other current assets	1,336			994
Inventories	17,344			14,544
Total current assets	44,294			38,128
Property, plant and equipment – net	14,928			14,395
Long-term receivables – trade and other	803			1,130
Long-term receivables – finance	12,955			11,948
Investments in unconsolidated affiliated companies	124			133
Noncurrent deferred and refundable income taxes	2,032			2,157
Intangible assets	4,236			4,368
Goodwill	7,320			7,080
Other assets	2,146			2,107
Total assets	$	88,838		$	81,446
Liabilities
Current liabilities:
Short-term borrowings:
Machinery and Power Systems	$	592		$	93
Financial Products	4,455			3,895
Accounts payable	8,470			8,161
Accrued expenses	3,532			3,386
Accrued wages, salaries and employee benefits	1,628			2,410
Customer advances	3,132			2,691
Dividends payable	339			298
Other current liabilities	2,117			1,967
Long-term debt due within one year:
Machinery and Power Systems	1,269			558
Financial Products	5,739			5,102
Total current liabilities	31,273			28,561
Long-term debt due after one year:
Machinery and Power Systems	9,169			8,415
Financial Products	18,092			16,529
Liability for postemployment benefits	10,626			10,956
Other liabilities	3,697			3,583
Total liabilities	72,857			68,044
Commitments and contingencies (Notes 10 and 12)
Redeemable noncontrolling interest	—			473
Stockholders’ equity
Common stock of $1.00 par value:
Authorized shares: 2,000,000,000 Issued shares: (6/30/12 and 12/31/11 – 814,894,624) at paid-in amount	4,373			4,273
Treasury stock (6/30/12 – 161,625,928 shares; 12/31/11 – 167,361,280 shares) at cost	(10,139		)	(10,281		)
Profit employed in the business	27,842			25,219
Accumulated other comprehensive income (loss)	(6,150		)	(6,328		)
Noncontrolling interests	55			46
Total stockholders’ equity	15,981			12,929
Total liabilities, redeemable noncontrolling interest and stockholders’ equity	$	88,838		$	81,446

See accompanying notes to Consolidated Financial Statements.

7

Caterpillar Inc.

Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited)

(Dollars in millions)

	Common stock			Treasury stock			Profit employed in the business			Accumulated other comprehensive income (loss)			Noncontrolling interests			Total
Six Months Ended June 30, 2011
Balance at December 31, 2010	$	3,888		$	(10,397	)	$	21,384		$	(4,051	)	$	40		$	10,864
Profit of consolidated and affiliated companies	—			—			2,240			—			25			2,265
Foreign currency translation, net of tax	—			—			—			312			10			322
Pension and other postretirement benefits, net of tax	—			—			—			196			2			198
Derivative financial instruments, net of tax	—			—			—			(9		)	—			(9		)
Available-for-sale securities, net of tax	—			—			—			8			—			8
Dividends declared	—			—			(581		)	—			—			(581		)
Distribution to noncontrolling interests	—			—			—			—			(2		)	(2		)
Common shares issued from treasury stock for stock-based compensation:  7,243,608	10			86			—			—			—			96
Stock-based compensation expense	111			—			—			—			—			111
Net excess tax benefits from stock-based compensation	156			—			—			—			—			156
Cat Japan share redemption1	—			—			38			—			(30		)	8
Balance at June 30, 2011	$	4,165		$	(10,311	)	$	23,081		$	(3,544	)	$	45		$	13,436
Six Months Ended June 30, 2012
Balance at December 31, 2011	$	4,273		$	(10,281	)	$	25,219		$	(6,328	)	$	46		$	12,929
Profit of consolidated and affiliated companies	—			—			3,285			—			35			3,320
Foreign currency translation, net of tax	—			—			—			(134		)	(24		)	(158		)
Pension and other postretirement benefits, net of tax	—			—			—			219			5			224
Derivative financial instruments, net of tax	—			—			—			(27		)	—			(27		)
Available-for-sale securities, net of tax	—			—			—			13			1			14
Change in ownership from noncontrolling interests	—			—			—			—			7			7
Dividends declared	—			—			(639		)	—			—			(639		)
Distribution to noncontrolling interests	—			—			—			—			(5		)	(5		)
Common shares issued from treasury stock for stock-based compensation: 5,735,352	(117		)	142			—			—			—			25
Stock-based compensation expense	135			—			—			—			—			135
Net excess tax benefits from stock-based compensation	156			—			—			—			—			156
Cat Japan share redemption1	(74		)	—			(23		)	107			(10		)	—
Balance at June 30, 2012	$	4,373		$	(10,139	)	$	27,842		$	(6,150	)	$	55		$	15,981

¹     See Notes 1 and 16 regarding the Cat Japan share redemption.

See accompanying notes to Consolidated Financial Statements.

8

Caterpillar Inc.

Consolidated Statement of Cash Flow

(Unaudited)

(Millions of dollars)

	Six Months Ended June 30,
	2012			2011
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	3,320		$	2,265
Adjustments for non-cash items:
Depreciation and amortization	1,350			1,174
Other	(59		)	337
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	37			45
Inventories	(2,939		)	(1,850		)
Accounts payable	299			1,056
Accrued expenses	115			(41		)
Accrued wages, salaries and employee benefits	(753		)	(91		)
Customer advances	434			14
Other assets – net	63			28
Other liabilities – net	140			357
Net cash provided by (used for) operating activities	2,007			3,294
Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(1,508		)	(924		)
Expenditures for equipment leased to others	(787		)	(580		)
Proceeds from disposals of leased assets and property, plant and equipment	543			621
Additions to finance receivables	(5,942		)	(4,294		)
Collections of finance receivables	4,298			3,981
Proceeds from sale of finance receivables	85			104
Investments and acquisitions (net of cash acquired)	(517		)	(68		)
Proceeds from sale of businesses and investments (net of cash sold)	308			21
Proceeds from sale of available-for-sale securities	177			122
Investments in available-for-sale securities	(199		)	(131		)
Other – net	38			(38		)
Net cash provided by (used for) investing activities	(3,504		)	(1,186		)
Cash flow from financing activities:
Dividends paid	(598		)	(565		)
Distribution to noncontrolling interests	(5		)	(2		)
Common stock issued, including treasury shares reissued	25			96
Excess tax benefit from stock-based compensation	156			159
Acquisitions of redeemable noncontrolling interests	(444		)	—
Proceeds from debt issued (original maturities greater than three months):
Machinery and Power Systems	1,662			4,530
Financial Products	7,357			5,799
Payments on debt (original maturities greater than three months):
Machinery and Power Systems	(211		)	(487		)
Financial Products	(4,822		)	(4,638		)
Short-term borrowings – net (original maturities three months or less)	552			36
Net cash provided by (used for) financing activities	3,672			4,928
Effect of exchange rate changes on cash	(129		)	87
Increase (decrease) in cash and short-term investments	2,046			7,123
Cash and short-term investments at beginning of period	3,057			3,592
Cash and short-term investments at end of period	$	5,103		$	10,715

All short-term investments, which consist primarily of highly liquid investments with original maturities of three months or less, are considered to be cash equivalents.

See accompanying notes to Consolidated Financial Statements.

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.A.  Basis of Presentation

In the opinion of management, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated results of operations for the three and six month periods ended June 30, 2012 and 2011, (b) the consolidated comprehensive income for the three and six month periods ended June 30, 2012 and 2011, (c) the consolidated financial position at June 30, 2012 and December 31, 2011, (d) the consolidated changes in stockholders’ equity for the six month periods ended June 30, 2012 and 2011, and (e) the consolidated cash flow for the six month periods ended June 30, 2012 and 2011.  The financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.

Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our Company’s annual report on Form 10-K for the year ended December 31, 2011 (2011 Form 10-K).

The December 31, 2011 financial position data included herein is derived from the audited consolidated financial statements included in the 2011 Form 10-K but does not include all disclosures required by U.S. GAAP.

B.  Nature of Operations

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

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

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

C.  Accumulated Other Comprehensive Income (Loss)

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

(Millions of dollars)	June 30, 2012				June 30, 2011
Foreign currency translation	$	239			$	863
Pension and other postretirement benefits	(6,410		)		(4,499		)
Derivative financial instruments	(37		)		36
Available-for-sale securities	58				56
Total accumulated other comprehensive income (loss)	$	(6,150	)	1	$	(3,544	)

¹  In conjunction with the Cat Japan share redemption, to reflect the increase in our ownership interest in Cat Japan from 67 percent to 100 percent, $107 million was reclassified to Accumulated other comprehensive income (loss) from other components of stockholders' equity and was not included in Comprehensive income during the second quarter of 2012. The amount was comprised of foreign currency translation of $167 million, pension and other postretirement benefits of $(61) million and available-for-sale securities of $1 million.

2.New Accounting Guidance

Disclosures about the credit quality of financing receivables and the allowance for credit losses– In July 2010, the Financial Accounting Standards Board (FASB) issued accounting guidance on disclosures about the credit quality of

10

financing receivables and the allowance for credit losses.  The guidance expands disclosures for the allowance for credit losses and financing receivables by requiring entities to disclose information at disaggregated levels.  It also requires disclosure of credit quality indicators, past due information and modifications of financing receivables.  Also, in April 2011, the FASB issued guidance clarifying when a restructuring of a receivable should be considered a troubled debt restructuring by providing additional guidance for determining whether the creditor has granted a concession and whether the debtor is experiencing financial difficulties.  For end of period balances, the new disclosures were effective December 31, 2010 and did not have a material impact on our financial statements.  For activity during a reporting period, the disclosures were effective January 1, 2011 and did not have a material impact on our financial statements.  The disclosures related to modifications of financing receivables, as well as the guidance clarifying when a restructured receivable should be considered a troubled debt restructuring were effective July 1, 2011 and did not have a material impact on our financial statements.  See Note 15 for additional information.

Presentation of comprehensive income – In June 2011, the FASB issued accounting guidance on the presentation of comprehensive income.  The guidance provides two options for presenting net income and other comprehensive income.  The total of comprehensive income, the components of net income, and the components of other comprehensive income may be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. We elected to present two separate statements. This guidance was effective January 1, 2012.

Goodwill impairment testing – In September 2011, the FASB issued accounting guidance on the testing of goodwill for impairment. The guidance allows entities testing goodwill for impairment the option of performing a qualitative assessment to determine the likelihood of goodwill impairment and whether it is necessary to perform the two-step impairment test currently required. This guidance was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption was permitted. We elected to early adopt this guidance for the year ended December 31, 2011 and the guidance did not have a material impact on our financial statements. See Note 7 for additional information.

3.Stock-Based Compensation

Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant date fair value of the award.  Stock-based compensation primarily consists of stock options, restricted stock units (RSUs) and stock-settled stock appreciation rights (SARs).  We recognized pretax stock-based compensation cost in the amount of $88 million and $135 million for the three and six months ended June 30, 2012, respectively; and $67 million and $111 million for the three and six months ended June 30, 2011, respectively.

The following table illustrates the type and fair value of the stock-based compensation awards granted during the six month periods ended June 30, 2012 and 2011, respectively:

	2012			2011
	# Granted	Fair Value Per Award		# Granted	Fair Value Per Award
Stock options	3,224,203	$	39.20	237,906	$	36.73
RSUs	1,429,939	$	104.61	1,082,032	$	97.51
SARs	—	$	—	2,722,689	$	36.73

The stock price on the date of grant was $110.09 and $102.13 for 2012 and 2011, respectively.

The following table provides the assumptions used in determining the fair value of the stock-based awards for the six month periods ended June 30, 2012 and 2011, respectively:

	Grant Year
	2012	2011
Weighted-average dividend yield	2.16%	2.22%
Weighted-average volatility	35.0%	32.7%
Range of volatilities	33.3-40.4%	20.9-45.4%
Range of risk-free interest rates	0.17-2.00%	0.25-3.51%
Weighted-average expected lives	7 years	8 years

11

As of June 30, 2012, the total remaining unrecognized compensation cost related to nonvested stock-based compensation awards was $293 million, which will be amortized over the weighted-average remaining requisite service periods of approximately 2.2 years.

4.Derivative Financial Instruments and Risk Management

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates and commodity prices.  In addition, the amount of Caterpillar stock that can be repurchased under our stock repurchase program is impacted by movements in the price of the stock.  Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate, commodity price and Caterpillar stock price exposures.  Our policy specifies that derivatives are not to be used for speculative purposes.  Derivatives that we use are primarily foreign currency forward and option contracts, interest rate swaps, commodity forward and option contracts, and stock repurchase contracts.  Our derivative activities are subject to the management, direction and control of our senior financial officers.  Risk management practices, including the use of financial derivative instruments, are presented to the Audit Committee of the Board of Directors at least annually.

All derivatives are recognized on the Consolidated Statement of Financial Position at their fair value. On the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flow to be paid (cash flow hedge), or (3) an undesignated instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk, are recorded in current earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in Accumulated other comprehensive income (loss) (AOCI) to the extent effective on the Consolidated Statement of Financial Position until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings.  Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings. Cash flow from designated derivative financial instruments are classified within the same category as the item being hedged on the Consolidated Statement of Cash Flow.  Cash flow from undesignated derivative financial instruments are included in the investing category on the Consolidated Statement of Cash Flow.

We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as fair value hedges to specific assets and liabilities on the Consolidated Statement of Financial Position and linking cash flow hedges to specific forecasted transactions or variability of cash flow.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the designated derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items.  When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, we discontinue hedge accounting prospectively, in accordance with the derecognition criteria for hedge accounting.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costs incurred in foreign currencies. Movements in foreign currency rates also affect our competitive position as these changes may affect business practices and/or pricing strategies of non-U.S.-based competitors. Additionally, we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.

Our Machinery and Power Systems operations purchase, manufacture and sell products in many locations around the world. As we have a diversified revenue and cost base, we manage our future foreign currency cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to five years.

We generally designate as cash flow hedges at inception of the contract any Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese yuan, euro, Indian rupee, Japanese yen, Mexican peso, Singapore dollar or Swiss franc forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current

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quarter-end. Designation is performed on a specific exposure basis to support hedge accounting. The remainder of Machinery and Power Systems foreign currency contracts are undesignated, including any hedges designed to protect our competitive exposure.  

As of June 30, 2012, $18 million of deferred net losses, net of tax, included in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position), are expected to be reclassified to current earnings (Other income (expense) in the Consolidated Statement of Results of Operations) over the next twelve months when earnings are affected by the hedged transactions.  The actual amount recorded in Other income (expense) will vary based on exchange rates at the time the hedged transactions impact earnings.

In managing foreign currency risk for our Financial Products operations, our objective is to minimize earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions. Our policy allows the use of foreign currency forward and option contracts to offset the risk of currency mismatch between our receivables and debt. All such foreign currency forward and option contracts are undesignated.

Interest Rate Risk

Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate derivatives to manage our exposure to interest rate changes and, in some cases, lower the cost of borrowed funds.

Our Machinery and Power Systems operations generally use fixed-rate debt as a source of funding.  Our objective is to minimize the cost of borrowed funds.  Our policy allows us to enter into fixed-to-floating interest rate swaps and forward rate agreements to meet that objective with the intent to designate as fair value hedges at inception of the contract all fixed-to-floating interest rate swaps.  Designation as a hedge of the fair value of our fixed-rate debt is performed to support hedge accounting.

Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating rate) of Cat Financial’s debt portfolio with the interest rate profile of their receivables portfolio within predetermined ranges on an ongoing basis. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the receivables portfolio. This matched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.

Our policy allows us to use fixed-to-floating, floating-to-fixed, and floating-to-floating interest rate swaps to meet the match-funding objective.  We designate fixed-to-floating interest rate swaps as fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest rate.  We designate most floating-to-fixed interest rate swaps as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.

As of June 30, 2012, $3 million of deferred net losses, net of tax, included in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position), related to Financial Products floating-to-fixed interest rate swaps, are expected to be reclassified to current earnings (Interest expense of Financial Products in the Consolidated Statement of Results of Operations) over the next twelve months.  The actual amount recorded in Interest expense of Financial Products will vary based on interest rates at the time the hedged transactions impact earnings.

We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate swaps at both Machinery and Power Systems and Financial Products.  The gains or losses associated with these swaps at the time of liquidation are amortized into earnings over the original term of the previously designated hedged item.

In anticipation of issuing debt for the planned acquisition of Bucyrus International, Inc., we entered into interest rate swaps to manage our exposure to interest rate changes. For the three and six months ended June 30, 2011, we recognized a net loss of $124 million and $149 million, respectively, included in Other income (expense) in the Consolidated Statement of Results of Operations. These contracts were not designated as hedging instruments, and therefore, did not receive hedge accounting treatment. The contracts were liquidated in conjunction with the debt issuance in May 2011.

Commodity Price Risk

Commodity price movements create a degree of risk by affecting the price we must pay for certain raw material. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased

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materials.

Our Machinery and Power Systems operations purchase base and precious metals embedded in the components we purchase from suppliers.  Our suppliers pass on a share of the price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.

Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five-year horizon. All such commodity forward and option contracts are undesignated.

The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position are as follows:

(Millions of dollars)
	Consolidated Statement of Financial	Asset (Liability) Fair Value
	Position Location	June 30, 2012			December 31, 2011
Designated derivatives
Foreign exchange contracts
Machinery and Power Systems	Receivables – trade and other	$	32		$	54
Machinery and Power Systems	Long-term receivables – trade and other	3			19
Machinery and Power Systems	Accrued expenses	(60		)	(73		)
Machinery and Power Systems	Other liabilities	(7		)	(10		)
Interest rate contracts
Financial Products	Receivables – trade and other	15			15
Financial Products	Long-term receivables – trade and other	229			233
Financial Products	Accrued expenses	(7		)	(6		)
		$	205		$	232
Undesignated derivatives
Foreign exchange contracts
Machinery and Power Systems	Receivables – trade and other	$	8		$	27
Machinery and Power Systems	Accrued expenses	(35		)	(12		)
Machinery and Power Systems	Other liabilities	(28		)	(85		)
Financial Products	Receivables – trade and other	11			7
Financial Products	Accrued expenses	(11		)	(16		)
Interest rate contracts
Financial Products	Accrued expenses	(2		)	(1		)
Commodity contracts
Machinery and Power Systems	Receivables – trade and other	1			2
Machinery and Power Systems	Accrued expenses	(4		)	(9		)
		$	(60	)	$	(87	)

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The effect of derivatives designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

Fair Value Hedges (Millions of dollars)
		Three Months Ended June 30, 2012					Six Months Ended June 30, 2012
	Classification	Gains (Losses) on Derivatives		Gains (Losses) on Borrowings			Gains (Losses) on Derivatives			Gains (Losses) on Borrowings
Interest rate contracts
Financial Products	Other income (expense)	$	6	$	(5	)	$	(3	)	$	10
		$	6	$	(5	)	$	(3	)	$	10

		Three Months Ended June 30, 2011					Six Months Ended June 30, 2011
	Classification	Gains (Losses) on Derivatives		Gains (Losses) on Borrowings			Gains (Losses) on Derivatives			Gains (Losses) on Borrowings
Interest rate contracts
Machinery and Power Systems	Other income (expense)	$	—	$	—		$	(1	)	$	1
Financial Products	Other income (expense)	42		(40		)	(11		)	12
		$	42	$	(40	)	$	(12	)	$	13

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Cash Flow Hedges (Millions of dollars)
	Three Months Ended June 30, 2012
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	—		Other income (expense)	$	(4	)	$	—
Interest rate contracts	—
Financial Products	(2		)	Interest expense of Financial Products	(1		)	(1		)	1
	$	(2	)		$	(5	)	$	(1	)

	Three Months Ended June 30, 2011
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(45	)	Other income (expense)	$	(9	)	$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(1		)	Interest expense of Financial Products	(6		)	—		1
	$	(46	)		$	(16	)	$	—

	Six Months Ended June 30, 2012
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(42	)	Other income (expense)	$	1		$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(2		)	Interest expense of Financial Products	(2		)	(1		)	1
	$	(44	)		$	(2	)	$	(1	)

	Six Months Ended June 30, 2011
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(18	)	Other income (expense)	$	9		$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(1		)	Interest expense of Financial Products	(12		)	1		1
	$	(19	)		$	(4	)	$	1

¹ The ineffective portion recognized in earnings is included in Other income (expense).

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The effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

(Millions of dollars)
	Classification of Gains (Losses)	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012
Foreign exchange contracts
Machinery and Power Systems	Other income (expense)	$	(35	)	$	30
Financial Products	Other income (expense)	(5		)	2
Commodity contracts
Machinery and Power Systems	Other income (expense)	(6		)	—
		$	(46	)	$	32

(Millions of dollars)
	Classification of Gains (Losses)	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
Foreign exchange contracts
Machinery and Power Systems	Other income (expense)	$	15		$	47
Financial Products	Other income (expense)	(2		)	(2		)
Interest rate contracts
Machinery and Power Systems	Other income (expense)	(124		)	(149		)
Commodity contracts
Machinery and Power Systems	Other income (expense)	(2		)	2
		$	(113	)	$	(102	)

Stock Repurchase Risk

Payments for stock repurchase derivatives are accounted for as a reduction in stockholders’ equity.  In February 2007, the Board of Directors authorized a $7.5 billion stock repurchase program, expiring on December 31, 2011.  In December 2011, the Board of Directors extended the $7.5 billion stock repurchase program through December 31, 2015. The amount of Caterpillar stock that can be repurchased under the authorization is impacted by movements in the price of the stock.  In August 2007, the Board of Directors authorized the use of derivative contracts to reduce stock repurchase price volatility.  There were no stock repurchase derivatives outstanding for the three and six months ended June 30, 2012 or 2011.

5.Inventories

Inventories (principally using the last-in, first-out (LIFO) method) are comprised of the following:

(Millions of dollars)	June 30, 2012		December 31, 2011
Raw materials	$	4,143	$	3,766
Work-in-process	3,504		2,959
Finished goods	9,429		7,562
Supplies	268		257
Total inventories	$	17,344	$	14,544

6.Investments in Unconsolidated Affiliated Companies

Combined financial information of the unconsolidated affiliated companies accounted for by the equity method (generally on a lag of 3 months or less) was as follows:

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Results of Operations of unconsolidated affiliated companies: (Millions of dollars)
	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Sales	$	206	$	241		$	372	$	439
Cost of sales	160		198			286		359
Gross profit	$	46	$	43		$	86	$	80
Profit (loss)	$	12	$	(17	)	$	22	$	(34	)

Financial Position of unconsolidated affiliated companies: (Millions of dollars)	June 30, 2012		December 31, 2011
Assets:
Current assets	$	332	$	345
Property, plant and equipment — net	107		200
Other assets	17		9
	456		554
Liabilities:
Current liabilities	197		220
Long-term debt due after one year	50		72
Other liabilities	9		17
	256		309
Equity	$	200	$	245

Caterpillar’s investments in unconsolidated affiliated companies: (Millions of dollars)	June 30, 2012		December 31, 2011
Investments in equity method companies	$	108	$	111
Plus: Investments in cost method companies	16		22
Total investments in unconsolidated affiliated companies	$	124	$	133

7.Intangible Assets and Goodwill

A.  Intangible assets

Intangible assets are comprised of the following:

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		June 30, 2012
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,822	$	(272	)	$	2,550
Intellectual property	11	1,787		(317		)	1,470
Other	10	316		(118		)	198
Total finite-lived intangible assets	14	4,925		(707		)	4,218
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,943	$	(707	)	$	4,236

		December 31, 2011
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,811	$	(213	)	$	2,598
Intellectual property	11	1,794		(244		)	1,550
Other	11	299		(97		)	202
Total finite-lived intangible assets	13	4,904		(554		)	4,350
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,922	$	(554	)	$	4,368

During the second quarter of 2012, we acquired finite-lived intangible assets aggregating $194 million due to the purchase of ERA Mining Machinery Limited. During the first quarter of 2012, we acquired finite-lived intangible assets aggregating $8 million due to the purchase of Cat Tohoku. See Note 18 for details on these business combinations.

Customer relationship intangibles of $100 million, net of accumulated amortization of $4 million, were reclassified from Intangible assets to held for sale in the first half of 2012, primarily related to the divestiture of portions of the Bucyrus distribution business, and are not included in the June 30, 2012 balances in the table above. See Note 19 for additional information on assets held for sale.

Customer relationship intangibles of $51 million, net of accumulated amortization of $29 million, from the All Other segment were impaired during the second quarter of 2012. Fair value of the intangibles was determined using an income approach based on the present value of discounted cash flows. The impairment of $22 million was recognized in Other operating (income) expenses on the Consolidated Statement of Results of Operations and included in the All Other segment.

Amortization expense for the three and six months ended June 30, 2012 was $99 million and $193 million, respectively. Amortization expense for the three and six months ended June 30, 2011 was $22 million and $44 million respectively.  Amortization expense related to intangible assets is expected to be:

(Millions of dollars)
2012	2013	2014	2015	2016	Thereafter
$393	$393	$386	$380	$371	$2,506

B.  Goodwill

During the second quarter of 2012, we recorded goodwill of $467 million related to the acquisition of ERA Mining Machinery Limited. During the first quarter of 2012, we recorded goodwill of $16 million related to the acquisition of Cat Tohoku. See Note 18 for details on these business combinations.

Goodwill of $152 million was reclassified to held for sale in the first half of 2012, primarily related to the divestiture of portions of the Bucyrus distribution business, and is not included in the June 30, 2012 balance in the table below. See

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Note 19 for additional information on assets held for sale.

We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. Goodwill is reviewed for impairment utilizing a qualitative assessment or a two-step process. We have an option to make a qualitative assessment of a reporting unit's goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the two-step process, the first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that an impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit's goodwill, the difference is recognized as an impairment loss. No goodwill for reporting units was impaired during the three and six months ended June 30, 2012 or 2011. See Note 19 for goodwill impairments relating to assets held for sale.

The changes in the carrying amount of the goodwill by reportable segment for the six months ended June 30, 2012 were as follows: 

(Millions of dollars)
	Construction Industries			Resource Industries			Power Systems			Other		Consolidated Total
Balance at December 31, 2011	$	378		$	4,099		$	2,486		$	117	$	7,080
Business acquisitions 1	16			467			—			—		483
Held for sale and business divestitures 2	—			(152		)	—			—		(152		)
Other adjustments 3	(5		)	(59		)	(27		)	—		(91		)
Balance at June 30, 2012	$	389		$	4,355		$	2,459		$	117	$	7,320

¹See Note 18 for additional details.

² See Note 19 for additional details.

³Other adjustments are comprised primarily of foreign currency translation.

8.Available-For-Sale Securities

We have investments in certain debt and equity securities, primarily at Cat Insurance, that have been classified as available-for-sale and recorded at fair value based upon quoted market prices. These investments are primarily included in Other assets in the Consolidated Statement of Financial Position. Unrealized gains and losses arising from the revaluation of available-for-sale securities are included, net of applicable deferred income taxes, in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position).  Realized gains and losses on sales of investments are generally determined using the FIFO (first-in, first-out) method for debt instruments and the specific identification method for equity securities.  Realized gains and losses are included in Other income (expense) in the Consolidated Statement of Results of Operations.

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	June 30, 2012							December 31, 2011
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value
Government debt
U.S. treasury bonds	$	10	$	—		$	10	$	10	$	—		$	10
Other U.S. and non-U.S. government bonds	121		2			123		90		2			92
Corporate bonds
Corporate bonds	588		35			623		542		30			572
Asset-backed securities	96		(1		)	95		112		(1		)	111
Mortgage-backed debt securities
U.S. governmental agency	266		12			278		297		13			310
Residential	29		(3		)	26		33		(3		)	30
Commercial	131		6			137		142		3			145
Equity securities
Large capitalization value	139		29			168		127		21			148
Smaller company growth	22		11			33		22		7			29
Total	$	1,402	$	91		$	1,493	$	1,375	$	72		$	1,447

During the three and six months ended June 30, 2012, charges for other-than-temporary declines in the market value of securities were $1 million. These charges were accounted for as realized losses and were included in Other income (expense) in the Consolidated Statement of Results of Operations.  The cost basis of the impacted securities was adjusted to reflect these charges.  During the three and six months ended June 30, 2011, there were no charges for other-than-temporary declines in the market value of securities.

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Investments in an unrealized loss position that are not other-than-temporarily impaired:
	June 30, 2012
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Asset-backed securities	$	3	$	—	$	19	$	4	$	22	$	4
Mortgage-backed debt securities
Residential	2		—		15		3		17		3
Commercial	2		—		8		1		10		1
Equity securities
Large capitalization value	28		3		14		2		42		5
Total	$	35	$	3	$	56	$	10	$	91	$	13

	December 31, 2011
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Corporate bonds	$	54	$	1	$	1	$	—	$	55	$	1
Asset-backed securities	1		—		20		5		21		5
Mortgage-backed debt securities
U.S. governmental agency	51		1		—		—		51		1
Residential	3		—		18		3		21		3
Commercial	15		—		8		1		23		1
Equity securities
Large capitalization value	36		5		6		1		42		6
Smaller company growth	4		1		—		—		4		1
Total	$	164	$	8	$	53	$	10	$	217	$	18

¹  Indicates length of time that individual securities have been in a continuous unrealized loss position.

Corporate Bonds.  The unrealized losses on our investments in corporate bonds and asset-backed securities relate primarily to changes in interest rates and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

Mortgage-Backed Debt Securities.  The unrealized losses on our investments in mortgage-backed securities and mortgage-related asset-backed securities relate primarily to the continuation of elevated housing delinquencies and default rates, risk aversion and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell these investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

Equity Securities.  Cat Insurance maintains a well-diversified equity portfolio consisting of two specific mandates:  large capitalization value stocks and smaller company growth stocks.  Overall U.S. equity valuations declined during the second quarter of 2012 due to a worsening European debt crisis and a global economic slowdown. In each case where unrealized losses exist, the respective company's management is taking action in order to increase shareholder value.   We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

The fair value of the available-for-sale debt securities at June 30, 2012, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.

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(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	125	$	127
Due after one year through five years	496		510
Due after five years through ten years	149		171
Due after ten years	45		43
U.S. agency mortgage-backed securities	266		278
Residential mortgage-backed securities	29		26
Commercial mortgage-backed securities	131		137
Total debt securities – available-for-sale	$	1,241	$	1,292

Sales of Securities
	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars)	2012		2011		2012		2011
Proceeds from the sale of available-for-sale securities	$	65	$	56	$	177	$	122
Gross gains from the sale of available-for-sale securities	$	1	$	1	$	3	$	2
Gross losses from the sale of available-for-sale securities	$	—	$	—	$	—	$	1

9.Postretirement Benefits

A.  Pension and postretirement benefit costs

In February 2012, we announced the closure of the Electro-Motive Diesel facility located in London, Ontario. As a result of the closure, we recognized a $37 million other postretirement benefits curtailment gain in the first quarter. This excludes a $21 million loss of a third party receivable for other postretirement benefits that was eliminated due to the closure. In addition, a $10 million special termination benefit expense was recognized related to statutory pension benefits required to be paid to certain affected employees.

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(Millions of dollars)	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	June 30,						June 30,						June 30,
	2012			2011			2012			2011			2012			2011
For the three months ended:
Components of net periodic benefit cost:
Service cost	$	46		$	38		$	28		$	28		$	22		$	20
Interest cost	154			162			46			44			56			63
Expected return on plan assets	(203		)	(199		)	(53		)	(50		)	(16		)	(17		)
Amortization of:
Prior service cost (credit)1	5			5			—			—			(16		)	(13		)
Net actuarial loss (gain) 1	124			113			24			18			25			27
Net periodic benefit cost	126			119			45			40			71			80
Curtailments, settlements and special termination benefits 2	—			—			12			9			—			—
Total cost included in operating profit	$	126		$	119		$	57		$	49		$	71		$	80
For the six months ended:
Components of net periodic benefit cost:
Service cost	$	92		$	77		$	56		$	55		$	46		$	41
Interest cost	308			324			91			87			111			126
Expected return on plan assets	(406		)	(398		)	(107		)	(100		)	(32		)	(35		)
Amortization of:
Transition obligation (asset)	—			—			—			—			1			1
Prior service cost (credit)1	10			10			—			1			(33		)	(27		)
Net actuarial loss (gain) 1	248			226			48			36			50			54
Net periodic benefit cost	252			239			88			79			143			160
Curtailments, settlements and special termination benefits 2	—			—			22			9			(40		)	—
Total cost included in operating profit	$	252		$	239		$	110		$	88		$	103		$	160
Weighted-average assumptions used to determine net cost:
Discount rate	4.3		%	5.1		%	4.3		%	4.6		%	4.3		%	5.0		%
Expected return on plan assets	8.0		%	8.5		%	7.1		%	7.1		%	8.0		%	8.5		%
Rate of compensation increase	4.5		%	4.5		%	3.9		%	4.2		%	4.4		%	4.4		%
1    Prior service cost (credit) and net actuarial loss (gain) for both pension and other postretirement benefits are generally amortized using the straight-line method over the average remaining service period to the full retirement eligibility date of employees expected to receive benefits from the plan. For other postretirement benefit plans in which all or almost all of the plan's participants are fully eligible for benefits under the plan, prior service cost (credit) and net actuarial loss (gain) are amortized using the straight-line method over the remaining life expectancy of those participants.
2       Curtailments, settlements and special termination benefits were recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations.

We made $119 million and $293 million of contributions to our pension plans during the three and six months ended June 30, 2012, respectively. We currently anticipate full-year 2012 contributions of approximately $1 billion, of which $570 million are required contributions. We made $104 million and $235 million of contributions to our pension plans during the three and six months ended June 30, 2011, respectively.

B.  Defined contribution benefit costs

On January 1, 2011, matching contributions to our U.S. 401(k) plan changed for certain employees that are still accruing benefits under a defined benefit pension plan.  Matching contributions changed from 100 percent of employee contributions to the plan up to six percent of their compensation to 50 percent of employee contributions up to six percent of compensation.  For U.S. employees whose defined benefit pension accruals were frozen as of December 31, 2010, we began providing a new annual employer contribution in 2011, which ranges from three to five percent of compensation, depending on years of service and age.

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Total company costs related to our defined contribution plans were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars)	2012		2011		2012		2011
U.S. Plans	$	33	$	50	$	134	$	132
Non-U.S. Plans	17		14		31		26
	$	50	$	64	$	165	$	158

10.Guarantees and Product Warranty

We have provided an indemnity to a third-party insurance company for potential losses related to performance bonds issued on behalf of Caterpillar dealers.  The bonds are issued to insure governmental agencies against nonperformance by certain dealers.  We also provided guarantees to a third party related to the performance of contractual obligations by certain Caterpillar dealers. The guarantees cover potential financial losses incurred by the third party resulting from the dealers’ nonperformance.

We provide loan guarantees to third-party lenders for financing associated with machinery purchased by customers. These guarantees have varying terms and are secured by the machinery. In addition, Cat Financial participates in standby letters of credit issued to third parties on behalf of their customers. These standby letters of credit have varying terms and beneficiaries and are secured by customer assets.

Cat Financial has provided a limited indemnity to a third-party bank resulting from the assignment of certain leases to that bank.  The indemnity is for the possibility that the insurers of these leases would become insolvent.  The indemnity expires December 15, 2012 and is unsecured.

No loss has been experienced or is anticipated under any of these guarantees.  At June 30, 2012 and December 31, 2011 the related liability was $15 million and $7 million, respectively. The increase in liability is primarily due to guarantees acquired through the purchase of ERA Mining Machinery Limited. The maximum potential amount of future payments (undiscounted and without reduction for any amounts that may possibly be recovered under recourse or collateralized provisions) we could be required to make under the guarantees are as follows:

(Millions of dollars)	June 30, 2012		December 31, 2011
Guarantees with Caterpillar dealers	$	146	$	140
Guarantees with customers	180		186
Limited indemnity	8		11
Guarantees – other	66		28
Total guarantees	$	400	$	365

Cat Financial provides guarantees to repurchase certain loans of Caterpillar dealers from a special-purpose corporation (SPC) that qualifies as a variable interest entity.  The purpose of the SPC is to provide short-term working capital loans to Caterpillar dealers.  This SPC issues commercial paper and uses the proceeds to fund its loan program.  Cat Financial has a loan purchase agreement with the SPC that obligates Cat Financial to purchase certain loans that are not paid at maturity.  Cat Financial receives a fee for providing this guarantee, which provides a source of liquidity for the SPC.  Cat Financial is the primary beneficiary of the SPC as their guarantees result in Cat Financial having both the power to direct the activities that most significantly impact the SPC’s economic performance and the obligation to absorb losses, and therefore Cat Financial has consolidated the financial statements of the SPC.  As of June 30, 2012 and December 31, 2011, the SPC’s assets of $866 million and $586 million, respectively, are primarily comprised of loans to dealers and the SPC’s liabilities of $866 million and $586 million, respectively, are primarily comprised of commercial paper.  No loss has been experienced or is anticipated under this loan purchase agreement.  Cat Financial’s assets are not available to pay creditors of the SPC, except to the extent Cat Financial may be obligated to perform under the guarantee, and assets of the SPC are not available to pay Cat Financial’s creditors.

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Our product warranty liability is determined by applying historical claim rate experience to the current field population and dealer inventory.  Generally, historical claim rates are based on actual warranty experience for each product by machine model/engine size.  Specific rates are developed for each product build month and are updated monthly based on actual warranty claim experience.  

(Millions of dollars)	2012
Warranty liability, January 1	$	1,308
Reduction in liability (payments)	(460		)
Increase in liability (new warranties)	540
Warranty liability, June 30	$	1,388

(Millions of dollars)	2011
Warranty liability, January 1	$	1,035
Reduction in liability (payments)	(926		)
Increase in liability (new warranties)	1,199
Warranty liability, December 31	$	1,308

11.Computations of Profit Per Share

(Dollars in millions except per share data)		Three Months Ended June 30,				Six Months Ended June 30,
		2012		2011		2012		2011
I.	Profit for the period (A)1:	$	1,699	$	1,015	$	3,285	$	2,240
II.	Determination of shares (in millions):	—
	Weighted-average number of common shares outstanding (B)	652.9		645.5		651.3		643.3
	Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price	16.7		21.7		18.6		22.7
	Average common shares outstanding for fully diluted computation (C) 2	669.6		667.2		669.9		666.0
III.	Profit per share of common stock:
	Assuming no dilution (A/B)	$	2.60	$	1.57	$	5.04	$	3.48
	Assuming full dilution (A/C) 2	$	2.54	$	1.52	$	4.90	$	3.36
1 Profit attributable to common stockholders. 2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

SARs and stock options to purchase 6,091,056 common shares were outstanding for both the three and six months ended June 30, 2012, respectively, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For both the three and six months ended June 30, 2011,  there were outstanding SARs and stock options to purchase 2,940,143 common shares, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

12.Environmental and Legal Matters

The company is regulated by federal, state and international environmental laws governing our use, transport and disposal of substances and control of emissions. In addition to governing our manufacturing and other operations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines. Compliance with these existing laws has not had a material impact on our capital expenditures, earnings or global competitive position.

We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws.  When it is probable we will pay remedial costs at a site and those costs can be reasonably estimated, the costs are

26

charged against our earnings.  In formulating that estimate, we do not consider amounts expected to be recovered from insurance companies or others.  The amount recorded for environmental remediation is not material and is included in Accrued expenses in the Consolidated Statement of Financial Position.

We cannot reasonably estimate costs at sites in the very early stages of remediation.  Currently, we have a few sites in the very early stages of remediation, and there is no more than a remote chance that a material amount for remedial activities at any individual site, or at all sites in the aggregate, will be required.

We have disclosed certain individual legal proceedings in this filing.  Additionally, we are involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of these unresolved actions involve disputes related to product design, manufacture and performance liability (including claimed asbestos and welding fumes exposure), contracts, employment issues, environmental matters or intellectual property rights.  The aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal actions is not material.  In some cases, we cannot reasonably estimate a range of loss because there is insufficient information regarding the matter.  However, there is no more than a remote chance that any liability arising from these matters would be material.  Although it is not possible to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will not individually or in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.

On May 14, 2007, the U.S. Environmental Protection Agency (EPA) issued a Notice of Violation to Caterpillar Inc., alleging various violations of Clean Air Act Sections 203, 206 and 207. EPA claims that Caterpillar violated such sections by shipping engines and catalytic converter after-treatment devices separately, introducing into commerce a number of uncertified and/or misbuilt engines, and failing to timely report emissions-related defects. On July 9, 2010, the Department of Justice issued a penalty demand to Caterpillar seeking a civil penalty of $3.2 million and implementation of injunctive relief involving expanded use of certain technologies. On July 28, 2011, EPA and the U.S. Department of Justice filed and lodged a civil complaint and consent decree with the U.S. District Court for the District of Columbia (Court) regarding the matter. Caterpillar agreed to the terms of the consent decree, which required payment of a civil penalty of $2.55 million, retirement of a small number of emissions credits and expanded defect-related reporting. On September 7, 2011, the Court entered the consent decree, making it effective on that date, and Caterpillar paid $2.04 million of the $2.55 million penalty due to the United States in accordance with the decree terms. On July 9, 2012, under the terms of the consent decree, and subject to a settlement agreement executed on June 21, 2012 with the California Air Resources Board, Caterpillar paid the remaining $0.51 million of the stipulated $2.55 million penalty to the California Air Resources Board.

13.Income Taxes

The provision for income taxes for the first six months of 2012 reflects an estimated annual effective tax rate of 30.5 percent compared to 29 percent for the first six months of 2011 and 26.5 percent for the full-year 2011, excluding the items discussed below. The increase from full-year 2011 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 2012 tax provision also includes a negative impact of $75 million from goodwill not deductible for tax purposes related to the divestiture of portions of the Bucyrus distribution business. A $72 million net benefit was recorded in the second quarter of 2011 due to planned repatriation of non-U.S. earnings offset by an increase in unrecognized tax benefits.

14.Segment Information

A.Basis for segment information

Our Executive Office is comprised of five Group Presidents and a CEO. Group Presidents are accountable for a related set of end-to-end businesses that they manage.  The CEO allocates resources and manages performance at the Group President level.  As such, the CEO serves as our Chief Operating Decision Maker and operating segments are primarily based on the Group President reporting structure.

Three of our operating segments, Construction Industries, Resource Industries and Power Systems, are led by Group Presidents.  One operating segment, Financial Products, is led by a Group President who has responsibility for Corporate Services.  Corporate Services is a cost center primarily responsible for the performance of certain support functions globally and to provide centralized services; it does not meet the definition of an operating segment.  One Group President leads a smaller operating segment that is included in the All Other operating segment. 

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The segment information for 2011 has been retrospectively adjusted to conform to the 2012 presentation. A portion of goodwill assets, related to recent acquisitions, that was allocated to Machinery and Power Systems operating segments is now a methodology difference between segment and external reporting.

B.Description of segments

We have five operating segments, of which four are reportable segments.  Following is a brief description of our reportable segments and the business activities included in the All Other operating segment:

Construction Industries:  A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing, and sales and product support. The product portfolio includes backhoe loaders, small wheel loaders, small track-type tractors, skid steer loaders, multi-terrain loaders, mini excavators, compact wheel loaders, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, medium track-type tractors, track-type loaders, motor graders, pipelayers and related parts. In addition, Construction Industries has responsibility for Power Systems and components in Japan and an integrated manufacturing cost center that supports Machinery and Power Systems businesses. Inter-segment sales are a source of revenue for this segment.

Resource Industries: A segment primarily responsible for supporting customers using machinery in mining and quarrying applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors, large mining trucks, underground mining equipment, tunnel boring equipment, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, compactors, select work tools, forestry products, paving products, machinery components and electronics and control systems. In addition, Resource Industries manages areas that provide services to other parts of the company, including integrated manufacturing, research and development and coordination of the Caterpillar Production System. On July 8, 2011, the acquisition of Bucyrus was completed. This added the responsibility for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for electric rope shovels, draglines, hydraulic shovels, drills, highwall miners and electric drive off-highway trucks to Resource Industries. In addition, segment profit includes Bucyrus acquisition-related costs and the impact from divestiture of a portion of the Bucyrus distribution business. On June 6, 2012, the acquisition of ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., Ltd., commonly known as Siwei, was completed. This added the responsibility for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for underground coal mining equipment to Resource Industries. Inter-segment sales are a source of revenue for this segment.

Power Systems:  A segment primarily responsible for supporting customers using reciprocating engines, turbines and related parts across industries serving electric power, industrial, petroleum and marine applications as well as rail-related businesses. Responsibilities include business strategy, product design, product management, development, manufacturing, marketing, sales and product support of reciprocating engine powered generator sets, integrated systems used in the electric power generation industry, reciprocating engines and integrated systems and solutions for the marine and petroleum industries; reciprocating engines supplied to the industrial industry as well as Caterpillar machinery; the business strategy, product design, product management, development, manufacturing, marketing, sales and product support of turbines and turbine-related services; the development, manufacturing, remanufacturing, maintenance, leasing and service of diesel-electric locomotives and components and other rail-related products and services. Inter-segment sales are a source of revenue for this segment.

Financial Products Segment:  Provides financing to customers and dealers for the purchase and lease of Caterpillar and other equipment, as well as some financing for Caterpillar sales to dealers.  Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The segment also provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment.

All Other: Primarily includes activities such as: the remanufacturing of Cat engines and components and remanufacturing services for other companies as well as the business strategy, product management, development, manufacturing, marketing and product support of undercarriage, specialty products, hardened bar stock components and ground engaging tools primarily for Caterpillar products; logistics services for Caterpillar and other companies; the product management, development, marketing, sales and product support of on-highway vocational trucks for North America (U.S. and Canada only); distribution services responsible for dealer development and administration, dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; and the 50/50 joint venture with

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Navistar (NC²) until it became a wholly owned subsidiary of Navistar effective September 29, 2011. Inter-segment sales are a source of revenue for this segment. Results for the All Other operating segment is included as a reconciling item between reportable segments and consolidated external reporting.

C.Segment measurement and reconciliations

There are several methodology differences between our segment reporting and our external reporting.  The following is a list of the more significant methodology differences:

▪ Machinery and Power Systems segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles and accounts payable.  Liabilities other than accounts payable are generally managed at the corporate level and are not included in segment operations.  Financial Products Segment assets generally include all categories of assets.

▪ Segment inventories and cost of sales are valued using a current cost methodology.

▪ Goodwill allocated to segments is amortized using a fixed amount based on a twenty year useful life.  This methodology difference only impacts segment assets; no goodwill amortization expense is included in segment profit.

▪ The present value of future lease payments for certain Machinery and Power Systems operating leases is included in segment assets.  The estimated financing component of the lease payments is excluded.

▪ Currency exposures for Machinery and Power Systems are generally managed at the corporate level and the effects of changes in exchange rates on results of operations within the year are not included in segment profit.  The net difference created in the translation of revenues and costs between exchange rates used for U.S. GAAP reporting and exchange rates used for segment reporting are recorded as a methodology difference.

▪ Postretirement benefit expenses are split; segments are generally responsible for service and prior service costs, with the remaining elements of net periodic benefit cost included as a methodology difference.

▪ Machinery and Power Systems segment profit is determined on a pretax basis and excludes interest expense, gains and losses on interest rate swaps and other income/expense items.  Financial Products Segment profit is determined on a pretax basis and includes other income/expense items.

Reconciling items are created based on accounting differences between segment reporting and our consolidated external reporting. Please refer to pages 32 to 37 for financial information regarding significant reconciling items.  Most of our reconciling items are self-explanatory given the above explanations.  For the reconciliation of profit, we have grouped the reconciling items as follows:

▪ Corporate costs:  These costs are related to corporate requirements and strategies that are considered to be for the benefit of the entire organization.

▪ Methodology differences:  See previous discussion of significant accounting differences between segment reporting and consolidated external reporting.

▪ Timing:   Timing differences in the recognition of costs between segment reporting and consolidated external reporting.

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Reportable Segments

Three Months Ended June 30,

(Millions of dollars)

	2012
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	5,340	$	123	$	5,463	$	139	$	688	$	9,771	$	219
Resource Industries	5,390		328		5,718		168		1,426		13,499		242
Power Systems	5,511		680		6,191		147		982		9,496		237
Machinery and Power Systems	$	16,241	$	1,131	$	17,372	$	454	$	3,096	$	32,766	$	698
Financial Products Segment	764		—		764		177		188		34,451		457
Total	$	17,005	$	1,131	$	18,136	$	631	$	3,284	$	67,217	$	1,155
	2011
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	4,941	$	124	$	5,065	$	126	$	482	$	7,942	$	158
Resource Industries	3,206		284		3,490		72		796		12,292		105
Power Systems	4,918		541		5,459		129		736		8,748		132
Machinery and Power Systems	$	13,065	$	949	$	14,014	$	327	$	2,014	$	28,982	$	395
Financial Products Segment	764		—		764		182		172		31,747		339
Total	$	13,829	$	949	$	14,778	$	509	$	2,186	$	60,729	$	734

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Reportable Segments

Six Months Ended June 30,

(Millions of dollars)

	2012
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	10,402	$	253	$	10,655	$	270	$	1,304	$	9,771	$	350
Resource Industries	10,168		656		10,824		331		2,594		13,499		374
Power Systems	10,498		1,355		11,853		285		1,794		9,496		366
Machinery and Power Systems	$	31,068	$	2,264	$	33,332	$	886	$	5,692	$	32,766	$	1,090
Financial Products Segment	1,525		—		1,525		351		393		34,451		800
Total	$	32,593	$	2,264	$	34,857	$	1,237	$	6,085	$	67,217	$	1,890
	2011
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	9,412	$	271	$	9,683	$	246	$	1,026	$	7,942	$	237
Resource Industries	5,974		558		6,532		143		1,592		12,292		161
Power Systems	9,367		1,095		10,462		265		1,436		8,748		217
Machinery and Power Systems	$	24,753	$	1,924	$	26,677	$	654	$	4,054	$	28,982	$	615
Financial Products Segment	1,494		—		1,494		358		308		31,747		519
Total	$	26,247	$	1,924	$	28,171	$	1,012	$	4,362	$	60,729	$	1,134

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Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments				Consolidated Total
Three Months Ended June 30, 2012
Total external sales and revenues from reportable segments	$	16,241		$	764	$	—			$	17,005
All Other operating segment	454			—		—				454
Other	(11		)	16		(90		)	1	(85		)
Total sales and revenues	$	16,684		$	780	$	(90	)		$	17,374
Three Months Ended June 30, 2011
Total external sales and revenues from reportable segments	$	13,065		$	764	$	—			$	13,829
All Other operating segment	475			—		—				475
Other	(5		)	13		(82		)	1	(74		)
Total sales and revenues	$	13,535		$	777	$	(82	)		$	14,230
1 Elimination of Financial Products revenues from Machinery and Power Systems.

Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments				Consolidated Total
Six Months Ended June 30, 2012
Total external sales and revenues from reportable segments	$	31,068		$	1,525	$	—			$	32,593
All Other operating segment	928			—		—				928
Other	(24		)	32		(174		)	1	(166		)
Total sales and revenues	$	31,972		$	1,557	$	(174	)		$	33,355
Six Months Ended June 30, 2011
Total external sales and revenues from reportable segments	$	24,753		$	1,494	$	—			$	26,247
All Other operating segment	1,064			—		—				1,064
Other	(5		)	23		(150		)	1	(132		)
Total sales and revenues	$	25,812		$	1,517	$	(150	)		$	27,179
1 Elimination of Financial Products revenues from Machinery and Power Systems.

32

Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidated Total
Three Months Ended June 30, 2012
Total profit from reportable segments	$	3,096		$	188		$	3,284
All Other operating segment	188			—			188
Cost centers	(11		)	—			(11		)
Corporate costs	(400		)	—			(400		)
Timing	(137		)	—			(137		)
Methodology differences:
Inventory/cost of sales	(21		)	—			(21		)
Postretirement benefit expense	(145		)	—			(145		)
Financing costs	(112		)	—			(112		)
Equity in profit of unconsolidated affiliated companies	(5		)	—			(5		)
Currency	9			—			9
Other income/expense methodology differences	(74		)	—			(74		)
Other methodology differences	4			(4		)	—
Total profit before taxes	$	2,392		$	184		$	2,576
Three Months Ended June 30, 2011
Total profit from reportable segments	$	2,014		$	172		$	2,186
All Other operating segment	122			—			122
Cost centers	(20		)	—			(20		)
Corporate costs	(300		)	—			(300		)
Timing	(93		)	—			(93		)
Methodology differences:
Inventory/cost of sales	16			—			16
Postretirement benefit expense	(166		)	—			(166		)
Financing costs	(89		)	—			(89		)
Equity in profit of unconsolidated affiliated companies	10			—			10
Currency	(93		)	—			(93		)
Interest rate swaps	(124		)	—			(124		)
Other income/expense methodology differences	(97		)	—			(97		)
Other methodology differences	(3		)	1			(2		)
Total profit before taxes	$	1,177		$	173		$	1,350

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Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidated Total
Six Months Ended June 30, 2012
Total profit from reportable segments	$	5,692		$	393		$	6,085
All Other operating segment	406			—			406
Cost centers	23			—			23
Corporate costs	(760		)	—			(760		)
Timing	(288		)	—			(288		)
Methodology differences:
Inventory/cost of sales	(35		)	—			(35		)
Postretirement benefit expense	(331		)	—			(331		)
Financing costs	(227		)	—			(227		)
Equity in profit of unconsolidated affiliated companies	(7		)	—			(7		)
Currency	140			—			140
Other income/expense methodology differences	(135		)	—			(135		)
Other methodology differences	6			(3		)	3
Total profit before taxes	$	4,484		$	390		$	4,874
Six Months Ended June 30, 2011
Total profit from reportable segments	$	4,054		$	308		$	4,362
All Other operating segment	367			—			367
Cost centers	1			—			1
Corporate costs	(571		)	—			(571		)
Timing	(169		)	—			(169		)
Methodology differences:
Inventory/cost of sales	22			—			22
Postretirement benefit expense	(358		)	—			(358		)
Financing costs	(178		)	—			(178		)
Equity in profit of unconsolidated affiliated companies	18			—			18
Currency	(75		)	—			(75		)
Interest rate swaps	(149		)	—			(149		)
Other income/expense methodology differences	(156		)	—			(156		)
Other methodology differences	(4		)	3			(1		)
Total profit before taxes	$	2,802		$	311		$	3,113

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Reconciliation of Assets:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidating Adjustments			Consolidated Total
June 30, 2012
Total assets from reportable segments	$	32,766		$	34,451		$	—		$	67,217
All Other operating segment	2,029			—			—			2,029
Items not included in segment assets:
Cash and short-term investments	2,810			—			—			2,810
Intercompany receivables	54			—			(54		)	—
Investment in Financial Products	4,011			—			(4,011		)	—
Deferred income taxes	4,107			—			(542		)	3,565
Goodwill, intangible assets and other assets	3,988			—			—			3,988
Operating lease methodology difference	(549		)	—			—			(549		)
Liabilities included in segment assets	13,061			—			—			13,061
Inventory methodology differences	(3,164		)	—			—			(3,164		)
Other	96			(137		)	(78		)	(119		)
Total assets	$	59,209		$	34,314		$	(4,685	)	$	88,838
December 31, 2011
Total assets from reportable segments	$	28,982		$	31,747		$	—		$	60,729
All Other operating segment	2,035			—			—			2,035
Items not included in segment assets:
Cash and short-term investments	1,829			—			—			1,829
Intercompany receivables	75			—			(75		)	—
Investment in Financial Products	4,035			—			(4,035		)	—
Deferred income taxes	4,109			—			(533		)	3,576
Goodwill, intangible assets and other assets	4,461			—			—			4,461
Operating lease methodology difference	(511		)	—			—			(511		)
Liabilities included in segment assets	12,088			—			—			12,088
Inventory methodology differences	(2,786		)	—			—			(2,786		)
Other	362			(194		)	(143		)	25
Total assets	$	54,679		$	31,553		$	(4,786	)	$	81,446

35

Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments		Consolidated Total
Three Months Ended June 30, 2012
Total depreciation and amortization from reportable segments	$	454		$	177	$	—	$	631
Items not included in segment depreciation and amortization:
All Other operating segment	41			—		—		41
Cost centers	22			—		—		22
Other	(11		)	6		—		(5		)
Total depreciation and amortization	$	506		$	183	$	—	$	689
Three Months Ended June 30, 2011
Total depreciation and amortization from reportable segments	$	327		$	182	$	—	$	509
Items not included in segment depreciation and amortization:
All Other operating segment	41			—		—		41
Cost centers	19			—		—		19
Other	28			2		—		30
Total depreciation and amortization	$	415		$	184	$	—	$	599

Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments		Consolidated Total
Six Months Ended June 30, 2012
Total depreciation and amortization from reportable segments	$	886		$	351	$	—	$	1,237
Items not included in segment depreciation and amortization:
All Other operating segment	84			—		—		84
Cost centers	41			—		—		41
Other	(23		)	11		—		(12		)
Total depreciation and amortization	$	988		$	362	$	—	$	1,350
Six Months Ended June 30, 2011
Total depreciation and amortization from reportable segments	$	654		$	358	$	—	$	1,012
Items not included in segment depreciation and amortization:
All Other operating segment	86			—		—		86
Cost centers	37			—		—		37
Other	33			6		—		39
Total depreciation and amortization	$	810		$	364	$	—	$	1,174

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Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments			Consolidated Total
Three Months Ended June 30, 2012
Total capital expenditures from reportable segments	$	698		$	457	$	—		$	1,155
Items not included in segment capital expenditures:
All Other operating segment	90			—		—			90
Cost centers	65			—		—			65
Timing	(81		)	—		—			(81		)
Other	(91		)	57		(29		)	(63		)
Total capital expenditures	$	681		$	514	$	(29	)	$	1,166
Three Months Ended June 30, 2011
Total capital expenditures from reportable segments	$	395		$	339	$	—		$	734
Items not included in segment capital expenditures:
All Other operating segment	51			—		—			51
Cost centers	19			—		—			19
Timing	(74		)	—		—			(74		)
Other	16			22		(24		)	14
Total capital expenditures	$	407		$	361	$	(24	)	$	744

Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments			Consolidated Total
Six Months Ended June 30, 2012
Total capital expenditures from reportable segments	$	1,090		$	800	$	—		$	1,890
Items not included in segment capital expenditures:
All Other operating segment	154			—		—			154
Cost centers	103			—		—			103
Timing	321			—		—			321
Other	(123		)	74		(124		)	(173		)
Total capital expenditures	$	1,545		$	874	$	(124	)	$	2,295
Six Months Ended June 30, 2011
Total capital expenditures from reportable segments	$	615		$	519	$	—		$	1,134
Items not included in segment capital expenditures:
All Other operating segment	89			—		—			89
Cost centers	34			—		—			34
Timing	240			—		—			240
Other	(3		)	55		(45		)	7
Total capital expenditures	$	975		$	574	$	(45	)	$	1,504

15.Cat Financial Financing Activities

A.Credit quality of financing receivables and allowance for credit losses

Cat Financial applies a systematic methodology to determine the allowance for credit losses for finance receivables.  Based upon Cat Financial’s analysis of credit losses and risk factors, portfolio segments are as follows:

▪ Customer - Finance receivables with retail customers.

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▪ Dealer - Finance receivables with Caterpillar dealers.

Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk.  Typically, Cat Financial’s finance receivables within a geographic area have similar credit risk profiles and methods for assessing and monitoring credit risk.  Cat Financial’s classes, which align with management reporting, are as follows:

▪ North America - Finance receivables originated in the United States or Canada.

▪ Europe - Finance receivables originated in Europe, Africa, Middle East and the Commonwealth of Independent States.

▪ Asia Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, South Korea and Southeast Asia.

▪ Mining - Finance receivables related to large mining customers worldwide.

▪ Latin America - Finance receivables originated in Central and South American countries and Mexico.

▪ Caterpillar Power Finance - Finance receivables related to marine vessels with Caterpillar engines worldwide and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems worldwide.

Impaired loans and finance leases

For all classes, a loan or finance lease is considered impaired, based on current information and events, if it is probable that Cat Financial will be unable to collect all amounts due according to the contractual terms of the loan or finance lease.  Loans and finance leases reviewed for impairment include loans and finance leases that are past due, non-performing or in bankruptcy. Recognition of income is suspended and the loan or finance lease is placed on non-accrual status when management determines that collection of future income is not probable (generally after 120 days days past due).  Accrual is resumed, and previously suspended income is recognized, when the loan or finance lease becomes contractually current and/or collection doubts are removed.  Cash receipts on impaired loans or finance leases are recorded against the receivable and then to any unrecognized income.

There were no impaired loans or finance leases as of June 30, 2012 or December 31, 2011, for the Dealer portfolio segment.  The average recorded investment for impaired loans and finance leases for the Dealer portfolio segment was zero for the three and six months ended June 30, 2012 and 2011.

Individually impaired loans and finance leases for the customer portfolio segment were as follows: 

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	June 30, 2012						December 31, 2011
(Millions of dollars)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	46	$	44	$	—	$	83	$	80	$	—
Europe	45		44		—		47		46		—
Asia Pacific	3		3		—		4		4		—
Mining	8		8		—		8		8		—
Latin America	5		5		—		9		9		—
Caterpillar Power Finance	175		174		—		175		170		—
Total	$	282	$	278	$	—	$	326	$	317	$	—
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	58	$	53	$	12	$	69	$	64	$	15
Europe	38		38		11		36		33		12
Asia Pacific	28		28		4		13		13		3
Mining	69		68		7		13		13		4
Latin America	45		45		7		25		25		6
Caterpillar Power Finance	112		108		20		93		92		16
Total	$	350	$	340	$	61	$	249	$	240	$	56
Total Impaired Loans and Finance Leases
Customer
North America	$	104	$	97	$	12	$	152	$	144	$	15
Europe	83		82		11		83		79		12
Asia Pacific	31		31		4		17		17		3
Mining	77		76		7		21		21		4
Latin America	50		50		7		34		34		6
Caterpillar Power Finance	287		282		20		268		262		16
Total	$	632	$	618	$	61	$	575	$	557	$	56
1  No related allowance for credit losses due to sufficient collateral value.

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	Three Months Ended June 30, 2012				Three Months Ended June 30, 2011
(Millions of dollars)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	57	$	—	$	104	$	1
Europe	45		—		8		—
Asia Pacific	3		—		6		—
Mining	8		—		8		—
Latin America	5		—		10		—
Caterpillar Power Finance	203		1		261		—
Total	$	321	$	1	$	397	$	1
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	66	$	1	$	161	$	2
Europe	40		—		53		—
Asia Pacific	24		—		17		1
Mining	41		1		—		—
Latin America	40		1		46		1
Caterpillar Power Finance	86		—		72		—
Total	$	297	$	3	$	349	$	4
Total Impaired Loans and Finance Leases
Customer
North America	$	123	$	1	$	265	$	3
Europe	85		—		61		—
Asia Pacific	27		—		23		1
Mining	49		1		8		—
Latin America	45		1		56		1
Caterpillar Power Finance	289		1		333		—
Total	$	618	$	4	$	746	$	5
1No related allowance for credit losses due to sufficient collateral value.

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	Six Months Ended June 30, 2012				Six Months Ended June 30, 2011
(Millions of dollars)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	63	$	1	$	97	$	2
Europe	45		—		7		—
Asia Pacific	3		—		5		—
Mining	8		—		8		—
Latin America	6		—		7		—
Caterpillar Power Finance	191		2		231		1
Total	$	316	$	3	$	355	$	3
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	69	$	1	$	175	$	4
Europe	40		—		58		1
Asia Pacific	22		1		21		1
Mining	29		1		—		—
Latin America	33		1		46		2
Caterpillar Power Finance	87		—		59		—
Total	$	280	$	4	$	359	$	8
Total Impaired Loans and Finance Leases
Customer
North America	$	132	$	2	$	272	$	6
Europe	85		—		65		1
Asia Pacific	25		1		26		1
Mining	37		1		8		—
Latin America	39		1		53		2
Caterpillar Power Finance	278		2		290		1
Total	$	596	$	7	$	714	$	11
1No related allowance for credit losses due to sufficient collateral value.

Non-accrual and past due loans and finance leases

For all classes, Cat Financial considers a loan or finance lease past due if any portion of a contractual payment is due and unpaid for more than 30 days.  Recognition of income is suspended and the loan or finance lease is placed on non-accrual status when management determines that collection of future income is not probable (generally after 120 days past due).  Accrual is resumed, and previously suspended income is recognized, when the loan or finance lease becomes contractually current and/or collection doubts are removed.

As of June 30, 2012 and December 31, 2011, there were no loans or finance leases on non-accrual status for the Dealer portfolio segment.

The investment in customer loans and finance leases on non-accrual status was as follows:

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(Millions of dollars)
	June 30, 2012		December 31, 2011
Customer
North America	$	92	$	112
Europe	48		58
Asia Pacific	30		24
Mining	12		12
Latin America	169		108
Caterpillar Power Finance	297		158
Total	$	648	$	472

Aging related to loans and finance leases were as follows:

(Millions of dollars)
	June 30, 2012
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables		91+ Still Accruing
Customer
North America	$	41	$	17	$	89	$	147	$	5,516	$	5,663	$	1
Europe	32		27		56		115		2,204		2,319		10
Asia Pacific	82		29		42		153		2,842		2,995		15
Mining	4		—		12		16		1,708		1,724		—
Latin America	45		23		157		225		2,354		2,579		—
Caterpillar Power Finance	83		32		177		292		2,876		3,168		14
Dealer
North America	—		—		—		—		1,907		1,907		—
Europe	—		—		—		—		69		69		—
Asia Pacific	—		—		—		—		620		620		—
Mining	—		—		—		—		1		1		—
Latin America	—		—		—		—		681		681		—
Total	$	287	$	128	$	533	$	948	$	20,778	$	21,726	$	40

(Millions of dollars)
	December 31, 2011
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables		91+ Still Accruing
Customer
North America	$	74	$	39	$	111	$	224	$	5,378	$	5,602	$	9
Europe	27		11		57		95		2,129		2,224		10
Asia Pacific	47		23		38		108		2,769		2,877		14
Mining	—		—		12		12		1,473		1,485		—
Latin America	32		15		99		146		2,339		2,485		—
Caterpillar Power Finance	14		16		125		155		2,765		2,920		25
Dealer
North America	—		—		—		—		1,689		1,689		—
Europe	—		—		—		—		57		57		—
Asia Pacific	—		—		—		—		161		161		—
Mining	—		—		—		—		—		—		—
Latin America	—		—		—		—		480		480		—
Total	$	194	$	104	$	442	$	740	$	19,240	$	19,980	$	58

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Allowance for credit loss activity

In estimating the allowance for credit losses, Cat Financial reviews loans and finance leases that are past due, non-performing or in bankruptcy. The allowance for credit losses as of June 30, 2012 and December 31, 2011 was as follows:

(Millions of dollars)
	June 30, 2012
Allowance for Credit Losses:	Customer			Dealer		Total
Balance at beginning of year	$	360		$	6	$	366
Receivables written off	(50		)	—		(50		)
Recoveries on receivables previously written off	23			—		23
Provision for credit losses	51			2		53
Other	(2		)	—		(2		)
Balance at end of period	$	382		$	8	$	390
Allowance for Credit Losses:
Individually evaluated for impairment	$	61		$	—	$	61
Collectively evaluated for impairment	321			8		329
Ending Balance	$	382		$	8	$	390
Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	632		$	—	$	632
Collectively evaluated for impairment	17,816			3,278		21,094
Ending Balance	$	18,448		$	3,278	$	21,726

(Millions of dollars)
	December 31, 2011
Allowance for Credit Losses:	Customer			Dealer		Total
Balance at beginning of year	$	357		$	5	$	362
Receivables written off	(210		)	—		(210		)
Recoveries on receivables previously written off	52			—		52
Provision for credit losses	167			1		168
Other	(6		)	—		(6		)
Balance at end of year	$	360		$	6	$	366
Allowance for Credit Losses:
Individually evaluated for impairment	$	56		$	—	$	56
Collectively evaluated for impairment	304			6		310
Ending Balance	$	360		$	6	$	366
Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	575		$	—	$	575
Collectively evaluated for impairment	17,018			2,387		19,405
Ending Balance	$	17,593		$	2,387	$	19,980

Credit quality of finance receivables

The credit quality of finance receivables is reviewed on a monthly basis.  Credit quality indicators include performing and non-performing.  Non-performing is defined as finance receivables currently over 120 days past due and/or on non-accrual status or in bankruptcy.  Finance receivables not meeting the criteria listed above are considered performing.  Non-performing receivables have the highest probability for credit loss.  The allowance for credit losses attributable to non-performing receivables is based on the most probable source of repayment, which is normally the liquidation of collateral.  In determining collateral value, Cat Financial estimates the current fair market value of the collateral. In addition, Cat Financial considers credit enhancements such as additional collateral and contractual third-party guarantees

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in determining the allowance for credit losses attributable to non-performing receivables.

The recorded investment in performing and non-performing finance receivables was as follows: 

(Millions of dollars)
	June 30, 2012						December 31, 2011
	Customer		Dealer		Total		Customer		Dealer		Total
Performing
North America	$	5,571	$	1,907	$	7,478	$	5,490	$	1,689	$	7,179
Europe	2,271		69		2,340		2,166		57		2,223
Asia Pacific	2,965		620		3,585		2,853		161		3,014
Mining	1,712		1		1,713		1,473		—		1,473
Latin America	2,410		681		3,091		2,377		480		2,857
Caterpillar Power Finance	2,871		—		2,871		2,762		—		2,762
Total Performing	$	17,800	$	3,278	$	21,078	$	17,121	$	2,387	$	19,508
Non-Performing
North America	$	92	$	—	$	92	$	112	$	—	$	112
Europe	48		—		48		58		—		58
Asia Pacific	30		—		30		24		—		24
Mining	12		—		12		12		—		12
Latin America	169		—		169		108		—		108
Caterpillar Power Finance	297		—		297		158		—		158
Total Non-Performing	$	648	$	—	$	648	$	472	$	—	$	472
Performing & Non-Performing
North America	$	5,663	$	1,907	$	7,570	$	5,602	$	1,689	$	7,291
Europe	2,319		69		2,388		2,224		57		2,281
Asia Pacific	2,995		620		3,615		2,877		161		3,038
Mining	1,724		1		1,725		1,485		—		1,485
Latin America	2,579		681		3,260		2,485		480		2,965
Caterpillar Power Finance	3,168		—		3,168		2,920		—		2,920
Total	$	18,448	$	3,278	$	21,726	$	17,593	$	2,387	$	19,980

Troubled Debt Restructurings

A restructuring of a loan or finance lease receivable constitutes a troubled debt restructuring (TDR) when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties.  Concessions granted may include extended contract maturities, inclusion of interest only periods, below market interest rates, and extended skip payment periods.

TDRs are reviewed along with other receivables as part of management’s ongoing evaluation of the adequacy of the allowance for credit losses.  The allowance for credit losses attributable to TDRs is based on the most probable source of repayment, which is normally the liquidation of collateral.  In determining collateral value, Cat Financial estimates the current fair market value of the collateral. In addition, Cat Financial factors in credit enhancements such as additional collateral and contractual third-party guarantees in determining the allowance for credit losses attributable to TDRs.

There were no loans or finance lease receivables modified as TDRs during the three and six months ended June 30, 2012 or 2011 for the Dealer portfolio segment.

Loan and finance lease receivables in the customer portfolio segment modified as TDRs during the three and six months ended June 30, 2012 and 2011, were as follows:

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(Dollars in millions)
	Three Months Ended June 30, 2012					Three Months Ended June 30, 2011
	Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment		Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment
Customer
North America	18	$	2	$	2	15	$	4	$	4
Europe	—	—		—		5	6		6
Latin America	—	—		—		4	5		5
Caterpillar Power Finance 1,2	—	—		—		25	60		60
Total 4	18	$	2	$	2	49	$	75	$	75

	Six Months Ended June 30, 2012					Six Months Ended June 30, 2011
	Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment		Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment
Customer
North America	41	$	4	$	4	39	$	9	$	9
Europe	7	7		7		6	7		7
Latin America	—	—		—		12	10		10
Caterpillar Power Finance 1,3	5	32		32		31	113		113
Total 4	53	$	43	$	43	88	$	139	$	139

¹  During the three and six months ended June 30, 2012, $6 million and $15 million, respectively, of additional funds were subsequently loaned to a borrower whose terms had been modified in a TDR.  The additional funds loaned are not reflected in the table above as no incremental modifications have been made with the borrower during the periods presented.  At June 30, 2012, remaining commitments to lend additional funds to a borrower whose terms have been modified in a TDR were $7 million.

²  Two customers comprise $55 million of the $60 million pre-TDR and post-TDR outstanding recorded investment for the three months ended June 30, 2011.

³  Three customers comprise $32 million of the pre-TDR and post-TDR outstanding recorded investment for the six months ended June 30, 2012. Four customers comprise $105 million of the $113 million pre-TDR and post-TDR outstanding recorded investment for the six months ended June 30, 2011.

⁴    Modifications include extended contract maturities, inclusion of interest only periods, below market interest rates, and extended skip payment periods.

TDRs in the customer portfolio segment with a payment default during the three and six months ended June 30, 2012 and 2011, which had been modified within twelve months prior to the default date, were as follows:

(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2011
	Number of Contracts	Post-TDR Recorded Investment		Number of Contracts	Post-TDR Recorded Investment
Customer
North America	14	$	1	7	$	3
Europe	—	—		1	1
Latin America	—	—		—	—
Caterpillar Power Finance	2	2		—	—
Total	16	$	3	8	$	4

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(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2011
	Number of Contracts	Post-TDR Recorded Investment		Number of Contracts	Post-TDR Recorded Investment
Customer
North America	25	$	2	41	$	9
Europe	—	—		1	1
Latin America	—	—		—	—
Caterpillar Power Finance 1	16	21		6	5
Total	41	$	23	48	$	15

¹ Two customers comprise $19 million of the $21 million post-TDR recorded investment for the six months ended June 30, 2012.

B.Securitized Retail Installment Sale Contracts and Finance Leases

Cat Financial has periodically transferred certain finance receivables relating to retail installment sale contracts and finance leases to SPEs as part of their asset-backed securitization program.

On April 25, 2011, Cat Financial exercised a clean-up call on their only outstanding asset-backed securitization transaction.  As a result, Cat Financial had no assets or liabilities related to their securitization program as of June 30, 2012 and December 31, 2011. 

16.Redeemable Noncontrolling Interest — Caterpillar Japan Ltd.

On August 1, 2008, Shin Caterpillar Mitsubishi Ltd. (SCM) completed the first phase of a share redemption plan whereby SCM redeemed half of Mitsubishi Heavy Industries' (MHI’s) shares in SCM.  This resulted in Caterpillar owning 67 percent of the outstanding shares of SCM and MHI owning the remaining 33 percent.  As part of the share redemption, SCM was renamed Caterpillar Japan Ltd. (Cat Japan) and we consolidated its financial statements.  On April 2, 2012, the redemption of the remaining 33 percent interest was completed, resulting in Caterpillar becoming the sole owner of Cat Japan. Caterpillar paid $444 million (36.5 billion Japanese Yen) to acquire the remaining equity interest held in Cat Japan by MHI. 

17.Fair Value Measurements

A.Fair value measurements

The guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques.  Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions.  In accordance with this guidance, fair value measurements are classified under the following hierarchy:

▪ Level 1 –Quoted prices for identical instruments in active markets.

▪ Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

▪ Level 3 – Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1.  In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2.  If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters

46

such as interest rates, yield curves and currency rates.  These measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation.  A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

Fair value measurement includes the consideration of nonperformance risk.  Nonperformance risk refers to the risk that an obligation (either by a counterparty or Caterpillar) will not be fulfilled.  For financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price.  For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly.

Available-for-sale securities

Our available-for-sale securities, primarily at Cat Insurance, include a mix of equity and debt instruments (see Note 8 for additional information).  Fair values for our U.S. treasury bonds and equity securities are based upon valuations for identical instruments in active markets.  Fair values for other government bonds, corporate bonds and mortgage-backed debt securities are based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.

Derivative financial instruments

The fair value of interest rate swap derivatives is primarily based on models that utilize the appropriate market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows.  The fair value of foreign currency and commodity forward and option contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.

Guarantees

The fair value of guarantees is based upon our estimate of the premium a market participant would require to issue the same guarantee in a stand-alone arms-length transaction with an unrelated party. If quoted or observable market prices are not available, fair value is based upon internally developed models that utilize current market-based assumptions.

Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial Products, included in our Consolidated Statement of Financial Position as of June 30, 2012 and December 31, 2011 are summarized below:

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(Millions of dollars)	June 30, 2012
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		123		—		123
Corporate bonds
Corporate bonds	—		623		—		623
Asset-backed securities	—		95		—		95
Mortgage-backed debt securities
U.S. governmental agency	—		278		—		278
Residential	—		26		—		26
Commercial	—		137		—		137
Equity securities
Large capitalization value	168		—		—		168
Smaller company growth	33		—		—		33
Total available-for-sale securities	211		1,282		—		1,493
Derivative financial instruments, net	—		145		—		145
Total Assets	$	211	$	1,427	$	—	$	1,638
Liabilities
Guarantees	$	—	$	—	$	15	$	15
Total Liabilities	$	—	$	—	$	15	$	15

(Millions of dollars)	December 31, 2011
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		92		—		92
Corporate bonds
Corporate bonds	—		572		—		572
Asset-backed securities	—		111		—		111
Mortgage-backed debt securities
U.S. governmental agency	—		310		—		310
Residential	—		30		—		30
Commercial	—		145		—		145
Equity securities
Large capitalization value	148		—		—		148
Smaller company growth	29		—		—		29
Total available-for-sale securities	187		1,260		—		1,447
Derivative financial instruments, net	—		145		—		145
Total Assets	$	187	$	1,405	$	—	$	1,592
Liabilities
Guarantees	$	—	$	—	$	7	$	7
Total Liabilities	$	—	$	—	$	7	$	7

Below are roll-forwards of assets and liabilities measured at fair value using Level 3 inputs for the six months ended

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June 30, 2012 and 2011.  These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions of a marketplace participant.

(Millions of dollars)	Guarantees
Balance at December 31, 2011	$	7
Acquisitions	6
Issuance of guarantees	3
Expiration of guarantees	(1		)
Balance at June 30, 2012	$	15
Balance at December 31, 2010	$	10
Issuance of guarantees	1
Expiration of guarantees	(4		)
Balance at June 30, 2011	$	7

In addition to the amounts above, Cat Financial had impaired loans with a fair value of $219 million and $141 million as of June 30, 2012 and December 31, 2011, respectively.  A loan is considered impaired when management determines that collection of contractual amounts due is not probable.  In these cases, an allowance for credit losses is established based primarily on the fair value of associated collateral.  As the collateral’s fair value is based on observable market prices and/or current appraised values, the impaired loans are classified as Level 2 measurements.

B.Fair values of financial instruments

In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair value measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments.

Cash and short-term investments

Carrying amount approximated fair value.

Restricted cash and short-term investments

Carrying amount approximated fair value.  Restricted cash and short-term investments are included in Prepaid expenses and other current assets in the Consolidated Statement of Financial Position.

Finance receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Wholesale inventory receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Short-term borrowings

Carrying amount approximated fair value.

Long-term debt

Fair value for Machinery and Power Systems and Financial Products fixed and floating rate debt was estimated based on quoted market prices.

Please refer to the table below for the fair values of our financial instruments.

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Fair Value of Financial Instruments
	June 30, 2012				December 31, 2011
(Millions of dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Assets
Cash and short-term investments	$	5,103	$	5,103	$	3,057	$	3,057	1
Restricted cash and short-term investments	189		189		87		87		1
Available-for-sale securities	1,493		1,493		1,447		1,447		1 & 2	Note 8
Finance receivables—net (excluding finance leases1)	14,146		14,079		12,689		12,516		2	Note 15
Wholesale inventory receivables—net (excluding finance leases1)	1,441		1,372		1,591		1,505		2	Note 15
Interest rate swaps—net	235		235		241		241		2	Note 4
Liabilities
Short-term borrowings	5,047		5,047		3,988		3,988		1
Long-term debt (including amounts due within one year)
Machinery and Power Systems	10,438		12,370		8,973		10,737		2
Financial Products	23,831		24,859		21,631		22,674		2
Foreign currency contracts—net	87		87		89		89		2	Note 4
Commodity contracts—net	3		3		7		7		2	Note 4
Guarantees	15		15		7		7		3	Note 10

¹ Total excluded items have a net carrying value at June 30, 2012 and December 31, 2011 of $7,601 million and $7,324 million, respectively.

18.Business Combinations

ERA Mining Machinery Limited

During the second quarter of 2012, Caterpillar, through its wholly-owned subsidiary Caterpillar (Luxembourg) Investment Co. S.A., completed a tender offer to acquire the issued shares of ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical Manufacturing Co., Ltd., commonly known as Siwei. Substantially all of the issued shares of Siwei, a public company listed on the Hong Kong Exchange, were acquired at the end of May 2012 and approximately one percent of the issued shares remained outstanding and unacquired as of June 30, 2012. We expect to complete the compulsory acquisition of the remaining shares of Siwei common stock in the third quarter of 2012. Siwei primarily designs, manufactures, sells and supports underground coal mining equipment in mainland China and is known for its expertise in manufacturing mining roof support equipment. The tender offer allowed Siwei shareholders to choose between two types of consideration in exchange for their shares. The alternatives were either cash consideration of HK$0.88 or a HK$1.00 loan note issued by Caterpillar (Luxembourg) Investment Co. S.A. to the former shareholders of Siwei that will entitle the holder to receive on redemption a minimum of HK$0.75 up to a maximum of HK$1.15 depending on Siwei's consolidated gross profit for 2012 and 2013. Approximately 4 billion Siwei shares were tendered for the cash alternative and approximately 1.6 billion Siwei shares were tendered for the loan note alternative. The preliminary purchase price of approximately $690 million is comprised of net cash paid of approximately $453 million ($475 million in cash paid for shares and to cancel share options less cash acquired of $22 million), the fair value of the loan notes of $169 million, approximately $155 million of assumed third-party short term borrowings, a loan and interest payable to Caterpillar from Siwei of $51 million, less restricted cash acquired of approximately $138 million. The noncontrolling interest for the outstanding shares not tendered is $7 million. The acquisition supports Caterpillar's long-term commitment to invest in China in order to support our growing base of Chinese customers and will further expand our underground mining business both inside and outside of China. Siwei will be reported in the Resource Industries segment.

The transaction was financed with available cash and included the issuance of loan notes to the former shareholders of Siwei, which have a debt component and a portion that is contingent consideration. The $169 million fair value of the loan notes is comprised of $152 million of debt representing the minimum redemption amount payable in April 2013 and $17 million in contingent consideration representing the portion of the redemption amount conditionally payable in April

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2013 or April 2014. The contingent consideration will be remeasured each reporting period at its estimated fair value with any adjustment included in Other operating (income) expenses in the Consolidated Results Of Operations.

Tangible assets acquired of $671 million, recorded at their fair values, primarily include cash of $22 million, restricted cash of $138 million, receivables of $213 million, inventory of $105 million and property, plant and equipment of $112 million. Finite-lived intangible assets acquired of $194 million were primarily related to customer relationships and also included trade names. The finite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of approximately 15 years. Liabilities assumed of $592 million, recorded at their fair values, primarily included accounts payable of $342 million, third-party short term borrowings of $155 million and accrued expenses of $50 million. Additionally, deferred tax liabilities were $38 million. Goodwill of $467 million, substantially all of which is non-deductible for income tax purposes, represents the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill will not be amortized, but will be tested for impairment at least annually. Factors that contributed to a purchase price resulting in the recognition of goodwill include expected cost savings primarily from increased purchasing power for raw materials and a reduction in other manufacturing input costs, expanded underground mining equipment sales opportunities in China and internationally, along with the acquired assembled workforce. These values represent a preliminary allocation of the purchase price subject to finalization of post-closing procedures. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

Caterpillar Tohoku Ltd

In March 2012, we acquired 100 percent of the stock of Caterpillar Tohoku Ltd (Cat Tohoku). Cat Tohoku was an independently owned and operated dealership providing sales, rental, service and after market support for Caterpillar machines and engines in the northeastern part of Japan. The purchase price, net of $18 million of acquired cash, was approximately $202 million. The purchase price included the assumption of $77 million in third party debt as well as $64 million net trade payables due to Caterpillar. We paid approximately $59 million at closing and recognized a payable of $21 million for estimated consideration due in March 2013. The acquisition of Cat Tohoku supports Caterpillar's efforts to restructure its distribution network in Japan.

The transaction was financed with available cash. Tangible assets acquired of $251 million primarily include cash of $18 million, receivables of $33 million, inventory of $26 million, and property, plant and equipment of $157 million. Finite-lived intangible assets acquired were $8 million. Liabilities assumed of $132 million, recorded at their fair values, primarily included debt of $77 million and accounts payable of $39 million. Goodwill of $16 million, which is deductible for income tax purposes, represents the excess of cost over the fair value of net tangible assets acquired. These values represent a preliminary allocation of the purchase price subject to finalization of post-closing procedures. The results of the acquired business for the period from the acquisition date are included in the accompanying consolidated financial statements and are reported in the Construction Industries segment. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

19. Divestitures and Assets held for sale

Bucyrus Distribution Business Divestiture

In conjunction with our acquisition of Bucyrus in July 2011, we announced our intention to sell the Bucyrus distribution business to Caterpillar dealers that support mining customers around the world in a series of individual transactions. Bucyrus predominantly employed a direct to end customer model to sell and support products. The intention is for Bucyrus products to be sold and serviced by Caterpillar dealers, consistent with our long-held distribution strategy. We expect these transitions will occur in phases based on the mining business opportunity within each dealer territory.

As portions of the Bucyrus distribution business are sold or classified as held for sale, they will not qualify as discontinued operations because Caterpillar expects significant continuing direct cash flows from the Caterpillar dealers after the divestitures. The gain or loss on disposal, along with the continuing operations of these disposal groups, will be reported in the Resource Industries segment. Goodwill will be allocated to each disposal group using the relative fair value method. The value of the customer relationship intangibles related to each portion of the Bucyrus distribution business to be sold will be included in the disposal groups. The disposal groups will be recorded at the lower of their carrying value or fair value less cost to sell. In the second quarter of 2012, we recorded a goodwill impairment for $27 million related to a disposal group being sold to one of the Caterpillar dealers. After the goodwill impairment, the carrying value of the disposal group was lower than its fair value less costs to sell. Fair value was determined based upon the negotiated sales

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price. The impairment was recorded in Other operating (income) expenses and included in the Resource Industries segment.

In the second quarter of 2012, three sale transactions were completed whereby we sold portions of the Bucyrus distribution business to Finning International, WesTrac Pty Limited, a wholly owned subsidiary of Seven Group Holdings Limited, and Ferreyros S.A.A. for $306 million, $400 million and $75 million respectively, subject to certain working capital adjustments. After-tax profit was unfavorably impacted by $8 million in the second quarter of 2012 as a result of the Bucyrus distribution business divestiture activities. This is comprised of $160 million of income (included in Other operating (income) expenses) related to the sales transactions, offset by costs incurred related to the Bucyrus distribution divestiture activities of $57 million (included in Selling, general and administrative expenses) and income tax of $111 million.

Assets sold included customer relationship intangibles of $146 million, other assets of $117 million, which consisted primarily of inventory and fixed assets, and allocated goodwill of $230 million related to the Bucyrus distribution divestiture activities.

As part of these divestitures, Cat Financial provided $400 million of financing to WesTrac Pty Limited and $75 million to Ferreyros S.A.A. These loans are included in Receivables – finance and Long-term receivables – finance in the Consolidated Statement of Financial Position.

For the first half of 2012, after-tax profit was unfavorably impacted by $28 million as a result of the Bucyrus distribution divestiture activities. This is comprised of $155 million of income (included in Other operating (income) expenses) related to the sales transactions, offset by costs incurred related to the Bucyrus distribution divestiture activities of $83 million (included in Selling, general and administrative expenses) and income tax of $100 million.

As of June 30, 2012, nine divestiture transactions were classified as held for sale and are expected to close throughout the remainder of 2012. Current assets held for sale were included in Prepaid expenses and other current assets and non-current assets held for sale were included in Other assets in the Consolidated Statement of Financial Position.

Subsequent to June 30, 2012, three sale transactions were completed whereby we sold portions of the Bucyrus distribution business to Barloworld Limited, Hewitt Equipment Limited and Toromont Industries Ltd, which were classified as held for sale at June 30, 2012.

Third Party Logistics Business Divestiture

On July 31, 2012, Platinum Equity acquired a 65 percent equity stake in Caterpillar Logistics Services LLC, the third party logistics division of our wholly owned subsidiary, Caterpillar Logistics Inc. (Cat Logistics). The sale of the third party business supports Caterpillar's increased focus on the continuing growth opportunities in its core businesses. Under the terms of the agreement, Caterpillar will retain a 35 percent equity stake. Current assets held for sale were included in Prepaid expenses and other current assets and non-current assets held for sale were included in Other assets in the Consolidated Statement of Financial Position at June 30, 2012. Current liabilities held for sale were included in Other current liabilities and non-current liabilities held for sale were included in Other liabilities in the Consolidated Statement of Financial Position.

The disposal will not qualify as discontinued operations because Caterpillar expects significant continuing involvement through the noncontrolling interest. The financial impact of the disposal, along with the continuing operations of the disposal group, will be reported in the All Other operating segment.

The major classes of assets and liabilities held for sale for a portion of the Bucyrus distribution business and the third party logistics divestitures were as follows:

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(Millions of dollars)	June 30, 2012		December 31, 2011
Receivables - trade and other	$	186	$	25
Prepaid expenses and other current assets	10		—
Inventory	141		109
Current assets	$	337	$	134
Property plant and equipment - net	$	222	$	28
Intangible assets	136		186
Goodwill	191		296
Other assets	62		—
Non-current assets	$	611	$	510
Accounts payable	$	19	$	—
Accrued expenses	15		—
Accrued wages, salaries and employee benefits	30		—
Current liabilities	$	64	$	—
Other liabilities	$	44	$	—
Liability for postemployment benefits	55		—
Long-term liabilities	$	99	$	—

20.Employee separation charges

In 2011, we reported employee separation charges of $112 million in Other operating (income) expenses in the Consolidated Statement of Results of Operations primarily related to the acquisition of Bucyrus. The majority of the charges were assigned to the Resource Industries segment.

For the three and six months ended June 30, 2012, we recognized employee separation charges of $9 million and $41 million in Other operating (income) expenses in the Consolidated Statement of Results of Operations primarily related to the closure of the Electro-Motive Diesel facility located in London, Ontario. The majority of the charges were assigned to the Power Systems segment.

Our accounting for separations was dependent upon how the particular program was designed. For voluntary programs, eligible separation costs were recognized at the time of employee acceptance. For involuntary programs, eligible costs were recognized when management had approved the program, the affected employees had been properly notified and the costs were estimable.

In addition to the separation charges noted above, in first quarter of 2012 we reported $6 million of net gains associated with certain pension and other postretirement benefit plans, which were also recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations. See Note 9 for additional information.

The following table summarizes the 2011 and 2012 separation activity:

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(Millions of dollars)
	Total
Liability balance at December 31, 2010	$	22
Increase in liability (separation charges)	$	112
Reduction in liability (payments and other adjustments)	(44		)
Liability balance at December 31, 2011	$	90
Increase in liability (separation charges)	$	41
Reduction in liability (payments and other adjustments)	(117		)
Liability balance at June 30, 2012	$	14

The remaining liability balances as of June 30, 2012 represent costs for employees that have either not yet separated from the Company or their full severance has not yet been paid. The majority of these remaining costs are expected to be paid in 2012 and 2013.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We reported second-quarter 2012 profit per share of $2.54, a quarterly record, and a 67 percent increase from second-quarter 2011 profit per share of $1.52. Sales and revenues were $17.374 billion, also a record, and a 22 percent increase from second-quarter 2011 sales and revenues of $14.230 billion. Profit was $1.699 billion in the quarter, an increase of 67 percent from $1.015 billion in the second quarter of 2011.

Profit per share for the six months ended June 30, 2012 was $4.90 per share, an increase of $1.54 per share from a profit of $3.36 per share for the six months ended June 30, 2011. Profit of $3.285 billion was 47 percent higher than profit of $2.240 billion for the six months ended June 30, 2011. Sales and revenues for the six months ended June 30, 2012 were $33.355 billion, up $6.176 billion, or 23 percent, from $27.179 billion for the six months ended June 30, 2011.

 Highlights for the second quarter of 2012 include:

▪ Second-quarter sales and revenues of $17.374 billion were an all-time high and were 22 percent higher than the second quarter of 2011. Excluding the effect of acquisitions, sales and revenues increased 12 percent from the second quarter of 2011.

▪ Profit per share was $2.54 in the second quarter of 2012, the highest quarterly profit per share in our history. Second-quarter 2012 profit per share increased $1.02 from the second quarter of 2011.

▪ Machinery & Power Systems (M&PS) operating cash flow was $1.281 billion in the second quarter of 2012, compared with $2.467 billion in the second quarter of 2011. The decrease was due to unfavorable changes in working capital, partially offset by higher profit.

▪ M&PS debt-to-capital ratio was 40.9 percent at the end of the second quarter of 2012, up slightly from 40.5 percent at the end of the first quarter of 2012 due to the issuance of $1.5 billion of long-term debt in June 2012.

▪ The liquidity position also continued to strengthen in the second quarter. Total cash on a consolidated basis was $5.1 billion, an increase of $2.2 billion from the end of the first quarter.

Notes:

▪ Glossary of terms is included on pages 69-70; first occurrence of terms shown in bold italics.

▪ Information on non-GAAP financial measures is included on pages 79-80.

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Consolidated Results of Operations

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

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the second quarter of 2011 (at left) and the second 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 $17.374 billion in the second quarter of 2012, an increase of $3.144 billion, or 22 percent, from the second quarter of 2011. The improvement was a result of sales volume, acquisitions and price realization. Sales volume improved $1.527 billion, as sales for both new equipment and aftermarket parts increased. Sales volume increased in Resource Industries, Construction Industries and Power Systems.

Excluding acquisitions, sales increased in all geographic regions with the most significant improvement in North America. Outside of North America, the most significant improvement was in Asia/Pacific. Within Asia/Pacific, increases, primarily in Australia, more than offset a decline in China. While sales in Europe were down, sales in Africa, the Middle East and the CIS increased. Sales in Latin America were slightly higher.

The acquisition of Bucyrus International Inc. (Bucyrus) added $1.176 billion in sales, and the Motoren-Werke Mannheim Holding GmbH (MWM) acquisition added $196 million in sales. Price realization improved $499 million.

The increase in machinery sales volume was primarily the result of higher end user demand.

Mine production increased despite lower commodity prices for metals and coal compared with a year earlier. While lower than a year ago, most mining-related commodity prices have remained at levels attractive for investment. This was positive for mining in most regions of the world and drove increased sales for Resource Industries.

Some improvements in construction activity and continued fleet upgrading, primarily in North America, led to higher sales of construction equipment. Despite the increase in our machine sales in North America, construction activity in the United States and other developed countries is still well below prior peaks. Construction sales declined in the Asia/Pacific region, where a large decrease in China more than offset increases in other Asia/Pacific countries.

Power Systems' sales improved with the most significant increases occurring in petroleum and rail applications. Worldwide demand for energy, at prices that encourage continued investment, resulted in higher sales of engines and turbines for petroleum applications. Sales of our rail products and services, primarily locomotives, increased due to higher demand. Those increases were partially offset by lower sales for electric power generation, due to lower end user demand.

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CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the second quarter of 2011 (at left) and the second quarter of 2012 (at right). Items favorably impacting operating profitappear 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 second quarter of 2012 was $2.616 billion compared with $1.601 billion for the second quarter of 2011. The increase was primarily the result of higher sales volume and improved price realization. Acquisitions and divestitures favorably impacted operating profit by $230 million, primarily related to Bucyrus.

The improvements were partially offset by higher period manufacturing costs and increased SG&A and R&D expenses.

Manufacturing costs were up $141 million primarily due to higher period costs related to production volume and capacity expansion programs. SG&A and R&D expenses increased $56 million primarily due to higher volume and increased costs to support product programs, partially offset by lower incentive compensation expense.

While manufacturing period costs, SG&A and R&D increased, as a percent of sales each declined compared with the second quarter of 2011. This focus on cost control contributed to the increase in operating profit as a percent of sales.

Short-term incentive compensation expense related to 2012 was about $270 million in the second quarter of 2012 compared with about $305 million in the second quarter of 2011.

The amount of incremental operating profit we earn on incremental sales and revenues is an important performance metric. Sales and revenues increased $3.144 billion from the second quarter of 2011 to the second quarter of 2012, and operating profit increased $1.015 billion. The resulting incremental operating profit rate is 32 percent. Excluding the acquisition of Bucyrus and MWM, incremental margin was about 44 percent. Excluding the acquisition of Bucyrus, MWM and currency impacts, incremental margin was about 39 percent.

The following table summarizes the impact of Bucyrus on second-quarter 2012 and 2011 results.

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Impact of Bucyrus on Profit
(Millions of dollars)
Impact Excluding Divestitures	Second Quarter 2011			Second Quarter 2012
Sales	$	—		$	1,176
Cost of goods sold	—			(872		)
SG&A	(31		)	(174		)
R&D	—			(32		)
Other operating (income) expenses	—			(1		)
Operating profit (loss)	(31		)	97
Interest expense	(11		)	(35		)
Other income (expense)	(162		)	7
Profit (loss) before tax	(204		)	69
Income tax (provision) benefit	72			(24		)
Profit (loss)	$	(132	)	$	45
Distribution Business Divestiture Impact
SG&A	$	—		$	(57	)
Other operating (income) expenses	—			160
Operating profit (loss)	—			103
Income tax (provision) benefit	—			(111		)
Profit (loss)	$	—		$	(8	)

Other Profit/Loss Items

▪ Interest expense excluding Financial Products increased $20 million from the second quarter of 2011 due to long-term debt issued in 2011 relating to the acquisition of Bucyrus.

▪ Other income/expense was income of$70 million compared with expense of $161 million in the second quarter of 2011. The change was primarily due to the absence of second-quarter 2011 losses of $162 million on interest rate swaps and credit facility fees associated with the debt issuance for the Bucyrus acquisition and the favorable impact of currency gains and losses.

▪ The provision for income taxes in the second quarter of 2012 reflects an estimated annual tax rate of 30.5 percent compared with 29 percent for the second quarter of 2011 and 26.5 percent for the full-year 2011, excluding the items discussed below. 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 for the second quarter of 2012 also includes a negative impact of $75 million from goodwill not deductible for tax purposes related to the divestiture of portions of the Bucyrus distribution business and $12 million for an increase in the 2012 estimated annual tax rate from 30 to 30.5 percent. A $72 million net benefit was recorded in the second quarter of 2011 due to planned repatriation of non-U.S. earnings offset by an increase in unrecognized tax benefits.

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Segment Information

Sales and Revenues by Geographic Region

(Millions of dollars)	Total			% Change		North America			% Change		Latin America			% Change		EAME			% Change		Asia/ Pacific			% Change
Second Quarter 2012
Construction Industries1	$	5,340		8	%	$	1,966		42	%	$	731		(3	)%	$	1,332		—	%	$	1,311		(11	)%
Resource Industries2	5,390			68	%	1,589			55	%	876			40	%	1,142			62	%	1,783			110	%
Power Systems3	5,511			12	%	2,373			20	%	618			(4	)%	1,474			11	%	1,046			8	%
All Other Segment4	454			(4	)%	217			5	%	17			(32	)%	135			(16	)%	85			1	%
Corporate Items and Eliminations	(11		)	—		(13		)			—					1					1
Machinery & Power Systems Sales	16,684			23	%	6,132			34	%	2,242			9	%	4,084			16	%	4,226			25	%
Financial Products Segment	764			—	%	417			(3	)%	97			8	%	102			(8	)%	148			13	%
Corporate Items and Eliminations	(74		)			(48		)			(8		)			(8		)			(10		)
Financial Products Revenues	690			(1	)%	369			(4	)%	89			6	%	94			(10	)%	138			12	%
Consolidated Sales and Revenues	$	17,374		22	%	$	6,501		31	%	$	2,331		9	%	$	4,178		15	%	$	4,364		25	%
Second Quarter 2011
Construction Industries1	$	4,941				$	1,385				$	755				$	1,334				$	1,467
Resource Industries2	3,206					1,026					626					703					851
Power Systems3	4,918					1,976					647					1,329					966
All Other Segment4	475					206					25					160					84
Corporate Items and Eliminations	(5		)			(5		)			—					—					—
Machinery & Power Systems Sales	13,535					4,588					2,053					3,526					3,368
Financial Products Segment	764					432					90					111					131
Corporate Items and Eliminations	(69		)			(49		)			(6		)			(6		)			(8		)
Financial Products Revenues	695					383					84					105					123
Consolidated Sales and Revenues	$	14,230				$	4,971				$	2,137				$	3,631				$	3,491

¹Does not include inter-segment sales of $123 million and $124 million in the second quarter 2012 and 2011, respectively.

²Does not include inter-segment sales of $328 million and $284 million in the second quarter 2012 and 2011, respectively.

³Does not include inter-segment sales of $680 million and $541 million in the second quarter 2012 and 2011, respectively.

⁴Does not include inter-segment sales of $927 million and $839 million in the second quarter 2012 and 2011, respectively.

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Sales and Revenues by Segment
(Millions of dollars)	Second Quarter 2011			Sales Volume			Price Realization			Currency			Acquisitions		Other			Second Quarter 2012			$ Change			% Change
Construction Industries	$	4,941		$	385		$	140		$	(126	)	$	—	$	—		$	5,340		$	399		8	%
Resource Industries	3,206			808			237			(37		)	1,176		—			5,390			2,184			68	%
Power Systems	4,918			374			98			(75		)	196		—			5,511			593			12	%
All Other Segment	475			(10		)	(1		)	(10		)	—		—			454			(21		)	(4	)%
Corporate Items and Eliminations	(5		)	(30		)	25			(1		)	—		—			(11		)	(6		)
Machinery & Power Systems Sales	13,535			1,527			499			(249		)	1,372		—			16,684			3,149			23	%
Financial Products Segment	764			—			—			—			—		—			764			—			—	%
Corporate Items and Eliminations	(69		)	—			—			—			—		(5		)	(74		)	(5		)
Financial Products Revenues	695			—			—			—			—		(5		)	690			(5		)	(1	)%
Consolidated Sales and Revenues	$	14,230		$	1,527		$	499		$	(249	)	$	1,372	$	(5	)	$	17,374		$	3,144		22	%

Operating Profit by Segment
(Millions of dollars)	Second Quarter 2012			Second Quarter 2011			$ Change			% Change
Construction Industries	$	688		$	482		$	206		43	%
Resource Industries	1,426			796			630			79	%
Power Systems	982			736			246			33	%
All Other Segment	188			122			66			54	%
Corporate Items and Eliminations	(778		)	(623		)	(155		)
Machinery & Power Systems	2,506			1,513			993			66	%
Financial Products Segment	188			172			16			9	%
Corporate Items and Eliminations	(4		)	(16		)	12
Financial Products	184			156			28			18	%
Consolidating Adjustments	(74		)	(68		)	(6		)
Consolidated Operating Profit	$	2,616		$	1,601		$	1,015		63	%

Construction Industries

Construction Industries' sales were $5.340 billion in the second quarter of 2012, an increase of $399 million, or 8 percent, from the second quarter of 2011. Sales increased in North America, were about flat in the EAME region and declined in Latin America and Asia/Pacific. The improvement in sales was a result of higher volume across all major equipment product categories. Sales of aftermarket parts were about flat.

Some improvement in construction activity and continued fleet upgrading, primarily in North America, led to the increase in sales. While the improvement in North America more than offset lower sales in China and other parts of the world, the construction industry in North America is still well below the prior peak.

Construction Industries' sales were lower in Asia/Pacific, where a large decrease in China more than offset increases in other Asia/Pacific countries. China's austerity policies caused machine demand to peak in the first half of 2011, making the second quarter of 2011 in China a strong sales quarter.

Construction Industries' profit was $688 million in the second quarter of 2012 compared with $482 million in the second quarter of 2011. The increase in profit was primarily due to improved price realization and higher sales volume and was partially offset by the negative impact of currency, which was mainly due to the Japanese yen and the Brazilian real. Manufacturing, SG&A and R&D expenses were about flat.

Resource Industries

Resource Industries' sales were $5.390 billion in the second quarter of 2012, an increase of $2.184 billion, or 68 percent, from the

60

second quarter of 2011. The sales increase was primarily due to the acquisition of Bucyrus in the third quarter of 2011 and higher sales volume in all regions of the world. While sales volume for both new equipment and aftermarket parts improved, the more significant increase was for new equipment.

Though the prices for metals and coal were down from a year earlier, mine production increased and price levels remained attractive for investment. This was positive for mining in most regions of the world.

Bucyrus sales were $1.176 billion in the second quarter of 2012, with $292 million in North America, $148 million in Latin America, $271 million in EAME and $465 million in Asia/Pacific.

Resource Industries' profit of $1.426 billion in the second quarter of 2012 was significantly higher than profit of $796 million in the second quarter of 2011. The acquisition of Bucyrus increased segment profit by $285 million.

Excluding the effect of the Bucyrus acquisition, Resource Industries' profit increased by $345 million, primarily due to higher sales volume and improved price realization. The improvement was partially offset by higher manufacturing, SG&A and R&D costs. The manufacturing cost increase was primarily due to higher costs related to increased production volume.

Power Systems

Power Systems' sales were $5.511 billion in the second quarter of 2012, an increase of $593 million, or 12 percent, from the second quarter of 2011. The improvement was the result of higher sales volume, the acquisition of MWM and improved price realization. The sales volume increase was almost all in North America.

The most significant increases in Power Systems' sales occurred in petroleum and rail applications. Worldwide demand for energy, at prices that encourage continued investment, resulted in higher sales of engines and turbines for petroleum applications. Sales of our rail products and services, primarily locomotives, increased due to higher demand. Those increases were partially offset by lower sales for electric power generation, due to lower end user demand.

Power Systems' profit was $982 million in the second quarter of 2012 compared with $736 million in the second quarter of 2011. The increase was primarily due to higher sales volume and improved price realization. The improvements were partially offset by increased period manufacturing, SG&A and R&D expenses.

MWM, acquired during the fourth quarter of 2011, added sales of $196 million, primarily in EAME, and was about neutral to profit.

Financial Products Segment

Financial Products' revenues were $764 million for both the second quarter of 2012 and 2011. The favorable impact from higher average earning assets was primarily offset by an unfavorable impact from lower interest rates.

Financial Products' profit was $188 million in the second quarter of 2012, compared with $172 million in the second quarter of 2011. The increase was primarily due to a $24 million favorable impact due to lower claims experience at Cat Insurance and a $13 million favorable impact from higher average earning assets. These increases were partially offset by $9 million lower net gains from returned or repossessed equipment.

At the end of the second quarter of 2012, past dues at Cat Financial were 3.35 percent compared with 3.19 percent at the end of the first quarter of 2012, 2.89 percent at the end of 2011 and 3.73 percent at the end of the second quarter of 2011. Although past dues have improved when compared with the second quarter of 2011, the increase from the end of 2011 and from the first quarter of 2012 reflects higher delinquencies in our European marine and China portfolios. Write-offs, net of recoveries, were $16 million for the second quarter of 2012, down from $29 million for the second quarter of 2011.

As of June 30, 2012, Cat Financial's allowance for credit losses totaled $393 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 June 30, 2011, was $382 million or 1.52 percent of net finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $782 million in the second quarter of 2012, an increase of $143 million from the second 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; and currency differences, as segment profit is reported using annual fixed exchange rates and inter-segment eliminations.

The increase in expense from the second quarter of 2011 was primarily due to higher corporate-level expenses and timing differences.

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SIX MONTHS ENDED JUNE 30, 2012 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2011

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the six months ended June 30, 2011 (at left) and the six months ended June 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 $33.355 billion for the six months ended June 30, 2012, an increase of $6.176 billion, or 23 percent, from the six months ended June 30, 2011. The improvement was a result of sales volume, acquisitions and price realization. Sales volume improved $3.092 billion, as sales for both new equipment and aftermarket parts increased. Sales volume increased in Resource Industries, Construction Industries and Power Systems. Excluding acquisitions, sales increased in all geographic regions except Latin America, with the most significant improvement in North America. The acquisition of Bucyrus added $2.177 billion in sales, and the Motoren-Werke Mannheim Holding GmbH (MWM) acquisition added $339 million in sales. Price realization improved $805 million.

The volume increase in machinery was primarily the result of higher end user demand. Dealer-reported new machine inventory levels were up about $1.3 billion during the six months ended June 30, 2012, compared to an increase of $1.1 billion in 2011.

Mine production increased despite lower commodity prices for metals and coal compared with a year earlier. While lower than a year ago, most mining-related commodity prices have remained at levels attractive for investment. This was positive for mining in most regions of the world and drove increased sales for Resource Industries.

Some improvements in construction activity and continued fleet upgrading, primarily in North America, led to higher sales of construction equipment. Despite the increase in our machine sales in North America, construction activity in the United States and other developed countries is still well below prior peaks. Construction sales declined in the Asia/Pacific region, where a large decrease in China more than offset increases in other Asia/Pacific countries.

Power Systems' sales improved with the most significant increases occurring in petroleum and rail applications. Worldwide demand for energy, at prices that encourage continued investment, resulted in higher sales of engines and turbines for petroleum applications. Sales of our rail products and services, primarily locomotives, increased due to higher demand. Those increases were partially offset by lower sales for electric power generation, due to lower end user demand.

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CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the six months ended June 30, 2011 (at left) and the six months ended June 30, 2012 (at right). Items favorably impacting operating profitappear 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 six months ended June 30, 2012 was $4.939 billion compared with $3.434 billion for the six months ended June 30, 2011. The increase was primarily the result of higher sales volume and improved price realization. Acquisitions and divestitures favorably impacted operating profit by $283 million, primarily related to Bucyrus.

The improvements were partially offset by higher manufacturing costs and increased SG&A and R&D expenses. Manufacturing costs were up $409 million primarily due to higher period costs related to production volume and capacity expansion programs. Material and freight costs were also up from the six months ended June 30, 2011. The increase in material costs was due to higher steel costs. SG&A and R&D expenses increased $175 million primarily due to higher volume and increased costs to support product programs, partially offset by lower incentive compensation expense.

While manufacturing period costs, SG&A and R&D increased, as a percent of sales, in total they declined compared with the six months ended June 30, 2011. This focus on cost control contributed to the increase in operating profit as a percent of sales.

Short-term incentive compensation expense related to the six months ended June 30, 2012 was about $500 million in the six months ended June 30, 2012 compared with about $525 million in the six months ended June 30, 2011.

The amount of incremental operating profit we earn on incremental sales and revenues is an important performance metric. Sales and revenues increased $6.176 billion from the six months ended June 30, 2011 compared to the six months ended June 30, 2012, and operating profit increased $1.505 billion. The resulting incremental operating profit rate is 24 percent. Excluding the acquisition of Bucyrus and MWM, incremental margin was about 33 percent. Excluding the acquisition of Bucyrus, MWM and currency impacts, incremental margin was about 32 percent.

The following table summarizes the impact of Bucyrus on year-to-date 2012 and 2011 results.

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Impact of Bucyrus on Profit
(Millions of dollars)
Impact Excluding Divestitures	Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
Sales	$	—		$	2,177
Cost of goods sold	—			(1,594		)
SG&A	(35		)	(331		)
R&D	—			(68		)
Other operating (income) expenses	—			(5		)
Operating profit (loss)	(35		)	179
Interest expense	(11		)	(71		)
Other income (expense)	(203		)	13
Profit (loss) before tax	(249		)	121
Income tax (provision) benefit	88			(43		)
Profit (loss)	$	(161	)	$	78
Distribution Business Divestiture Impact
SG&A	$	—		$	(83	)
Other operating (income) expenses	—			155
Operating profit (loss)	—			72
Income tax (provision) benefit	—			(100		)
Profit (loss)	$	—		$	(28	)

Other Profit/Loss Items

▪ Interest expense excluding Financial Products increased $46 million from the six months ended June 30, 2011 due to long-term debt issued in 2011 relating to the acquisition of Bucyrus.

▪ Other income/expense was income of$158 million compared with expense of $144 million in the six months ended June 30, 2011. The change was primarily due to the absence of losses during the six months ended June 30, 2011 of $204 million on interest rate swaps and credit facility fees associated with the debt issuance for the Bucyrus acquisition and the favorable impact of currency gains and losses.

▪ The provision for income taxes for the first six months of 2012 reflects an estimated annual effective tax rate of 30.5 percent compared with 29 percent for the first six months of 2011 and 26.5 percent for the full-year 2011, excluding the items discussed below. The increase from full-year 2011 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 2012 tax provision also includes a negative impact of $75 million from goodwill not deductible for tax purposes related to the divestiture of portions of the Bucyrus distribution business. A $72 million net benefit was recorded in the second quarter of 2011 due to planned repatriation of non-U.S. earnings offset by an increase in unrecognized tax benefits.

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Segment Information

Sales and Revenues by Geographic Region

(Millions of dollars)	Total			% Change		North America			% Change		Latin America			% Change		EAME			% Change		Asia/ Pacific			% Change
Six months ended June 30, 2012
Construction Industries1	$	10,402		11	%	$	3,746		39	%	$	1,421		(2	)%	$	2,565		5	%	$	2,670		(5	)%
Resource Industries2	10,168			70	%	3,149			61	%	1,566			29	%	2,172			69	%	3,281			116	%
Power Systems3	10,498			12	%	4,551			15	%	1,109			—	%	2,851			13	%	1,987			12	%
All Other Segment4	928			(13	)%	442			(19	)%	38			(33	)%	279			(4	)%	169			(1	)%
Corporate Items and Eliminations	(24		)			(24		)			—					—					—
Machinery & Power Systems Sales	31,972			24	%	11,864			30	%	4,134			8	%	7,867			20	%	8,107			29	%
Financial Products Segment	1,525			2	%	833			(3	)%	194			15	%	205			(6	)%	293			19	%
Corporate Items and Eliminations	(142		)			(94		)			(15		)			(15		)			(18		)
Financial Products Revenues	1,383			1	%	739			(3	)%	179			13	%	190			(10	)%	275			18	%
Consolidated Sales and Revenues	$	33,355		23	%	$	12,603		27	%	$	4,313		8	%	$	8,057		19	%	$	8,382		28	%
Six months ended June 30, 2011
Construction Industries1	$	9,412				$	2,693				$	1,456				$	2,442				$	2,821
Resource Industries2	5,974					1,951					1,215					1,286					1,522
Power Systems3	9,367					3,955					1,107					2,523					1,782
All Other Segment4	1,064					547					57					290					170
Corporate Items and Eliminations	(5		)			(5		)			—					—					—
Machinery & Power Systems Sales	25,812					9,141					3,835					6,541					6,295
Financial Products Segment	1,494					861					169					218					246
Corporate Items and Eliminations	(127		)			(96		)			(10		)			(8		)			(13		)
Financial Products Revenues	1,367					765					159					210					233
Consolidated Sales and Revenues	$	27,179				$	9,906				$	3,994				$	6,751				$	6,528

¹Does not include inter-segment sales of $253 million and $271 million for the six months ended June 30, 2012 and 2011, respectively.

²Does not include inter-segment sales of $656 million and $558 million for the six months ended June 30, 2012 and 2011, respectively.

³Does not include inter-segment sales of $1,355 million and $1,095 million for the six months ended June 30, 2012 and 2011, respectively.

⁴Does not include inter-segment sales of $1,834 million and $1,635 million for the six months ended June 30, 2012 and 2011, respectively.

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Sales and Revenues by Segment
(Millions of dollars)	Six months ended June 30, 2011			Sales Volume			Price Realization			Currency			Acquisitions		Other			Six months ended June 30, 2012			$ Change			% Change
Construction Industries	$	9,412		$	906		$	200		$	(116	)	$	—	$	—		$	10,402		$	990		11	%
Resource Industries	5,974			1,642			414			(39		)	2,177		—			10,168			4,194			70	%
Power Systems	9,367			709			169			(86		)	339		—			10,498			1,131			12	%
All Other Segment	1,064			(124		)	(1		)	(11		)	—		—			928			(136		)	(13	)%
Corporate Items and Eliminations	(5		)	(41		)	23			(1		)	—		—			(24		)	(19		)
Machinery & Power Systems Sales	25,812			3,092			805			(253		)	2,516		—			31,972			6,160			24	%
Financial Products Segment	1,494			—			—			—			—		31			1,525			31			2	%
Corporate Items and Eliminations	(127		)	—			—			—			—		(15		)	(142		)	(15		)
Financial Products Revenues	1,367			—			—			—			—		16			1,383			16			1	%
Consolidated Sales and Revenues	$	27,179		$	3,092		$	805		$	(253	)	$	2,516	$	16		$	33,355		$	6,176		23	%

Operating Profit by Segment
(Millions of dollars)	Six months ended June 30, 2012			Six months ended June 30, 2011			$ Change			% Change
Construction Industries	$	1,304		$	1,026		$	278		27	%
Resource Industries	2,594			1,592			1,002			63	%
Power Systems	1,794			1,436			358			25	%
All Other Segment	406			367			39			11	%
Corporate Items and Eliminations	(1,395		)	(1,147		)	(248		)
Machinery & Power Systems	4,703			3,274			1,429			44	%
Financial Products Segment	393			308			85			28	%
Corporate Items and Eliminations	(15		)	(26		)	11
Financial Products	378			282			96			34	%
Consolidating Adjustments	(142		)	(122		)	(20		)
Consolidated Operating Profit	$	4,939		$	3,434		$	1,505		44	%

Construction Industries

Construction Industries' sales were $10.402 billion in the six months ended June 30, 2012, an increase of $990 million, or 11 percent, from the six months ended June 30, 2011. Sales increased in North America, were up slightly in the EAME region and declined slightly in Asia/Pacific and Latin America. The improvement in sales was a result of higher volume across all major equipment product categories. While sales volume for both new equipment and aftermarket parts improved, the more significant increase was for new equipment.

Some improvement in construction activity and continued fleet upgrading, primarily in North America, led to the increase in sales. Despite the increase in our machine sales in North America, construction activity in the United States and other developed countries is still well below prior peaks.

Construction Industries' sales were lower in Asia/Pacific, where a large decrease in China more than offset increases in other Asia/Pacific countries. China's austerity policies caused machine demand to peak in the first half of 2011, making the first half of 2011 in China a strong sales period.

Construction Industries' profit was $1.304 billion in the six months ended June 30, 2012 compared with $1.026 billion in the six months ended June 30, 2011. The increase in profit was primarily due to higher sales volume and improved price realization and was partially offset by the negative impact of currency, mainly due to the Japanese yen, and higher period manufacturing costs.

Resource Industries

Resource Industries' sales were $10.168 billion for the six months ended June 30, 2012, an increase of $4.194 billion, or 70 percent,

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from the six months ended June 30, 2011. The sales increase was primarily due to the acquisition of Bucyrus in the third quarter of 2011 and higher sales volume in most regions of the world. While sales volume for both new equipment and aftermarket parts improved, the more significant increase was for new equipment.

Mine production increased despite lower commodity prices for metals and coal compared with a year earlier. While lower than a year ago, most mining-related commodity prices have remained at levels attractive for investment. This was positive for mining in most regions of the world and drove increased sales for Resource Industries.

Bucyrus sales were $2.177 billion for the six months ended June 30, 2012, with $565 million in North America, $322 million in Latin America, $452 million in EAME and $838 million in Asia/Pacific.

Resource Industries' profit of $2.594 billion in the six months ended June 30, 2012 was significantly higher than profit of $1.592 billion for the six months ended June 30, 2011. The acquisition of Bucyrus increased segment profit by $347 million.

Excluding the effect of the Bucyrus acquisition, Resource Industries' profit increased by $655 million, primarily due to higher sales volume and improved price realization. The improvement was partially offset by higher manufacturing, SG&A and R&D costs. The manufacturing cost increase was primarily due to higher costs related to increased production volume.

Power Systems

Power Systems' sales were $10.498 billion in the six months ended June 30, 2012, an increase of $1.131 billion, or 12 percent, compared to the six months ended June 30, 2011. The improvement was the result of higher sales volume, the acquisition of MWM and improved price realization. The sales volume increase occurred primarily in North America.

Worldwide demand for energy, at prices that encourage continued investment, resulted in higher sales of engines and turbines for petroleum applications. Sales of our rail products and services, primarily locomotives, increased due to higher demand. Those increases were partially offset by lower sales for electric power generation due to lower end user demand.

Power Systems' profit was $1.794 billion in the six months ended June 30, 2012 compared with $1.436 billion in the six months ended June 30, 2011. The increase was primarily due to higher sales volume and improved price realization. The improvements were partially offset by increased manufacturing, SG&A and R&D expenses, all largely driven by higher volume.

MWM, acquired during the fourth quarter of 2011, added sales of $339 million, primarily in EAME, and was about neutral to profit.

Financial Products Segment

Financial Products' revenues were $1.525 billion for the six months ended June 30, 2012, an increase of $31 million, or 2 percent, from the six months ended June 30, 2011. The increase was primarily due to the impact from higher average earning assets, partially offset by an unfavorable impact from lower interest rates.

Financial Products' profit of $393 million in the first half of 2012 was up $85 million from the first half of 2011. The increase was due to a $35 million favorable impact due to lower claims experience at Cat Insurance and a $33 million decrease in provision expense and a $31 million favorable impact from higher average earning assets at Cat Financial.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $1,410 million in the six months ended June 30, 2012, an increase of $237 million from the six months ended June 30, 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; and currency differences, as segment profit is reported using annual fixed exchange rates and inter-segment eliminations.

Corporate-level expenses and expense from timing and other methodology differences increased from the six months ended June 30, 2011 and were partially offset by favorable currency differences. Segment profit for 2012 is based on fixed exchange rates set at the beginning of 2012, while segment profit for 2011 is based on fixed exchange rates set at the beginning of 2011. The difference in actual exchange rates compared with fixed exchange rates is included in corporate items and eliminations and is not reflected in segment profit. The favorable impact included in corporate items and eliminations related to currency was primarily due to actual exchange rates in the first six months of 2012 being favorable compared with 2012 fixed exchange rates.

ACQUISITIONS AND DIVESTITURES

ERA Mining Machinery Limited

During the second quarter of 2012, Caterpillar, through its wholly-owned subsidiary Caterpillar (Luxembourg) Investment Co. S.A., completed a tender offer to acquire the issued shares of ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical Manufacturing Co., Ltd., commonly known as Siwei. Substantially all of the issued

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shares of Siwei, a public company listed on the Hong Kong Exchange, were acquired at the end of May 2012 and approximately one percent of the issued shares remained outstanding and unacquired as of June 30, 2012. We expect to complete the compulsory acquisition of the remaining shares of Siwei common stock in the third quarter of 2012. Siwei primarily designs, manufactures, sells and supports underground coal mining equipment in mainland China and is known for its expertise in manufacturing mining roof support equipment. The tender offer allowed Siwei shareholders to choose between two types of consideration in exchange for their shares. The alternatives were either cash consideration of HK$0.88 or a HK$1.00 loan note issued by Caterpillar (Luxembourg) Investment Co. S.A. to the former shareholders of Siwei that will entitle the holder to receive on redemption a minimum of HK$0.75 up to a maximum of HK$1.15 depending on Siwei's consolidated gross profit for 2012 and 2013. Approximately 4 billion Siwei shares were tendered for the cash alternative and approximately 1.6 billion Siwei shares were tendered for the loan note alternative. The preliminary purchase price of approximately $690 million is comprised of net cash paid of approximately $453 million ($475 million in cash paid for shares and to cancel share options less cash acquired of $22 million), the fair value of the loan notes of $169 million, approximately $155 million of assumed third-party short term borrowings, a loan and interest payable to Caterpillar from Siwei of $51 million, less restricted cash acquired of approximately $138 million. The noncontrolling interest for the outstanding shares not tendered is $7 million. The acquisition supports Caterpillar's long-term commitment to invest in China in order to support our growing base of Chinese customers and will further expand our underground mining business both inside and outside of China. Siwei will be reported in the Resource Industries segment.

The transaction was financed with available cash and included the issuance of loan notes to the former shareholders of Siwei, which have a debt component and a portion that is contingent consideration. The $169 million fair value of the loan notes is comprised of $152 million of debt representing the minimum redemption amount payable in April 2013 and $17 million in contingent consideration representing the portion of the redemption amount conditionally payable in April 2013 or April 2014. The contingent consideration will be remeasured each reporting period at its estimated fair value with any adjustment included in Other operating (income) expenses in the Consolidated Results Of Operations.

Tangible assets acquired of $671 million, recorded at their fair values, primarily include cash of $22 million, restricted cash of $138 million, receivables of $213 million, inventory of $105 million and property, plant and equipment of $112 million. Finite-lived intangible assets acquired of $194 million were primarily related to customer relationships and also included trade names. The finite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of approximately 15 years. Liabilities assumed of $592 million, recorded at their fair values, primarily included accounts payable of $342 million, third-party short term borrowings of $155 million and accrued expenses of $50 million. Additionally, deferred tax liabilities were $38 million. Goodwill of $467 million, substantially all of which is non-deductible for income tax purposes, represents the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill will not be amortized, but will be tested for impairment at least annually. Factors that contributed to a purchase price resulting in the recognition of goodwill include expected cost savings primarily from increased purchasing power for raw materials and a reduction in other manufacturing input costs, expanded underground mining equipment sales opportunities in China and internationally, along with the acquired assembled workforce. These values represent a preliminary allocation of the purchase price subject to finalization of post-closing procedures. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

Bucyrus Distribution Business Divestiture

In conjunction with our acquisition of Bucyrus in July 2011, we announced our intention to sell the Bucyrus distribution business to Caterpillar dealers that support mining customers around the world in a series of individual transactions. Bucyrus predominantly employed a direct to end customer model to sell and support products. The intention is for Bucyrus products to be sold and serviced by Caterpillar dealers, consistent with our long-held distribution strategy. We expect these transitions will occur in phases based on the mining business opportunity within each dealer territory.

As portions of the Bucyrus distribution business are sold or classified as held for sale, they will not qualify as discontinued operations because Caterpillar expects significant continuing direct cash flows from the Caterpillar dealers after the divestitures. The gain or loss on disposal, along with the continuing operations of these disposal groups, will be reported in the Resource Industries segment. Goodwill will be allocated to each disposal group using the relative fair value method. The value of the customer relationship intangibles related to each portion of the Bucyrus distribution business to be sold will be included in the disposal groups. The disposal groups will be recorded at the lower of their carrying value or fair value less cost to sell. In the second quarter of 2012, we recorded a goodwill impairment for $27 million related to a disposal group being sold to one of the Caterpillar dealers. After the goodwill impairment, the carrying value of the disposal group was lower than its fair value less costs to sell. Fair value was determined based upon the negotiated sales price. The impairment was recorded in Other operating (income) expenses and included in the Resource Industries segment.

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In the second quarter of 2012, three sale transactions were completed whereby we sold portions of the Bucyrus distribution business to Finning International, WesTrac Pty Limited, a wholly owned subsidiary of Seven Group Holdings Limited, and Ferreyros S.A.A. for $306 million, $400 million and $75 million respectively, subject to certain working capital adjustments. After-tax profit was unfavorably impacted by $8 million in the second quarter of 2012 as a result of the Bucyrus distribution business divestiture activities. This is comprised of $160 million of income (included in Other operating (income) expenses) related to the sales transactions, offset by costs incurred related to the Bucyrus distribution divestiture activities of $57 million (included in Selling, general and administrative expenses) and income tax of $111 million.

Assets sold included customer relationship intangibles of $146 million, other assets of $117 million, which consisted primarily of inventory and fixed assets, and allocated goodwill of $230 million related to the Bucyrus distribution divestiture activities.

As part of these divestitures, Cat Financial provided $400 million of financing to WesTrac Pty Limited and $75 million to Ferreyros S.A.A. These loans are included in Receivables – finance and Long-term receivables – finance in the Consolidated Statement of Financial Position.

For the first half of 2012, after-tax profit was unfavorably impacted by $28 million as a result of the Bucyrus distribution divestiture activities. This is comprised of $155 million of income (included in Other operating (income) expenses) related to the sales transactions, offset by costs incurred related to the Bucyrus distribution divestiture activities of $83 million (included in Selling, general and administrative expenses) and income tax of $100 million.

GLOSSARY OF TERMS

1. All Other Segment -Primarily includes activities such as: the remanufacturing of Cat engines and components and remanufacturing services for other companies as well as the product management, development, manufacturing, marketing and product support of undercarriage, specialty products, hardened bar stock components and ground engaging tools primarily for Caterpillar products; logistics services for Caterpillar and other companies; the product management, development, marketing, sales and product support of on-highway vocational trucks for North America (U.S. & Canada only); distribution services responsible for dealer development and administration, dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; and the 50/50 joint venture with Navistar (NC2) until it became a wholly owned subsidiary of Navistar effective September 29, 2011.

2. Caterpillar Production System - The Caterpillar Production System is the common Order-to-Delivery process being implemented enterprise-wide to achieve our safety, quality, velocity, earnings and growth goals.

3. Consolidating Adjustments - Eliminations of transactions between Machinery and Power Systems and Financial Products.

4. Construction Industries - A segment responsible for small and core construction machines. Responsibility includes business strategy, product design, product management and development, manufacturing, marketing, and sales and product support. The product portfolio includes backhoe loaders, small wheel loaders, small track-type tractors, skid steer loaders, multi-terrain loaders, mini excavators, compact wheel loaders, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, medium track-type tractors, track-type loaders, motor graders and pipe layers. In addition, Construction Industries has responsibility for Power Systems and components in Japan and an integrated manufacturing cost center that supports Machinery and Power Systems businesses.

5. Currency - With respect to sales and revenues, currency represents the translation impact on sales resulting from changes in foreign currency exchange rates versus the U.S. dollar. With respect to operating profit, currency represents the net translation impact on sales and operating costs resulting from changes in foreign currency exchange rates versus the U.S. dollar. Currency includes the impact on sales and operating profit for the Machinery and Power Systems lines of business only; currency impacts on Financial Products revenues and operating profit are included in the Financial Products portions of the respective analyses. With respect to other income/expense, currency represents the effects of forward and option contracts entered into by the company to reduce the risk of fluctuations in exchange rates and the net effect of changes in foreign currency exchange rates on our foreign currency assets and liabilities for consolidated results.

6. Debt-to-Capital Ratio - A key measure of financial strength used by both management and our credit rating agencies. The metric is a ratio of Machinery and Power Systems debt (short-term borrowings plus long-term debt) and redeemable noncontrolling interest to the sum of Machinery and Power Systems debt, redeemable noncontrolling interest and stockholders' equity.

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7. EAME - A geographic region including Europe, Africa, the Middle East and the Commonwealth of Independent States (CIS).

8. Earning Assets - Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases, less accumulated depreciation at Cat Financial.

9. Financial Products Segment -Provides financing to customers and dealers for the purchase and lease of Caterpillar and other equipment, as well as some financing for Caterpillar sales to dealers. Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The segment also provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment.

10. Latin America - Geographic region including Central and South American countries and Mexico.

11. Machinery and Power Systems (M&PS) - Represents the aggregate total of Construction Industries, Resource Industries, Power Systems, and All Other segments and related corporate items and eliminations.

12. Machinery and Power Systems Other Operating (Income) Expenses - Comprised primarily of gains/losses on disposal of long-lived assets, long-lived asset impairment charges, pension curtailment charges and employee redundancy costs.

13. Manufacturing Costs - Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs. Variable manufacturing costs are defined as having a direct relationship with the volume of production. This includes material costs, direct labor and other costs that vary directly with production volume such as freight, power to operate machines and supplies that are consumed in the manufacturing process. Period manufacturing costs support production but are defined as generally not having a direct relationship to short-term changes in volume. Examples include machinery and equipment repair, depreciation on manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and operations management.

14. Power Systems - A segment responsible for the product management, development, manufacturing, marketing, sales and product support of reciprocating engine powered generator sets, integrated systems used in the electric power generation industry, reciprocating engines and integrated systems and solutions for the marine and petroleum industries; reciprocating engines supplied to the industrial industry as well as Caterpillar machinery; the product management, development, manufacturing, marketing, sales and product support of turbines and turbine-related services; the development, manufacturing, remanufacturing, maintenance, leasing and service of diesel-electric locomotives and components and other rail-related products and services.

15. Price Realization - The impact of net price changes excluding currency and new product introductions. Consolidated price realization includes the impact of changes in the relative weighting of sales between geographic regions.

16. Resource Industries - A segment responsible for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for large track-type tractors, large mining trucks, underground mining equipment, tunnel boring equipment, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, compactors, select work tools, forestry products, paving products, machinery components and electronics and control systems. In addition, Resource Industries manages areas that provide services to other parts of the company, including integrated manufacturing, research and development and coordination of the Caterpillar Production System. On July 8, 2011, the acquisition of Bucyrus International Inc. was completed. This added the responsibility for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for electric rope shovels, draglines, hydraulic shovels, drills, highwall miners and electric drive off-highway trucks to Resource Industries. In addition, Resource Industries segment profit includes Bucyrus acquisition-related costs and the impact from divestiture of the former Bucyrus distribution businesses. On June 6, 2012, the acquisition of ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., Ltd., commonly known as Siwei, was completed. This added the responsibility for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for underground coal mining equipment to Resource Industries.

17. Sales Volume - With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery and Power Systems as well as the incremental revenue impact of new product introductions, including emissions-related product updates. With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery and Power Systems combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact of changes in the relative weighting of Machinery and Power Systems sales with respect to total sales.

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LIQUIDITY AND CAPITAL RESOURCES

Sources of funds

We generate significant capital resources from operating activities, which are the primary source of funding for our Machinery and Power Systems operations. Funding for these businesses is also provided by commercial paper and long-term debt issuances. Financial Products operations are funded primarily from commercial paper, term debt issuances and collections from the existing portfolio. Throughout the second quarter of 2012, we experienced favorable liquidity conditions globally in both our Machinery and Power Systems and Financial Products operations. On a consolidated basis, we ended second quarter of 2012 with $5.10 billion of cash, an increase of $2.05 billion from year-end 2011. Our cash balances are held in numerous locations throughout the world. We expect to meet our United States funding needs without repatriating undistributed profits that are indefinitely reinvested outside the United States.

Consolidated operating cash flow for the first half of 2012 was $2.01 billion, down from $3.29 billion for the same period a year ago. The decrease was primarily due to changes in inventory, accounts payable and short-term incentive compensation. Inventory increased more in the first half of 2012 than in the first half of 2011. Also contributing to the decline in operating cash flow were less significant increases in accounts payable during the first half of 2012 compared to the first half of 2011 and the payment of additional short-term incentive compensation during the first half of 2012 compared with the first half of 2011. Partially offsetting these items was higher profit. See further discussion of operating cash flow under Machinery and Power Systems and Financial Products.

Total debt as of June 30, 2012 was $39.32 billion, an increase of $4.72 billion from year-end 2011. Debt related to Machinery and Power Systems increased $1.96 billion in the first half of 2012, primarily due to the issuance of $1.50 billion of long-term debt. On June 21, 2012, we issued $500 million of 0.950% Senior Notes due in 2015, $500 million of 1.500% Senior notes due in 2017, and $500 million of 2.600% of Senior Notes due in 2022. The Notes are unsecured obligations of Caterpillar and rank equally with all other unsecured indebtedness. This debt was issued for general corporate purposes. Debt related to Financial Products increased $2.76 billion primarily at Cat Financial, reflecting increasing portfolio balances and an increasing cash position.

We have three global credit facilities with a syndicate of banks totaling $8.5 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial to support the commercial paper programs in the event those programs become unavailable and for general liquidity purposes.  Based on management's allocation decision, which can be revised from time to time, the portion of the Credit Facility available to Cat Financial as of June 30, 2012 was $6.5 billion.

· The 364-day facility of $2.55 billion expires in September 2012.

· The four-year facility of $2.09 billion expires in September 2014.

· The five-year facility of $3.86 billion expires in September 2016.

At June 30, 2012, Caterpillar's consolidated net worth was $22.39 billion, which was above the $9.00 billion required under the Credit Facility.  The consolidated net worth is defined as the consolidated stockholder's equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).

At June 30, 2012, Cat Financial's covenant interest coverage ratio was 1.66 to 1.  This is above the 1.15 to 1 minimum ratio calculated as (1) profit excluding income taxes, interest expense and net gain/(loss) from interest rate derivatives to (2) interest expense calculated at the end of each calendar quarter for the rolling four quarter period then most recently ended, required by the Credit Facility.

In addition, at June 30, 2012, Cat Financial's covenant leverage ratio was 8.30 to 1. This is below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31, required by the Credit Facility.

In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the bank group may terminate the commitments allocated to the party that does not meet its covenants.  Additionally, in such event, certain of Cat Financial's other lenders under other loan agreements where similar financial covenants or cross default provisions are applicable, may, at their election, choose to pursue remedies under those loan agreements, including accelerating the repayment of outstanding borrowings.  At June 30, 2012, there were no borrowings under the Credit Facility.

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Our total credit commitments as of June 30, 2012 were:

	June 30, 2012
(Millions of dollars)	Consolidated			Machinery and Power Systems			Financial Products
Credit lines available:
Global credit facilities	$	8,500		$	2,000		$	6,500
Other external	4,843			742			4,101
Total credit lines available	13,343			2,742			10,601
Less: Global credit facilities supporting commercial paper	(3,266		)	—			(3,266		)
Less: Utilized credit	(2,603		)	(394		)	(2,209		)
Available credit	$	7,474		$	2,348		$	5,126

Other consolidated credit lines with banks as of June 30, 2012 totaled $4.84 billion. These committed and uncommitted credit lines, which may be eligible for renewal at various future dates or have no specified expiration date, are used primarily by our subsidiaries for local funding requirements. Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines.

In the event that Caterpillar or Cat Financial, or any of their debt securities, experiences a credit rating downgrade, it would likely result in an increase in our borrowing costs and make access to certain credit markets more difficult. In the event economic conditions deteriorate such that access to debt markets becomes unavailable, our Machinery and Power Systems operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our Credit Facility. Our Financial Products operations would rely on cash flow from its existing portfolio, utilization of existing cash balances, access to our Credit Facility and other credit line facilities of Cat Financial and potential borrowings from Caterpillar. In addition, we maintain a support agreement with Cat Financial, which requires Caterpillar to remain the sole owner of Cat Financial and may, under certain circumstances, require Caterpillar to make payments to Cat Financial should Cat Financial fail to maintain certain financial ratios.

Machinery and Power Systems

Net cash provided by operating activities was $1.52 billion in the first half of 2012, compared with $4.11 billion for the same period in 2011. The decline was a result of unfavorable changes primarily related to inventory, receivables, accounts payable and short-term incentive compensation. Partially offsetting these items were higher profit and an increase in customer advances.

Excluding the acquisition of Siwei, inventory increased approximately $2.7 billion during the first half of 2012 and there were several reasons for the increase:

• About half of the increase was finished inventory, with more than half of that at our Excavator Division. Most of the increase in excavators was in China. As we began 2012, our expectations for sales in China were higher, and we built substantial new machine inventory. However, sales did not improve as much as expected, resulting in increased inventory. We are working to lower finished inventory and are lowering production levels in China and have started to export machines to other regions of the world. Given the weak construction equipment industry in China, we expect a gradual reduction through the remainder of 2012.

• About 30 percent of the increase was for components, work-in-process and aftermarket parts inventory and was related to increasing sales.

• About 10 percent of the inventory increase was related to the former Bucyrus (net of the impact of divestitures of distribution businesses to Cat dealers). Bucyrus sales are generally seasonally stronger during the second half of the year and with relatively long production lead times, it is common for Bucyrus to add inventory during the first half of the year to support higher sales during the second half.

• In-transit inventory accounted for about 10 percent of the increase and was related to higher sales.

During the first half of 2011, we experienced decreases in receivables, resulting from increased sales of receivables to Cat Financial to support expected acquisitions. We continued to benefit from the sale of receivables in the first half of 2012, but the change in receivables was not significant. Also contributing to the decline in operating cash flow were less significant increases in accounts payable during the first half of 2012 compared to the first half of 2011 and the payment of additional short-term incentive compensation during the first half of 2012 compared with the first half of 2011.

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Net cash used for investing activities in the first half of 2012 was $1.14 billion compared with net cash used for investing activities of $94 million in the first half of 2011. The change was primarily due to the absence of the 2011 loan repayments from Cat Financial and the use of cash for higher capital expenditures and the acquisition of Siwei in 2012, partially offset by higher proceeds from divestitures. Net cash provided by financing activities in the first half of 2012 was $630 million compared with net cash provided by financing activities of $3.60 billion in the first half of 2011. The change was primarily due to the issuance of long-term debt for the acquisition of Bucyrus in 2011.

Our priorities for the use of cash are maintaining a strong financial position that helps maintain our credit rating, providing capital to support growth, appropriately funding employee benefit plans, paying dividends and repurchasing common stock with excess cash.

Strong financial position - A key measure of Machinery and Power Systems' financial strength used by both management and our credit rating agencies is Machinery and Power Systems' debt-to-capital ratio. Debt-to-capital is defined as short-term borrowings, long-term debt due within one year, redeemable noncontrolling interest and long-term debt due after one year (debt) divided by the sum of debt (including redeemable noncontrolling interest) and stockholders' equity. Debt also includes borrowings from Financial Products. The debt-to-capital ratio for Machinery and Power Systems was 40.9 percent at June 30, 2012, within our target range of 30 to 45 percent, compared with 42.7 percent at December 31, 2011. Profit during the first half of 2012 was the primary contributor to the reduction in the debt-to-capital ratio, partially offset by the $1.5 billion debt issuance in June 2012.

Capital to support growth - Capital expenditures during first half of 2012 were $1.55 billion, an increase of $570 million compared with the first half of 2011. We expect capital expenditures for 2012 to be about $4 billion, up from $2.65 billion in 2011. During the second quarter of 2012, we completed the acquisition of Siwei. The preliminary purchase price of approximately $690 million is comprised of net cash paid of approximately $453 million ($475 million in cash paid for shares and to cancel share options less cash acquired of $22 million), the fair value of the loan notes of $169 million which includes a debt component and a contingent consideration portion, approximately $155 million of assumed third-party short term borrowings, a loan and interest payable to Caterpillar from Siwei of $51 million, less restricted cash acquired of approximately $138 million. The acquisition of Siwei was funded with available cash and included the issuance of loan notes to the former shareholders of Siwei, which have a debt component and a portion that is contingent consideration.

Appropriately funded employee benefit plans - We made $119 million and $293 million of contributions to our pension plans during the three and six months ended June 30, 2012, respectively. We currently anticipate full-year 2012 contributions of approximately $1 billion, of which $570 million are required contributions. We made $104 million and $235 million of contributions to our pension plans during the three and six months ended June 30, 2011, respectively.

Paying dividends - Dividends paid totaled $598 million in the first half of 2012, representing 46 cents per share paid in both the first and second quarter. Each quarter, our Board of Directors reviews the company's dividend for the applicable quarter. The Board evaluates the financial condition of the company and considers the economic outlook, corporate cash flow, the company's liquidity needs, and the health and stability of global credit markets to determine whether to maintain or change the quarterly dividend. On June 13, 2012, we increased the quarterly dividend 13 percent to 52 cents per share payable on August 20, 2012, to stockholders of record at the close of business on July 20, 2012.

Common stock repurchases - Pursuant to the February 2007 Board-authorized stock repurchase program, $3.8 billion of the $7.5 billion authorized was spent through 2008.  In December 2011, the Board of Directors extended the authorization for the $7.5 billion stock repurchase program through December 31, 2015. We have not repurchased stock under the program since 2008.  Basic shares outstanding as of June 30, 2012 were 653 million.

Financial Products

Financial Products operating cash flow was $559 million through the first half of 2012, compared with $563 million for the same period a year ago.  Net cash used for investing activities through the first half of 2012 was $2.12 billion, compared to $1.51 billion for the same period in 2011. The change was primarily due to more net cash used for finance receivables and expenditures for equipment leased to others due to increased growth in Cat Financial's portfolio. Net cash provided by financing activities was $2.73 billion through the first half of 2012, compared with $366 million for the same period in 2011. The change was primarily to provide for an increase in Cat Financial's cash position and the impact of net intercompany borrowings.

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CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts. The more significant estimates include: residual values for leased assets, fair values for goodwill impairment tests, impairment of available-for-sale securities, warranty liability, stock-based compensation, reserves for product liability and insurance losses, postretirement benefits, post-sale discounts, credit losses and income taxes. We have incorporated many years of data into the determination of each of these estimates and we have not historically experienced significant adjustments. These assumptions are reviewed at least annually with the Audit Committee of the Board of Directors.  Following are the methods and assumptions used in determining our estimates and an indication of the risks inherent in each.

Residual values for leased assets — The residual values for Cat Financial’s leased assets, which are based upon the estimated wholesale market value of leased equipment at the time of the expiration of the lease, are based on a careful analysis of historical wholesale market sales prices, projected forward on a level trend line without consideration for inflation or possible future pricing action.  At the inception of the lease, residual values are derived from consideration of the following critical factors: market size and demand, any known significant market/product trends, total expected hours of usage, machine configuration, application, location, model changes, quantities and past re-marketing experience, third-party residual guarantees and contractual customer purchase options.  During the term of the leases, residual amounts are monitored.  If estimated market values reflect a non-temporary impairment due to economic factors, obsolescence or other adverse circumstances, the residuals are adjusted to the lower estimated values by a charge to earnings.  For equipment on operating leases, the charge is recognized through depreciation expense.  For finance leases, it is recognized through a reduction of finance revenue.

Fair values for goodwill impairment tests — We test goodwill for impairment annually, at the reporting unit level, and whenever events or circumstances make it likely that an impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell all or a portion of a reporting unit.  We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis.

Goodwill is reviewed for impairment utilizing a qualitative assessment or a two-step process. We have an option to make a qualitative assessment of a reporting unit's goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the two-step process, the first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that an impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit's goodwill, the difference is recognized as an impairment loss.

The impairment test process requires valuation of the respective reporting unit, which we primarily determine using an income approach based on a discounted five year forecasted cash flow with a year-five residual value. The residual value is computed using the constant growth method, which values the forecasted cash flows in perpetuity. The income approach is supported by a reconciliation of our calculated fair value for Caterpillar to the company’s market capitalization. The assumptions about future cash flows and growth rates are based on each reporting unit’s long-term forecast and are subject to review and approval by senior management. The discount rate is based on our weighted average cost of capital, which we believe approximates the rate from a market participant’s perspective. The estimated fair value could be impacted by changes in market conditions, interest rates, growth rates, tax rates, costs, pricing and capital expenditures.

A prolonged economic downturn resulting in lower long-term growth rates and reduced long-term profitability may reduce the fair value of our reporting units. Industry specific events or circumstances that have a negative impact to the valuation assumptions may also reduce the fair value of our reporting units.  Should such events occur and it becomes more likely than not that a reporting unit’s fair value has fallen below its carrying value, we will perform an interim goodwill impairment test(s), in addition to the annual impairment test.  Future impairment tests may result in a goodwill impairment, depending on the outcome of both step one and step two of the impairment review process.  A goodwill impairment would be reported as a non-cash charge to earnings.

Impairment of available-for-sale securities —Available-for-sale securities, primarily at Cat Insurance, are reviewed at least quarterly to identify fair values below cost which may indicate that a security is impaired and should be written down to fair value.

For debt securities, once a security’s fair value is below cost we utilize data gathered by investment managers, external sources

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and internal research to monitor the performance of the security to determine whether an other-than-temporary impairment has occurred.  These reviews, which include an analysis of whether it is more likely than not that we will be required to sell the security before its anticipated recovery, consist of both quantitative and qualitative analysis and require a degree of management judgment.  Securities in a loss position are monitored and assessed at least quarterly based on severity of loss and may be deemed other-than-temporarily impaired at any time.  Once a security’s fair value has been twenty percent or more below its original cost for six consecutive months, the security will be other-than-temporarily impaired unless there are sufficient facts and circumstances supporting otherwise.

For equity securities in a loss position, determining whether the security is other-than-temporarily impaired requires an analysis of the securities’ historical sector returns and volatility. This information is utilized to estimate the security’s future fair value to assess whether the security has the ability to recover to its original cost over a reasonable period of time as follows:

▪ Historical annualized sector returns over a two-year period are analyzed to estimate the security’s fair value over the next two years.

▪ The volatility factor for the security is applied to the sector historical returns to further estimate the fair value of the security over the next two years.

In the event the estimated future fair value is less than the original cost, qualitative factors are then considered in determining whether a security is other-than-temporarily impaired, which includes reviews of the following:  significant changes in the regulatory, economic or technological environment of the investee, significant changes in the general market condition of either the geographic area or the industry in which the investee operates, and length of time and the extent to which the fair value has been less than cost.  These qualitative factors are subjective and require a degree of management judgment.

Warranty liability — At the time a sale is recognized, we record estimated future warranty costs.  The warranty liability is determined by applying historical claim rate experience to the current field population and dealer inventory.  Generally, historical claim rates are based on actual warranty experience for each product by machine model/engine size.  Specific rates are developed for each product build month and are updated monthly based on actual warranty claim experience.  Warranty costs may differ from those estimated if actual claim rates are higher or lower than our historical rates.

Stock-based compensation — We use a lattice-based option-pricing model to calculate the fair value of our stock options and SARs.  The calculation of the fair value of the awards using the lattice-based option-pricing model is affected by our stock price on the date of grant as well as assumptions regarding the following:

▪ Volatility is a measure of the amount by which the stock price is expected to fluctuate each year during the expected term of the award and is based on historical and current implied volatilities from traded options on Caterpillar stock. The implied volatilities from traded options are impacted by changes in market conditions.  An increase in the volatility would result in an increase in our expense.

▪ The expected term represents the period of time that awards granted are expected to be outstanding and is an output of the lattice-based option-pricing model. In determining the expected term of the award, future exercise and forfeiture patterns are estimated from Caterpillar employee historical exercise behavior.  These patterns are also affected by the vesting conditions of the award.  Changes in the future exercise behavior of employees or in the vesting period of the award could result in a change in the expected term.  An increase in the expected term would result in an increase in our expense.

▪ The weighted-average dividend yield is based on Caterpillar’s historical dividend yields.  As holders of stock-based awards do not receive dividend payments, this could result in employees retaining the award for a longer period of time if dividend yields decrease or exercising the award sooner if dividend yields increase.  A decrease in the dividend yield would result in an increase in our expense.

▪ The risk-free interest rate is based on the U.S. Treasury yield curve in effect at time of grant.  As the risk-free interest rate increases, the expected term increases, resulting in an increase in our expense.

The fair value of our RSUs is determined by reducing the stock price on the date of grant by the present value of the estimated dividends to be paid during the vesting period. The estimated dividends are based on Caterpillar’s weighted-average dividend yields.  A decrease in the dividend yield would result in an increase in our expense.

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Stock-based compensation expense recognized during the period is based on the value of the number of awards that are expected to vest.  In determining the stock-based compensation expense to be recognized, a forfeiture rate is applied to the fair value of the award.  This rate represents the number of awards that are expected to be forfeited prior to vesting and is based on Caterpillar employee historical behavior.  Changes in the future behavior of employees could impact this rate.  A decrease in this rate would result in an increase in our expense.

Product liability and insurance loss reserve — We determine these reserves based upon reported claims in process of settlement and actuarial estimates for losses incurred but not reported. Loss reserves, including incurred but not reported reserves, are based on estimates and ultimate settlements may vary significantly from such estimates due to increased claims frequency or severity over historical levels.

Postretirement benefits — Primary actuarial assumptions were determined as follows:

▪ The U.S. expected long-term rate of return on plan assets is based on our estimate of long-term passive returns for equities and fixed income securities weighted by the allocation of our plan assets.  Based on historical performance, we increase the passive returns due to our active management of the plan assets.  A similar process is used to determine the rate for our non-U.S. pension plans.  This rate is impacted by changes in general market conditions, but because it represents a long-term rate, it is not significantly impacted by short-term market swings.  Changes in our allocation of plan assets would also impact this rate.  For example, a shift to more fixed income securities would lower the rate. A decrease in the rate would increase our expense.

▪ The assumed discount rate is used to discount future benefit obligations back to today’s dollars.  The U.S. discount rate is based on a benefit cash flow-matching approach and represents the rate at which our benefit obligations could effectively be settled as of our measurement date, December 31.  The benefit cash flow-matching approach involves analyzing Caterpillar’s projected cash flows against a high quality bond yield curve, calculated using a wide population of corporate Aa bonds available on the measurement date.  The very highest and lowest yielding bonds (top and bottom 10 percent) are excluded from the analysis.  A similar approach is used to determine the assumed discount rate for our most significant non-U.S. plans. This rate is sensitive to changes in interest rates.  A decrease in the discount rate would increase our obligation and future expense.

▪ The expected rate of compensation increase is used to develop benefit obligations using projected pay at retirement. It represents average long-term salary increases. This rate is influenced by our long-term compensation policies.  An increase in the rate would increase our obligation and expense.

▪ The assumed health care trend rate represents the rate at which health care costs are assumed to increase and is based on historical and expected experience.  Changes in our projections of future health care costs due to general economic conditions and those specific to health care (e.g., technology driven cost changes) will impact this trend rate.  An increase in the trend rate would increase our obligation and expense.

Post-sale discount reserve — We provide discounts to dealers through merchandising programs.  We have numerous programs that are designed to promote the sale of our products.  The most common dealer programs provide a discount when the dealer sells a product to a targeted end user.  The amount of accrued post-sale discounts was $1,111 million and $937 million as of June 30, 2012 and December 31, 2011 respectively.  The reserve represents discounts that we expect to pay on previously sold units and is reviewed at least quarterly.  The reserve is adjusted if discounts paid differ from those estimated.  Historically, those adjustments have not been material.

Credit loss reserve — Management’s ongoing evaluation of the adequacy of the allowance for credit losses considers both impaired and unimpaired finance receivables and takes into consideration past loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of underlying collateral and current economic conditions. In estimating probable losses we review accounts that are past due, non-performing, in bankruptcy or otherwise identified as at risk for potential credit loss including accounts which have been modified.  Accounts are identified as at risk for potential credit loss using information available about the customer, such as financial statements, news reports and published credit ratings as well as general information regarding industry trends and the economic environment in which the customer operates.

The allowance for credit losses attributable to specific accounts is based on the most probable source of repayment, which is normally the liquidation of collateral. In determining collateral value we estimate current fair value of collateral and consider credit enhancements such as additional collateral and third-party guarantees. The allowance for credit losses attributable to the remaining accounts is a general allowance based upon the risk in the portfolio, primarily using probabilities of default and an estimate of

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associated losses.  In addition, qualitative factors not able to be fully captured in previous analysis including industry trends, macroeconomic factors and model imprecision are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

While management believes it has exercised prudent judgment and applied reasonable assumptions, there can be no assurance that in the future, changes in economic conditions or other factors would not cause changes in the financial health of our customers. If the financial health of our customer deteriorates, the timing and level of payments received could be impacted and therefore, could result in a change to our estimated losses.

Income tax reserve — We are subject to the income tax laws of the many jurisdictions in which we operate.  These tax laws are complex, and the manner in which they apply to our facts is sometimes open to interpretation.  In establishing the provision for income taxes, we must make judgments about the application of these inherently complex tax laws.

Despite our belief that our tax return positions are consistent with applicable tax laws, we believe that taxing authorities could challenge certain positions. Settlement of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. We record tax benefits for uncertain tax positions based upon management’s evaluation of the information available at the reporting date.  To be recognized in the financial statements, a tax benefit must be at least more likely than not of being sustained based on technical merits.  The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.  Significant judgment is required in making these determinations and adjustments to unrecognized tax benefits may be necessary to reflect actual taxes payable upon settlement.  Adjustments related to positions impacting the effective tax rate affect the provision for income taxes.  Adjustments related to positions impacting the timing of deductions impact deferred tax assets and liabilities.

Our income tax positions and analysis are based on currently enacted tax law.  Future changes in tax law could significantly impact the provision for income taxes, the amount of taxes payable, and the deferred tax asset and liability balances.  Deferred tax assets generally represent tax benefits for tax deductions or credits available in future tax returns.  Certain estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the benefit of a deferred tax asset will not be realized.  In making this assessment, management analyzes and estimates the impact of future taxable income, reversing temporary differences and available prudent and feasible tax planning strategies.  Should a change in facts or circumstances lead to a change in judgment about the ultimate realizability of a deferred tax asset, we record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in the provision for income taxes.

A provision for U.S. income taxes has not been recorded on undistributed profits of our non-U.S. subsidiaries that we have determined to be indefinitely reinvested outside the U.S.  If management intentions or U.S. tax law changes in the future, there may be a significant negative impact on the provision for income taxes to record an incremental tax liability in the period the change occurs. A deferred tax asset is recognized only if we have definite plans to generate a U.S. tax benefit by repatriating earnings in the foreseeable future.

GLOBAL WORKFORCE

Caterpillar worldwide full-time employment was 132,825 at the end of second quarter 2012 compared with 108,175 at the end of second quarter 2011, an increase of 24,650 full-time employees. In addition, the flexible workforce increased by 4,039 for a total increase in the global workforce of 28,689.

The increase was primarily a result of acquisitions and higher sales volume. Acquisitions, primarily Bucyrus, MWM and ERA Mining Machinery Limited, added 16,322 people to the global workforce.

OTHER MATTERS

Environmental and Legal Matters

The company is regulated by federal, state and international environmental laws governing our use, transport and disposal of substances and control of emissions. In addition to governing our manufacturing and other operations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines. Compliance with these existing laws has not had a material impact on our capital expenditures, earnings or global competitive position.

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We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws.  When it is probable we will pay remedial costs at a site and those costs can be reasonably estimated, the costs are charged against our earnings.  In formulating that estimate, we do not consider amounts expected to be recovered from insurance companies or others.  The amount recorded for environmental remediation is not material and is included in Accrued expenses in the Consolidated Statement of Financial Position.

We cannot reasonably estimate costs at sites in the very early stages of remediation.  Currently, we have a few sites in the very early stages of remediation, and there is no more than a remote chance that a material amount for remedial activities at any individual site, or at all sites in the aggregate, will be required.

We have disclosed certain individual legal proceedings in this filing.  Additionally, we are involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of these unresolved actions involve disputes related to product design, manufacture and performance liability (including claimed asbestos and welding fumes exposure), contracts, employment issues, environmental matters or intellectual property rights.  The aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal actions is not material.  In some cases, we cannot reasonably estimate a range of loss because there is insufficient information regarding the matter.  However, there is no more than a remote chance that any liability arising from these matters would be material.  Although it is not possible to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will not individually or in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.

On May 14, 2007, the U.S. Environmental Protection Agency (EPA) issued a Notice of Violation to Caterpillar Inc., alleging various violations of Clean Air Act Sections 203, 206 and 207. EPA claims that Caterpillar violated such sections by shipping engines and catalytic converter after-treatment devices separately, introducing into commerce a number of uncertified and/or misbuilt engines, and failing to timely report emissions-related defects. On July 9, 2010, the Department of Justice issued a penalty demand to Caterpillar seeking a civil penalty of $3.2 million and implementation of injunctive relief involving expanded use of certain technologies. On July 28, 2011, EPA and the U.S. Department of Justice filed and lodged a civil complaint and consent decree with the U.S. District Court for the District of Columbia (Court) regarding the matter. Caterpillar agreed to the terms of the consent decree, which required payment of a civil penalty of $2.55 million, retirement of a small number of emissions credits and expanded defect-related reporting. On September 7, 2011, the Court entered the consent decree, making it effective on that date, and Caterpillar paid $2.04 million of the $2.55 million penalty due to the United States in accordance with the decree terms. On July 9, 2012, under the terms of the consent decree, and subject to a settlement agreement executed on June 21, 2012 with the California Air Resources Board, Caterpillar paid the remaining $0.51 million of the stipulated $2.55 million penalty to the California Air Resources Board.

Retirement Benefits

We recognized pension expense of $183 million and $362 million for the three and six months ended June 30, 2012, as compared to $168 million and $327 million for the three and six months ended June 30, 2011. The increase in expense is due to higher amortization of net actuarial losses due to lower discount rates at the end of 2011 and asset losses in 2011. In addition, 2012 expense included $10 million of special termination benefits related to the closure of the Electro-Motive Diesel facility discussed below. This was partially offset by higher amortization of asset gains from 2009 and 2010. Accounting guidance on retirement benefits requires companies to discount future benefit obligations back to today’s dollars using a discount rate that is based on high-quality fixed-income investments. A decrease in the discount rate increases the pension benefit obligation, while an increase in the discount rate decreases the pension benefit obligation.  This increase or decrease in the pension benefit obligation is recognized in Accumulated other comprehensive income (loss) and subsequently amortized into earnings as an actuarial gain or loss.  The guidance also requires companies to use an expected long-term rate of asset return for computing current year pension expense. Differences between the actual and expected returns are also recognized in Accumulated other comprehensive income (loss) and subsequently amortized into earnings as actuarial gains and losses.  As of June 30, 2012, total actuarial losses, recognized in Accumulated other comprehensive income (loss), related to pensions were $8.51 billion.  The majority of the actuarial losses are due to lower discount rates, plan asset losses and losses from other demographic and economic assumptions over the past several years.

Other postretirement benefit expense was $71 million and $103 million for the three and six months ended June 30, 2012, as compared to $80 million and $160 million for the three and six months ended June 30, 2011.  The decrease in expense was primarily the result of curtailment gains of $40 million of which $37 million is related to the closure of the Electro-Motive Diesel facility discussed below.  Actuarial losses, recognized in Accumulated other comprehensive income (loss), for other postretirement benefit plans were $1.44 billion at June 30, 2012. These losses mainly reflect several years of declining discount rates, changes in our

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health care trend assumption and plan asset losses, partially offset by gains from lower than expected health care costs. 

Actuarial losses for both pensions and other postretirement benefits will be impacted in future periods by actual asset returns, actual health care inflation, discount rate changes, actual demographic experience and other factors that impact these expenses. These losses, reported in Accumulated other comprehensive income (loss), will generally be amortized as a component of net periodic benefit cost on a straight-line basis over the average remaining service period of active employees expected to receive benefits under the plans. For other postretirement benefit plans in which all or almost all of the plan's participants are fully eligible for benefits under the plan, the losses are amortized using the straight-line method over the remaining life expectancy of those participants. At the end of 2011, the average remaining service period of active employees or life expectancy for fully eligible employees was 11 years for our U.S. pension plans, 13 years for our non-U.S. pension plans and 10 years for other postretirement benefit plans. We expect our amortization of net actuarial losses to increase approximately $60 million in 2012 as compared to 2011, primarily due to a decrease in discount rates and plan asset losses during 2011, partially offset by higher amortization of plan asset gains from 2009 and 2010.

In February 2012, we announced the closure of the Electro-Motive Diesel facility located in London, Ontario. As a result of the closure, we recognized a $37 million other postretirement benefits curtailment gain in the first quarter. This excludes a $21 million loss of a third party receivable for other postretirement benefits that was eliminated due to the closure. In addition, a $10 million special termination benefit expense was recognized related to statutory pension benefits required to be paid to certain affected employees.

We expect our total defined benefit expense to decrease approximately $40 million in 2012 as compared to 2011.  This decrease in expense is primarily due to the other postretirement benefits curtailment gain related to the closure of the Electro-Motive Diesel facility.

We made $119 million and $293 million of contributions to our pension plans during the three and six months ended June 30, 2012, respectively. We currently anticipate full-year 2012 contributions of approximately $1 billion, of which $570 million are required contributions. We made $104 million and $235 million of contributions to our pension plans during the three months and six months ended June 30, 2011, respectively.

Order Backlog

The dollar amount of backlog believed to be firm was approximately $28.2 billion at June 30, 2012 and $29.8 billion at December 31, 2011.  This reflects an 11 percent increase in backlog from the same period a year ago (including the Bucyrus backlog as of the acquisition on July 8, 2011) and an 8 percent decline from the end of the first quarter of 2012. The decline occurred in Construction Industries, Resource Industries and Power Systems, and was primarily a result of improvements in delivery performance with a number of machines coming off managed distribution. Dealers and customers are also exercising caution, particularly for long lead-time products, given the economic uncertainty in the world today. Of the total backlog, approximately $5.8 billion at June 30, 2012 and $4.0 billion at December 31, 2011 was not expected to be filled in the following twelve months.

NON-GAAP FINANCIAL MEASURES

The following definitions are provided for “non-GAAP financial measures” in connection with Item 10(e) of Regulation S-K issued by the Securities and Exchange Commission.   These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies.  Management does not intend these items to be considered in isolation or substitutes for the related GAAP measures.

Supplemental Consolidating Data

We are providing supplemental consolidating data for the purpose of additional analysis.  The data has been grouped as follows:

Consolidated – Caterpillar Inc. and its subsidiaries.

Machinery and Power Systems – The Machinery and Power Systems data contained in the schedules on pages 81 to 88 are “non-GAAP financial measures” as defined by the Securities and Exchange Commission in Item 10(e) of Regulation S-K.  This non-GAAP financial measure has no standardized meaning prescribed by U.S. GAAP, and therefore, is unlikely to be comparable with the calculation of similar measures for other companies.  Management does not intend this item to be considered in isolation or as a substitute for the related GAAP measure.  Caterpillar defines Machinery and Power Systems as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.  Machinery

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and Power Systems information relates to the design, manufacture and marketing of our products.  Financial Products information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.  The nature of these businesses is different especially with regard to the financial position and cash flow items.  Caterpillar management utilizes this presentation internally to highlight these differences.  We also believe this presentation will assist readers in understanding our business.

Financial Products – Our finance and insurance subsidiaries, primarily Cat Financial and Cat Insurance.

Consolidating Adjustments – Eliminations of transactions between Machinery and Power Systems and Financial Products.

Pages 81 to 88 reconcile Machinery and Power Systems with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.

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Caterpillar Inc.

Supplemental Data for Results of Operations

For The Three Months Ended June 30, 2012

(Unaudited)

(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery and Power Systems1			Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery and Power Systems	$	16,684	$	16,684		$	—	$	—
Revenues of Financial Products	690		—			780		(90		)	2
Total sales and revenues	17,374		16,684			780		(90		)
Operating costs:
Cost of goods sold	12,280		12,280			—		—
Selling, general and administrative expenses	1,517		1,373			150		(6		)	3
Research and development expenses	632		632			—		—
Interest expense of Financial Products	198		—			198		—			4
Other operating (income) expenses	131		(107		)	248		(10		)	3
Total operating costs	14,758		14,178			596		(16		)
Operating profit	2,616		2,506			184		(74		)
Interest expense excluding Financial Products	110		121			—		(11		)	4
Other income (expense)	70		7			—		63			5
Consolidated profit before taxes	2,576		2,392			184		—
Provision for income taxes	872		819			53		—
Profit of consolidated companies	1,704		1,573			131		—
Equity in profit (loss) of unconsolidated affiliated companies	5		5			—		—
Equity in profit of Financial Products’ subsidiaries	—		130			—		(130		)	6
Profit of consolidated and affiliated companies	1,709		1,708			131		(130		)
Less: Profit attributable to noncontrolling interests	10		9			1		—
Profit7	$	1,699	$	1,699		$	130	$	(130	)

¹  Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

²  Elimination of Financial Products’ revenues earned from Machinery and Power Systems.

³  Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

⁴  Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

⁵  Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

⁶  Elimination of Financial Products’ profit due to equity method of accounting.

⁷  Profit attributable to common stockholders.

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Caterpillar Inc.

Supplemental Data for Results of Operations

For The Six Months Ended June 30, 2012

(Unaudited)

(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery and Power Systems1			Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery and Power Systems	$	31,972	$	31,972		$	—	$	—
Revenues of Financial Products	1,383		—			1,557		(174		)	2
Total sales and revenues	33,355		31,972			1,557		(174		)
Operating costs:
Cost of goods sold	23,517		23,517			—		—
Selling, general and administrative expenses	2,857		2,597			277		(17		)	3
Research and development expenses	1,219		1,219			—		—
Interest expense of Financial Products	402		—			402		—			4
Other operating (income) expenses	421		(64		)	500		(15		)	3
Total operating costs	28,416		27,269			1,179		(32		)
Operating profit	4,939		4,703			378		(142		)
Interest expense excluding Financial Products	223		246			—		(23		)	4
Other income (expense)	158		27			12		119			5
Consolidated profit before taxes	4,874		4,484			390		—
Provision for income taxes	1,561		1,449			112		—
Profit of consolidated companies	3,313		3,035			278		—
Equity in profit (loss) of unconsolidated affiliated companies	7		7			—		—
Equity in profit of Financial Products’ subsidiaries	—		273			—		(273		)	6
Profit of consolidated and affiliated companies	3,320		3,315			278		(273		)
Less: Profit attributable to noncontrolling interests	35		30			5		—
Profit7	$	3,285	$	3,285		$	273	$	(273	)

¹  Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

²  Elimination of Financial Products’ revenues earned from Machinery and Power Systems.

³  Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

⁴  Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

⁵  Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

⁶  Elimination of Financial Products’ profit due to equity method of accounting.

⁷  Profit attributable to common stockholders.

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Caterpillar Inc.

Supplemental Data for Results of Operations

For The Three Months Ended June 30, 2011

(Unaudited)

(Millions of dollars)

				Supplemental Consolidating Data
	Consolidated			Machinery and Power Systems1			Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery and Power Systems	$	13,535		$	13,535		$	—	$	—
Revenues of Financial Products	695			—			777		(82		)	2
Total sales and revenues	14,230			13,535			777		(82		)
Operating costs:
Cost of goods sold	10,303			10,303			—		—
Selling, general and administrative expenses	1,257			1,121			141		(5		)	3
Research and development expenses	584			584			—		—
Interest expense of Financial Products	209			—			209		—			4
Other operating (income) expenses	276			14			271		(9		)	3
Total operating costs	12,629			12,022			621		(14		)
Operating profit	1,601			1,513			156		(68		)
Interest expense excluding Financial Products	90			101			—		(11		)	4
Other income (expense)	(161		)	(235		)	17		57			5
Consolidated profit before taxes	1,350			1,177			173		—
Provision for income taxes	318			273			45		—
Profit of consolidated companies	1,032			904			128		—
Equity in profit (loss) of unconsolidated affiliated companies	(10		)	(10		)	—		—
Equity in profit of Financial Products’ subsidiaries	—			123			—		(123		)	6
Profit of consolidated and affiliated companies	1,022			1,017			128		(123		)
Less: Profit attributable to noncontrolling interests	7			2			5		—
Profit7	$	1,015		$	1,015		$	123	$	(123	)

¹  Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

²  Elimination of Financial Products’ revenues earned from Machinery and Power Systems.

³  Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

⁴  Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

⁵  Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

⁶  Elimination of Financial Products’ profit due to equity method of accounting.

⁷  Profit attributable to common stockholders.

83

Caterpillar Inc.

Supplemental Data for Results of Operations

For The Six Months Ended June 30, 2011

(Unaudited)

(Millions of dollars)

				Supplemental Consolidating Data
	Consolidated			Machinery and Power Systems1			Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery and Power Systems	$	25,812		$	25,812		$	—	$	—
Revenues of Financial Products	1,367			—			1,517		(150		)	2
Total sales and revenues	27,179			25,812			1,517		(150		)
Operating costs:
Cost of goods sold	19,360			19,360			—		—
Selling, general and administrative expenses	2,356			2,070			293		(7		)	3
Research and development expenses	1,109			1,109			—		—
Interest expense of Financial Products	412			—			413		(1		)	4
Other operating (income) expenses	508			(1		)	529		(20		)	3
Total operating costs	23,745			22,538			1,235		(28		)
Operating profit	3,434			3,274			282		(122		)
Interest expense excluding Financial Products	177			198			—		(21		)	4
Other income (expense)	(144		)	(274		)	29		101			5
Consolidated profit before taxes	3,113			2,802			311		—
Provision for income taxes	830			747			83		—
Profit of consolidated companies	2,283			2,055			228		—
Equity in profit (loss) of unconsolidated affiliated companies	(18		)	(18		)	—		—
Equity in profit of Financial Products’ subsidiaries	—			220			—		(220		)	6
Profit of consolidated and affiliated companies	2,265			2,257			228		(220		)
Less: Profit attributable to noncontrolling interests	25			17			8		—
Profit7	$	2,240		$	2,240		$	220	$	(220	)

¹  Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

²  Elimination of Financial Products’ revenues earned from Machinery and Power Systems.

³  Elimination of net expenses recorded by Machinery and Power Systems paid to Financial Products.

⁴  Elimination of interest expense recorded between Financial Products and Machinery and Power Systems.

⁵  Elimination of discount recorded by Machinery and Power Systems on receivables sold to Financial Products and of interest earned between Machinery and Power Systems and Financial Products.

⁶  Elimination of Financial Products’ profit due to equity method of accounting.

⁷  Profit attributable to common stockholders.

84

Caterpillar Inc.

Supplemental Data for Financial Position

At June 30, 2012

(Unaudited)

(Millions of dollars)

				Supplemental Consolidating Data
	Consolidated			Machinery and Power Systems1			Financial Products		Consolidating Adjustments
Assets
Current assets:
Cash and short-term investments	$	5,103		$	2,810		$	2,293	$	—
Receivables – trade and other	10,443			5,510			394		4,539			2,3
Receivables – finance	8,383			—			13,003		(4,620		)	3
Deferred and refundable income taxes	1,685			1,621			64		—
Prepaid expenses and other current assets	1,336			885			464		(13		)	4
Inventories	17,344			17,344			—		—
Total current assets	44,294			28,170			16,218		(94		)
Property, plant and equipment – net	14,928			11,832			3,096		—
Long-term receivables – trade and other	803			202			272		329			2,3
Long-term receivables – finance	12,955			—			13,322		(367		)	3
Investments in unconsolidated affiliated companies	124			124			—		—
Investments in Financial Products subsidiaries	—			4,011			—		(4,011		)	5
Noncurrent deferred and refundable income taxes	2,032			2,483			91		(542		)	6
Intangible assets	4,236			4,227			9		—
Goodwill	7,320			7,303			17		—
Other assets	2,146			857			1,289		—
Total assets	$	88,838		$	59,209		$	34,314	$	(4,685	)
Liabilities
Current liabilities:
Short-term borrowings	$	5,047		$	592		$	4,455	$	—		7
Accounts payable	8,470			8,396			151		(77		)	8
Accrued expenses	3,532			3,143			402		(13		)	9
Accrued wages, salaries and employee benefits	1,628			1,605			23		—
Customer advances	3,132			3,132			—		—
Dividends payable	339			339			—		—
Other current liabilities	2,117			1,650			476		(9		)	6
Long-term debt due within one year	7,008			1,269			5,739		—
Total current liabilities	31,273			20,126			11,246		(99		)
Long-term debt due after one year	27,261			9,211			18,092		(42		)	7
Liability for postemployment benefits	10,626			10,626			—		—
Other liabilities	3,697			3,265			965		(533		)	6
Total liabilities	72,857			43,228			30,303		(674		)
Commitments and contingencies
Redeemable noncontrolling interest	—			—			—		—
Stockholders’ equity
Common stock	4,373			4,373			906		(906		)	5
Treasury stock	(10,139		)	(10,139		)	—		—
Profit employed in the business	27,842			27,842			2,903		(2,903		)	5
Accumulated other comprehensive income (loss)	(6,150		)	(6,150		)	102		(102		)	5
Noncontrolling interests	55			55			100		(100		)	5
Total stockholders’ equity	15,981			15,981			4,011		(4,011		)
Total liabilities, redeemable noncontrolling interest and stockholders’ equity	$	88,838		$	59,209		$	34,314	$	(4,685	)

¹ Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

² Elimination of receivables between Machinery and Power Systems and Financial Products.

³ Reclassification of Machinery and Power Systems’ trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.

⁴ Elimination of Machinery and Power Systems’ insurance premiums that are prepaid to Financial Products.

⁵ Elimination of Financial Products’ equity which is accounted for by Machinery and Power Systems on the equity basis.

⁶ Reclassification reflecting required netting of deferred tax assets / liabilities by taxing jurisdiction.

⁷ Elimination of debt between Machinery and Power Systems and Financial Products.

⁸ Elimination of payables between Machinery and Power Systems and Financial Products.

⁹ Elimination of prepaid insurance in Financial Products’ accrued expenses.

85

Caterpillar Inc.

Supplemental Data for Financial Position

At December 31, 2011

(Unaudited)

(Millions of dollars)

				Supplemental Consolidating Data
	Consolidated			Machinery  and Power Systems1			Financial Products		Consolidating Adjustments
Assets
Current assets:
Cash and short-term investments	$	3,057		$	1,829		$	1,228	$	—
Receivables – trade and other	10,285			5,497			430		4,358			2,3
Receivables – finance	7,668			—			12,202		(4,534		)	3
Deferred and refundable income taxes	1,580			1,515			65		—
Prepaid expenses and other current assets	994			525			481		(12		)	4
Inventories	14,544			14,544			—		—
Total current assets	38,128			23,910			14,406		(188		)
Property, plant and equipment – net	14,395			11,492			2,903		—
Long-term receivables – trade and other	1,130			281			271		578			2,3
Long-term receivables – finance	11,948			—			12,556		(608		)	3
Investments in unconsolidated affiliated companies	133			133			—		—
Investments in Financial Products subsidiaries	—			4,035			—		(4,035		)	5
Noncurrent deferred and refundable income taxes	2,157			2,593			97		(533		)	6
Intangible assets	4,368			4,359			9		—
Goodwill	7,080			7,063			17		—
Other assets	2,107			813			1,294		—
Total assets	$	81,446		$	54,679		$	31,553	$	(4,786	)
Liabilities
Current liabilities:
Short-term borrowings	$	3,988		$	157		$	3,895	$	(64	)	7
Accounts payable	8,161			8,106			165		(110		)	8
Accrued expenses	3,386			2,957			443		(14		)	9
Accrued wages, salaries and employee benefits	2,410			2,373			37		—
Customer advances	2,691			2,691			—		—
Dividends payable	298			298			—		—
Other current liabilities	1,967			1,590			382		(5		)	6
Long-term debt due within one year	5,660			558			5,102		—
Total current liabilities	28,561			18,730			10,024		(193		)
Long-term debt due after one year	24,944			8,446			16,529		(31		)	7
Liability for postemployment benefits	10,956			10,956			—		—
Other liabilities	3,583			3,145			965		(527		)	6
Total liabilities	68,044			41,277			27,518		(751		)
Commitments and contingencies
Redeemable noncontrolling interest	473			473			—		—
Stockholders’ equity
Common stock	4,273			4,273			906		(906		)	5
Treasury stock	(10,281		)	(10,281		)	—		—
Profit employed in the business	25,219			25,219			2,880		(2,880		)	5
Accumulated other comprehensive income (loss)	(6,328		)	(6,328		)	154		(154		)	5
Noncontrolling interests	46			46			95		(95		)	5
Total stockholders’ equity	12,929			12,929			4,035		(4,035		)
Total liabilities, redeemable noncontrolling interest and stockholders’ equity	$	81,446		$	54,679		$	31,553	$	(4,786	)

¹ Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

² Elimination of receivables between Machinery and Power Systems and Financial Products.

³ Reclassification of Machinery and Power Systems’ trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.

⁴ Elimination of Machinery and Power Systems’ insurance premiums that are prepaid to Financial Products.

⁵ Elimination of Financial Products’ equity which is accounted for by Machinery and Power Systems on the equity basis.

⁶ Reclassification reflecting required netting of deferred tax assets / liabilities by taxing jurisdiction.

⁷ Elimination of debt between Machinery and Power Systems and Financial Products.

⁸ Elimination of payables between Machinery and Power Systems and Financial Products.

⁹ Elimination of prepaid insurance in Financial Products’ accrued expenses.

86

Caterpillar Inc.

Supplemental Data for Cash Flow

For The Six Months Ended June 30, 2012

(Unaudited)

(Millions of dollars)

				Supplemental Consolidating Data
	Consolidated			Machinery and Power Systems1			Financial Products			Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	3,320		$	3,315		$	278		$	(273	)	2
Adjustments for non-cash items:
Depreciation and amortization	1,350			988			362			—
Undistributed profit of Financial Products	—			(23		)	—			23			3
Other	(59		)	(66		)	(94		)	101			4
Changes in assets and liabilities, net of acquisitions and divestitures:	—
Receivables - trade and other	37			(36		)	(21		)	94			4,5
Inventories	(2,939		)	(2,893		)	—			(46		)	4
Accounts payable	299			290			(24		)	33			4
Accrued expenses	115			119			(5		)	1			4
Accrued wages, salaries and employee benefits	(753		)	(739		)	(14		)	—
Customer advances	434			434			—			—
Other assets – net	63			52			1			10			4
Other liabilities – net	140			74			76			(10		)	4
Net cash provided by (used for) operating activities	2,007			1,515			559			(67		)
Cash flow from investing activities:
Capital expenditures - excluding equipment leased to others	(1,508		)	(1,500		)	(8		)	—
Expenditures for equipment leased to others	(787		)	(45		)	(866		)	124			4,9
Proceeds from disposals of leased assets and property, plant and equipment	543			63			491			(11		)	4
Additions to finance receivables	(5,942		)	—			(10,012		)	4,070			5,8,9
Collections of finance receivables	4,298			—			8,016			(3,718		)	5,9
Net intercompany purchased receivables	—			—			117			(117		)	5
Proceeds from sale of finance receivables	85			—			85			—
Net intercompany borrowings	—			—			63			(63		)	6
Investments and acquisitions (net of cash acquired)	(517		)	(461		)	—			(56		)	9
Proceeds from sale of businesses and investments (net of cash sold)	308			783			—			(475		)	8
Proceeds from sale of available-for-sale securities	177			19			158			—
Investments in available-for-sale securities	(199		)	(4		)	(195		)	—
Other – net	38			8			30			—
Net cash provided by (used for) investing activities	(3,504		)	(1,137		)	(2,121		)	(246		)
Cash flow from financing activities:
Dividends paid	(598		)	(598		)	(250		)	250			7
Distribution to noncontrolling interests	(5		)	(5		)	—			—
Common stock issued, including treasury shares reissued	25			25			—			—
Excess tax benefit from stock-based compensation	156			156			—			—
Acquisitions of redeemable noncontrolling interests	(444		)	(444		)	—			—
Net intercompany borrowings	—			(63		)	—			63			6
Proceeds from debt issued (original maturities greater than three months)	9,019			1,662			7,357			—
Payments on debt (original maturities greater than three months)	(5,033		)	(211		)	(4,822		)	—
Short-term borrowings – net  (original maturities three months or less)	552			108			444			—
Net cash provided by (used for) financing activities	3,672			630			2,729			313
Effect of exchange rate changes on cash	(129		)	(27		)	(102		)	—
Increase (decrease) in cash and short-term investments	2,046			981			1,065			—
Cash and short-term investments at beginning of period	3,057			1,829			1,228			—
Cash and short-term investments at end of period	$	5,103		$	2,810		$	2,293		$	—

¹ Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

² Elimination of Financial Products’ profit after tax due to equity method of accounting.

³ Non-cash adjustment for the undistributed earnings from Financial Products.

⁴ Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

⁵ Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory.

⁶ Elimination of net proceeds and payments to/from Machinery and Power Systems and Financial Products.

⁷ Elimination of dividend from Financial Products to Machinery and Power Systems.

⁸ Elimination of proceeds received from Financial Products related to Machinery and Power Systems' sale of Bucyrus distribution businesses to Cat dealers.

⁹ Reclassification of Financial Products' payments related to Machinery and Power Systems' acquisition of Caterpillar Tohoku Limited.

87

Caterpillar Inc.

Supplemental Data for Cash Flow

For The Six Months Ended June 30, 2011

(Unaudited)

(Millions of dollars)

				Supplemental Consolidating Data
	Consolidated			Machinery and Power Systems1			Financial Products			Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	2,265		$	2,257		$	228		$	(220	)	2
Adjustments for non-cash items:
Depreciation and amortization	1,174			810			364			—
Other	337			308			(63		)	92			4
Financial Products’ dividend in excess of profit	—			80			—			(80		)	3
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables - trade and other	45			1,159			17			(1,131		)	4,5
Inventories	(1,850		)	(1,850		)	—			—
Accounts payable	1,056			1,083			12			(39		)	4
Accrued expenses	(41		)	(12		)	(28		)	(1		)	4
Accrued wages, salaries and employee benefits	(91		)	(88		)	(3		)	—
Customer advances	14			14			—			—
Other assets – net	28			89			61			(122		)	4
Other liabilities – net	357			261			(25		)	121			4
Net cash provided by (used for) operating activities	3,294			4,111			563			(1,380		)
Cash flow from investing activities:
Capital expenditures - excluding equipment leased to others	(924		)	(921		)	(3		)	—
Expenditures for equipment leased to others	(580		)	(54		)	(571		)	45			4
Proceeds from disposals of leased assets and property, plant and equipment	621			72			601			(52		)	4
Additions to finance receivables	(4,294		)	—			(7,734		)	3,440			5,8
Collections of finance receivables	3,981			—			7,008			(3,027		)	5
Net intercompany purchased receivables	—			—			(1,056		)	1,056
Proceeds from sale of finance receivables	104			—			104			—
Net intercompany borrowings	—			600			62			(662		)	6
Investments and acquisitions (net of cash acquired)	(68		)	(68		)	—			—
Proceeds from sale of business and investments (net of cash sold)	21			392			11			(382		)	8
Proceeds from sale of available-for-sale securities	122			6			116			—
Investments in available-for-sale securities	(131		)	(7		)	(124		)	—
Other – net	(38		)	(114		)	76			—
Net cash provided by (used for) investing activities	(1,186		)	(94		)	(1,510		)	418
Cash flow from financing activities:
Dividends paid	(565		)	(565		)	(300		)	300			7
Distribution to noncontrolling interests	(2		)	(2		)	—			—
Common stock issued, including treasury shares reissued	96			96			—			—
Excess tax benefit from stock-based compensation	159			159			—			—
Net intercompany borrowings	—			(62		)	(600		)	662			6
Proceeds from debt issued (original maturities greater than three months)	10,329			4,530			5,799			—
Payments on debt (original maturities greater than three months)	(5,125		)	(487		)	(4,638		)	—
Short-term borrowings – net  (original maturities three months or less)	36			(69		)	105			—
Net cash provided by (used for) financing activities	4,928			3,600			366			962
Effect of exchange rate changes on cash	87			14			73			—
Increase (decrease) in cash and short-term investments	7,123			7,631			(508		)	—
Cash and short-term investments at beginning of period	3,592			1,825			1,767			—
Cash and short-term investments at end of period	$	10,715		$	9,456		$	1,259		$	—

¹    Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.

²    Elimination of Financial Products’ profit after tax due to equity method of accounting.

³    Elimination of Financial Products’ dividend to Machinery and Power Systems in excess of Financial Products’ profit.

⁴    Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

⁵    Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory.

⁶    Elimination of net proceeds and payments to/from Machinery and Power Systems and Financial Products.

⁷    Elimination of dividend from Financial Products to Machinery and Power Systems.

⁸    Elimination of proceeds received from Financial Products related to machinery and Power Systems' sale of Carter Machinery.

88

Forward-looking Statements

Certain statements in this Form 10-Q relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance, and we do not undertake to update our forward-looking statements.

Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global economic conditions and economic conditions in the industries and markets we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity or component price increases and/or limited availability of raw materials and component products, including steel; (iv) our and our customers', dealers' and suppliers' ability to access and manage liquidity; (v) political and economic risks and instability, including national or international conflicts and civil unrest; (vi) our and Cat Financial's ability to: maintain credit ratings, avoid material increases in borrowing costs, and access capital markets; (vii) the financial condition and credit worthiness of Cat Financial's customers; (viii) inability to realize expected benefits from acquisitions and divestitures, including the acquisition of Bucyrus International, Inc.; (ix) international trade and investment policies; (x) challenges related to Tier 4 emissions compliance; (xi) market acceptance of our products and services; (xii) changes in the competitive environment, including market share, pricing and geographic and product mix of sales; (xiii) successful implementation of capacity expansion projects, cost reduction initiatives and efficiency or productivity initiatives, including the Caterpillar Production System; (xiv) sourcing practices of our dealers or original equipment manufacturers; (xv) compliance with environmental laws and regulations; (xvi) alleged or actual violations of trade or anti-corruption laws and regulations; (xvii) additional tax expense or exposure; (xviii) currency fluctuations; (xix) our or Cat Financial's compliance with financial covenants; (xx) increased pension plan funding obligations; (xxi) union disputes or other employee relations issues; (xxii) significant legal proceedings, claims, lawsuits or investigations; (xxiii) compliance requirements imposed if carbon emissions legislation and/or regulations are adopted; (xxiv) changes in accounting standards; (xxv) failure or breach of IT security; (xxvi) adverse effects of natural disasters; and (xxvii) other factors described in more detail under “Item 1A. Risk Factors” in our Form 10-K filed with the SEC on February 21, 2012 for the year ended December 31, 2011. This filing is available on our website at www.caterpillar.com/secfilings.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The information required by this Item is incorporated by reference from Note 4 — “Derivative Financial Instruments and Risk Management” included in Part I, Item 1 and Management’s Discussion and Analysis included in Part I, Item 2 of this Form 10-Q.

Item 4.  Controls and Procedures

Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of the company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report.  Based on that evaluation, the company’s management, including the CEO and CFO, concluded that the company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.

Changes in internal control over financial reporting

Except for the change noted below, there has been no change in the company's internal control over financial reporting during the second quarter of 2012, that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

During the second quarter of 2012, we acquired substantially all of the of the equity in ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical Manufacturing Co., Ltd., commonly known as Siwei. As part of the post-closing integration, we are engaged in refining and harmonizing the internal controls and processes of the acquired business with those of the company. Management intends to exclude the internal controls of Siwei from its annual assessment of the effectiveness of the company's internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 for 2012. This exclusion is in accordance with the general guidance issued by the Securities and Exchange Commission that an

89

assessment of a recent business combination may be omitted from management's report on internal control over financial reporting in the year of consolidation.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

The information required by this Item is incorporated by reference from Note 12 included in Part I, Item 1 of this Form 10-Q.    

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

No shares were repurchased during the second quarter 2012.

Other Purchases of Equity Securities

Period	Total Number of Shares Purchased1	Average Price Paid per Share		Total Number of Shares Purchased Under the Program	Approximate Dollar Value of Shares that may yet be Purchased under the Program
April 1-30, 2012	1,160	$	106.49	NA	NA
May 1-31, 2012	4,815	$	105.04	NA	NA
June 1-30, 2012	822	$	90.29	NA	NA
Total	6,797	$	103.50

¹ Represents shares delivered back to issuer for the payment of taxes resulting from the vesting of restricted stock units and the exercise of stock options by employees and Directors.

Non-U.S. Employee Stock Purchase Plans

We have 29 employee stock purchase plans administered outside the United States for our non-U.S. employees.  As of June 30, 2012, those plans had approximately 13,927 active participants in the aggregate.  During the second quarter of 2012, approximately 100,095 shares of Caterpillar common stock or foreign denominated equivalents were distributed under the plans.  Participants in some foreign plans have the option of receiving non-U.S. share certificates (foreign-denominated equivalents) in lieu of U.S. shares of Caterpillar common stock upon withdrawal from the plan.  These equivalent certificates are tradable only on the local stock market and are included in our determination of shares outstanding.

Distributions of Caterpillar stock under the plans are exempt from registration under the Securities Act of 1933 (Act) pursuant to 17 CFR 230.903.

Item 4. Mine Safety Disclosures

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this quarterly report.

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Item 6. Exhibits

3.1	Restated Certificate of Incorporation of Caterpillar Inc., effective June 13, 2012.
3.2	Bylaws of Caterpillar Inc., as amended and restated as of June 13, 2012
4.1	Form of 0.950% Senior Note due 2015 (incorporated by reference from Exhibit 4.1 to Form 8-K filed June 21, 2012).
4.2	Form of 1.500% Senior Note due 2017 (incorporated by reference from Exhibit 4.2 to Form 8-K filed June 21, 2012).
4.3	Form of 2.600% Senior Note due 2022 (incorporated by reference from Exhibit 4.3 to Form 8-K filed June 21, 2012).
11	Computations of Earnings per Share (included in Note 11 of this Form 10-Q filed for the quarter ended June 30, 2012).
31.1	Certification of Douglas R. Oberhelman, Chairman and Chief Executive Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Edward J. Rapp, Group President and Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Douglas R. Oberhelman, Chairman and Chief Executive Officer of Caterpillar Inc. and Edward J. Rapp, Group President and Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95	Mine Safety Disclosures
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

91

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CATERPILLAR INC.
August 6, 2012	/s/Douglas R. Oberhelman	Chairman and Chief Executive Officer
	(Douglas R. Oberhelman)
August 6, 2012	/s/Edward J. Rapp	Group President and Chief Financial Officer
	(Edward J. Rapp)
August 6, 2012	/s/James B. Buda	Senior Vice President and Chief Legal Officer
	(James B. Buda)
August 6, 2012	/s/Jananne A. Copeland	Corporate Controller and Chief Accounting Officer
	(Jananne A. Copeland)

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EXHIBIT INDEX

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of Caterpillar Inc., effective June 13, 2012.
3.2	Bylaws of Caterpillar Inc., as amended and restated as of June 13, 2012.
4.1	Form of 0.950% Senior Note due 2015 (incorporated by reference from Exhibit 4.1 to Form 8-K filed June 21, 2012).
4.2	Form of 1.500% Senior Note due 2017 (incorporated by reference from Exhibit 4.2 to Form 8-K filed June 21, 2012).
4.3	Form of 2.600% Senior Note due 2022 (incorporated by reference from Exhibit 4.3 to Form 8-K filed June 21, 2012).
11	Computations of Earnings per Share (included in Note 11 of this Form 10-Q filed for the quarter ended June 30, 2012).
31.1	Certification of Douglas R. Oberhelman, Chairman and Chief Executive Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Edward J. Rapp, Group President and Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Douglas R. Oberhelman, Chairman and Chief Executive Officer of Caterpillar Inc. and Edward J. Rapp, Group President and Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95	Mine Safety Disclosures
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

93

EX-3.1

EXHIBIT 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

CATERPILLAR INC.

Caterpillar Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

1. The name of the corporation is Caterpillar Inc. The date of filing its original Certificate of Incorporation with the Secretary of State was March 12, 1986.

2. This Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Certificate of Incorporation of this corporation and has been duly adopted by the stockholders of the corporation in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of Delaware.

3. The text of the Certificate of Incorporation is amended and restatedto read as herein set forth in full:

FIRST: The name of this corporation is Caterpillar Inc.

SECOND: The address of the registered office of the corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, and the name of its registered agent at that address is The Corporation Trust Company.

THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH: (a) The corporation is authorized to issue two classes of shares to be designated, respectively, "common stock" and "preferred stock." The total number of such shares shall be two billion and five million (2,005,000,000), all of which shares shall have a par value of $1.00 per share. The total number of shares of common stock authorized to be issued shall be two billion (2,000,000,000) and the total number of shares of preferred stock authorized to be issued shall be five million (5,000,000).

(b) The shares of preferred stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to establish from time to time by resolution or resolutions the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof, including but not limited to the fixing or alteration of the dividend rights, dividend rate or rates, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of shares of preferred stock, and the number of shares constituting any such series and the designation thereof, or any or all of them; and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

FIFTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors shall have power to make, alter, amend and repeal the bylaws (except so far as the bylaws adopted by the stockholders shall otherwise provide). Any bylaws made by the Board of Directors under the powers conferred hereby may be altered, amended or repealed by the Board of Directors or by the stockholders. Notwithstanding the foregoing and anything contained in this Certificate of Incorporation to the contrary, Sections 1(b)(ii), 1(c) and 3(f) of Article II, and Section 1 of Article III of the bylaws shall not be altered, amended or repealed, and no provisions inconsistent therewith shall be adopted, without the affirmative vote

of the holders of not less than a majority of the outstanding stock of the corporation entitled to vote generally in the election of directors, voting together as a single class (it being understood that for the purposes of this Article FIFTH, each share shall have one vote except as otherwise provided in accordance with Article FOURTH).

SIXTH: (a) The number of directors which shall constitute the whole Board of Directors of this corporation shall be as specified in the bylaws of the corporation, subject to the provisions of Article FIFTH herein and this Article SIXTH.

(b) At each annual meeting of stockholders, directors shall be elected for a term of office to expire at the next annual meeting of stockholders, with each director to serve until his successor is duly elected and qualified or until his death, resignation or removal.

(c) No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

(d) Newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office (and not by stockholders), even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of stockholders and until such director's successor shall have been elected and qualified.

(e) Any director may be removed from office without cause but only by the affirmative vote of the holders of not less than a majority of the outstanding stock of the corporation entitled to vote generally in the election of directors, voting together as a single class (it being understood that for the purpose of this Article SIXTH, each share shall have one vote except as otherwise provided in accordance with Article FOURTH).

(f) Notwithstanding the foregoing, whenever the holders of any one or more classes or series of stock issued by this corporation having a preference over the common stock as to dividends or upon liquidation, shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies, terms of removal and other features of such directorships shall be governed by the terms of Article FOURTH and the resolution or resolutions establishing such class or series adopted pursuant thereto.

SEVENTH: (a) Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.

(b) Special meetings of the stockholders of this corporation for any purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer, the Secretary or by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, but such special meetings may not be called by any other person or persons, except as otherwise provided in the bylaws of this corporation.

(c) Advance notice of stockholder nominations for the election of directors shall be given in the manner provided in the bylaws of this corporation.

(d) Election of directors need not be by written ballot unless the bylaws of this corporation shall so provide.

EIGHTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Certificate of Incorporation, and all rights conferred on stockholders herein are granted subject to this reservation. Notwithstanding the foregoing, the affirmative vote of not less than a majorityof the total voting power of

all outstanding shares of stock in this corporation entitled to vote generally in the election of directors voting together as a single class (it being understood that for the purposes of this Article EIGHTH, each share shall have one vote except as otherwise provided in accordance with Article FOURTH) shall be required to alter, amend or repeal, or adopt any provisions inconsistent with the provisions set forth in Articles FIFTH, SIXTH, SEVENTH, and this Article EIGHTH.

NINTH: No director shall be personally liable to the corporation or any stockholders for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the Delaware General Corporation Law) or any amendment thereto or any successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached the duty of loyalty to the corporation of its stockholders, (ii) shall not have acted in good faith, or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law, or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article NINTH, nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article NINTH, shall eliminate or reduce the effect of this Article NINTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article NINTH would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

IN WITNESS WHEREOF, said Caterpillar Inc. has caused this certificate to be signed by Douglas R. Oberhelman, its Chief Executive Officer, and attested by Christopher M. Reitz, its Secretary, this 13th day of June 2012.

Caterpillar Inc.
By:	/s/ Douglas R. Oberhelman
	Name: Douglas R. Oberhelman
	Title: Chief Executive Officer

ATTEST:

By:	/s/ Chrisopher M. Reitz
	Name: Christopher M. Reitz
	Title: Secretary

EX-3.2

EXHIBIT 3.2

CATERPILLAR INC.

BYLAWS

(as amended and restated as of June 13, 2012)

Article I

Offices

Section 1. Registered Office.

The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2. Other Offices.

The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require.

Article II

Stockholders

Section 1. Stockholder Meetings.

(a) Place of Meetings. Meetings of stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the board of directors.

(b) Annual Meeting.

(i) The annual meeting of stockholders shall be held on the second Wednesday in June in each year at a time designated by the board of directors, or at such a time and date as may be designated by the board.

(ii) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder (other than the nomination of a person for election as a director, which is governed by Article III, Section 1(d)(ii) of these bylaws), the stockholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than 60 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or 30 days after such anniversary date, notice by the stockholder to be timely must be so received not earlier than 120 days prior to such annual meeting and not later than the close of business on the fifteenth (15th) day following the date on which public announcement of the date of the annual meeting was first made by the corporation. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. A stockholder's notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and (b) as to the stockholder proposing such business and any beneficial owner on whose behalf the proposal is made (1) the name and address, as they appear on the corporation's books, of the stockholder and such beneficial owner, (2) a representation that the stockholder is a holder of record

of stock of the corporation entitled to vote at the annual meeting and intends to appear in person or by proxy at the meeting to introduce the matter specified in the notice, (3) the class and number of shares of the corporation which are beneficially owned by such stockholder and beneficial owner, (4) any material interest of such stockholder and beneficial owner in such business, (5) a description of any agreement, arrangement or understanding with respect to such business between or among such stockholder and beneficial owner and any other person or persons (naming such person or persons), (6) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, stock appreciation or similar rights, options, hedging transactions, and borrowed or loaned shares, regardless of whether settled in shares or cash) that has been entered into as of the date of the stockholder's notice by, or on behalf of, such stockholder and beneficial owner, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the corporation's capital stock, or increase or decrease the voting power of such stockholder and beneficial owner with respect to shares of stock of the corporation and (7) a representation that such stockholder and beneficial owner will promptly notify the corporation in writing of any changes in the information required by this Section 1(b)(ii). Notwithstanding anything in the bylaws to the contrary, no business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934 and included in the corporation's notice of meeting) shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1(b)(ii), or, with respect to the election of directors, the provisions of Article III, Section 1(d) of these bylaws. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 1, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(c) Special Meetings.

(i) Special meetings of the stockholders of this corporation for any purpose or purposes may be called at any time by the chairman of the board, by the chief executive officer, by the secretary, or by the board of directors pursuant to a resolution approved by a majority of the entire board of directors, but such special meetings may not be called by any other person or persons.

(ii) A special meeting of stockholders shall be called by the board of directors upon written request to the secretary of one or more record holders of shares of stock of the corporation representing in the aggregate not less than twenty-five percent (25%) of the total number of shares of stock entitled to vote on the matter or matters to be brought before the proposed special meeting. A request to the secretary shall be signed by each stockholder, or a duly authorized agent of such stockholder, requesting the special meeting and shall set forth, for each stockholder requesting the meeting, the information required to be in a stockholder's notice pursuant to Article II, Section 1(b)(ii) (as if such notice were submitted in connection with an annual meeting) or Article III, Section 1(d)(ii) of these bylaws, as applicable.

(iii) A special meeting requested by stockholders shall be held at such date, time and place as may be fixed by the board of directors; provided, however, that the date of any such special meeting shall be not more than ninety (90) days after a proper request to call the special meeting is received by the secretary. Notwithstanding the foregoing, a special meeting requested by stockholders shall not be held if (1) the business proposed to be brought before the special meeting by stockholders is not a proper subject for stockholder action under applicable law or (2) the board of directors has called or calls for an annual meeting of stockholders to be held within ninety (90) days after the secretary receives the request for the special meeting and the board of directors determines in good faith that the business of such annual meeting includes (among any other matters properly brought before the annual meeting) the business specified in the request. A stockholder may revoke a request for a special meeting at any time by written revocation delivered to the secretary, and if, following such revocation, there are un-revoked requests from stockholders holding in the aggregate less than the requisite number of shares entitling the stockholders to request the calling of a special meeting, the board of directors, in its discretion, may cancel the special meeting.

(iv) Business transacted at all special meetings shall be limited to the matters stated in the corporation's notice of special meeting. Business transacted at a special meeting requested by stockholders shall be limited to the matters described in the request for the special meeting; provided, however, that nothing herein shall prohibit the board of directors from submitting additional matters to stockholders at any such special meeting. In the event that a special meeting is called at the request of stockholders for the purpose of electing one or more persons to the board of directors, a stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the corporation's notice of meeting, if the stockholder's notice is submitted within the time and in the manner required by Article III, Section 1(d)(ii) of these bylaws.

(v) Notwithstanding anything in the bylaws to the contrary, no business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934 and included in the corporation's notice of meeting) shall be conducted at a special meeting except in accordance with the procedures set forth in this Section 1(c). The presiding officer of a special meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 1(c), and if the presiding officer should so determine, the presiding officer shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(d) Notice of Meetings. Notice of every meeting of the stockholders shall be given in any manner permitted by law, and such notice shall include the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting.

(e) Quorum. Except as otherwise required by law, the certificate of incorporation and these bylaws, the holders of not less than one-third of the shares entitled to vote at any meeting of the stockholders, present in person or by proxy, shall constitute a quorum at all meetings of the stockholders. If a quorum shall fail to attend any meeting, the chairman of the meeting may adjourn the meeting to another place, date or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then, except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum.

Section 2. Determination of Stockholders Entitled to Vote.

To determine the stockholders entitled to notice of any meeting or to vote, the board of directors may fix in advance a record date for each as provided in Article VI, Section 1 hereof.

Section 3. Voting.

(a) Subject to the provisions of applicable law, and except as otherwise provided in the certificate of incorporation, each stockholder present in person or by proxy shall be entitled to one vote for each full share of stock registered in the name of such stockholder at the time fixed by the board of directors or by law as the record date of the determination of stockholders entitled to vote at a meeting.

(b) Every stockholder entitled to vote may do so in person or by one or more agents authorized by proxy. Such authorization may be in writing or by transmission of an electronic communication, as permitted by law and in accordance with procedures established for the meeting.

(c) Voting may be by voice or by ballot as the chairman of the meeting shall determine.

(d) In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Directors shall be elected by a plurality of the votes of the shares present in person or by proxy at the meeting and entitled to vote on the election of directors.

(e) In advance of any meeting of stockholders the board of directors may appoint one or more persons (who shall not be candidates for office) as inspectors of election to act at the meeting. If inspectors are not so appointed, or if an appointed inspector fails to appear or fails or refuses to act at a meeting, the chairman of any meeting of stockholders may, and on the request of any stockholder or his proxy shall, appoint inspectors of election at the meeting.

(f) Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.

Article III

Board of Directors

Section 1. Election of Directors.

(a) Number. The authorized number of directors of the corporation shall be fixed from time to time by the board of directors but shall not be less than three (3). The exact number of directors shall be determined from time to time either by a resolution or bylaw duly adopted by the board of directors.

(b) Election and Terms of Directors. Each director shall serve for a term of office to expire at the next annual meeting of stockholders, with each director to serve until his successor is duly elected and qualified or until his death, resignation or removal.

(c) Newly Created Directorships and Vacancies. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director. Newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office (and not by stockholders), even though less than a quorum of the board of directors. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of stockholders and until such director's successor shall have been elected and qualified.

(d) Nomination of Directors. Candidates for director shall be nominated either

(i) by the board of directors or a committee appointed by the board of directors or

(ii) by nomination at any such stockholders' meeting by or on behalf of any stockholder entitled to vote at such meeting provided that written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the secretary of the corporation (1) with respect to an election to be held at an annual meeting of stockholders, not less than 60 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or 30 days after such anniversary date, notice by the stockholder to be timely must be so given not earlier than 120 days prior to such annual meeting and not later than the fifteenth (15th) day following the date on which public announcement of the date of such meeting is first made by the corporation and (2) with respect to an election to be held at a special meeting of stockholders for the election of directors, not later than the close of business on the tenth (10th) day following the date on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment or postponement of a meeting commence a new time period (or extend any time period)

for the giving of a stockholder's notice as described above. Each such notice shall set forth as to the stockholder giving the notice and any beneficial owner on whose behalf the nomination is made: (a) the name and address of such stockholder and beneficial holder and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) the class and number of shares of the corporation which are beneficially owned by such stockholder and beneficial owner, (d) a description of all arrangements or understandings between or among such stockholder and beneficial owner and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (e) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, stock appreciation or similar rights, options, hedging transactions, and borrowed or loaned shares, regardless of whether settled in shares or cash) that has been entered into as of the date of the stockholder's notice by, or on behalf of, such stockholder and beneficial owner, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the corporation's capital stock, or increase or decrease the voting power of such stockholder and beneficial owner with respect to shares of stock of the corporation; (f) a representation that such stockholder and beneficial owner will promptly notify the corporation in writing of any changes in the information required by this Section 1(d)(ii); (g) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the board of directors; and (h) the consent of each nominee to serve as a director of the corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

(e) Removal. Any director may be removed from office without cause but only by the affirmative vote of the holders of not less than a majority of the outstanding stock of the corporation entitled to vote generally in the election of directors, voting together as a single class.

(f) Preferred Stock Provisions. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of stock issued by this corporation having a preference over the common stock as to dividends or upon liquidation, shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies, nominations, terms of removal and other features of such directorships shall be governed by the terms of Article FOURTH of the certificate of incorporation and the resolution or resolutions establishing such class or series adopted pursuant thereto.

Section 2. Meetings of the Board of Directors.

(a) Regular Meetings. Regular meetings of the board of directors shall be held without call at 7:30 a.m. on the second Wednesday in February, April, June, August, October and December (unless otherwise set forth in a meeting notice). Notice of all such regular meetings is permitted but not required.

(b) Special Meetings. Special meetings of the board of directors may be called by the chairman of the board, any two (2) directors or by any officer authorized by the board.

(c) Notice of Meetings. Notices setting the time and place of meetings shall be given by the secretary or an assistant secretary, or by any other officer authorized by the board. Such notices shall be given to each director personally or by mail, messenger, telephone or electronic transmission. Notice by mail shall be deposited in the United States mail, postage prepaid, not later than the third (3rd) day prior to the date fixed for the meeting. Notice by telephone or electronic transmission shall be sent, and notice given personally or by messenger shall be delivered, at least twenty-four (24) hours prior to the time set for the meeting. Notice of a special meeting need not contain a statement of the purpose of the meeting.

(d) Adjourned Meetings. A majority of directors present at any regular or special meeting of the board of directors, whether or not constituting a quorum, may adjourn from time to time until the time fixed for the next regular meeting. Notice of the time and place of holding an adjourned meeting shall not be required if the time and place are fixed at the meeting adjourned.

(e) Place of Meetings. Unless (i) a resolution of the board of directors, or (ii) the written consent of all directors given either before or after the meeting and filed with the secretary or (iii) the meeting notice, designates a different place within or without the State of Delaware, meetings of the board of directors, both regular and special, shall be held at the corporation's offices at 100 N.E. Adams Street, Peoria, Illinois.

(f) Participation by Telephone or Other Means. Members of the board may participate in a meeting through use of conference telephone or other communications equipment, so long as all members participating in such meeting can hear one another, and such participation shall constitute presence in person at such meeting.

(g) Quorum. At all meetings of the board one-third of the total number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action is approved by at least a majority of the required quorum for such meeting. Less than a quorum may adjourn any meeting of the board from time to time without notice.

Section 3. Action Without a Meeting.

Any action required or permitted to be taken by the board of directors may be taken without a meeting if all members of the board consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the board.

Section 4. Compensation of Directors.

The directors may be paid such compensation for their services as the board shall from time to time determine. Directors who receive salaries as officers or employees of the corporation shall not receive additional compensation for their services as directors.

Section 5. Committees of the Board.

There shall be such committees of the board of directors each consisting of two or more directors with such authority, subject to applicable law, as a majority of the board shall by resolution determine. Committees of the board shall meet subject to the call of the chairman of each committee and shall prepare and file with the secretary minutes of their meetings. Unless a committee shall by resolution establish a different procedure, notice of the time and place of committee meetings shall be given by the chairman of the committee, or at his request by the chairman of the board or by the secretary or an assistant secretary. Such notice shall be given to each committee member personally or by mail, messenger, telephone or electronic transmission at the times provided in subsection (c) of Section 2 of this Article for notice of special meetings of the board of directors. One-third of a committee but not less than two members shall constitute a quorum for the transaction of business. Except as a committee by resolution may determine otherwise, the provisions of Section 3 and of subsections (d), (e) and (f) of Section 2 of this Article shall apply, mutatis mutandis, to meetings of board committees.

Article IV

Officers

Section 1. Officers.

The officers of the corporation shall be a chairman of the board, who shall be the chief executive officer, one or more group presidents, one or more vice presidents, a chief financial officer, a secretary and a treasurer, together with such other officers as the board of directors shall determine. Any two or more offices may be held by the same person.

Notwithstanding the foregoing or any other provision of these bylaws, the chairman of the board may be an individual other than the chief executive officer only for a period not to exceed six months commencing upon the effective date of the election of a new chief executive officer.

Section 2. Election and Tenure of Officers.

Officers shall be elected by the board of directors, shall hold office at the pleasure of the board, and shall be subject to removal at any time by the board. Vacancies in office may be filled by the board.

Section 3. Powers and Duties of Officers.

Each officer shall have such powers and duties as may be prescribed by the board of directors or by an officer authorized to do so by the board.

Section 4. Compensation of Officers.

The compensation of officers shall be determined by the board of directors; provided that the board may delegate authority to determine the compensation of any assistant secretary or assistant treasurer, with power to redelegate.

Article V

Indemnification

The corporation shall indemnify to the full extent permitted by, and in the manner permissible under, the laws of the State of Delaware any person made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he, his testator or intestate is or was a director or officer of the corporation or any predecessor of the corporation, or served any other enterprise as a director or officer at the request of the corporation or any predecessor of the corporation. The corporation shall pay or reimburse the actual and reasonable expenses (including attorneys fees) of such person incurred in defending any threatened or pending proceeding in advance of its final disposition if the corporation has received an undertaking by the person receiving such payment or reimbursement to repay all amounts advanced if it should be ultimately determined that he or she is not entitled to be indemnified under this Article V or otherwise.

The foregoing provisions of this Article V shall be deemed to be a contract between the corporation and each director and officer who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

The foregoing rights of indemnification and advancement of expenses shall not be deemed exclusive of any other rights to which any director or officer may be entitled apart from the provisions of this Article.

The board of directors in its discretion shall have power on behalf of the corporation to indemnify and advance expenses to any person, other than a director or officer, made a party to any action, suit or proceeding by reason of the fact that he, his testator or intestate, is or was an employee of the corporation.

Article VI

Miscellaneous

Section 1. Record Date.

(a) In order that the corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the board of directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors and which record date shall not be more than sixty (60) nor less than ten (10) days prior to the date of such meeting. If the board of directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the board of directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no

record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the foregoing provisions at the adjourned meeting.

(b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board may fix, in advance, a record date, which shall not be more than sixty (60) days prior to any such corporate action. If not fixed by the board, the record date shall be at the close of business on the day on which the board of directors adopts resolution relating thereto.

(c) Stockholders on a record date are entitled to notice, to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided by agreement or by applicable law.

Section 2. Stock Certificates.

(a) Shares of the corporation may be certificated or uncertificated, as provided under the laws of the State of Delaware. Every holder of certificated shares in the corporation shall be entitled to have a certificate signed in the name of the corporation by the chairman of the board or the vice chairman, or by the president or vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the stockholder. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

(b) The corporation may issue a new share certificate or a new certificate for any other security in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate or the owner's legal representative to give the corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 3. Corporate Seal.

The corporation shall have a corporate seal in such form as shall be prescribed and adopted by the board of directors.

Section 4. Construction and Definitions.

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the General Corporation Law of Delaware shall govern the construction of these bylaws.

Section 5. Amendments.

Subject to the provisions of the certificate of incorporation, these bylaws may be altered, amended or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at the meeting; provided that in the notice of such special meeting notice of such purpose shall be given. Subject to the laws of the State of Delaware, the certificate of incorporation and these bylaws, the board of directors may by majority vote of those present at any meeting at which a quorum is present amend these bylaws, or enact such other bylaws as in their judgment may be advisable for the regulation of the conduct of the affairs of the corporation.

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, Douglas R. Oberhelman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Caterpillar Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 6, 2012	/s/Douglas R. Oberhelman	Chairman of the Board and Chief Executive Officer
	(Douglas R. Oberhelman)

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Edward J. Rapp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Caterpillar Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 6, 2012	/s/Edward J. Rapp	Group President and Chief Financial Officer
	(Edward J. Rapp)

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Caterpillar Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 6, 2012	/s/Douglas R. Oberhelman	Chairman of the Board and Chief Executive Officer
	(Douglas R. Oberhelman)
August 6, 2012	/s/Edward J. Rapp	Group President and Chief Financial Officer
	(Edward J. Rapp)

A signed original of this written statement required by Section 906 has been provided to Caterpillar Inc. and will be retained by Caterpillar Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-95

Second Quarter, 2012 Mine Safety Disclosures

Mine or Operating Name/MSHA Identification Number

Contractor ID

Section 104 S&S Citations (#)

Section 104(b) Orders (#)

Section 104(d) Citations and Orders (#)

Section 110(b)(2) Violations (#)

Section 107(a) Orders (#)

Total Dollar Value of MSHA Assessments Proposed ($)

Total Number of Mining Related Fatalities (#)

Received Notice of Pattern Violations Under Section 104(e) (yes/no)

Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no)

Legal Actions Pending as of Last Day of Period (#)

Legal Actions Initiated During Period (#)

Legal Actions Resolved During Period (#)

Bear Run, 1202422

Z8T

1

El Segundo, 2902257

Z620

1

Lee Ranch, 2901879

Z8T

1

North Antelope Rochelle Mine, 4801353

Z8T

807

Jim Bridger Mine, 4800677

Z8T

1

1

Republic Energy, 4609054

Z8T

1

Twilight MTR Surface Mine, 4608645

Z8T

1*

Total

2

1

807

4

*Legal action pending at Twilight MTR Surface Mine initiated on August 21, 2008 and inadvertently omitted from prior reports.

XML

Intangible Assets and Goodwill (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended			3 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 Y	Jun. 30, 2011	Dec. 31, 2011 Y	Jun. 30, 2012 ERA Mining Machinery Limited	Mar. 31, 2012 Caterpillar Tohoku Limited	Jun. 30, 2012 Customer Relationships	Jun. 30, 2012 Customer Relationships Y	Dec. 31, 2011 Customer Relationships Y	Jun. 30, 2012 Intellectual Property Y	Dec. 31, 2011 Intellectual Property Y	Jun. 30, 2012 Other Y	Dec. 31, 2011 Other Y
Intangible assets
Weighted Amortizable Life (in years)			14		13				15	15	11	11	10	11
Gross Carrying Amount	$ 4,925		$ 4,925		$ 4,904			$ 2,822	$ 2,822	$ 2,811	$ 1,787	$ 1,794	$ 316	$ 299
Accumulated Amortization	(707)		(707)		(554)			(272)	(272)	(213)	(317)	(244)	(118)	(97)
Net	4,218		4,218		4,350			2,550	2,550	2,598	1,470	1,550	198	202
Indefinite-lived intangible assets in process research & development	18		18		18
Total intangible assets, net	4,236		4,236		4,368
Total intangible assets, gross carrying amount	4,943		4,943		4,922
Finite-lived intangible assets acquired						194	8
Assets classified to held for sale, intangible assets									100
Accumulated amortization on held for sale intangible assets									4
Impaired finite-lived intangible assets, gross								51	51
Imparied finite-lived intangible assets, accumulated amortization								29	29
Impairment of Intangible Assets, Finite-lived								22
Amortization expense	99	22	193	44
2012			393
2013			393
2014			386
2015			380
2016			371
Thereafter			$ 2,506

XML

Derivative Financial Instruments and Risk Management (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2012 Y	Jun. 30, 2011
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Maximum Length of Time Hedged in Foreign Currency Cash Flow Hedge		P5Y
Deferred net losses, foreign currency exchange rate risk, to be reclassified from equity to current earnings over the next twelve months		$ 18
Deferred net losses, interest rate risk, to be reclassified from equity to current earnings over the next twelve months		3
Loss on Interest Rate Derivative Instruments Not Designated as Hedging Instruments	$ 124		$ 149
Commodity forward and option contracts, maximum period (in years)		5

XML

Segment Information (Details 5) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Items not included in segment depreciation and amortization:
All other operating segments	$ 41	$ 41	$ 84	$ 86
Cost centers	22	19	41	37
Other	(5)	30	(12)	39
Total depreciation and amortization	689	599	1,350	1,174
Reportable segments
Items not included in segment depreciation and amortization:
Total depreciation and amortization	631	509	1,237	1,012
Machinery and Power Systems
Items not included in segment depreciation and amortization:
All other operating segments	41	41	84	86
Cost centers	22	19	41	37
Other	(11)	28	(23)	33
Total depreciation and amortization	506	415	988	810
Machinery and Power Systems | Reportable segments
Items not included in segment depreciation and amortization:
Total depreciation and amortization	454	327	886	654
Financial Products
Items not included in segment depreciation and amortization:
All other operating segments	0	0	0	0
Cost centers	0	0	0	0
Other	6	2	11	6
Total depreciation and amortization	183	184	362	364
Financial Products | Reportable segments
Items not included in segment depreciation and amortization:
Total depreciation and amortization	177	182	351	358
Consolidating Adjustments
Items not included in segment depreciation and amortization:
All other operating segments	0	0	0	0
Cost centers	0	0	0	0
Other	0	0	0	0
Total depreciation and amortization	0	0	0	0
Consolidating Adjustments | Reportable segments
Items not included in segment depreciation and amortization:
Total depreciation and amortization	$ 0	$ 0	$ 0	$ 0

XML

Intangible Assets and Goodwilll (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Jun. 30, 2012 ERA Mining Machinery Limited	Mar. 31, 2012 Caterpillar Tohoku Limited	Jun. 30, 2012 Construction Industries	Jun. 30, 2012 Resource Industries	Jun. 30, 2012 Power Systems	Jun. 30, 2012 Other
Carrying amount of goodwill by reportable segment
Goodwill			$ 467	$ 16
Assets classified to held for sale, goodwill	152
Goodwill:
Balance at beginning of year		7,080			378	4,099	2,486	117
Business acquisitions		483			16	467	0	0
Held for sale and business divestitures		(152)			0	(152)	0	0
Other adjustments		(91)			(5)	(59)	(27)	0
Balance at end of period	$ 7,320	$ 7,320			$ 389	$ 4,355	$ 2,459	$ 117

XML

Fair Value Measurements (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Available-for-sale securities	$ 1,493	$ 1,447
Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	1,493	1,447
Derivative financial instruments, net	145	145
Total Assets	1,638	1,592
Liabilities
Guarantees	15	7
Total Liabilities	15	7
U.S. treasury bonds
Assets
Available-for-sale securities	10	10
U.S. treasury bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	10	10
Other U.S. and non-U.S. government bonds
Assets
Available-for-sale securities	123	92
Other U.S. and non-U.S. government bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	123	92
Corporate bonds
Assets
Available-for-sale securities	623	572
Corporate bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	623	572
Asset-backed Securities
Assets
Available-for-sale securities	95	111
Asset-backed Securities | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	95	111
U.S. governmental agency | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	278	310
Residential
Assets
Available-for-sale securities	26	30
Residential | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	26	30
Commercial
Assets
Available-for-sale securities	137	145
Commercial | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	137	145
Large capitalization value
Assets
Available-for-sale securities	168	148
Large capitalization value | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	168	148
Smaller company growth
Assets
Available-for-sale securities	33	29
Smaller company growth | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	33	29
Level 1 | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	211	187
Derivative financial instruments, net	0	0
Total Assets	211	187
Liabilities
Guarantees	0	0
Total Liabilities	0	0
Level 1 | U.S. treasury bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	10	10
Level 1 | Other U.S. and non-U.S. government bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 1 | Corporate bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 1 | Asset-backed Securities | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 1 | U.S. governmental agency | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 1 | Residential | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 1 | Commercial | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 1 | Large capitalization value | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	168	148
Level 1 | Smaller company growth | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	33	29
Level 2 | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	1,282	1,260
Derivative financial instruments, net	145	145
Total Assets	1,427	1,405
Liabilities
Guarantees	0	0
Total Liabilities	0	0
Level 2 | U.S. treasury bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 2 | Other U.S. and non-U.S. government bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	123	92
Level 2 | Corporate bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	623	572
Level 2 | Asset-backed Securities | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	95	111
Level 2 | U.S. governmental agency | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	278	310
Level 2 | Residential | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	26	30
Level 2 | Commercial | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	137	145
Level 2 | Large capitalization value | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 2 | Smaller company growth | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Derivative financial instruments, net	0	0
Total Assets	0	0
Liabilities
Guarantees	15	7
Total Liabilities	15	7
Level 3 | U.S. treasury bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Other U.S. and non-U.S. government bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Corporate bonds | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Asset-backed Securities | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | U.S. governmental agency | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Residential | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Commercial | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Large capitalization value | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	0	0
Level 3 | Smaller company growth | Fair Value, Measurements, Recurring
Assets
Available-for-sale securities	$ 0	$ 0

XML

Basis of Presentation, Nature of Operations and Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Apr. 02, 2012	Mar. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Aug. 01, 2008
Accumulated Other Comprehensive Income (Loss)
Foreign currency translation	$ 239				$ 863
Pension and other postretirement benefits	(6,410)				(4,499)
Derivative financial instruments	(37)				36
Available-for-sale securities	58				56
Total accumulated other comprehensive income (loss)	(6,150)			(6,328)	(3,544)
Noncontrolling Interest, Ownership Percentage by Parent		33.00%	67.00%			67.00%
Noncontrolling interest, ownership percentage of parent after redemption		100.00%
Noncontrolling Interest Share Redemption	107
Foreign currency translation reclassifed to Accumulated other comprehensive income (loss)	167
Pension and other postretirement benefits reclassified to Accumulated other comprehensive income (loss)	(61)
Available for sale securities reclassified to Accumulated other comprehensive income (loss)	$ 1

XML

Derivative Financial Instruments and Risk Management (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Location and fair value of derivative instruments reported in the Statement of Financial Position

The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position are as follows:

(Millions of dollars)
	Consolidated Statement of Financial	Asset (Liability) Fair Value
	Position Location	June 30, 2012			December 31, 2011
Designated derivatives
Foreign exchange contracts
Machinery and Power Systems	Receivables – trade and other	$	32		$	54
Machinery and Power Systems	Long-term receivables – trade and other	3			19
Machinery and Power Systems	Accrued expenses	(60		)	(73		)
Machinery and Power Systems	Other liabilities	(7		)	(10		)
Interest rate contracts
Financial Products	Receivables – trade and other	15			15
Financial Products	Long-term receivables – trade and other	229			233
Financial Products	Accrued expenses	(7		)	(6		)
		$	205		$	232
Undesignated derivatives
Foreign exchange contracts
Machinery and Power Systems	Receivables – trade and other	$	8		$	27
Machinery and Power Systems	Accrued expenses	(35		)	(12		)
Machinery and Power Systems	Other liabilities	(28		)	(85		)
Financial Products	Receivables – trade and other	11			7
Financial Products	Accrued expenses	(11		)	(16		)
Interest rate contracts
Financial Products	Accrued expenses	(2		)	(1		)
Commodity contracts
Machinery and Power Systems	Receivables – trade and other	1			2
Machinery and Power Systems	Accrued expenses	(4		)	(9		)
		$	(60	)	$	(87	)

Schedule of effect of derivatives designated as hedging instruments on Consolidated Statement of Results of Operations

The effect of derivatives designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

Fair Value Hedges (Millions of dollars)
		Three Months Ended June 30, 2012					Six Months Ended June 30, 2012
	Classification	Gains (Losses) on Derivatives		Gains (Losses) on Borrowings			Gains (Losses) on Derivatives			Gains (Losses) on Borrowings
Interest rate contracts
Financial Products	Other income (expense)	$	6	$	(5	)	$	(3	)	$	10
		$	6	$	(5	)	$	(3	)	$	10

		Three Months Ended June 30, 2011					Six Months Ended June 30, 2011
	Classification	Gains (Losses) on Derivatives		Gains (Losses) on Borrowings			Gains (Losses) on Derivatives			Gains (Losses) on Borrowings
Interest rate contracts
Machinery and Power Systems	Other income (expense)	$	—	$	—		$	(1	)	$	1
Financial Products	Other income (expense)	42		(40		)	(11		)	12
		$	42	$	(40	)	$	(12	)	$	13

Schedule of effect of derivatives designated as cash flow hedging instruments on Consolidated Results of Operations

Cash Flow Hedges (Millions of dollars)
	Three Months Ended June 30, 2012
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	—		Other income (expense)	$	(4	)	$	—
Interest rate contracts	—
Financial Products	(2		)	Interest expense of Financial Products	(1		)	(1		)	1
	$	(2	)		$	(5	)	$	(1	)

	Three Months Ended June 30, 2011
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(45	)	Other income (expense)	$	(9	)	$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(1		)	Interest expense of Financial Products	(6		)	—		1
	$	(46	)		$	(16	)	$	—

	Six Months Ended June 30, 2012
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(42	)	Other income (expense)	$	1		$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(2		)	Interest expense of Financial Products	(2		)	(1		)	1
	$	(44	)		$	(2	)	$	(1	)

	Six Months Ended June 30, 2011
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(18	)	Other income (expense)	$	9		$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(1		)	Interest expense of Financial Products	(12		)	1		1
	$	(19	)		$	(4	)	$	1

¹ The ineffective portion recognized in earnings is included in Other income (expense)

Effect of derivatives not designated as hedging instruments on the Statement of Results of Operations

The effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

(Millions of dollars)
	Classification of Gains (Losses)	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012
Foreign exchange contracts
Machinery and Power Systems	Other income (expense)	$	(35	)	$	30
Financial Products	Other income (expense)	(5		)	2
Commodity contracts
Machinery and Power Systems	Other income (expense)	(6		)	—
		$	(46	)	$	32

(Millions of dollars)
	Classification of Gains (Losses)	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
Foreign exchange contracts
Machinery and Power Systems	Other income (expense)	$	15		$	47
Financial Products	Other income (expense)	(2		)	(2		)
Interest rate contracts
Machinery and Power Systems	Other income (expense)	(124		)	(149		)
Commodity contracts
Machinery and Power Systems	Other income (expense)	(2		)	2
		$	(113	)	$	(102	)

XML

Fair Value Measurements (Details 2) (Fair Value, Measurements, Recurring, USD $) In Millions, unless otherwise specified			6 Months Ended
	Jun. 30, 2012 Level 2 Financial Products	Dec. 31, 2011 Level 2 Financial Products	Jun. 30, 2012 Level 3 Guarantees	Jun. 30, 2011 Level 3 Guarantees
Roll-forward of liabilities measured at fair value using Level 3 inputs
Balance at beginning of year			$ 7	$ 10
Acquisitions			6
Issuance of guarantees			3	1
Expiration of guarantees			(1)	(4)
Balance at end of period			15	7
Fair Value, Impaired Loans
Impaired loans	$ 219	$ 141

XML

Cat Financial Financing Activities (Details 2) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 D	Dec. 31, 2011
Cat Financial Financing Activities [Abstract]
Period after which Unpaid Installments are Considered as Past Due (in days)	30
Period after which collection of future income is considered as not probable (in days)	120
Aging related to loans and finance leases
31-60 Days Past Due	$ 287	$ 194
61-90 Days Past Due	128	104
91+ Days Past Due	533	442
Total Past Due	948	740
Current	20,778	19,240
Total Finance Receivables	21,726	19,980
91+ Still Accruing	40	58
North America
Aging related to loans and finance leases
Total Finance Receivables	7,570	7,291
Europe
Aging related to loans and finance leases
Total Finance Receivables	2,388	2,281
Asia Pacific
Aging related to loans and finance leases
Total Finance Receivables	3,615	3,038
Mining
Aging related to loans and finance leases
Total Finance Receivables	1,725	1,485
Latin America
Aging related to loans and finance leases
Total Finance Receivables	3,260	2,965
Caterpillar Power Finance
Aging related to loans and finance leases
Total Finance Receivables	3,168	2,920
Customer
Aging related to loans and finance leases
Total Finance Receivables	18,448	17,593
Investment in loans and finance leases on non-accrual status	648	472
Customer | North America
Aging related to loans and finance leases
31-60 Days Past Due	41	74
61-90 Days Past Due	17	39
91+ Days Past Due	89	111
Total Past Due	147	224
Current	5,516	5,378
Total Finance Receivables	5,663	5,602
91+ Still Accruing	1	9
Investment in loans and finance leases on non-accrual status	92	112
Customer | Europe
Aging related to loans and finance leases
31-60 Days Past Due	32	27
61-90 Days Past Due	27	11
91+ Days Past Due	56	57
Total Past Due	115	95
Current	2,204	2,129
Total Finance Receivables	2,319	2,224
91+ Still Accruing	10	10
Investment in loans and finance leases on non-accrual status	48	58
Customer | Asia Pacific
Aging related to loans and finance leases
31-60 Days Past Due	82	47
61-90 Days Past Due	29	23
91+ Days Past Due	42	38
Total Past Due	153	108
Current	2,842	2,769
Total Finance Receivables	2,995	2,877
91+ Still Accruing	15	14
Investment in loans and finance leases on non-accrual status	30	24
Customer | Mining
Aging related to loans and finance leases
31-60 Days Past Due	4	0
61-90 Days Past Due	0	0
91+ Days Past Due	12	12
Total Past Due	16	12
Current	1,708	1,473
Total Finance Receivables	1,724	1,485
91+ Still Accruing	0	0
Investment in loans and finance leases on non-accrual status	12	12
Customer | Latin America
Aging related to loans and finance leases
31-60 Days Past Due	45	32
61-90 Days Past Due	23	15
91+ Days Past Due	157	99
Total Past Due	225	146
Current	2,354	2,339
Total Finance Receivables	2,579	2,485
91+ Still Accruing	0	0
Investment in loans and finance leases on non-accrual status	169	108
Customer | Caterpillar Power Finance
Aging related to loans and finance leases
31-60 Days Past Due	83	14
61-90 Days Past Due	32	16
91+ Days Past Due	177	125
Total Past Due	292	155
Current	2,876	2,765
Total Finance Receivables	3,168	2,920
91+ Still Accruing	14	25
Investment in loans and finance leases on non-accrual status	297	158
Dealer
Aging related to loans and finance leases
Total Finance Receivables	3,278	2,387
Investment in loans and finance leases on non-accrual status	0	0
Dealer | North America
Aging related to loans and finance leases
31-60 Days Past Due
61-90 Days Past Due
91+ Days Past Due
Total Past Due	0	0
Current	1,907	1,689
Total Finance Receivables	1,907	1,689
91+ Still Accruing
Dealer | Europe
Aging related to loans and finance leases
31-60 Days Past Due
61-90 Days Past Due
91+ Days Past Due
Total Past Due	0	0
Current	69	57
Total Finance Receivables	69	57
91+ Still Accruing
Dealer | Asia Pacific
Aging related to loans and finance leases
31-60 Days Past Due
61-90 Days Past Due
91+ Days Past Due
Total Past Due	0	0
Current	620	161
Total Finance Receivables	620	161
91+ Still Accruing
Dealer | Mining
Aging related to loans and finance leases
31-60 Days Past Due
61-90 Days Past Due
91+ Days Past Due
Total Past Due	0	0
Current	1	0
Total Finance Receivables	1	0
91+ Still Accruing
Dealer | Latin America
Aging related to loans and finance leases
31-60 Days Past Due
61-90 Days Past Due
91+ Days Past Due
Total Past Due	0	0
Current	681	480
Total Finance Receivables	681	480
91+ Still Accruing
Dealer | Caterpillar Power Finance
Aging related to loans and finance leases
Total Finance Receivables	$ 0	$ 0

XML

Available-For-Sale Securities (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Less than 12 months
Fair Value	$ 35		$ 35		$ 164
Unrealized Losses	3		3		8
12 months or more
Fair Value	56		56		53
Unrealized Losses	10		10		10
Total
Fair Value	91		91		217
Unrealized Losses	13		13		18
Pretax charges recognized for "other-than-temporary" declines in the market values of equities securities	1	0	1	0
Corporate bonds
Less than 12 months
Fair Value					54
Unrealized Losses					1
12 months or more
Fair Value					1
Unrealized Losses					0
Total
Fair Value					55
Unrealized Losses					1
Asset-backed Securities
Less than 12 months
Fair Value	3		3		1
Unrealized Losses	0		0		0
12 months or more
Fair Value	19		19		20
Unrealized Losses	4		4		5
Total
Fair Value	22		22		21
Unrealized Losses	4		4		5
U.S. governmental agency mortgage-backed securities
Less than 12 months
Fair Value					51
Unrealized Losses					1
12 months or more
Fair Value					0
Unrealized Losses					0
Total
Fair Value					51
Unrealized Losses					1
Residential
Less than 12 months
Fair Value	2		2		3
Unrealized Losses	0		0		0
12 months or more
Fair Value	15		15		18
Unrealized Losses	3		3		3
Total
Fair Value	17		17		21
Unrealized Losses	3		3		3
Commercial
Less than 12 months
Fair Value	2		2		15
Unrealized Losses	0		0		0
12 months or more
Fair Value	8		8		8
Unrealized Losses	1		1		1
Total
Fair Value	10		10		23
Unrealized Losses	1		1		1
Large capitalization value
Less than 12 months
Fair Value	28		28		36
Unrealized Losses	3		3		5
12 months or more
Fair Value	14		14		6
Unrealized Losses	2		2		1
Total
Fair Value	42		42		42
Unrealized Losses	5		5		6
Smaller company growth
Less than 12 months
Fair Value					4
Unrealized Losses					1
12 months or more
Fair Value					0
Unrealized Losses					0
Total
Fair Value					4
Unrealized Losses					$ 1

XML

Cat Financial Financing Activities (Details 5) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Customer
Loan and finance lease receivables modified as TDRs
Number of Contracts (in contracts)	18	49	53	88
Pre-TDR Outstanding Recorded Investment	$ 2	$ 75	$ 43	$ 139
Post-TDR Outstanding Recorded Investment	2	75	43	139
TDRs with a payment default which had been modified within twelve months prior to the default date
Number of Contracts (in contracts)	16	8	41	48
Post-TDR Recorded Investment	3	4	23	15
Customer | North America
Loan and finance lease receivables modified as TDRs
Number of Contracts (in contracts)	18	15	41	39
Pre-TDR Outstanding Recorded Investment	2	4	4	9
Post-TDR Outstanding Recorded Investment	2	4	4	9
TDRs with a payment default which had been modified within twelve months prior to the default date
Number of Contracts (in contracts)	14	7	25	41
Post-TDR Recorded Investment	1	3	2	9
Customer | Europe
Loan and finance lease receivables modified as TDRs
Number of Contracts (in contracts)	0	5	7	6
Pre-TDR Outstanding Recorded Investment	0	6	7	7
Post-TDR Outstanding Recorded Investment	0	6	7	7
TDRs with a payment default which had been modified within twelve months prior to the default date
Number of Contracts (in contracts)	0	1	0	1
Post-TDR Recorded Investment	0	1	0	1
Customer | Latin America
Loan and finance lease receivables modified as TDRs
Number of Contracts (in contracts)	0	4	0	12
Pre-TDR Outstanding Recorded Investment	0	5	0	10
Post-TDR Outstanding Recorded Investment	0	5	0	10
TDRs with a payment default which had been modified within twelve months prior to the default date
Number of Contracts (in contracts)	0	0	0	0
Post-TDR Recorded Investment	0	0	0	0
Customer | Caterpillar Power Finance
Loan and finance lease receivables modified as TDRs
Number of Contracts (in contracts)	0	25	5	31
Pre-TDR Outstanding Recorded Investment	0	60	32	113
Post-TDR Outstanding Recorded Investment	0	60	32	113
Additional funds loaned not recorded as TDRs	6		15
Remaining Commitments	7		7
Number of customers that comprise the majority of the pre-TDR and post-TDR recorded investment (in customers)		2	3	4
Pre-TDR Outstanding Recorded Investment for Customers Comprising Majority of Total		55		105
Post-TDR Outstanding Recorded Investment for Customers Comprising Majority of Total		55		105
TDRs with a payment default which had been modified within twelve months prior to the default date
Number of Contracts (in contracts)	2	0	16	6
Post-TDR Recorded Investment	2	0	21	5
Number of customers with a payment default that had been modified within twelve months prior to the default date, which comprise the majority of the post-TDR recorded investment (in customers)			2
Post-TDR Recorded Investment Which Had a Payment Default for Customers Comprising Majority of Total			$ 19
Dealer
Loan and finance lease receivables modified as TDRs
Number of Contracts (in contracts)	0	0	0	0

XML

Business Combinations (Details) In Millions, except Share data in Billions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012 ERA Mining Machinery Limited USD ($) Y types	Jun. 30, 2012 ERA Mining Machinery Limited Cash Consideration HKD	Jun. 30, 2012 ERA Mining Machinery Limited Loan note consideration HKD	Mar. 31, 2012 Caterpillar Tohoku Limited USD ($)
Business Acquisition
Percentage of equity acquired (as a percent)	99.00%			100.00%
Percentage of issued shares outstanding and unacquired (as a percent)	1.00%
Purchase price of acquired entity	$ 690			$ 202
Cost of acquisition, net cash paid	453
Cost of acquisition paid in cash	475			59
Cash acquired	22			18
Far value of loan notes issued for shares	169
Third party liabilities assumed	155			77
Loan and Interest Payable to Caterpillar	51
Restricted cash acquired	138
Fair value of noncontrolling interest	7
Loan notes debt component, minimum redemption amount	152
Loan notes, fair value of contingent consideration	17
Trade payables acquired due to Caterpillar				64
Estimated consideration payable				21
Business Combination, Alternate considerations to acquiree
Number of consideration alternatives	2
Value of Consideration to be paid (in HKD/share)		0.88	1.00
Contingent consideration arrangement, value minimum (in HKD/share)			0.75
Contingent consideration arrangement, value maximum (HKD/share)			1.15
Number of shares tendered (in shares)		4.0	1.6
Assets
Tangible assets acquired	671			251
Cash acquired	22			18
Restricted cash acquired	138
Receivables trade and other	213			33
Inventory	105			26
Property, plant and equipment	112			157
Finite-lived intangible assets	194			8
Goodwill	467			16
Finite-lived Intangible Asset, Weighted Average Useful Life (in years)	15
Liabilities
Total liabilities assumed	592			132
Accounts payable	342			39
Third party liabilities assumed	155			77
Accrued expenses	50
Deferred Income Tax Liability	$ 38

XML

Redeemable Noncontrolling Interest - Caterpillar Japan Ltd. (Details) In Millions, unless otherwise specified	Apr. 02, 2012 USD ($)	Apr. 02, 2012 JPY (¥)	Mar. 31, 2012	Aug. 01, 2008
Redeemable Noncontrolling Interest Disclosure Abstract
Cat Japan, consolidated subsidiary, Caterpillar majority percentage ownership (as a percent)	33.00%	33.00%	67.00%	67.00%
Cat Japan, consolidated subsidiary, MHI minority percentage ownership (as a percent)				33.00%
Cost of Acquired Remaining Interest Cash Paid	$ 444	¥ 36,500

XML

Segment Information (Details 6) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Items not included in segment capital expenditures:
All other operating segments	$ 90	$ 51	$ 154	$ 89
Cost centers	65	19	103	34
Timing	(81)	(74)	321	240
Other	(63)	14	(173)	7
Total capital expenditures	1,166	744	2,295	1,504
Reportable segments
Segment Reporting Information, Capital Expenditure
Total accountable capital expenditures from reportable segments	1,155	734	1,890	1,134
Machinery and Power Systems
Items not included in segment capital expenditures:
All other operating segments	90	51	154	89
Cost centers	65	19	103	34
Timing	(81)	(74)	321	240
Other	(91)	16	(123)	(3)
Total capital expenditures	681	407	1,545	975
Machinery and Power Systems | Reportable segments
Segment Reporting Information, Capital Expenditure
Total accountable capital expenditures from reportable segments	698	395	1,090	615
Financial Products
Items not included in segment capital expenditures:
All other operating segments	0	0	0	0
Cost centers	0	0	0	0
Timing	0	0	0	0
Other	57	22	74	55
Total capital expenditures	514	361	874	574
Financial Products | Reportable segments
Segment Reporting Information, Capital Expenditure
Total accountable capital expenditures from reportable segments	457	339	800	519
Consolidating Adjustments
Items not included in segment capital expenditures:
All other operating segments	0	0	0	0
Cost centers	0	0	0	0
Timing	0	0	0	0
Other	(29)	(24)	(124)	(45)
Total capital expenditures	(29)	(24)	(124)	(45)
Consolidating Adjustments | Reportable segments
Segment Reporting Information, Capital Expenditure
Total accountable capital expenditures from reportable segments	$ 0	$ 0	$ 0	$ 0

XML

Redeemable Noncontrolling Interest - Caterpillar Japan Ltd.

6 Months Ended

Jun. 30, 2012

Redeemable Noncontrolling Interest Disclosure Abstract

Redeemable Noncontrolling Interest - Caterpillar Japan Ltd.

Redeemable Noncontrolling Interest — Caterpillar Japan Ltd.

On August 1, 2008, Shin Caterpillar Mitsubishi Ltd. (SCM) completed the first phase of a share redemption plan whereby SCM redeemed half of Mitsubishi Heavy Industries' (MHI’s) shares in SCM.  This resulted in Caterpillar owning 67 percent of the outstanding shares of SCM and MHI owning the remaining 33 percent.  As part of the share redemption, SCM was renamed Caterpillar Japan Ltd. (Cat Japan) and we consolidated its financial statements.  On April 2, 2012, the redemption of the remaining 33 percent interest was completed, resulting in Caterpillar becoming the sole owner of Cat Japan. Caterpillar paid $444 million (36.5 billion Japanese Yen) to acquire the remaining equity interest held in Cat Japan by MHI.

XML

Derivative Financial Instruments and Risk Management (Details 3) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Derivative Instruments, Gain (Loss)
Gains (Losses) on Derivatives	$ 6	$ 42	$ (3)	$ (12)
Gains (Losses) on Borrowings	(5)	(40)	10	13
Amount of Gains (Losses) Recognized in AOCI (Effective Portion)	(2)	(46)	(44)	(19)
Amount of Gains (Losses) Reclassified from AOCI (Effective Portion)	(5)	(16)	(2)	(4)
Recognized in Earnings (Ineffective Portion)	(1)	0	(1)	1
Interest rate contracts, Gains or (Losses) on derivatives not designated as hedging instruments		(124)		(149)
Gains or (Losses) on derivatives not designated as hedging instruments	(46)	(113)	32	(102)
Machinery and Power Systems
Derivative Instruments, Gain (Loss)
Foreign exchange contracts, Amount of Gains (Losses) Recognized in AOCI (Effective Portion)	0	(45)	(42)	(18)
Interest rate contracts, Amount of Gains (Losses) Recognized in AOCI (Effective Portion)		0	0	0
Financial Products
Derivative Instruments, Gain (Loss)
Interest rate contracts, Amount of Gains (Losses) Recognized in AOCI (Effective Portion)	(2)	(1)	(2)	(1)
Other Income (Expense) | Machinery and Power Systems
Derivative Instruments, Gain (Loss)
Gains (Losses) on Derivatives		0		(1)
Gains (Losses) on Borrowings		0		1
Foreign exchange contracts, Amount of Gains (Losses) Reclassified from AOCI (Effective Portion)	(4)	(9)	1	9
Foreign exchange contracts, Recognized in Earnings (Ineffective Portion)	0	0	0	0
Interest rate contracts, Amount of Gains (Losses) Reclassified from AOCI (Effective Portion)		(1)	(1)	(1)
Interest rate contracts, Recognized in Earnings (Ineffective Portion)		0	0	0
Foreign exchange contracts, Gains or (Losses) on derivatives not designated as hedging instruments	(35)	15	30	47
Interest rate contracts, Gains or (Losses) on derivatives not designated as hedging instruments		(124)		(149)
Commodity contracts, Gains or (Losses) on derivatives not designated as hedging instruments	(6)	(2)	0	2
Other Income (Expense) | Financial Products
Derivative Instruments, Gain (Loss)
Gains (Losses) on Derivatives	6	42	(3)	(11)
Gains (Losses) on Borrowings	(5)	(40)	10	12
Foreign exchange contracts, Gains or (Losses) on derivatives not designated as hedging instruments	(5)	(2)	2	(2)
Interest Expense | Financial Products
Derivative Instruments, Gain (Loss)
Interest rate contracts, Amount of Gains (Losses) Reclassified from AOCI (Effective Portion)	(1)	(6)	(2)	(12)
Interest rate contracts, Recognized in Earnings (Ineffective Portion)	$ (1)	$ 0	$ (1)	$ 1

XML

Cat Financial Financing Activities (Tables)

6 Months Ended

Jun. 30, 2012

Cat Financial Financing Activities

Impaired loans and finance leases

Individually impaired loans and finance leases for the customer portfolio segment were as follows: 

	June 30, 2012						December 31, 2011
(Millions of dollars)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	46	$	44	$	—	$	83	$	80	$	—
Europe	45		44		—		47		46		—
Asia Pacific	3		3		—		4		4		—
Mining	8		8		—		8		8		—
Latin America	5		5		—		9		9		—
Caterpillar Power Finance	175		174		—		175		170		—
Total	$	282	$	278	$	—	$	326	$	317	$	—
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	58	$	53	$	12	$	69	$	64	$	15
Europe	38		38		11		36		33		12
Asia Pacific	28		28		4		13		13		3
Mining	69		68		7		13		13		4
Latin America	45		45		7		25		25		6
Caterpillar Power Finance	112		108		20		93		92		16
Total	$	350	$	340	$	61	$	249	$	240	$	56
Total Impaired Loans and Finance Leases
Customer
North America	$	104	$	97	$	12	$	152	$	144	$	15
Europe	83		82		11		83		79		12
Asia Pacific	31		31		4		17		17		3
Mining	77		76		7		21		21		4
Latin America	50		50		7		34		34		6
Caterpillar Power Finance	287		282		20		268		262		16
Total	$	632	$	618	$	61	$	575	$	557	$	56
1  No related allowance for credit losses due to sufficient collateral value.

	Three Months Ended June 30, 2012				Three Months Ended June 30, 2011
(Millions of dollars)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	57	$	—	$	104	$	1
Europe	45		—		8		—
Asia Pacific	3		—		6		—
Mining	8		—		8		—
Latin America	5		—		10		—
Caterpillar Power Finance	203		1		261		—
Total	$	321	$	1	$	397	$	1
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	66	$	1	$	161	$	2
Europe	40		—		53		—
Asia Pacific	24		—		17		1
Mining	41		1		—		—
Latin America	40		1		46		1
Caterpillar Power Finance	86		—		72		—
Total	$	297	$	3	$	349	$	4
Total Impaired Loans and Finance Leases
Customer
North America	$	123	$	1	$	265	$	3
Europe	85		—		61		—
Asia Pacific	27		—		23		1
Mining	49		1		8		—
Latin America	45		1		56		1
Caterpillar Power Finance	289		1		333		—
Total	$	618	$	4	$	746	$	5
1No related allowance for credit losses due to sufficient collateral value.

	Six Months Ended June 30, 2012				Six Months Ended June 30, 2011
(Millions of dollars)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	63	$	1	$	97	$	2
Europe	45		—		7		—
Asia Pacific	3		—		5		—
Mining	8		—		8		—
Latin America	6		—		7		—
Caterpillar Power Finance	191		2		231		1
Total	$	316	$	3	$	355	$	3
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	69	$	1	$	175	$	4
Europe	40		—		58		1
Asia Pacific	22		1		21		1
Mining	29		1		—		—
Latin America	33		1		46		2
Caterpillar Power Finance	87		—		59		—
Total	$	280	$	4	$	359	$	8
Total Impaired Loans and Finance Leases
Customer
North America	$	132	$	2	$	272	$	6
Europe	85		—		65		1
Asia Pacific	25		1		26		1
Mining	37		1		8		—
Latin America	39		1		53		2
Caterpillar Power Finance	278		2		290		1
Total	$	596	$	7	$	714	$	11
1No related allowance for credit losses due to sufficient collateral value.

Investment in loans and finance leases on non-accrual status

The investment in customer loans and finance leases on non-accrual status was as follows:

(Millions of dollars)
	June 30, 2012		December 31, 2011
Customer
North America	$	92	$	112
Europe	48		58
Asia Pacific	30		24
Mining	12		12
Latin America	169		108
Caterpillar Power Finance	297		158
Total	$	648	$	472

Past due loans and finance leases

Aging related to loans and finance leases were as follows:

(Millions of dollars)
	June 30, 2012
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables		91+ Still Accruing
Customer
North America	$	41	$	17	$	89	$	147	$	5,516	$	5,663	$	1
Europe	32		27		56		115		2,204		2,319		10
Asia Pacific	82		29		42		153		2,842		2,995		15
Mining	4		—		12		16		1,708		1,724		—
Latin America	45		23		157		225		2,354		2,579		—
Caterpillar Power Finance	83		32		177		292		2,876		3,168		14
Dealer
North America	—		—		—		—		1,907		1,907		—
Europe	—		—		—		—		69		69		—
Asia Pacific	—		—		—		—		620		620		—
Mining	—		—		—		—		1		1		—
Latin America	—		—		—		—		681		681		—
Total	$	287	$	128	$	533	$	948	$	20,778	$	21,726	$	40

(Millions of dollars)
	December 31, 2011
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables		91+ Still Accruing
Customer
North America	$	74	$	39	$	111	$	224	$	5,378	$	5,602	$	9
Europe	27		11		57		95		2,129		2,224		10
Asia Pacific	47		23		38		108		2,769		2,877		14
Mining	—		—		12		12		1,473		1,485		—
Latin America	32		15		99		146		2,339		2,485		—
Caterpillar Power Finance	14		16		125		155		2,765		2,920		25
Dealer
North America	—		—		—		—		1,689		1,689		—
Europe	—		—		—		—		57		57		—
Asia Pacific	—		—		—		—		161		161		—
Mining	—		—		—		—		—		—		—
Latin America	—		—		—		—		480		480		—
Total	$	194	$	104	$	442	$	740	$	19,240	$	19,980	$	58

Allowance for credit losses and recorded investment in finance receivables

The allowance for credit losses as of June 30, 2012 and December 31, 2011 was as follows:

(Millions of dollars)
	June 30, 2012
Allowance for Credit Losses:	Customer			Dealer		Total
Balance at beginning of year	$	360		$	6	$	366
Receivables written off	(50		)	—		(50		)
Recoveries on receivables previously written off	23			—		23
Provision for credit losses	51			2		53
Other	(2		)	—		(2		)
Balance at end of period	$	382		$	8	$	390
Allowance for Credit Losses:
Individually evaluated for impairment	$	61		$	—	$	61
Collectively evaluated for impairment	321			8		329
Ending Balance	$	382		$	8	$	390
Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	632		$	—	$	632
Collectively evaluated for impairment	17,816			3,278		21,094
Ending Balance	$	18,448		$	3,278	$	21,726

(Millions of dollars)
	December 31, 2011
Allowance for Credit Losses:	Customer			Dealer		Total
Balance at beginning of year	$	357		$	5	$	362
Receivables written off	(210		)	—		(210		)
Recoveries on receivables previously written off	52			—		52
Provision for credit losses	167			1		168
Other	(6		)	—		(6		)
Balance at end of year	$	360		$	6	$	366
Allowance for Credit Losses:
Individually evaluated for impairment	$	56		$	—	$	56
Collectively evaluated for impairment	304			6		310
Ending Balance	$	360		$	6	$	366
Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	575		$	—	$	575
Collectively evaluated for impairment	17,018			2,387		19,405
Ending Balance	$	17,593		$	2,387	$	19,980

Recorded investment of performing and non-performing finance receivables

The recorded investment in performing and non-performing finance receivables was as follows: 

(Millions of dollars)
	June 30, 2012						December 31, 2011
	Customer		Dealer		Total		Customer		Dealer		Total
Performing
North America	$	5,571	$	1,907	$	7,478	$	5,490	$	1,689	$	7,179
Europe	2,271		69		2,340		2,166		57		2,223
Asia Pacific	2,965		620		3,585		2,853		161		3,014
Mining	1,712		1		1,713		1,473		—		1,473
Latin America	2,410		681		3,091		2,377		480		2,857
Caterpillar Power Finance	2,871		—		2,871		2,762		—		2,762
Total Performing	$	17,800	$	3,278	$	21,078	$	17,121	$	2,387	$	19,508
Non-Performing
North America	$	92	$	—	$	92	$	112	$	—	$	112
Europe	48		—		48		58		—		58
Asia Pacific	30		—		30		24		—		24
Mining	12		—		12		12		—		12
Latin America	169		—		169		108		—		108
Caterpillar Power Finance	297		—		297		158		—		158
Total Non-Performing	$	648	$	—	$	648	$	472	$	—	$	472
Performing & Non-Performing
North America	$	5,663	$	1,907	$	7,570	$	5,602	$	1,689	$	7,291
Europe	2,319		69		2,388		2,224		57		2,281
Asia Pacific	2,995		620		3,615		2,877		161		3,038
Mining	1,724		1		1,725		1,485		—		1,485
Latin America	2,579		681		3,260		2,485		480		2,965
Caterpillar Power Finance	3,168		—		3,168		2,920		—		2,920
Total	$	18,448	$	3,278	$	21,726	$	17,593	$	2,387	$	19,980

Loan and finance receivables modified as TDRs

Loan and finance lease receivables in the customer portfolio segment modified as TDRs during the three and six months ended June 30, 2012 and 2011, were as follows:

(Dollars in millions)
	Three Months Ended June 30, 2012					Three Months Ended June 30, 2011
	Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment		Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment
Customer
North America	18	$	2	$	2	15	$	4	$	4
Europe	—	—		—		5	6		6
Latin America	—	—		—		4	5		5
Caterpillar Power Finance 1,2	—	—		—		25	60		60
Total 4	18	$	2	$	2	49	$	75	$	75

	Six Months Ended June 30, 2012					Six Months Ended June 30, 2011
	Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment		Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment
Customer
North America	41	$	4	$	4	39	$	9	$	9
Europe	7	7		7		6	7		7
Latin America	—	—		—		12	10		10
Caterpillar Power Finance 1,3	5	32		32		31	113		113
Total 4	53	$	43	$	43	88	$	139	$	139

¹  During the three and six months ended June 30, 2012, $6 million and $15 million, respectively, of additional funds were subsequently loaned to a borrower whose terms had been modified in a TDR.  The additional funds loaned are not reflected in the table above as no incremental modifications have been made with the borrower during the periods presented.  At June 30, 2012, remaining commitments to lend additional funds to a borrower whose terms have been modified in a TDR were $7 million.

²  Two customers comprise $55 million of the $60 million pre-TDR and post-TDR outstanding recorded investment for the three months ended June 30, 2011.

³  Three customers comprise $32 million of the pre-TDR and post-TDR outstanding recorded investment for the six months ended June 30, 2012. Four customers comprise $105 million of the $113 million pre-TDR and post-TDR outstanding recorded investment for the six months ended June 30, 2011.

⁴    Modifications include extended contract maturities, inclusion of interest only periods, below market interest rates, and extended skip payment periods.

Troubled debt restructuring payment default

TDRs in the customer portfolio segment with a payment default during the three and six months ended June 30, 2012 and 2011, which had been modified within twelve months prior to the default date, were as follows:

(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2011
	Number of Contracts	Post-TDR Recorded Investment		Number of Contracts	Post-TDR Recorded Investment
Customer
North America	14	$	1	7	$	3
Europe	—	—		1	1
Latin America	—	—		—	—
Caterpillar Power Finance	2	2		—	—
Total	16	$	3	8	$	4

(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2011
	Number of Contracts	Post-TDR Recorded Investment		Number of Contracts	Post-TDR Recorded Investment
Customer
North America	25	$	2	41	$	9
Europe	—	—		1	1
Latin America	—	—		—	—
Caterpillar Power Finance 1	16	21		6	5
Total	41	$	23	48	$	15

¹ Two customers comprise $19 million of the $21 million post-TDR recorded investment for the six months ended June 30, 2012.

XML

Cat Financial Financing Activities (Details 4) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 D	Dec. 31, 2011
Cat Financial Financing Activities
Period after which finance receivables are considered non-performing (in days)	120
Finance Receivables
Ending Balance - recorded investment in finance receivables	$ 21,726	$ 19,980
Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	21,078	19,508
Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	648	472
North America
Finance Receivables
Ending Balance - recorded investment in finance receivables	7,570	7,291
North America | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	7,478	7,179
North America | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	92	112
Europe
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,388	2,281
Europe | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,340	2,223
Europe | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	48	58
Asia Pacific
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,615	3,038
Asia Pacific | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,585	3,014
Asia Pacific | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	30	24
Mining
Finance Receivables
Ending Balance - recorded investment in finance receivables	1,725	1,485
Mining | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	1,713	1,473
Mining | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	12	12
Latin America
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,260	2,965
Latin America | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,091	2,857
Latin America | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	169	108
Caterpillar Power Finance
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,168	2,920
Caterpillar Power Finance | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,871	2,762
Caterpillar Power Finance | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	297	158
Customer
Finance Receivables
Ending Balance - recorded investment in finance receivables	18,448	17,593
Customer | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	17,800	17,121
Customer | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	648	472
Customer | North America
Finance Receivables
Ending Balance - recorded investment in finance receivables	5,663	5,602
Customer | North America | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	5,571	5,490
Customer | North America | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	92	112
Customer | Europe
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,319	2,224
Customer | Europe | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,271	2,166
Customer | Europe | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	48	58
Customer | Asia Pacific
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,995	2,877
Customer | Asia Pacific | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,965	2,853
Customer | Asia Pacific | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	30	24
Customer | Mining
Finance Receivables
Ending Balance - recorded investment in finance receivables	1,724	1,485
Customer | Mining | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	1,712	1,473
Customer | Mining | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	12	12
Customer | Latin America
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,579	2,485
Customer | Latin America | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,410	2,377
Customer | Latin America | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	169	108
Customer | Caterpillar Power Finance
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,168	2,920
Customer | Caterpillar Power Finance | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	2,871	2,762
Customer | Caterpillar Power Finance | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	297	158
Dealer
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,278	2,387
Dealer | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	3,278	2,387
Dealer | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables	0	0
Dealer | North America
Finance Receivables
Ending Balance - recorded investment in finance receivables	1,907	1,689
Dealer | North America | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	1,907	1,689
Dealer | North America | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables
Dealer | Europe
Finance Receivables
Ending Balance - recorded investment in finance receivables	69	57
Dealer | Europe | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	69	57
Dealer | Europe | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables
Dealer | Asia Pacific
Finance Receivables
Ending Balance - recorded investment in finance receivables	620	161
Dealer | Asia Pacific | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	620	161
Dealer | Asia Pacific | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables
Dealer | Mining
Finance Receivables
Ending Balance - recorded investment in finance receivables	1	0
Dealer | Mining | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	1	0
Dealer | Mining | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables
Dealer | Latin America
Finance Receivables
Ending Balance - recorded investment in finance receivables	681	480
Dealer | Latin America | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	681	480
Dealer | Latin America | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables
Dealer | Caterpillar Power Finance
Finance Receivables
Ending Balance - recorded investment in finance receivables	0	0
Dealer | Caterpillar Power Finance | Performing
Finance Receivables
Ending Balance - recorded investment in finance receivables	0	0
Dealer | Caterpillar Power Finance | Nonperforming
Finance Receivables
Ending Balance - recorded investment in finance receivables

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Available-For-Sale Securities (Tables)

6 Months Ended

Jun. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Schedule of available-for-sale securities

	June 30, 2012							December 31, 2011
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value
Government debt
U.S. treasury bonds	$	10	$	—		$	10	$	10	$	—		$	10
Other U.S. and non-U.S. government bonds	121		2			123		90		2			92
Corporate bonds
Corporate bonds	588		35			623		542		30			572
Asset-backed securities	96		(1		)	95		112		(1		)	111
Mortgage-backed debt securities
U.S. governmental agency	266		12			278		297		13			310
Residential	29		(3		)	26		33		(3		)	30
Commercial	131		6			137		142		3			145
Equity securities
Large capitalization value	139		29			168		127		21			148
Smaller company growth	22		11			33		22		7			29
Total	$	1,402	$	91		$	1,493	$	1,375	$	72		$	1,447

Investments in an unrealized loss position that are not other-than-temporarily impaired:

Investments in an unrealized loss position that are not other-than-temporarily impaired:
	June 30, 2012
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Asset-backed securities	$	3	$	—	$	19	$	4	$	22	$	4
Mortgage-backed debt securities
Residential	2		—		15		3		17		3
Commercial	2		—		8		1		10		1
Equity securities
Large capitalization value	28		3		14		2		42		5
Total	$	35	$	3	$	56	$	10	$	91	$	13

	December 31, 2011
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Corporate bonds	$	54	$	1	$	1	$	—	$	55	$	1
Asset-backed securities	1		—		20		5		21		5
Mortgage-backed debt securities
U.S. governmental agency	51		1		—		—		51		1
Residential	3		—		18		3		21		3
Commercial	15		—		8		1		23		1
Equity securities
Large capitalization value	36		5		6		1		42		6
Smaller company growth	4		1		—		—		4		1
Total	$	164	$	8	$	53	$	10	$	217	$	18

¹  Indicates length of time that individual securities have been in a continuous unrealized loss position.

Fair value of the available-for-sale debt securities, by contractual maturity

(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	125	$	127
Due after one year through five years	496		510
Due after five years through ten years	149		171
Due after ten years	45		43
U.S. agency mortgage-backed securities	266		278
Residential mortgage-backed securities	29		26
Commercial mortgage-backed securities	131		137
Total debt securities – available-for-sale	$	1,241	$	1,292

Schedule of proceeds and gross gain and losses from the sale of available-for-sale securities

Sales of Securities
	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars)	2012		2011		2012		2011
Proceeds from the sale of available-for-sale securities	$	65	$	56	$	177	$	122
Gross gains from the sale of available-for-sale securities	$	1	$	1	$	3	$	2
Gross losses from the sale of available-for-sale securities	$	—	$	—	$	—	$	1

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Inventories (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Inventory Disclosure [Abstract]
Raw Materials	$ 4,143	$ 3,766
Work-in-process	3,504	2,959
Finished goods	9,429	7,562
Supplies	268	257
Total inventories	$ 17,344	$ 14,544

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Segment Information (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Segment Reporting Revenue Reconciling Item
Sales and revenues	$ 17,374	$ 14,230	$ 33,355	$ 27,179
Machinery and Power Systems
Segment Reporting Revenue Reconciling Item
Sales and revenues	16,684	13,535	31,972	25,812
Financial Products
Segment Reporting Revenue Reconciling Item
Sales and revenues	780	777	1,557	1,517
Consolidating Adjustments
Segment Reporting Revenue Reconciling Item
Sales and revenues	(90)	(82)	(174)	(150)
Reportable segments
Segment Reporting Revenue Reconciling Item
Sales and revenues	17,005	13,829	32,593	26,247
Reportable segments | Machinery and Power Systems
Segment Reporting Revenue Reconciling Item
Sales and revenues	16,241	13,065	31,068	24,753
Reportable segments | Financial Products
Segment Reporting Revenue Reconciling Item
Sales and revenues	764	764	1,525	1,494
Reportable segments | Consolidating Adjustments
Segment Reporting Revenue Reconciling Item
Sales and revenues	0	0	0	0
All other operating segments
Segment Reporting Revenue Reconciling Item
Sales and revenues	454	475	928	1,064
All other operating segments | Machinery and Power Systems
Segment Reporting Revenue Reconciling Item
Sales and revenues	454	475	928	1,064
All other operating segments | Financial Products
Segment Reporting Revenue Reconciling Item
Sales and revenues	0	0	0	0
All other operating segments | Consolidating Adjustments
Segment Reporting Revenue Reconciling Item
Sales and revenues	0	0	0	0
Other
Segment Reporting Revenue Reconciling Item
Sales and revenues	(85)	(74)	(166)	(132)
Other | Machinery and Power Systems
Segment Reporting Revenue Reconciling Item
Sales and revenues	(11)	(5)	(24)	(5)
Other | Financial Products
Segment Reporting Revenue Reconciling Item
Sales and revenues	16	13	32	23
Other | Consolidating Adjustments
Segment Reporting Revenue Reconciling Item
Sales and revenues	$ (90)	$ (82)	$ (174)	$ (150)

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Guarantees and Product Warranty (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Commitments and Contingencies Disclosure [Abstract]
Related liability	$ 15	$ 7
Guarantor Obligations
Guarantees, maximum potential amount of future payments	400	365
Financial Special-Purpose Company's assets in Consolidated Statement of Financial Position	866	586
Financial Special-Purpose Company's liabilities in Consolidated Statement of Financial Position	866	586
Caterpillar dealer guarantees
Guarantor Obligations
Guarantees, maximum potential amount of future payments	146	140
Customer guarantees
Guarantor Obligations
Guarantees, maximum potential amount of future payments	180	186
Limited idemnity
Guarantor Obligations
Guarantees, maximum potential amount of future payments	8	11
Other guarantees
Guarantor Obligations
Guarantees, maximum potential amount of future payments	$ 66	$ 28

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Stock-Based Compensation (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 Y	Jun. 30, 2011 Y
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation expense, before tax (in dollars)	$ 88	$ 67	$ 135	$ 111
Stock-based compensation awards
Granted, Stock options (in shares)			3,224,203	237,906
Fair Value Per Award, Stock options (in dollars per share)			$ 39.20	$ 36.73
Stock price on the date of grant (in dollars per share)	$ 110.09	$ 102.13	$ 110.09	$ 102.13
Assumptions used in determining the fair value of the stock-based awards
Weighted-average dividend yield (as a percent)			2.16%	2.22%
Weighted-average volatility (as a percent)			35.00%	32.70%
Volatilities, low end of range (as a percent)			33.30%	20.90%
Volatilities, high end of range (as a percent)			40.40%	45.40%
Risk-free interest rates, low end of range (as a percent)			0.17%	0.25%
Risk-free interest rates, high end of range (as a percent)			2.00%	3.51%
Weighted-average expected lives (in years)			7	8
Unrecognized compensation cost related to nonvested stock-based compensation awards (in dollars)	$ 293		$ 293
Term of amortization of unrecognized compensation cost over weighted-average remaining requisite service periods (in years)			2.2
RSUs
Stock-based compensation awards
Granted (in shares)			1,429,939	1,082,032
Fair Value Per Award (in dollars per share)			$ 104.61	$ 97.51
SARs
Stock-based compensation awards
Granted (in shares)			0	2,722,689
Fair Value Per Award (in dollars per share)			$ 0.00	$ 36.73

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Consolidated Statement of Cash Flow (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flow from operating activities:
Profit of consolidated and affliated companies	$ 3,320	$ 2,265
Adjustments for non-cash items:
Depreciation and amortization	1,350	1,174
Other	(59)	337
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables - trade and other	37	45
Inventories	(2,939)	(1,850)
Accounts payable	299	1,056
Accrued expenses	115	(41)
Accrued wages, salaries and employee benefits	(753)	(91)
Customer advances	434	14
Other assets - net	63	28
Other liabilities - net	140	357
Net cash provided by (used for) operating activities	2,007	3,294
Cash flow from investing activities:
Capital expenditures - excluding equipment leased to others	(1,508)	(924)
Expenditures for equipment leased to others	(787)	(580)
Proceeds from disposals of leased assets and property, plant and equipment	543	621
Additions to finance receivables	(5,942)	(4,294)
Collections of finance receivables	4,298	3,981
Proceeds from sale of finance receivables	85	104
Investments and acquisitions (net of cash acquired)	(517)	(68)
Proceeds from sale of businesses and investments (net of cash sold)	308	21
Proceeds from sale of available-for-sale securities	177	122
Investments in available-for-sale securities	(199)	(131)
Other - net	38	(38)
Net cash provided by (used for) investing activities	(3,504)	(1,186)
Cash flow from financing activities:
Dividends paid	(598)	(565)
Distribution to noncontrolling interests	(5)	(2)
Common stock issued, including treasury shares reissued	25	96
Excess tax benefit from stock-based compensation	156	159
Acquisitions of redeemable noncontrolling interests	(444)	0
Proceeds from debt issued (original maturities greater than three months):
Machinery and Power Systems	1,662	4,530
Financial Products	7,357	5,799
Payments on debt (original maturities greater than three months):
Machinery and Power Systems	(211)	(487)
Financial Products	(4,822)	(4,638)
Short-term borrowings - net (original maturities three months or less)	552	36
Net cash provided by (used for) financing activities	3,672	4,928
Effect of exchange rate changes on cash	(129)	87
Increase (decrease) in cash and short-term investments	2,046	7,123
Cash and short-term investments at beginning of period	3,057	3,592
Cash and short-term investments at end of period	$ 5,103	$ 10,715

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Guarantees and Product Warranty (Details 2) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Movement in Standard Product Warranty Accrual
Warranty liability, beginning balance	$ 1,308	$ 1,035
Reduction in liability (payments)	(460)	(926)
Increase in liability (new warranties)	540	1,199
Warranty liability, ending balance	$ 1,388	$ 1,308

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial Products, included in our Consolidated Statement of Financial Position as of June 30, 2012 and December 31, 2011 are summarized below:

(Millions of dollars)	June 30, 2012
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		123		—		123
Corporate bonds
Corporate bonds	—		623		—		623
Asset-backed securities	—		95		—		95
Mortgage-backed debt securities
U.S. governmental agency	—		278		—		278
Residential	—		26		—		26
Commercial	—		137		—		137
Equity securities
Large capitalization value	168		—		—		168
Smaller company growth	33		—		—		33
Total available-for-sale securities	211		1,282		—		1,493
Derivative financial instruments, net	—		145		—		145
Total Assets	$	211	$	1,427	$	—	$	1,638
Liabilities
Guarantees	$	—	$	—	$	15	$	15
Total Liabilities	$	—	$	—	$	15	$	15

(Millions of dollars)	December 31, 2011
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		92		—		92
Corporate bonds
Corporate bonds	—		572		—		572
Asset-backed securities	—		111		—		111
Mortgage-backed debt securities
U.S. governmental agency	—		310		—		310
Residential	—		30		—		30
Commercial	—		145		—		145
Equity securities
Large capitalization value	148		—		—		148
Smaller company growth	29		—		—		29
Total available-for-sale securities	187		1,260		—		1,447
Derivative financial instruments, net	—		145		—		145
Total Assets	$	187	$	1,405	$	—	$	1,592
Liabilities
Guarantees	$	—	$	—	$	7	$	7
Total Liabilities	$	—	$	—	$	7	$	7

Roll-forwards of assets and liabilities measured at fair value using Level 3 inputs

Below are roll-forwards of assets and liabilities measured at fair value using Level 3 inputs for the six months ended June 30, 2012 and 2011.  These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions of a marketplace participant.

(Millions of dollars)	Guarantees
Balance at December 31, 2011	$	7
Acquisitions	6
Issuance of guarantees	3
Expiration of guarantees	(1		)
Balance at June 30, 2012	$	15
Balance at December 31, 2010	$	10
Issuance of guarantees	1
Expiration of guarantees	(4		)
Balance at June 30, 2011	$	7

Fair Values of Financial Instruments

Please refer to the table below for the fair values of our financial instruments.

Fair Value of Financial Instruments
	June 30, 2012				December 31, 2011
(Millions of dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Assets
Cash and short-term investments	$	5,103	$	5,103	$	3,057	$	3,057	1
Restricted cash and short-term investments	189		189		87		87		1
Available-for-sale securities	1,493		1,493		1,447		1,447		1 & 2	Note 8
Finance receivables—net (excluding finance leases1)	14,146		14,079		12,689		12,516		2	Note 15
Wholesale inventory receivables—net (excluding finance leases1)	1,441		1,372		1,591		1,505		2	Note 15
Interest rate swaps—net	235		235		241		241		2	Note 4
Liabilities
Short-term borrowings	5,047		5,047		3,988		3,988		1
Long-term debt (including amounts due within one year)
Machinery and Power Systems	10,438		12,370		8,973		10,737		2
Financial Products	23,831		24,859		21,631		22,674		2
Foreign currency contracts—net	87		87		89		89		2	Note 4
Commodity contracts—net	3		3		7		7		2	Note 4
Guarantees	15		15		7		7		3	Note 10

¹ Total excluded items have a net carrying value at June 30, 2012 and December 31, 2011 of $7,601 million and $7,324 million, respectively.

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Employee separation charges

6 Months Ended

Jun. 30, 2012

Employee separation charges [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

Employee separation charges

In 2011, we reported employee separation charges of $112 million in Other operating (income) expenses in the Consolidated Statement of Results of Operations primarily related to the acquisition of Bucyrus. The majority of the charges were assigned to the Resource Industries segment.

For the three and six months ended June 30, 2012, we recognized employee separation charges of $9 million and $41 million in Other operating (income) expenses in the Consolidated Statement of Results of Operations primarily related to the closure of the Electro-Motive Diesel facility located in London, Ontario. The majority of the charges were assigned to the Power Systems segment.

Our accounting for separations was dependent upon how the particular program was designed. For voluntary programs, eligible separation costs were recognized at the time of employee acceptance. For involuntary programs, eligible costs were recognized when management had approved the program, the affected employees had been properly notified and the costs were estimable.

In addition to the separation charges noted above, in first quarter of 2012 we reported $6 million of net gains associated with certain pension and other postretirement benefit plans, which were also recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations. See Note 9 for additional information.

The following table summarizes the 2011 and 2012 separation activity:

(Millions of dollars)
	Total
Liability balance at December 31, 2010	$	22
Increase in liability (separation charges)	$	112
Reduction in liability (payments and other adjustments)	(44		)
Liability balance at December 31, 2011	$	90
Increase in liability (separation charges)	$	41
Reduction in liability (payments and other adjustments)	(117		)
Liability balance at June 30, 2012	$	14

The remaining liability balances as of June 30, 2012 represent costs for employees that have either not yet separated from the Company or their full severance has not yet been paid. The majority of these remaining costs are expected to be paid in 2012 and 2013.

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Divestitures and Assets Held for Sale

6 Months Ended

Jun. 30, 2012

Divestitures and Assets held for sale [Abstract]

Divestitures and Assets Held for Sale

 Divestitures and Assets held for sale

Bucyrus Distribution Business Divestiture

In conjunction with our acquisition of Bucyrus in July 2011, we announced our intention to sell the Bucyrus distribution business to Caterpillar dealers that support mining customers around the world in a series of individual transactions. Bucyrus predominantly employed a direct to end customer model to sell and support products. The intention is for Bucyrus products to be sold and serviced by Caterpillar dealers, consistent with our long-held distribution strategy. We expect these transitions will occur in phases based on the mining business opportunity within each dealer territory.

As portions of the Bucyrus distribution business are sold or classified as held for sale, they will not qualify as discontinued operations because Caterpillar expects significant continuing direct cash flows from the Caterpillar dealers after the divestitures. The gain or loss on disposal, along with the continuing operations of these disposal groups, will be reported in the Resource Industries segment. Goodwill will be allocated to each disposal group using the relative fair value method. The value of the customer relationship intangibles related to each portion of the Bucyrus distribution business to be sold will be included in the disposal groups. The disposal groups will be recorded at the lower of their carrying value or fair value less cost to sell. In the second quarter of 2012, we recorded a goodwill impairment for $27 million related to a disposal group being sold to one of the Caterpillar dealers. After the goodwill impairment, the carrying value of the disposal group was lower than its fair value less costs to sell. Fair value was determined based upon the negotiated sales price. The impairment was recorded in Other operating (income) expenses and included in the Resource Industries segment.

In the second quarter of 2012, three sale transactions were completed whereby we sold portions of the Bucyrus distribution business to Finning International, WesTrac Pty Limited, a wholly owned subsidiary of Seven Group Holdings Limited, and Ferreyros S.A.A. for $306 million, $400 million and $75 million respectively, subject to certain working capital adjustments. After-tax profit was unfavorably impacted by $8 million in the second quarter of 2012 as a result of the Bucyrus distribution business divestiture activities. This is comprised of $160 million of income (included in Other operating (income) expenses) related to the sales transactions, offset by costs incurred related to the Bucyrus distribution divestiture activities of $57 million (included in Selling, general and administrative expenses) and income tax of $111 million.

Assets sold included customer relationship intangibles of $146 million, other assets of $117 million, which consisted primarily of inventory and fixed assets, and allocated goodwill of $230 million related to the Bucyrus distribution divestiture activities.

As part of these divestitures, Cat Financial provided $400 million of financing to WesTrac Pty Limited and $75 million to Ferreyros S.A.A. These loans are included in Receivables – finance and Long-term receivables – finance in the Consolidated Statement of Financial Position.

For the first half of 2012, after-tax profit was unfavorably impacted by $28 million as a result of the Bucyrus distribution divestiture activities. This is comprised of $155 million of income (included in Other operating (income) expenses) related to the sales transactions, offset by costs incurred related to the Bucyrus distribution divestiture activities of $83 million (included in Selling, general and administrative expenses) and income tax of $100 million.

As of June 30, 2012, nine divestiture transactions were classified as held for sale and are expected to close throughout the remainder of 2012. Current assets held for sale were included in Prepaid expenses and other current assets and non-current assets held for sale were included in Other assets in the Consolidated Statement of Financial Position.

Subsequent to June 30, 2012, three sale transactions were completed whereby we sold portions of the Bucyrus distribution business to Barloworld Limited, Hewitt Equipment Limited and Toromont Industries Ltd, which were classified as held for sale at June 30, 2012.

Third Party Logistics Business Divestiture

On July 31, 2012, Platinum Equity acquired a 65 percent equity stake in Caterpillar Logistics Services LLC, the third party logistics division of our wholly owned subsidiary, Caterpillar Logistics Inc. (Cat Logistics). The sale of the third party business supports Caterpillar's increased focus on the continuing growth opportunities in its core businesses. Under the terms of the agreement, Caterpillar will retain a 35 percent equity stake. Current assets held for sale were included in Prepaid expenses and other current assets and non-current assets held for sale were included in Other assets in the Consolidated Statement of Financial Position at June 30, 2012. Current liabilities held for sale were included in Other current liabilities and non-current liabilities held for sale were included in Other liabilities in the Consolidated Statement of Financial Position.

The disposal will not qualify as discontinued operations because Caterpillar expects significant continuing involvement through the noncontrolling interest. The financial impact of the disposal, along with the continuing operations of the disposal group, will be reported in the All Other operating segment.

The major classes of assets and liabilities held for sale for a portion of the Bucyrus distribution business and the third party logistics divestitures were as follows:

(Millions of dollars)	June 30, 2012		December 31, 2011
Receivables - trade and other	$	186	$	25
Prepaid expenses and other current assets	10		—
Inventory	141		109
Current assets	$	337	$	134
Property plant and equipment - net	$	222	$	28
Intangible assets	136		186
Goodwill	191		296
Other assets	62		—
Non-current assets	$	611	$	510
Accounts payable	$	19	$	—
Accrued expenses	15		—
Accrued wages, salaries and employee benefits	30		—
Current liabilities	$	64	$	—
Other liabilities	$	44	$	—
Liability for postemployment benefits	55		—
Long-term liabilities	$	99	$	—

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Available-For-Sale Securities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities
Cost Basis	$ 1,402	$ 1,375
Unrealized pretax net gains (losses)	91	72
Fair Value	1,493	1,447
U.S. treasury bonds
Schedule of Available-for-sale Securities
Cost Basis	10	10
Unrealized pretax net gains (losses)	0	0
Fair Value	10	10
Other U.S. and non-U.S. government bonds
Schedule of Available-for-sale Securities
Cost Basis	121	90
Unrealized pretax net gains (losses)	2	2
Fair Value	123	92
Corporate bonds
Schedule of Available-for-sale Securities
Cost Basis	588	542
Unrealized pretax net gains (losses)	35	30
Fair Value	623	572
Asset-backed Securities
Schedule of Available-for-sale Securities
Cost Basis	96	112
Unrealized pretax net gains (losses)	(1)	(1)
Fair Value	95	111
U.S. governmental agency mortgage-backed securities
Schedule of Available-for-sale Securities
Cost Basis	266	297
Unrealized pretax net gains (losses)	12	13
Fair Value	278	310
Residential
Schedule of Available-for-sale Securities
Cost Basis	29	33
Unrealized pretax net gains (losses)	(3)	(3)
Fair Value	26	30
Commercial
Schedule of Available-for-sale Securities
Cost Basis	131	142
Unrealized pretax net gains (losses)	6	3
Fair Value	137	145
Large capitalization value
Schedule of Available-for-sale Securities
Cost Basis	139	127
Unrealized pretax net gains (losses)	29	21
Fair Value	168	148
Smaller company growth
Schedule of Available-for-sale Securities
Cost Basis	22	22
Unrealized pretax net gains (losses)	11	7
Fair Value	$ 33	$ 29

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Divestitures and Assets Held for Sale Divestitures and Assets Held for Sale (Tables)

6 Months Ended

Jun. 30, 2012

Divestitures and Assets held for sale [Abstract]

Disclosure of assets and liabilities held for sale

The major classes of assets and liabilities held for sale for a portion of the Bucyrus distribution business and the third party logistics divestitures were as follows:

(Millions of dollars)	June 30, 2012		December 31, 2011
Receivables - trade and other	$	186	$	25
Prepaid expenses and other current assets	10		—
Inventory	141		109
Current assets	$	337	$	134
Property plant and equipment - net	$	222	$	28
Intangible assets	136		186
Goodwill	191		296
Other assets	62		—
Non-current assets	$	611	$	510
Accounts payable	$	19	$	—
Accrued expenses	15		—
Accrued wages, salaries and employee benefits	30		—
Current liabilities	$	64	$	—
Other liabilities	$	44	$	—
Liability for postemployment benefits	55		—
Long-term liabilities	$	99	$	—

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Derivative Financial Instruments and Risk Management (Policies)

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Risk Management Policy

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costs incurred in foreign currencies. Movements in foreign currency rates also affect our competitive position as these changes may affect business practices and/or pricing strategies of non-U.S.-based competitors. Additionally, we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.

Our Machinery and Power Systems operations purchase, manufacture and sell products in many locations around the world. As we have a diversified revenue and cost base, we manage our future foreign currency cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to five years.

We generally designate as cash flow hedges at inception of the contract any Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese yuan, euro, Indian rupee, Japanese yen, Mexican peso, Singapore dollar or Swiss franc forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current quarter-end. Designation is performed on a specific exposure basis to support hedge accounting. The remainder of Machinery and Power Systems foreign currency contracts are undesignated, including any hedges designed to protect our competitive exposure.  

As of June 30, 2012, $18 million of deferred net losses, net of tax, included in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position), are expected to be reclassified to current earnings (Other income (expense) in the Consolidated Statement of Results of Operations) over the next twelve months when earnings are affected by the hedged transactions.  The actual amount recorded in Other income (expense) will vary based on exchange rates at the time the hedged transactions impact earnings.

In managing foreign currency risk for our Financial Products operations, our objective is to minimize earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions. Our policy allows the use of foreign currency forward and option contracts to offset the risk of currency mismatch between our receivables and debt. All such foreign currency forward and option contracts are undesignated.

Interest Rate Risk

Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate derivatives to manage our exposure to interest rate changes and, in some cases, lower the cost of borrowed funds.

Our Machinery and Power Systems operations generally use fixed-rate debt as a source of funding.  Our objective is to minimize the cost of borrowed funds.  Our policy allows us to enter into fixed-to-floating interest rate swaps and forward rate agreements to meet that objective with the intent to designate as fair value hedges at inception of the contract all fixed-to-floating interest rate swaps.  Designation as a hedge of the fair value of our fixed-rate debt is performed to support hedge accounting.

Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating rate) of Cat Financial’s debt portfolio with the interest rate profile of their receivables portfolio within predetermined ranges on an ongoing basis. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the receivables portfolio. This matched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.

Our policy allows us to use fixed-to-floating, floating-to-fixed, and floating-to-floating interest rate swaps to meet the match-funding objective.  We designate fixed-to-floating interest rate swaps as fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest rate.  We designate most floating-to-fixed interest rate swaps as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.

As of June 30, 2012, $3 million of deferred net losses, net of tax, included in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position), related to Financial Products floating-to-fixed interest rate swaps, are expected to be reclassified to current earnings (Interest expense of Financial Products in the Consolidated Statement of Results of Operations) over the next twelve months.  The actual amount recorded in Interest expense of Financial Products will vary based on interest rates at the time the hedged transactions impact earnings.

We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate swaps at both Machinery and Power Systems and Financial Products.  The gains or losses associated with these swaps at the time of liquidation are amortized into earnings over the original term of the previously designated hedged item.

In anticipation of issuing debt for the planned acquisition of Bucyrus International, Inc., we entered into interest rate swaps to manage our exposure to interest rate changes. For the three and six months ended June 30, 2011, we recognized a net loss of $124 million and $149 million, respectively, included in Other income (expense) in the Consolidated Statement of Results of Operations. These contracts were not designated as hedging instruments, and therefore, did not receive hedge accounting treatment. The contracts were liquidated in conjunction with the debt issuance in May 2011.

Commodity Price Risk

Commodity price movements create a degree of risk by affecting the price we must pay for certain raw material. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased materials.

Our Machinery and Power Systems operations purchase base and precious metals embedded in the components we purchase from suppliers.  Our suppliers pass on a share of the price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.

Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five-year horizon. All such commodity forward and option contracts are undesignated.

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

6 Months Ended

Jun. 30, 2012

Basis of Presentation Abstract

Accumulated Other Comprehensive Income (Loss), net of tax

Accumulated other comprehensive income (loss), net of tax, included in the Consolidated Statement of Changes in Stockholders’ Equity, consisted of the following:

(Millions of dollars)	June 30, 2012				June 30, 2011
Foreign currency translation	$	239			$	863
Pension and other postretirement benefits	(6,410		)		(4,499		)
Derivative financial instruments	(37		)		36
Available-for-sale securities	58				56
Total accumulated other comprehensive income (loss)	$	(6,150	)	1	$	(3,544	)

¹  In conjunction with the Cat Japan share redemption, to reflect the increase in our ownership interest in Cat Japan from 67 percent to 100 percent, $107 million was reclassified to Accumulated other comprehensive income (loss) from other components of stockholders' equity and was not included in Comprehensive income during the second quarter of 2012. The amount was comprised of foreign currency translation of $167 million, pension and other postretirement benefits of $(61) million and available-for-sale securities of $1 million.

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Consolidated Statement of Stockholders' Equity (Parenthetical)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Statement of Stockholders' Equity [Abstract]
Common shares issued from treasury stock for stock-based compensation (in shares)	5,735,352	7,243,608

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of type and fair value of the stock-based compensation awards granted during the period

The following table illustrates the type and fair value of the stock-based compensation awards granted during the six month periods ended June 30, 2012 and 2011, respectively:

	2012			2011
	# Granted	Fair Value Per Award		# Granted	Fair Value Per Award
Stock options	3,224,203	$	39.20	237,906	$	36.73
RSUs	1,429,939	$	104.61	1,082,032	$	97.51
SARs	—	$	—	2,722,689	$	36.73

Schedule providing assumptions used in determining the fair value of stock-based awards

The following table provides the assumptions used in determining the fair value of the stock-based awards for the six month periods ended June 30, 2012 and 2011, respectively:

	Grant Year
	2012	2011
Weighted-average dividend yield	2.16%	2.22%
Weighted-average volatility	35.0%	32.7%
Range of volatilities	33.3-40.4%	20.9-45.4%
Range of risk-free interest rates	0.17-2.00%	0.25-3.51%
Weighted-average expected lives	7 years	8 years

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Divestitures and Assets Held for Sale (Details 2) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jul. 31, 2012 Logistics
Disposal Groups
Percentage of equity interest sold in subsidiary			65.00%
Percentage of equity interest retained in subsidiary			35.00%
Current Assets
Receivables - trade and other	$ 186	$ 25
Prepaid expenses and other current assets	10	0
Inventory	141	109
Current assets	337	134
Non-current Assets
Property, plant and equipment, net	222	28
Intangible assets	136	186
Goodwill	191	296
Other assets	62	0
Non-current assets	611	510
Current Liabilities
Accounts Payable	19	0
Accrued Expenses	15	0
Accrued wages, salaries and employee benefits	30	0
Current liabilities	64	0
Long-term Liabilities
Other liabilities	44	0
Liability for postemployment benefits	55	0
Long-term liabilities	$ 99	$ 0

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Computations of Profit Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Computations of Profit Per Share

(Dollars in millions except per share data)		Three Months Ended June 30,				Six Months Ended June 30,
		2012		2011		2012		2011
I.	Profit for the period (A)1:	$	1,699	$	1,015	$	3,285	$	2,240
II.	Determination of shares (in millions):	—
	Weighted-average number of common shares outstanding (B)	652.9		645.5		651.3		643.3
	Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price	16.7		21.7		18.6		22.7
	Average common shares outstanding for fully diluted computation (C) 2	669.6		667.2		669.9		666.0
III.	Profit per share of common stock:
	Assuming no dilution (A/B)	$	2.60	$	1.57	$	5.04	$	3.48
	Assuming full dilution (A/C) 2	$	2.54	$	1.52	$	4.90	$	3.36
1 Profit attributable to common stockholders. 2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

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Investments in Unconsolidated Affiliated Companies (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Results of Operations of unconsolidated affiliated companies:
Sales	$ 206	$ 241	$ 372	$ 439
Cost of sales	160	198	286	359
Gross profit	46	43	86	80
Profit (loss)	12	(17)	22	(34)
Assets:
Current assets	332		332		345
Property, plant and equipment - net	107		107		200
Other assets	17		17		9
Assets	456		456		554
Liabilities:
Current liabilities	197		197		220
Long-term debt due after one year	50		50		72
Other liabilities	9		9		17
Liabilities	256		256		309
Equity	200		200		245
Caterpillar's investments in unconsolidated affiliated companies:
Investments in equity method companies	108		108		111
Plus: Investments in cost method companies	16		16		22
Total investments in unconsolidated affiliated companies	$ 124		$ 124		$ 133

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Cat Financial Financing Activities (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Cat Financial Financing Activities
Period after which collection of future income is considered as not probable (in days)			120
Customer
Impaired loans and finance leases
Recorded Investment	$ 632		$ 632		$ 575
Unpaid Principal Balance	618		618		557
Related Allowance	61		61		56
Average Recorded Investment	618	746	596	714
Interest Income Recognized	4	5	7	11
Customer | Impaired Loans and Finance Leases with No Allowance Recorded
Impaired loans and finance leases
Recorded Investment	282		282		326
Unpaid Principal Balance	278		278		317
Related Allowance	0		0		0
Average Recorded Investment	321	397	316	355
Interest Income Recognized	1	1	3	3
Customer | Impaired Loans and Finance Leases with Allowance Recorded
Impaired loans and finance leases
Recorded Investment	350		350		249
Unpaid Principal Balance	340		340		240
Related Allowance	61		61		56
Average Recorded Investment	297	349	280	359
Interest Income Recognized	3	4	4	8
Customer | North America
Impaired loans and finance leases
Recorded Investment	104		104		152
Unpaid Principal Balance	97		97		144
Related Allowance	12		12		15
Average Recorded Investment	123	265	132	272
Interest Income Recognized	1	3	2	6
Customer | North America | Impaired Loans and Finance Leases with No Allowance Recorded
Impaired loans and finance leases
Recorded Investment	46		46		83
Unpaid Principal Balance	44		44		80
Related Allowance	0		0		0
Average Recorded Investment	57	104	63	97
Interest Income Recognized	0	1	1	2
Customer | North America | Impaired Loans and Finance Leases with Allowance Recorded
Impaired loans and finance leases
Recorded Investment	58		58		69
Unpaid Principal Balance	53		53		64
Related Allowance	12		12		15
Average Recorded Investment	66	161	69	175
Interest Income Recognized	1	2	1	4
Customer | Europe
Impaired loans and finance leases
Recorded Investment	83		83		83
Unpaid Principal Balance	82		82		79
Related Allowance	11		11		12
Average Recorded Investment	85	61	85	65
Interest Income Recognized	0	0	0	1
Customer | Europe | Impaired Loans and Finance Leases with No Allowance Recorded
Impaired loans and finance leases
Recorded Investment	45		45		47
Unpaid Principal Balance	44		44		46
Related Allowance	0		0		0
Average Recorded Investment	45	8	45	7
Interest Income Recognized	0	0	0	0
Customer | Europe | Impaired Loans and Finance Leases with Allowance Recorded
Impaired loans and finance leases
Recorded Investment	38		38		36
Unpaid Principal Balance	38		38		33
Related Allowance	11		11		12
Average Recorded Investment	40	53	40	58
Interest Income Recognized	0	0	0	1
Customer | Asia Pacific
Impaired loans and finance leases
Recorded Investment	31		31		17
Unpaid Principal Balance	31		31		17
Related Allowance	4		4		3
Average Recorded Investment	27	23	25	26
Interest Income Recognized	0	1	1	1
Customer | Asia Pacific | Impaired Loans and Finance Leases with No Allowance Recorded
Impaired loans and finance leases
Recorded Investment	3		3		4
Unpaid Principal Balance	3		3		4
Related Allowance	0		0		0
Average Recorded Investment	3	6	3	5
Interest Income Recognized	0	0	0	0
Customer | Asia Pacific | Impaired Loans and Finance Leases with Allowance Recorded
Impaired loans and finance leases
Recorded Investment	28		28		13
Unpaid Principal Balance	28		28		13
Related Allowance	4		4		3
Average Recorded Investment	24	17	22	21
Interest Income Recognized	0	1	1	1
Customer | Mining
Impaired loans and finance leases
Recorded Investment	77		77		21
Unpaid Principal Balance	76		76		21
Related Allowance	7		7		4
Average Recorded Investment	49	8	37	8
Interest Income Recognized	1	0	1	0
Customer | Mining | Impaired Loans and Finance Leases with No Allowance Recorded
Impaired loans and finance leases
Recorded Investment	8		8		8
Unpaid Principal Balance	8		8		8
Related Allowance	0		0		0
Average Recorded Investment	8	8	8	8
Interest Income Recognized	0	0	0	0
Customer | Mining | Impaired Loans and Finance Leases with Allowance Recorded
Impaired loans and finance leases
Recorded Investment	69		69		13
Unpaid Principal Balance	68		68		13
Related Allowance	7		7		4
Average Recorded Investment	41	0	29	0
Interest Income Recognized	1	0	1	0
Customer | Latin America
Impaired loans and finance leases
Recorded Investment	50		50		34
Unpaid Principal Balance	50		50		34
Related Allowance	7		7		6
Average Recorded Investment	45	56	39	53
Interest Income Recognized	1	1	1	2
Customer | Latin America | Impaired Loans and Finance Leases with No Allowance Recorded
Impaired loans and finance leases
Recorded Investment	5		5		9
Unpaid Principal Balance	5		5		9
Related Allowance	0		0		0
Average Recorded Investment	5	10	6	7
Interest Income Recognized	0	0	0	0
Customer | Latin America | Impaired Loans and Finance Leases with Allowance Recorded
Impaired loans and finance leases
Recorded Investment	45		45		25
Unpaid Principal Balance	45		45		25
Related Allowance	7		7		6
Average Recorded Investment	40	46	33	46
Interest Income Recognized	1	1	1	2
Customer | Caterpillar Power Finance
Impaired loans and finance leases
Recorded Investment	287		287		268
Unpaid Principal Balance	282		282		262
Related Allowance	20		20		16
Average Recorded Investment	289	333	278	290
Interest Income Recognized	1	0	2	1
Customer | Caterpillar Power Finance | Impaired Loans and Finance Leases with No Allowance Recorded
Impaired loans and finance leases
Recorded Investment	175		175		175
Unpaid Principal Balance	174		174		170
Related Allowance	0		0		0
Average Recorded Investment	203	261	191	231
Interest Income Recognized	1	0	2	1
Customer | Caterpillar Power Finance | Impaired Loans and Finance Leases with Allowance Recorded
Impaired loans and finance leases
Recorded Investment	112		112		93
Unpaid Principal Balance	108		108		92
Related Allowance	20		20		16
Average Recorded Investment	86	72	87	59
Interest Income Recognized	0	0	0	0
Dealer
Impaired loans and finance leases
Recorded Investment	0		0		0
Average Recorded Investment	$ 0	$ 0	$ 0	$ 0

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Consolidated Statement of Results of Operations (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Sales and revenues:
Sales of Machinery and Power Systems	$ 16,684		$ 13,535		$ 31,972		$ 25,812
Revenues of Financial Products	690		695		1,383		1,367
Total sales and revenues	17,374		14,230		33,355		27,179
Operating costs:
Cost of goods sold	12,280		10,303		23,517		19,360
Selling, general and administrative expenses	1,517		1,257		2,857		2,356
Research and development expenses	632		584		1,219		1,109
Interest expense of Financial Products	198		209		402		412
Other operating (income) expenses	131		276		421		508
Total operating costs	14,758		12,629		28,416		23,745
Operating profit	2,616		1,601		4,939		3,434
Interest expense excluding Financial Products	110		90		223		177
Other income (expense)	70		(161)		158		(144)
Consolidated profit before taxes	2,576		1,350		4,874		3,113
Provision for income taxes	872		318		1,561		830
Profit of consolidated companies	1,704		1,032		3,313		2,283
Equity in profit (loss) of unconsolidated affiliated companies	5		(10)		7		(18)
Profit of consolidated and affiliated companies	1,709		1,022		3,320		2,265
Less: Profit attributable to noncontrolling interests	10		7		35		25
Profit	$ 1,699	[1]	$ 1,015	[1]	$ 3,285	[1]	$ 2,240	[1]
Profit per common share (in dollars per share)	$ 2.60		$ 1.57		$ 5.04		$ 3.48
Profit per common share - diluted (in dollars per share)	$ 2.54	[2]	$ 1.52	[2]	$ 4.90	[2]	$ 3.36	[2]
Weighted-average common shares outstanding (millions) -
Basic (in shares)	652.9		645.5		651.3		643.3
Diluted (in shares)	669.6	[2]	667.2	[2]	669.9	[2]	666.0	[2]
Cash dividends declared per common share (in dollars per share)	$ 0.98		$ 0.90		$ 0.98		$ 0.90

[1] 1 Profit attributable to common stockholders.

[2] 2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

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Employee separation charges (Tables)

6 Months Ended

Jun. 30, 2012

Employee separation charges [Abstract]

Summary of separation activity

The following table summarizes the 2011 and 2012 separation activity:

(Millions of dollars)
	Total
Liability balance at December 31, 2010	$	22
Increase in liability (separation charges)	$	112
Reduction in liability (payments and other adjustments)	(44		)
Liability balance at December 31, 2011	$	90
Increase in liability (separation charges)	$	41
Reduction in liability (payments and other adjustments)	(117		)
Liability balance at June 30, 2012	$	14

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Consolidated Statement of Financial Position (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Common Stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common Stock, Authorized Shares	2,000,000,000	2,000,000,000
Common Stock, issued shares	814,894,624	814,894,624
Treasury Stock, Shares	161,625,928	167,361,280

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Postretirement Benefits (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 29, 2012	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pension Contributions [Abstract]
Contributions to pension plans		$ 119,000,000	$ 104,000,000	$ 293,000,000	$ 235,000,000
Expected full year contributions pension plans during the year		1,000,000,000		1,000,000,000
Amount of employer contribution required in current year		570,000,000		570,000,000
U.S. Pension Benefits
Components of net periodic benefit cost
Service cost		46,000,000	38,000,000	92,000,000	77,000,000
Interest cost		154,000,000	162,000,000	308,000,000	324,000,000
Expected return on plan assets		(203,000,000)	(199,000,000)	(406,000,000)	(398,000,000)
Amortization of:
Transition obligation / (asset)				0	0
Prior service cost / (credit)		5,000,000	5,000,000	10,000,000	10,000,000
Net actuarial loss / (gain)		124,000,000	113,000,000	248,000,000	226,000,000
Net periodic benefit cost, excluding curtailments, settlements and special termination benefits		126,000,000	119,000,000	252,000,000	239,000,000
Curtailments, settlements and special termination benefits		0	0	0	0
Total cost included in operating profit		126,000,000	119,000,000	252,000,000	239,000,000
Weighted-average assumptions used to determine net cost:
Discount rate (as a percent)				4.30%	5.10%
Expected return on plan assets (as a percent)				8.00%	8.50%
Rate of compensation increase (as a percent)				4.50%	4.50%
Non-U.S. Pension Benefits
Components of net periodic benefit cost
Service cost		28,000,000	28,000,000	56,000,000	55,000,000
Interest cost		46,000,000	44,000,000	91,000,000	87,000,000
Expected return on plan assets		(53,000,000)	(50,000,000)	(107,000,000)	(100,000,000)
Amortization of:
Transition obligation / (asset)				0	0
Prior service cost / (credit)		0	0	0	1,000,000
Net actuarial loss / (gain)		24,000,000	18,000,000	48,000,000	36,000,000
Net periodic benefit cost, excluding curtailments, settlements and special termination benefits		45,000,000	40,000,000	88,000,000	79,000,000
Curtailments, settlements and special termination benefits	10,000,000	12,000,000	9,000,000	22,000,000	9,000,000
Total cost included in operating profit		57,000,000	49,000,000	110,000,000	88,000,000
Weighted-average assumptions used to determine net cost:
Discount rate (as a percent)				4.30%	4.60%
Expected return on plan assets (as a percent)				7.10%	7.10%
Rate of compensation increase (as a percent)				3.90%	4.20%
Other Postretirement Benefits
Defined Benefit Plan Disclosure
Defined Benefit Plan Loss on Third Party Receivable	21,000,000
Components of net periodic benefit cost
Service cost		22,000,000	20,000,000	46,000,000	41,000,000
Interest cost		56,000,000	63,000,000	111,000,000	126,000,000
Expected return on plan assets		(16,000,000)	(17,000,000)	(32,000,000)	(35,000,000)
Amortization of:
Transition obligation / (asset)				1,000,000	1,000,000
Prior service cost / (credit)		(16,000,000)	(13,000,000)	(33,000,000)	(27,000,000)
Net actuarial loss / (gain)		25,000,000	27,000,000	50,000,000	54,000,000
Net periodic benefit cost, excluding curtailments, settlements and special termination benefits		71,000,000	80,000,000	143,000,000	160,000,000
Curtailments, settlements and special termination benefits	(37,000,000)	0	0	(40,000,000)	0
Total cost included in operating profit		$ 71,000,000	$ 80,000,000	$ 103,000,000	$ 160,000,000
Weighted-average assumptions used to determine net cost:
Discount rate (as a percent)				4.30%	5.00%
Expected return on plan assets (as a percent)				8.00%	8.50%
Rate of compensation increase (as a percent)				4.40%	4.40%

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Investments in Unconsolidated Affiliated Companies (Tables)

6 Months Ended

Jun. 30, 2012

Equity Method Investments and Joint Ventures [Abstract]

Results of Operations of unconsolidated affiliated companies

Combined financial information of the unconsolidated affiliated companies accounted for by the equity method (generally on a lag of 3 months or less) was as follows:

Results of Operations of unconsolidated affiliated companies: (Millions of dollars)
	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Sales	$	206	$	241		$	372	$	439
Cost of sales	160		198			286		359
Gross profit	$	46	$	43		$	86	$	80
Profit (loss)	$	12	$	(17	)	$	22	$	(34	)

Financial Position of unconsolidated affiliated companies

Financial Position of unconsolidated affiliated companies: (Millions of dollars)	June 30, 2012		December 31, 2011
Assets:
Current assets	$	332	$	345
Property, plant and equipment — net	107		200
Other assets	17		9
	456		554
Liabilities:
Current liabilities	197		220
Long-term debt due after one year	50		72
Other liabilities	9		17
	256		309
Equity	$	200	$	245

Caterpillar’s investments in unconsolidated affiliated companies: (Millions of dollars)	June 30, 2012		December 31, 2011
Investments in equity method companies	$	108	$	111
Plus: Investments in cost method companies	16		22
Total investments in unconsolidated affiliated companies	$	124	$	133

Caterpillar's investments in unconsolidated affiliated companies

Caterpillar’s investments in unconsolidated affiliated companies: (Millions of dollars)	June 30, 2012		December 31, 2011
Investments in equity method companies	$	108	$	111
Plus: Investments in cost method companies	16		22
Total investments in unconsolidated affiliated companies	$	124	$	133

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Estimated annual effective tax rate (as a percent)	30.50%	29.00%	26.50%
Income Tax Reconciliation Non-deductible Expense Goodwill on Divestiture	$ 75
Tax benefit, repatriation of non-U.S. earnings due to available foreign tax credits in excess of the U.S. tax liability on the dividend	$ 72

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes for the first six months of 2012 reflects an estimated annual effective tax rate of 30.5 percent compared to 29 percent for the first six months of 2011 and 26.5 percent for the full-year 2011, excluding the items discussed below. The increase from full-year 2011 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 2012 tax provision also includes a negative impact of $75 million from goodwill not deductible for tax purposes related to the divestiture of portions of the Bucyrus distribution business. A $72 million net benefit was recorded in the second quarter of 2011 due to planned repatriation of non-U.S. earnings offset by an increase in unrecognized tax benefits.

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Intangible Assets and Goodwill (Tables)

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets

Intangible assets are comprised of the following:

		June 30, 2012
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,822	$	(272	)	$	2,550
Intellectual property	11	1,787		(317		)	1,470
Other	10	316		(118		)	198
Total finite-lived intangible assets	14	4,925		(707		)	4,218
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,943	$	(707	)	$	4,236

		December 31, 2011
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,811	$	(213	)	$	2,598
Intellectual property	11	1,794		(244		)	1,550
Other	11	299		(97		)	202
Total finite-lived intangible assets	13	4,904		(554		)	4,350
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,922	$	(554	)	$	4,368

Expected amortization expense related to intangible assets

Amortization expense related to intangible assets is expected to be:

(Millions of dollars)
2012	2013	2014	2015	2016	Thereafter
$393	$393	$386	$380	$371	$2,506

Goodwill

The changes in the carrying amount of the goodwill by reportable segment for the six months ended June 30, 2012 were as follows: 

(Millions of dollars)
	Construction Industries			Resource Industries			Power Systems			Other		Consolidated Total
Balance at December 31, 2011	$	378		$	4,099		$	2,486		$	117	$	7,080
Business acquisitions 1	16			467			—			—		483
Held for sale and business divestitures 2	—			(152		)	—			—		(152		)
Other adjustments 3	(5		)	(59		)	(27		)	—		(91		)
Balance at June 30, 2012	$	389		$	4,355		$	2,459		$	117	$	7,320

¹See Note 18 for additional details.

² See Note 19 for additional details.

³Other adjustments are comprised primarily of foreign currency

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Cat Financial Financing Activities

6 Months Ended

Jun. 30, 2012

Cat Financial Financing Activities

Cat Financial Financing Activities

Cat Financial Financing Activities

A.Credit quality of financing receivables and allowance for credit losses

Cat Financial applies a systematic methodology to determine the allowance for credit losses for finance receivables.  Based upon Cat Financial’s analysis of credit losses and risk factors, portfolio segments are as follows:

▪ Customer - Finance receivables with retail customers.

▪ Dealer - Finance receivables with Caterpillar dealers.

Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk.  Typically, Cat Financial’s finance receivables within a geographic area have similar credit risk profiles and methods for assessing and monitoring credit risk.  Cat Financial’s classes, which align with management reporting, are as follows:

▪ North America - Finance receivables originated in the United States or Canada.

▪ Europe - Finance receivables originated in Europe, Africa, Middle East and the Commonwealth of Independent States.

▪ Asia Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, South Korea and Southeast Asia.

▪ Mining - Finance receivables related to large mining customers worldwide.

▪ Latin America - Finance receivables originated in Central and South American countries and Mexico.

▪ Caterpillar Power Finance - Finance receivables related to marine vessels with Caterpillar engines worldwide and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems worldwide.

Impaired loans and finance leases

For all classes, a loan or finance lease is considered impaired, based on current information and events, if it is probable that Cat Financial will be unable to collect all amounts due according to the contractual terms of the loan or finance lease.  Loans and finance leases reviewed for impairment include loans and finance leases that are past due, non-performing or in bankruptcy. Recognition of income is suspended and the loan or finance lease is placed on non-accrual status when management determines that collection of future income is not probable (generally after 120 days days past due).  Accrual is resumed, and previously suspended income is recognized, when the loan or finance lease becomes contractually current and/or collection doubts are removed.  Cash receipts on impaired loans or finance leases are recorded against the receivable and then to any unrecognized income.

There were no impaired loans or finance leases as of June 30, 2012 or December 31, 2011, for the Dealer portfolio segment.  The average recorded investment for impaired loans and finance leases for the Dealer portfolio segment was zero for the three and six months ended June 30, 2012 and 2011.

Individually impaired loans and finance leases for the customer portfolio segment were as follows: 

	June 30, 2012						December 31, 2011
(Millions of dollars)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	46	$	44	$	—	$	83	$	80	$	—
Europe	45		44		—		47		46		—
Asia Pacific	3		3		—		4		4		—
Mining	8		8		—		8		8		—
Latin America	5		5		—		9		9		—
Caterpillar Power Finance	175		174		—		175		170		—
Total	$	282	$	278	$	—	$	326	$	317	$	—
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	58	$	53	$	12	$	69	$	64	$	15
Europe	38		38		11		36		33		12
Asia Pacific	28		28		4		13		13		3
Mining	69		68		7		13		13		4
Latin America	45		45		7		25		25		6
Caterpillar Power Finance	112		108		20		93		92		16
Total	$	350	$	340	$	61	$	249	$	240	$	56
Total Impaired Loans and Finance Leases
Customer
North America	$	104	$	97	$	12	$	152	$	144	$	15
Europe	83		82		11		83		79		12
Asia Pacific	31		31		4		17		17		3
Mining	77		76		7		21		21		4
Latin America	50		50		7		34		34		6
Caterpillar Power Finance	287		282		20		268		262		16
Total	$	632	$	618	$	61	$	575	$	557	$	56
1  No related allowance for credit losses due to sufficient collateral value.

	Three Months Ended June 30, 2012				Three Months Ended June 30, 2011
(Millions of dollars)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	57	$	—	$	104	$	1
Europe	45		—		8		—
Asia Pacific	3		—		6		—
Mining	8		—		8		—
Latin America	5		—		10		—
Caterpillar Power Finance	203		1		261		—
Total	$	321	$	1	$	397	$	1
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	66	$	1	$	161	$	2
Europe	40		—		53		—
Asia Pacific	24		—		17		1
Mining	41		1		—		—
Latin America	40		1		46		1
Caterpillar Power Finance	86		—		72		—
Total	$	297	$	3	$	349	$	4
Total Impaired Loans and Finance Leases
Customer
North America	$	123	$	1	$	265	$	3
Europe	85		—		61		—
Asia Pacific	27		—		23		1
Mining	49		1		8		—
Latin America	45		1		56		1
Caterpillar Power Finance	289		1		333		—
Total	$	618	$	4	$	746	$	5
1No related allowance for credit losses due to sufficient collateral value.

	Six Months Ended June 30, 2012				Six Months Ended June 30, 2011
(Millions of dollars)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired Loans and Finance Leases With No Allowance Recorded1
Customer
North America	$	63	$	1	$	97	$	2
Europe	45		—		7		—
Asia Pacific	3		—		5		—
Mining	8		—		8		—
Latin America	6		—		7		—
Caterpillar Power Finance	191		2		231		1
Total	$	316	$	3	$	355	$	3
Impaired Loans and Finance Leases With An Allowance Recorded
Customer
North America	$	69	$	1	$	175	$	4
Europe	40		—		58		1
Asia Pacific	22		1		21		1
Mining	29		1		—		—
Latin America	33		1		46		2
Caterpillar Power Finance	87		—		59		—
Total	$	280	$	4	$	359	$	8
Total Impaired Loans and Finance Leases
Customer
North America	$	132	$	2	$	272	$	6
Europe	85		—		65		1
Asia Pacific	25		1		26		1
Mining	37		1		8		—
Latin America	39		1		53		2
Caterpillar Power Finance	278		2		290		1
Total	$	596	$	7	$	714	$	11
1No related allowance for credit losses due to sufficient collateral value.

Non-accrual and past due loans and finance leases

For all classes, Cat Financial considers a loan or finance lease past due if any portion of a contractual payment is due and unpaid for more than 30 days.  Recognition of income is suspended and the loan or finance lease is placed on non-accrual status when management determines that collection of future income is not probable (generally after 120 days past due).  Accrual is resumed, and previously suspended income is recognized, when the loan or finance lease becomes contractually current and/or collection doubts are removed.

As of June 30, 2012 and December 31, 2011, there were no loans or finance leases on non-accrual status for the Dealer portfolio segment.

The investment in customer loans and finance leases on non-accrual status was as follows:

(Millions of dollars)
	June 30, 2012		December 31, 2011
Customer
North America	$	92	$	112
Europe	48		58
Asia Pacific	30		24
Mining	12		12
Latin America	169		108
Caterpillar Power Finance	297		158
Total	$	648	$	472

Aging related to loans and finance leases were as follows:

(Millions of dollars)
	June 30, 2012
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables		91+ Still Accruing
Customer
North America	$	41	$	17	$	89	$	147	$	5,516	$	5,663	$	1
Europe	32		27		56		115		2,204		2,319		10
Asia Pacific	82		29		42		153		2,842		2,995		15
Mining	4		—		12		16		1,708		1,724		—
Latin America	45		23		157		225		2,354		2,579		—
Caterpillar Power Finance	83		32		177		292		2,876		3,168		14
Dealer
North America	—		—		—		—		1,907		1,907		—
Europe	—		—		—		—		69		69		—
Asia Pacific	—		—		—		—		620		620		—
Mining	—		—		—		—		1		1		—
Latin America	—		—		—		—		681		681		—
Total	$	287	$	128	$	533	$	948	$	20,778	$	21,726	$	40

(Millions of dollars)
	December 31, 2011
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables		91+ Still Accruing
Customer
North America	$	74	$	39	$	111	$	224	$	5,378	$	5,602	$	9
Europe	27		11		57		95		2,129		2,224		10
Asia Pacific	47		23		38		108		2,769		2,877		14
Mining	—		—		12		12		1,473		1,485		—
Latin America	32		15		99		146		2,339		2,485		—
Caterpillar Power Finance	14		16		125		155		2,765		2,920		25
Dealer
North America	—		—		—		—		1,689		1,689		—
Europe	—		—		—		—		57		57		—
Asia Pacific	—		—		—		—		161		161		—
Mining	—		—		—		—		—		—		—
Latin America	—		—		—		—		480		480		—
Total	$	194	$	104	$	442	$	740	$	19,240	$	19,980	$	58

Allowance for credit loss activity

In estimating the allowance for credit losses, Cat Financial reviews loans and finance leases that are past due, non-performing or in bankruptcy. The allowance for credit losses as of June 30, 2012 and December 31, 2011 was as follows:

(Millions of dollars)
	June 30, 2012
Allowance for Credit Losses:	Customer			Dealer		Total
Balance at beginning of year	$	360		$	6	$	366
Receivables written off	(50		)	—		(50		)
Recoveries on receivables previously written off	23			—		23
Provision for credit losses	51			2		53
Other	(2		)	—		(2		)
Balance at end of period	$	382		$	8	$	390
Allowance for Credit Losses:
Individually evaluated for impairment	$	61		$	—	$	61
Collectively evaluated for impairment	321			8		329
Ending Balance	$	382		$	8	$	390
Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	632		$	—	$	632
Collectively evaluated for impairment	17,816			3,278		21,094
Ending Balance	$	18,448		$	3,278	$	21,726

(Millions of dollars)
	December 31, 2011
Allowance for Credit Losses:	Customer			Dealer		Total
Balance at beginning of year	$	357		$	5	$	362
Receivables written off	(210		)	—		(210		)
Recoveries on receivables previously written off	52			—		52
Provision for credit losses	167			1		168
Other	(6		)	—		(6		)
Balance at end of year	$	360		$	6	$	366
Allowance for Credit Losses:
Individually evaluated for impairment	$	56		$	—	$	56
Collectively evaluated for impairment	304			6		310
Ending Balance	$	360		$	6	$	366
Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	575		$	—	$	575
Collectively evaluated for impairment	17,018			2,387		19,405
Ending Balance	$	17,593		$	2,387	$	19,980

Credit quality of finance receivables

The credit quality of finance receivables is reviewed on a monthly basis.  Credit quality indicators include performing and non-performing.  Non-performing is defined as finance receivables currently over 120 days past due and/or on non-accrual status or in bankruptcy.  Finance receivables not meeting the criteria listed above are considered performing.  Non-performing receivables have the highest probability for credit loss.  The allowance for credit losses attributable to non-performing receivables is based on the most probable source of repayment, which is normally the liquidation of collateral.  In determining collateral value, Cat Financial estimates the current fair market value of the collateral. In addition, Cat Financial considers credit enhancements such as additional collateral and contractual third-party guarantees in determining the allowance for credit losses attributable to non-performing receivables.

The recorded investment in performing and non-performing finance receivables was as follows: 

(Millions of dollars)
	June 30, 2012						December 31, 2011
	Customer		Dealer		Total		Customer		Dealer		Total
Performing
North America	$	5,571	$	1,907	$	7,478	$	5,490	$	1,689	$	7,179
Europe	2,271		69		2,340		2,166		57		2,223
Asia Pacific	2,965		620		3,585		2,853		161		3,014
Mining	1,712		1		1,713		1,473		—		1,473
Latin America	2,410		681		3,091		2,377		480		2,857
Caterpillar Power Finance	2,871		—		2,871		2,762		—		2,762
Total Performing	$	17,800	$	3,278	$	21,078	$	17,121	$	2,387	$	19,508
Non-Performing
North America	$	92	$	—	$	92	$	112	$	—	$	112
Europe	48		—		48		58		—		58
Asia Pacific	30		—		30		24		—		24
Mining	12		—		12		12		—		12
Latin America	169		—		169		108		—		108
Caterpillar Power Finance	297		—		297		158		—		158
Total Non-Performing	$	648	$	—	$	648	$	472	$	—	$	472
Performing & Non-Performing
North America	$	5,663	$	1,907	$	7,570	$	5,602	$	1,689	$	7,291
Europe	2,319		69		2,388		2,224		57		2,281
Asia Pacific	2,995		620		3,615		2,877		161		3,038
Mining	1,724		1		1,725		1,485		—		1,485
Latin America	2,579		681		3,260		2,485		480		2,965
Caterpillar Power Finance	3,168		—		3,168		2,920		—		2,920
Total	$	18,448	$	3,278	$	21,726	$	17,593	$	2,387	$	19,980

Troubled Debt Restructurings

A restructuring of a loan or finance lease receivable constitutes a troubled debt restructuring (TDR) when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties.  Concessions granted may include extended contract maturities, inclusion of interest only periods, below market interest rates, and extended skip payment periods.

TDRs are reviewed along with other receivables as part of management’s ongoing evaluation of the adequacy of the allowance for credit losses.  The allowance for credit losses attributable to TDRs is based on the most probable source of repayment, which is normally the liquidation of collateral.  In determining collateral value, Cat Financial estimates the current fair market value of the collateral. In addition, Cat Financial factors in credit enhancements such as additional collateral and contractual third-party guarantees in determining the allowance for credit losses attributable to TDRs.

There were no loans or finance lease receivables modified as TDRs during the three and six months ended June 30, 2012 or 2011 for the Dealer portfolio segment.

Loan and finance lease receivables in the customer portfolio segment modified as TDRs during the three and six months ended June 30, 2012 and 2011, were as follows:

(Dollars in millions)
	Three Months Ended June 30, 2012					Three Months Ended June 30, 2011
	Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment		Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment
Customer
North America	18	$	2	$	2	15	$	4	$	4
Europe	—	—		—		5	6		6
Latin America	—	—		—		4	5		5
Caterpillar Power Finance 1,2	—	—		—		25	60		60
Total 4	18	$	2	$	2	49	$	75	$	75

	Six Months Ended June 30, 2012					Six Months Ended June 30, 2011
	Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment		Number of Contracts	Pre-TDR Outstanding Recorded Investment		Post-TDR Outstanding Recorded Investment
Customer
North America	41	$	4	$	4	39	$	9	$	9
Europe	7	7		7		6	7		7
Latin America	—	—		—		12	10		10
Caterpillar Power Finance 1,3	5	32		32		31	113		113
Total 4	53	$	43	$	43	88	$	139	$	139

¹  During the three and six months ended June 30, 2012, $6 million and $15 million, respectively, of additional funds were subsequently loaned to a borrower whose terms had been modified in a TDR.  The additional funds loaned are not reflected in the table above as no incremental modifications have been made with the borrower during the periods presented.  At June 30, 2012, remaining commitments to lend additional funds to a borrower whose terms have been modified in a TDR were $7 million.

²  Two customers comprise $55 million of the $60 million pre-TDR and post-TDR outstanding recorded investment for the three months ended June 30, 2011.

³  Three customers comprise $32 million of the pre-TDR and post-TDR outstanding recorded investment for the six months ended June 30, 2012. Four customers comprise $105 million of the $113 million pre-TDR and post-TDR outstanding recorded investment for the six months ended June 30, 2011.

⁴    Modifications include extended contract maturities, inclusion of interest only periods, below market interest rates, and extended skip payment periods.

TDRs in the customer portfolio segment with a payment default during the three and six months ended June 30, 2012 and 2011, which had been modified within twelve months prior to the default date, were as follows:

(Dollars in millions)	Three Months Ended June 30, 2012			Three Months Ended June 30, 2011
	Number of Contracts	Post-TDR Recorded Investment		Number of Contracts	Post-TDR Recorded Investment
Customer
North America	14	$	1	7	$	3
Europe	—	—		1	1
Latin America	—	—		—	—
Caterpillar Power Finance	2	2		—	—
Total	16	$	3	8	$	4

(Dollars in millions)	Six Months Ended June 30, 2012			Six Months Ended June 30, 2011
	Number of Contracts	Post-TDR Recorded Investment		Number of Contracts	Post-TDR Recorded Investment
Customer
North America	25	$	2	41	$	9
Europe	—	—		1	1
Latin America	—	—		—	—
Caterpillar Power Finance 1	16	21		6	5
Total	41	$	23	48	$	15

¹ Two customers comprise $19 million of the $21 million post-TDR recorded investment for the six months ended June 30, 2012.

B.Securitized Retail Installment Sale Contracts and Finance Leases

Cat Financial has periodically transferred certain finance receivables relating to retail installment sale contracts and finance leases to SPEs as part of their asset-backed securitization program.

On April 25, 2011, Cat Financial exercised a clean-up call on their only outstanding asset-backed securitization transaction.  As a result, Cat Financial had no assets or liabilities related to their securitization program as of June 30, 2012 and December 31, 2011.

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Segment Information (Details 3) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Reconciliation of Consolidated profit (loss) before taxes
Total profit from reportable segments	$ 2,616	$ 1,601	$ 4,939	$ 3,434
All other operating segments	188	122	406	367
Cost centers	(11)	(20)	23	1
Corporate costs	(400)	(300)	(760)	(571)
Timing	(137)	(93)	(288)	(169)
Methodology differences:
Inventory/cost of sales	(21)	16	(35)	22
Postretirement benefit expense	(145)	(166)	(331)	(358)
Financing costs	(112)	(89)	(227)	(178)
Equity in profit of unconsolidated affiliated companies	(5)	10	(7)	18
Currency	9	(93)	140	(75)
Interest rate swaps		(124)		(149)
Other income/expense methodology differences	(74)	(97)	(135)	(156)
Other methodology differences	0	(2)	3	(1)
Consolidated profit before taxes	2,576	1,350	4,874	3,113
Reportable segments
Reconciliation of Consolidated profit (loss) before taxes
Total profit from reportable segments	3,284	2,186	6,085	4,362
Machinery and Power Systems
Reconciliation of Consolidated profit (loss) before taxes
All other operating segments	188	122	406	367
Cost centers	(11)	(20)	23	1
Corporate costs	(400)	(300)	(760)	(571)
Timing	(137)	(93)	(288)	(169)
Methodology differences:
Inventory/cost of sales	(21)	16	(35)	22
Postretirement benefit expense	(145)	(166)	(331)	(358)
Financing costs	(112)	(89)	(227)	(178)
Equity in profit of unconsolidated affiliated companies	(5)	10	(7)	18
Currency	9	(93)	140	(75)
Interest rate swaps		(124)		(149)
Other income/expense methodology differences	(74)	(97)	(135)	(156)
Other methodology differences	4	(3)	6	(4)
Consolidated profit before taxes	2,392	1,177	4,484	2,802
Machinery and Power Systems | Reportable segments
Reconciliation of Consolidated profit (loss) before taxes
Total profit from reportable segments	3,096	2,014	5,692	4,054
Financial Products
Reconciliation of Consolidated profit (loss) before taxes
All other operating segments	0	0	0	0
Cost centers	0	0	0	0
Corporate costs	0	0	0	0
Timing	0	0	0	0
Methodology differences:
Inventory/cost of sales	0	0	0	0
Postretirement benefit expense	0	0	0	0
Financing costs	0	0	0	0
Equity in profit of unconsolidated affiliated companies	0	0	0	0
Currency	0	0	0	0
Interest rate swaps		0		0
Other income/expense methodology differences	0	0	0	0
Other methodology differences	(4)	1	(3)	3
Consolidated profit before taxes	184	173	390	311
Financial Products | Reportable segments
Reconciliation of Consolidated profit (loss) before taxes
Total profit from reportable segments	$ 188	$ 172	$ 393	$ 308

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Consolidated Statement of Changes in Stockholders' Equity (USD $) In Millions, unless otherwise specified		Total	Common Stock	Treasury Stock	Profit employed in the business	Accumulated other comprehensive income (loss)	Noncontrolling interests
Balance at Dec. 31, 2010		$ 10,864	$ 3,888	$ (10,397)	$ 21,384	$ (4,051)	$ 40
Increase (Decrease) in Stockholders' Equity
Profit of consolidated and affliated companies		2,265	0	0	2,240	0	25
Foreign currency translation, net of tax		322	0	0	0	312	10
Pension and other postretirement benefits, net of tax		198	0	0	0	196	2
Derivative financial instruments, net of tax		(9)	0	0	0	(9)	0
Available-for-sale securities , net of tax		8	0	0	0	8	0
Dividends declared		(581)	0	0	(581)	0	0
Distribution to noncontrolling interests		(2)	0	0	0	0	(2)
Common shares issued from treasury stock for stock-based compensation: 5,735,352 and 7,243,608 for the six months ended June 30, 2012 and 2011, respectively		96	10	86	0	0	0
Stock-based compensation expense		111	111	0	0	0	0
Net excess tax benefits from stock-based compensation		156	156	0	0	0	0
Cat Japan share redemption	[1]	8	0	0	38	0	(30)
Balance at Jun. 30, 2011		13,436	4,165	(10,311)	23,081	(3,544)	45
Balance at Dec. 31, 2011		12,929	4,273	(10,281)	25,219	(6,328)	46
Increase (Decrease) in Stockholders' Equity
Profit of consolidated and affliated companies		3,320	0	0	3,285	0	35
Foreign currency translation, net of tax		(158)	0	0	0	(134)	(24)
Pension and other postretirement benefits, net of tax		224	0	0	0	219	5
Derivative financial instruments, net of tax		(27)	0	0	0	(27)	0
Available-for-sale securities , net of tax		14	0	0	0	13	1
Change in Ownership for Noncontrolling Interests		7	0	0	0	0	7
Dividends declared		(639)	0	0	(639)	0	0
Distribution to noncontrolling interests		(5)	0	0	0	0	(5)
Common shares issued from treasury stock for stock-based compensation: 5,735,352 and 7,243,608 for the six months ended June 30, 2012 and 2011, respectively		25	(117)	142	0	0	0
Stock-based compensation expense		135	135	0	0	0	0
Net excess tax benefits from stock-based compensation		156	156	0	0	0	0
Cat Japan share redemption	[1]	0	(74)	0	(23)	107	(10)
Balance at Jun. 30, 2012		$ 15,981	$ 4,373	$ (10,139)	$ 27,842	$ (6,150)	$ 55

[1] 1 See Notes 1 and 16 regarding the Cat Japan share redemption.

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Consolidated Statement of Comprehensive Income (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Profit of consolidated and affliated companies	$ 1,709	$ 1,022	$ 3,320	$ 2,265
Other Comprehensive Income (Loss), Net of Tax:
Foreign currency translation, net of tax (expense)/benefit of: Three months ended: 2012-($33), 2011-$21; Six months ended: 2012 - ($16), 2011 - $84	(339)	97	(158)	322
Pension and other postretirement benefits:
Current year actuarial gain (loss), net of tax (expense)/benefit of: Three months ended: 2012-($2), 2011-$0; Six months ended: 2012-($8), 2011-$0	5	0	15	0
Amortization of acturial (gain) loss, net of tax (expense)/benefit of: Three months ended: 2012-$(60), 2011-$(59); Six months ended: 2012-($120), 2011-($112)	113	108	226	207
Current year prior service credit (cost), net of tax (expense)/benefit of: Six months ended: 2012-$2, 2011-$0			(3)	0
Amortization of prior service (credit) cost, net of tax (expense)/benefit of: Three months ended: 2012-$4, 2011-$3; Six months ended: 2012-$8, 2011-$6	(7)	(5)	(15)	(10)
Amortization of transition (asset) obligation, net of tax (expense)/benefit of: Six months ended: 2012-$0, 2011-$0			1	1
Derivative financial instruments:
Gains (losses) deferred, net of tax (expense)/benefit of: Three months ended: 2012-$0, 2011-$16; SIx months ended: 2012-$16, 2011-$6	(2)	(30)	(28)	(13)
(Gains) losses reclassified to earnings, net of tax (expense)/benefit of: Three months ended: 2012-($2), 2011-($5); Six months ended: 2012-($1), 2011-$0	3	11	1	4
Available-for-sale securities:
Gains (losses) deferred, net of tax (expense)/benefit of: Three months ended: 2012-$4, 2011-$(2); Six months ended: 2012-($5), 2011-($5)	(5)	4	16	9
(Gains) losses reclassified to earnings, net of tax (expense)/benefit of: Three months ended: 2012 - $0, 2011 - $0; Six months ended: 2012-$0, 2011-$0	0	(1)	(2)	(1)
Total other comprehensive income (loss), net of tax	(232)	184	53	519
Comprehensive Income	1,477	1,206	3,373	2,784
Less: comprehensive income attributable to the noncontrolling interests	(2)	(11)	(17)	(37)
Comprehensive income attributable to the company	$ 1,475	$ 1,195	$ 3,356	$ 2,747

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Available-For-Sale Securities

6 Months Ended

Jun. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Available-For-Sale Securities

Available-For-Sale Securities

We have investments in certain debt and equity securities, primarily at Cat Insurance, that have been classified as available-for-sale and recorded at fair value based upon quoted market prices. These investments are primarily included in Other assets in the Consolidated Statement of Financial Position. Unrealized gains and losses arising from the revaluation of available-for-sale securities are included, net of applicable deferred income taxes, in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position).  Realized gains and losses on sales of investments are generally determined using the FIFO (first-in, first-out) method for debt instruments and the specific identification method for equity securities.  Realized gains and losses are included in Other income (expense) in the Consolidated Statement of Results of Operations.

	June 30, 2012							December 31, 2011
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value
Government debt
U.S. treasury bonds	$	10	$	—		$	10	$	10	$	—		$	10
Other U.S. and non-U.S. government bonds	121		2			123		90		2			92
Corporate bonds
Corporate bonds	588		35			623		542		30			572
Asset-backed securities	96		(1		)	95		112		(1		)	111
Mortgage-backed debt securities
U.S. governmental agency	266		12			278		297		13			310
Residential	29		(3		)	26		33		(3		)	30
Commercial	131		6			137		142		3			145
Equity securities
Large capitalization value	139		29			168		127		21			148
Smaller company growth	22		11			33		22		7			29
Total	$	1,402	$	91		$	1,493	$	1,375	$	72		$	1,447

During the three and six months ended June 30, 2012, charges for other-than-temporary declines in the market value of securities were $1 million. These charges were accounted for as realized losses and were included in Other income (expense) in the Consolidated Statement of Results of Operations.  The cost basis of the impacted securities was adjusted to reflect these charges.  During the three and six months ended June 30, 2011, there were no charges for other-than-temporary declines in the market value of securities.

Investments in an unrealized loss position that are not other-than-temporarily impaired:
	June 30, 2012
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Asset-backed securities	$	3	$	—	$	19	$	4	$	22	$	4
Mortgage-backed debt securities
Residential	2		—		15		3		17		3
Commercial	2		—		8		1		10		1
Equity securities
Large capitalization value	28		3		14		2		42		5
Total	$	35	$	3	$	56	$	10	$	91	$	13

	December 31, 2011
	Less than 12 months1				12 months or more1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Corporate bonds	$	54	$	1	$	1	$	—	$	55	$	1
Asset-backed securities	1		—		20		5		21		5
Mortgage-backed debt securities
U.S. governmental agency	51		1		—		—		51		1
Residential	3		—		18		3		21		3
Commercial	15		—		8		1		23		1
Equity securities
Large capitalization value	36		5		6		1		42		6
Smaller company growth	4		1		—		—		4		1
Total	$	164	$	8	$	53	$	10	$	217	$	18

¹  Indicates length of time that individual securities have been in a continuous unrealized loss position.

Corporate Bonds.  The unrealized losses on our investments in corporate bonds and asset-backed securities relate primarily to changes in interest rates and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

Mortgage-Backed Debt Securities.  The unrealized losses on our investments in mortgage-backed securities and mortgage-related asset-backed securities relate primarily to the continuation of elevated housing delinquencies and default rates, risk aversion and credit-related yield spreads since time of purchase.  We do not intend to sell the investments and it is not likely that we will be required to sell these investments before recovery of their amortized cost basis.  We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

Equity Securities.  Cat Insurance maintains a well-diversified equity portfolio consisting of two specific mandates:  large capitalization value stocks and smaller company growth stocks.  Overall U.S. equity valuations declined during the second quarter of 2012 due to a worsening European debt crisis and a global economic slowdown. In each case where unrealized losses exist, the respective company's management is taking action in order to increase shareholder value.   We do not consider these investments to be other-than-temporarily impaired as of June 30, 2012.

The fair value of the available-for-sale debt securities at June 30, 2012, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.

(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	125	$	127
Due after one year through five years	496		510
Due after five years through ten years	149		171
Due after ten years	45		43
U.S. agency mortgage-backed securities	266		278
Residential mortgage-backed securities	29		26
Commercial mortgage-backed securities	131		137
Total debt securities – available-for-sale	$	1,241	$	1,292

Sales of Securities
	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars)	2012		2011		2012		2011
Proceeds from the sale of available-for-sale securities	$	65	$	56	$	177	$	122
Gross gains from the sale of available-for-sale securities	$	1	$	1	$	3	$	2
Gross losses from the sale of available-for-sale securities	$	—	$	—	$	—	$	1

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Document and Entity Information Document	6 Months Ended
	Jun. 30, 2012
Document and Entity Information
Entity Registrant Name	CATERPILLAR INC
Entity Central Index Key	0000018230
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	653,268,696
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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Postretirement Benefits

6 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Postemployment Benefit Plans

Postretirement Benefits

A.  Pension and postretirement benefit costs

In February 2012, we announced the closure of the Electro-Motive Diesel facility located in London, Ontario. As a result of the closure, we recognized a $37 million other postretirement benefits curtailment gain in the first quarter. This excludes a $21 million loss of a third party receivable for other postretirement benefits that was eliminated due to the closure. In addition, a $10 million special termination benefit expense was recognized related to statutory pension benefits required to be paid to certain affected employees.

(Millions of dollars)	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	June 30,						June 30,						June 30,
	2012			2011			2012			2011			2012			2011
For the three months ended:
Components of net periodic benefit cost:
Service cost	$	46		$	38		$	28		$	28		$	22		$	20
Interest cost	154			162			46			44			56			63
Expected return on plan assets	(203		)	(199		)	(53		)	(50		)	(16		)	(17		)
Amortization of:
Prior service cost (credit)1	5			5			—			—			(16		)	(13		)
Net actuarial loss (gain) 1	124			113			24			18			25			27
Net periodic benefit cost	126			119			45			40			71			80
Curtailments, settlements and special termination benefits 2	—			—			12			9			—			—
Total cost included in operating profit	$	126		$	119		$	57		$	49		$	71		$	80
For the six months ended:
Components of net periodic benefit cost:
Service cost	$	92		$	77		$	56		$	55		$	46		$	41
Interest cost	308			324			91			87			111			126
Expected return on plan assets	(406		)	(398		)	(107		)	(100		)	(32		)	(35		)
Amortization of:
Transition obligation (asset)	—			—			—			—			1			1
Prior service cost (credit)1	10			10			—			1			(33		)	(27		)
Net actuarial loss (gain) 1	248			226			48			36			50			54
Net periodic benefit cost	252			239			88			79			143			160
Curtailments, settlements and special termination benefits 2	—			—			22			9			(40		)	—
Total cost included in operating profit	$	252		$	239		$	110		$	88		$	103		$	160
Weighted-average assumptions used to determine net cost:
Discount rate	4.3		%	5.1		%	4.3		%	4.6		%	4.3		%	5.0		%
Expected return on plan assets	8.0		%	8.5		%	7.1		%	7.1		%	8.0		%	8.5		%
Rate of compensation increase	4.5		%	4.5		%	3.9		%	4.2		%	4.4		%	4.4		%
1    Prior service cost (credit) and net actuarial loss (gain) for both pension and other postretirement benefits are generally amortized using the straight-line method over the average remaining service period to the full retirement eligibility date of employees expected to receive benefits from the plan. For other postretirement benefit plans in which all or almost all of the plan's participants are fully eligible for benefits under the plan, prior service cost (credit) and net actuarial loss (gain) are amortized using the straight-line method over the remaining life expectancy of those participants.
2       Curtailments, settlements and special termination benefits were recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations.

We made $119 million and $293 million of contributions to our pension plans during the three and six months ended June 30, 2012, respectively. We currently anticipate full-year 2012 contributions of approximately $1 billion, of which $570 million are required contributions. We made $104 million and $235 million of contributions to our pension plans during the three and six months ended June 30, 2011, respectively.

B.  Defined contribution benefit costs

On January 1, 2011, matching contributions to our U.S. 401(k) plan changed for certain employees that are still accruing benefits under a defined benefit pension plan.  Matching contributions changed from 100 percent of employee contributions to the plan up to six percent of their compensation to 50 percent of employee contributions up to six percent of compensation.  For U.S. employees whose defined benefit pension accruals were frozen as of December 31, 2010, we began providing a new annual employer contribution in 2011, which ranges from three to five percent of compensation, depending on years of service and age.

Total company costs related to our defined contribution plans were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars)	2012		2011		2012		2011
U.S. Plans	$	33	$	50	$	134	$	132
Non-U.S. Plans	17		14		31		26
	$	50	$	64	$	165	$	158

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Fair Value Measurements (Details 3) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Assets
Cash and short-term investments	$ 5,103	$ 3,057	$ 10,715	$ 3,592
Available-for-sale securities	1,493	1,447
Carrying Amount
Assets
Cash and short-term investments	5,103	3,057
Restricted cash and short-term investments	189	87
Available-for-sale securities	1,493	1,447
Finance receivables-net (excluding finance leases)	14,146	12,689
Wholesale inventory receivables-net (excluding finance leases)	1,441	1,591
Interest rate swaps-net	235	241
Liabilities
Short-term borrowings	5,047	3,988
Foreign currency contracts-net	87	89
Commodity contracts-net	3	7
Guarantees	15	7
Carrying Amount | Machinery and Power Systems
Liabilities
Long-term debt (including amounts due within one year)	10,438	8,973
Carrying Amount | Financial Products
Liabilities
Long-term debt (including amounts due within one year)	23,831	21,631
Fair Value | Level 1
Assets
Cash and short-term investments	5,103	3,057
Restricted cash and short-term investments	189	87
Liabilities
Short-term borrowings	5,047	3,988
Fair Value | Level 2
Assets
Finance receivables-net (excluding finance leases)	14,079	12,516
Wholesale inventory receivables-net (excluding finance leases)	1,372	1,505
Interest rate swaps-net	235	241
Liabilities
Foreign currency contracts-net	87	89
Commodity contracts-net	3	7
Fair Value | Level 3
Liabilities
Guarantees	15	7
Fair Value | Level 1 & 2
Assets
Available-for-sale securities	1,493	1,447
Fair Value | Machinery and Power Systems | Level 2
Liabilities
Long-term debt (including amounts due within one year)	12,370	10,737
Fair Value | Financial Products | Level 2
Liabilities
Long-term debt (including amounts due within one year)	24,859	22,674
Carrying amount of assets excluded from measurement at fair value
Assets
Finance leases	$ 7,601	$ 7,324

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Consolidated Statement of Comprehensive Income (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Statement of Income and Comprehensive Income [Abstract]
Foreign currency translation, net of tax (expense)/benefit	$ (33)	$ 21	$ (16)	$ 84
Current year actuarial gain (loss), net of tax (expense)/benefit	(2)	0	(8)	0
Amortization of actuarial (gain) loss, net of tax (expense)/benefit	(60)	(59)	(120)	(112)
Current year prior service credit (cost), net of tax (expense)/benefit	0	0	2	0
Amortization of prior service (credit) cost, net of tax (expense)/benefit	4	3	8	6
Amortization of transition (asset) obligation, net of tax (expense)/benefit	0	0	0	0
Derivative financial instruments, Gains (losses) deferred, net of tax (expense)/benefit	0	16	16	6
Derivative financial instruments, (Gains) losses reclassified to earnings, net of tax (expense)/benefit	(2)	(5)	(1)	0
Available-for-sale securities, Gains (losses) deferred, net of tax (expense)/benefit	4	(2)	(5)	(5)
Available-for-sale securities, (Gains) losses reclassified to earnings, net of tax (expense)/benefit	$ 0	$ 0	$ 0	$ 0

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant date fair value of the award.  Stock-based compensation primarily consists of stock options, restricted stock units (RSUs) and stock-settled stock appreciation rights (SARs).  We recognized pretax stock-based compensation cost in the amount of $88 million and $135 million for the three and six months ended June 30, 2012, respectively; and $67 million and $111 million for the three and six months ended June 30, 2011, respectively.

The following table illustrates the type and fair value of the stock-based compensation awards granted during the six month periods ended June 30, 2012 and 2011, respectively:

	2012			2011
	# Granted	Fair Value Per Award		# Granted	Fair Value Per Award
Stock options	3,224,203	$	39.20	237,906	$	36.73
RSUs	1,429,939	$	104.61	1,082,032	$	97.51
SARs	—	$	—	2,722,689	$	36.73

The stock price on the date of grant was $110.09 and $102.13 for 2012 and 2011, respectively.

The following table provides the assumptions used in determining the fair value of the stock-based awards for the six month periods ended June 30, 2012 and 2011, respectively:

	Grant Year
	2012	2011
Weighted-average dividend yield	2.16%	2.22%
Weighted-average volatility	35.0%	32.7%
Range of volatilities	33.3-40.4%	20.9-45.4%
Range of risk-free interest rates	0.17-2.00%	0.25-3.51%
Weighted-average expected lives	7 years	8 years

As of June 30, 2012, the total remaining unrecognized compensation cost related to nonvested stock-based compensation awards was $293 million, which will be amortized over the weighted-average remaining requisite service periods of approximately 2.2 years.

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New Accounting Guidance

6 Months Ended

Jun. 30, 2012

Accounting Changes and Error Corrections [Abstract]

New Accounting Guidance

New Accounting Guidance

Disclosures about the credit quality of financing receivables and the allowance for credit losses– In July 2010, the Financial Accounting Standards Board (FASB) issued accounting guidance on disclosures about the credit quality of financing receivables and the allowance for credit losses.  The guidance expands disclosures for the allowance for credit losses and financing receivables by requiring entities to disclose information at disaggregated levels.  It also requires disclosure of credit quality indicators, past due information and modifications of financing receivables.  Also, in April 2011, the FASB issued guidance clarifying when a restructuring of a receivable should be considered a troubled debt restructuring by providing additional guidance for determining whether the creditor has granted a concession and whether the debtor is experiencing financial difficulties.  For end of period balances, the new disclosures were effective December 31, 2010 and did not have a material impact on our financial statements.  For activity during a reporting period, the disclosures were effective January 1, 2011 and did not have a material impact on our financial statements.  The disclosures related to modifications of financing receivables, as well as the guidance clarifying when a restructured receivable should be considered a troubled debt restructuring were effective July 1, 2011 and did not have a material impact on our financial statements.  See Note 15 for additional information.

Presentation of comprehensive income – In June 2011, the FASB issued accounting guidance on the presentation of comprehensive income.  The guidance provides two options for presenting net income and other comprehensive income.  The total of comprehensive income, the components of net income, and the components of other comprehensive income may be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. We elected to present two separate statements. This guidance was effective January 1, 2012.

Goodwill impairment testing – In September 2011, the FASB issued accounting guidance on the testing of goodwill for impairment. The guidance allows entities testing goodwill for impairment the option of performing a qualitative assessment to determine the likelihood of goodwill impairment and whether it is necessary to perform the two-step impairment test currently required. This guidance was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption was permitted. We elected to early adopt this guidance for the year ended December 31, 2011 and the guidance did not have a material impact on our financial statements. See Note 7 for additional information.

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Segment Information

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Segment Information

Segment Information

A.Basis for segment information

Our Executive Office is comprised of five Group Presidents and a CEO. Group Presidents are accountable for a related set of end-to-end businesses that they manage.  The CEO allocates resources and manages performance at the Group President level.  As such, the CEO serves as our Chief Operating Decision Maker and operating segments are primarily based on the Group President reporting structure.

Three of our operating segments, Construction Industries, Resource Industries and Power Systems, are led by Group Presidents.  One operating segment, Financial Products, is led by a Group President who has responsibility for Corporate Services.  Corporate Services is a cost center primarily responsible for the performance of certain support functions globally and to provide centralized services; it does not meet the definition of an operating segment.  One Group President leads a smaller operating segment that is included in the All Other operating segment. 

The segment information for 2011 has been retrospectively adjusted to conform to the 2012 presentation. A portion of goodwill assets, related to recent acquisitions, that was allocated to Machinery and Power Systems operating segments is now a methodology difference between segment and external reporting.

B.Description of segments

We have five operating segments, of which four are reportable segments.  Following is a brief description of our reportable segments and the business activities included in the All Other operating segment:

Construction Industries:  A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing, and sales and product support. The product portfolio includes backhoe loaders, small wheel loaders, small track-type tractors, skid steer loaders, multi-terrain loaders, mini excavators, compact wheel loaders, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, medium track-type tractors, track-type loaders, motor graders, pipelayers and related parts. In addition, Construction Industries has responsibility for Power Systems and components in Japan and an integrated manufacturing cost center that supports Machinery and Power Systems businesses. Inter-segment sales are a source of revenue for this segment.

Resource Industries: A segment primarily responsible for supporting customers using machinery in mining and quarrying applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors, large mining trucks, underground mining equipment, tunnel boring equipment, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, compactors, select work tools, forestry products, paving products, machinery components and electronics and control systems. In addition, Resource Industries manages areas that provide services to other parts of the company, including integrated manufacturing, research and development and coordination of the Caterpillar Production System. On July 8, 2011, the acquisition of Bucyrus was completed. This added the responsibility for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for electric rope shovels, draglines, hydraulic shovels, drills, highwall miners and electric drive off-highway trucks to Resource Industries. In addition, segment profit includes Bucyrus acquisition-related costs and the impact from divestiture of a portion of the Bucyrus distribution business. On June 6, 2012, the acquisition of ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., Ltd., commonly known as Siwei, was completed. This added the responsibility for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for underground coal mining equipment to Resource Industries. Inter-segment sales are a source of revenue for this segment.

Power Systems:  A segment primarily responsible for supporting customers using reciprocating engines, turbines and related parts across industries serving electric power, industrial, petroleum and marine applications as well as rail-related businesses. Responsibilities include business strategy, product design, product management, development, manufacturing, marketing, sales and product support of reciprocating engine powered generator sets, integrated systems used in the electric power generation industry, reciprocating engines and integrated systems and solutions for the marine and petroleum industries; reciprocating engines supplied to the industrial industry as well as Caterpillar machinery; the business strategy, product design, product management, development, manufacturing, marketing, sales and product support of turbines and turbine-related services; the development, manufacturing, remanufacturing, maintenance, leasing and service of diesel-electric locomotives and components and other rail-related products and services. Inter-segment sales are a source of revenue for this segment.

Financial Products Segment:  Provides financing to customers and dealers for the purchase and lease of Caterpillar and other equipment, as well as some financing for Caterpillar sales to dealers.  Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The segment also provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment.

All Other: Primarily includes activities such as: the remanufacturing of Cat engines and components and remanufacturing services for other companies as well as the business strategy, product management, development, manufacturing, marketing and product support of undercarriage, specialty products, hardened bar stock components and ground engaging tools primarily for Caterpillar products; logistics services for Caterpillar and other companies; the product management, development, marketing, sales and product support of on-highway vocational trucks for North America (U.S. and Canada only); distribution services responsible for dealer development and administration, dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; and the 50/50 joint venture with Navistar (NC²) until it became a wholly owned subsidiary of Navistar effective September 29, 2011. Inter-segment sales are a source of revenue for this segment. Results for the All Other operating segment is included as a reconciling item between reportable segments and consolidated external reporting.

C.Segment measurement and reconciliations

There are several methodology differences between our segment reporting and our external reporting.  The following is a list of the more significant methodology differences:

▪ Machinery and Power Systems segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles and accounts payable.  Liabilities other than accounts payable are generally managed at the corporate level and are not included in segment operations.  Financial Products Segment assets generally include all categories of assets.

▪ Segment inventories and cost of sales are valued using a current cost methodology.

▪ Goodwill allocated to segments is amortized using a fixed amount based on a twenty year useful life.  This methodology difference only impacts segment assets; no goodwill amortization expense is included in segment profit.

▪ The present value of future lease payments for certain Machinery and Power Systems operating leases is included in segment assets.  The estimated financing component of the lease payments is excluded.

▪ Currency exposures for Machinery and Power Systems are generally managed at the corporate level and the effects of changes in exchange rates on results of operations within the year are not included in segment profit.  The net difference created in the translation of revenues and costs between exchange rates used for U.S. GAAP reporting and exchange rates used for segment reporting are recorded as a methodology difference.

▪ Postretirement benefit expenses are split; segments are generally responsible for service and prior service costs, with the remaining elements of net periodic benefit cost included as a methodology difference.

▪ Machinery and Power Systems segment profit is determined on a pretax basis and excludes interest expense, gains and losses on interest rate swaps and other income/expense items.  Financial Products Segment profit is determined on a pretax basis and includes other income/expense items.

Reconciling items are created based on accounting differences between segment reporting and our consolidated external reporting. Please refer to pages 32 to 37 for financial information regarding significant reconciling items.  Most of our reconciling items are self-explanatory given the above explanations.  For the reconciliation of profit, we have grouped the reconciling items as follows:

▪ Corporate costs:  These costs are related to corporate requirements and strategies that are considered to be for the benefit of the entire organization.

▪ Methodology differences:  See previous discussion of significant accounting differences between segment reporting and consolidated external reporting.

▪ Timing:   Timing differences in the recognition of costs between segment reporting and consolidated external reporting.

Reportable Segments

Three Months Ended June 30,

(Millions of dollars)

	2012
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	5,340	$	123	$	5,463	$	139	$	688	$	9,771	$	219
Resource Industries	5,390		328		5,718		168		1,426		13,499		242
Power Systems	5,511		680		6,191		147		982		9,496		237
Machinery and Power Systems	$	16,241	$	1,131	$	17,372	$	454	$	3,096	$	32,766	$	698
Financial Products Segment	764		—		764		177		188		34,451		457
Total	$	17,005	$	1,131	$	18,136	$	631	$	3,284	$	67,217	$	1,155
	2011
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	4,941	$	124	$	5,065	$	126	$	482	$	7,942	$	158
Resource Industries	3,206		284		3,490		72		796		12,292		105
Power Systems	4,918		541		5,459		129		736		8,748		132
Machinery and Power Systems	$	13,065	$	949	$	14,014	$	327	$	2,014	$	28,982	$	395
Financial Products Segment	764		—		764		182		172		31,747		339
Total	$	13,829	$	949	$	14,778	$	509	$	2,186	$	60,729	$	734

Reportable Segments

Six Months Ended June 30,

(Millions of dollars)

	2012
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	10,402	$	253	$	10,655	$	270	$	1,304	$	9,771	$	350
Resource Industries	10,168		656		10,824		331		2,594		13,499		374
Power Systems	10,498		1,355		11,853		285		1,794		9,496		366
Machinery and Power Systems	$	31,068	$	2,264	$	33,332	$	886	$	5,692	$	32,766	$	1,090
Financial Products Segment	1,525		—		1,525		351		393		34,451		800
Total	$	32,593	$	2,264	$	34,857	$	1,237	$	6,085	$	67,217	$	1,890
	2011
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	9,412	$	271	$	9,683	$	246	$	1,026	$	7,942	$	237
Resource Industries	5,974		558		6,532		143		1,592		12,292		161
Power Systems	9,367		1,095		10,462		265		1,436		8,748		217
Machinery and Power Systems	$	24,753	$	1,924	$	26,677	$	654	$	4,054	$	28,982	$	615
Financial Products Segment	1,494		—		1,494		358		308		31,747		519
Total	$	26,247	$	1,924	$	28,171	$	1,012	$	4,362	$	60,729	$	1,134

Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments				Consolidated Total
Three Months Ended June 30, 2012
Total external sales and revenues from reportable segments	$	16,241		$	764	$	—			$	17,005
All Other operating segment	454			—		—				454
Other	(11		)	16		(90		)	1	(85		)
Total sales and revenues	$	16,684		$	780	$	(90	)		$	17,374
Three Months Ended June 30, 2011
Total external sales and revenues from reportable segments	$	13,065		$	764	$	—			$	13,829
All Other operating segment	475			—		—				475
Other	(5		)	13		(82		)	1	(74		)
Total sales and revenues	$	13,535		$	777	$	(82	)		$	14,230
1 Elimination of Financial Products revenues from Machinery and Power Systems.

Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments				Consolidated Total
Six Months Ended June 30, 2012
Total external sales and revenues from reportable segments	$	31,068		$	1,525	$	—			$	32,593
All Other operating segment	928			—		—				928
Other	(24		)	32		(174		)	1	(166		)
Total sales and revenues	$	31,972		$	1,557	$	(174	)		$	33,355
Six Months Ended June 30, 2011
Total external sales and revenues from reportable segments	$	24,753		$	1,494	$	—			$	26,247
All Other operating segment	1,064			—		—				1,064
Other	(5		)	23		(150		)	1	(132		)
Total sales and revenues	$	25,812		$	1,517	$	(150	)		$	27,179
1 Elimination of Financial Products revenues from Machinery and Power Systems.

Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidated Total
Three Months Ended June 30, 2012
Total profit from reportable segments	$	3,096		$	188		$	3,284
All Other operating segment	188			—			188
Cost centers	(11		)	—			(11		)
Corporate costs	(400		)	—			(400		)
Timing	(137		)	—			(137		)
Methodology differences:
Inventory/cost of sales	(21		)	—			(21		)
Postretirement benefit expense	(145		)	—			(145		)
Financing costs	(112		)	—			(112		)
Equity in profit of unconsolidated affiliated companies	(5		)	—			(5		)
Currency	9			—			9
Other income/expense methodology differences	(74		)	—			(74		)
Other methodology differences	4			(4		)	—
Total profit before taxes	$	2,392		$	184		$	2,576
Three Months Ended June 30, 2011
Total profit from reportable segments	$	2,014		$	172		$	2,186
All Other operating segment	122			—			122
Cost centers	(20		)	—			(20		)
Corporate costs	(300		)	—			(300		)
Timing	(93		)	—			(93		)
Methodology differences:
Inventory/cost of sales	16			—			16
Postretirement benefit expense	(166		)	—			(166		)
Financing costs	(89		)	—			(89		)
Equity in profit of unconsolidated affiliated companies	10			—			10
Currency	(93		)	—			(93		)
Interest rate swaps	(124		)	—			(124		)
Other income/expense methodology differences	(97		)	—			(97		)
Other methodology differences	(3		)	1			(2		)
Total profit before taxes	$	1,177		$	173		$	1,350

Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidated Total
Six Months Ended June 30, 2012
Total profit from reportable segments	$	5,692		$	393		$	6,085
All Other operating segment	406			—			406
Cost centers	23			—			23
Corporate costs	(760		)	—			(760		)
Timing	(288		)	—			(288		)
Methodology differences:
Inventory/cost of sales	(35		)	—			(35		)
Postretirement benefit expense	(331		)	—			(331		)
Financing costs	(227		)	—			(227		)
Equity in profit of unconsolidated affiliated companies	(7		)	—			(7		)
Currency	140			—			140
Other income/expense methodology differences	(135		)	—			(135		)
Other methodology differences	6			(3		)	3
Total profit before taxes	$	4,484		$	390		$	4,874
Six Months Ended June 30, 2011
Total profit from reportable segments	$	4,054		$	308		$	4,362
All Other operating segment	367			—			367
Cost centers	1			—			1
Corporate costs	(571		)	—			(571		)
Timing	(169		)	—			(169		)
Methodology differences:
Inventory/cost of sales	22			—			22
Postretirement benefit expense	(358		)	—			(358		)
Financing costs	(178		)	—			(178		)
Equity in profit of unconsolidated affiliated companies	18			—			18
Currency	(75		)	—			(75		)
Interest rate swaps	(149		)	—			(149		)
Other income/expense methodology differences	(156		)	—			(156		)
Other methodology differences	(4		)	3			(1		)
Total profit before taxes	$	2,802		$	311		$	3,113

Reconciliation of Assets:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidating Adjustments			Consolidated Total
June 30, 2012
Total assets from reportable segments	$	32,766		$	34,451		$	—		$	67,217
All Other operating segment	2,029			—			—			2,029
Items not included in segment assets:
Cash and short-term investments	2,810			—			—			2,810
Intercompany receivables	54			—			(54		)	—
Investment in Financial Products	4,011			—			(4,011		)	—
Deferred income taxes	4,107			—			(542		)	3,565
Goodwill, intangible assets and other assets	3,988			—			—			3,988
Operating lease methodology difference	(549		)	—			—			(549		)
Liabilities included in segment assets	13,061			—			—			13,061
Inventory methodology differences	(3,164		)	—			—			(3,164		)
Other	96			(137		)	(78		)	(119		)
Total assets	$	59,209		$	34,314		$	(4,685	)	$	88,838
December 31, 2011
Total assets from reportable segments	$	28,982		$	31,747		$	—		$	60,729
All Other operating segment	2,035			—			—			2,035
Items not included in segment assets:
Cash and short-term investments	1,829			—			—			1,829
Intercompany receivables	75			—			(75		)	—
Investment in Financial Products	4,035			—			(4,035		)	—
Deferred income taxes	4,109			—			(533		)	3,576
Goodwill, intangible assets and other assets	4,461			—			—			4,461
Operating lease methodology difference	(511		)	—			—			(511		)
Liabilities included in segment assets	12,088			—			—			12,088
Inventory methodology differences	(2,786		)	—			—			(2,786		)
Other	362			(194		)	(143		)	25
Total assets	$	54,679		$	31,553		$	(4,786	)	$	81,446

Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments		Consolidated Total
Three Months Ended June 30, 2012
Total depreciation and amortization from reportable segments	$	454		$	177	$	—	$	631
Items not included in segment depreciation and amortization:
All Other operating segment	41			—		—		41
Cost centers	22			—		—		22
Other	(11		)	6		—		(5		)
Total depreciation and amortization	$	506		$	183	$	—	$	689
Three Months Ended June 30, 2011
Total depreciation and amortization from reportable segments	$	327		$	182	$	—	$	509
Items not included in segment depreciation and amortization:
All Other operating segment	41			—		—		41
Cost centers	19			—		—		19
Other	28			2		—		30
Total depreciation and amortization	$	415		$	184	$	—	$	599

Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments		Consolidated Total
Six Months Ended June 30, 2012
Total depreciation and amortization from reportable segments	$	886		$	351	$	—	$	1,237
Items not included in segment depreciation and amortization:
All Other operating segment	84			—		—		84
Cost centers	41			—		—		41
Other	(23		)	11		—		(12		)
Total depreciation and amortization	$	988		$	362	$	—	$	1,350
Six Months Ended June 30, 2011
Total depreciation and amortization from reportable segments	$	654		$	358	$	—	$	1,012
Items not included in segment depreciation and amortization:
All Other operating segment	86			—		—		86
Cost centers	37			—		—		37
Other	33			6		—		39
Total depreciation and amortization	$	810		$	364	$	—	$	1,174

Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments			Consolidated Total
Three Months Ended June 30, 2012
Total capital expenditures from reportable segments	$	698		$	457	$	—		$	1,155
Items not included in segment capital expenditures:
All Other operating segment	90			—		—			90
Cost centers	65			—		—			65
Timing	(81		)	—		—			(81		)
Other	(91		)	57		(29		)	(63		)
Total capital expenditures	$	681		$	514	$	(29	)	$	1,166
Three Months Ended June 30, 2011
Total capital expenditures from reportable segments	$	395		$	339	$	—		$	734
Items not included in segment capital expenditures:
All Other operating segment	51			—		—			51
Cost centers	19			—		—			19
Timing	(74		)	—		—			(74		)
Other	16			22		(24		)	14
Total capital expenditures	$	407		$	361	$	(24	)	$	744

Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments			Consolidated Total
Six Months Ended June 30, 2012
Total capital expenditures from reportable segments	$	1,090		$	800	$	—		$	1,890
Items not included in segment capital expenditures:
All Other operating segment	154			—		—			154
Cost centers	103			—		—			103
Timing	321			—		—			321
Other	(123		)	74		(124		)	(173		)
Total capital expenditures	$	1,545		$	874	$	(124	)	$	2,295
Six Months Ended June 30, 2011
Total capital expenditures from reportable segments	$	615		$	519	$	—		$	1,134
Items not included in segment capital expenditures:
All Other operating segment	89			—		—			89
Cost centers	34			—		—			34
Timing	240			—		—			240
Other	(3		)	55		(45		)	7
Total capital expenditures	$	975		$	574	$	(45	)	$	1,504

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Guarantees and Product Warranty

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Guarantees and Product Warranty

Guarantees and Product Warranty

We have provided an indemnity to a third-party insurance company for potential losses related to performance bonds issued on behalf of Caterpillar dealers.  The bonds are issued to insure governmental agencies against nonperformance by certain dealers.  We also provided guarantees to a third party related to the performance of contractual obligations by certain Caterpillar dealers. The guarantees cover potential financial losses incurred by the third party resulting from the dealers’ nonperformance.

We provide loan guarantees to third-party lenders for financing associated with machinery purchased by customers. These guarantees have varying terms and are secured by the machinery. In addition, Cat Financial participates in standby letters of credit issued to third parties on behalf of their customers. These standby letters of credit have varying terms and beneficiaries and are secured by customer assets.

Cat Financial has provided a limited indemnity to a third-party bank resulting from the assignment of certain leases to that bank.  The indemnity is for the possibility that the insurers of these leases would become insolvent.  The indemnity expires December 15, 2012 and is unsecured.

No loss has been experienced or is anticipated under any of these guarantees.  At June 30, 2012 and December 31, 2011 the related liability was $15 million and $7 million, respectively. The increase in liability is primarily due to guarantees acquired through the purchase of ERA Mining Machinery Limited. The maximum potential amount of future payments (undiscounted and without reduction for any amounts that may possibly be recovered under recourse or collateralized provisions) we could be required to make under the guarantees are as follows:

(Millions of dollars)	June 30, 2012		December 31, 2011
Guarantees with Caterpillar dealers	$	146	$	140
Guarantees with customers	180		186
Limited indemnity	8		11
Guarantees – other	66		28
Total guarantees	$	400	$	365

Cat Financial provides guarantees to repurchase certain loans of Caterpillar dealers from a special-purpose corporation (SPC) that qualifies as a variable interest entity.  The purpose of the SPC is to provide short-term working capital loans to Caterpillar dealers.  This SPC issues commercial paper and uses the proceeds to fund its loan program.  Cat Financial has a loan purchase agreement with the SPC that obligates Cat Financial to purchase certain loans that are not paid at maturity.  Cat Financial receives a fee for providing this guarantee, which provides a source of liquidity for the SPC.  Cat Financial is the primary beneficiary of the SPC as their guarantees result in Cat Financial having both the power to direct the activities that most significantly impact the SPC’s economic performance and the obligation to absorb losses, and therefore Cat Financial has consolidated the financial statements of the SPC.  As of June 30, 2012 and December 31, 2011, the SPC’s assets of $866 million and $586 million, respectively, are primarily comprised of loans to dealers and the SPC’s liabilities of $866 million and $586 million, respectively, are primarily comprised of commercial paper.  No loss has been experienced or is anticipated under this loan purchase agreement.  Cat Financial’s assets are not available to pay creditors of the SPC, except to the extent Cat Financial may be obligated to perform under the guarantee, and assets of the SPC are not available to pay Cat Financial’s creditors.

Our product warranty liability is determined by applying historical claim rate experience to the current field population and dealer inventory.  Generally, historical claim rates are based on actual warranty experience for each product by machine model/engine size.  Specific rates are developed for each product build month and are updated monthly based on actual warranty claim experience.  

(Millions of dollars)	2012
Warranty liability, January 1	$	1,308
Reduction in liability (payments)	(460		)
Increase in liability (new warranties)	540
Warranty liability, June 30	$	1,388

(Millions of dollars)	2011
Warranty liability, January 1	$	1,035
Reduction in liability (payments)	(926		)
Increase in liability (new warranties)	1,199
Warranty liability, December 31	$	1,308

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Employee separation charges (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Employee separation charges [Abstract]
Defined Benefit Plan, Other Costs		$ (6)
Employee Separation Charges [Roll Forward]
Liability balance at beginning of period		90	90	22
Increase in liability (separation charges)	9		41	112
Reduction in liability (payments and other adjustments)			(117)	(44)
Liability balance at end of period	$ 14		$ 14	$ 90

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Investments in Unconsolidated Affiliated Companies

6 Months Ended

Jun. 30, 2012

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Affiliated Companies

Investments in Unconsolidated Affiliated Companies

Combined financial information of the unconsolidated affiliated companies accounted for by the equity method (generally on a lag of 3 months or less) was as follows:

Results of Operations of unconsolidated affiliated companies: (Millions of dollars)
	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Sales	$	206	$	241		$	372	$	439
Cost of sales	160		198			286		359
Gross profit	$	46	$	43		$	86	$	80
Profit (loss)	$	12	$	(17	)	$	22	$	(34	)

Financial Position of unconsolidated affiliated companies: (Millions of dollars)	June 30, 2012		December 31, 2011
Assets:
Current assets	$	332	$	345
Property, plant and equipment — net	107		200
Other assets	17		9
	456		554
Liabilities:
Current liabilities	197		220
Long-term debt due after one year	50		72
Other liabilities	9		17
	256		309
Equity	$	200	$	245

Caterpillar’s investments in unconsolidated affiliated companies: (Millions of dollars)	June 30, 2012		December 31, 2011
Investments in equity method companies	$	108	$	111
Plus: Investments in cost method companies	16		22
Total investments in unconsolidated affiliated companies	$	124	$	133

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Postretirement Benefits (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2010
Defined contribution plans
Costs related to defined contribution plans (in dollars)	$ 50	$ 64	$ 165	$ 158
U.S. Plans
Defined contribution plans
Percentage that the employer generally matches of employee contributions to U.S. defined contribution plans (as a percent)					100.00%
Employee compensation percentage contributed to defined contribution plan eligible for employer matching contributions (as a percent)					6.00%
Percentage that the employer generally matches of employee contributions to U.S. defined contribution plans for employees accruing benefits under a defined benefit pension plan (as a percent)					50.00%
Compensation percentage contributed to defined contribution plan eligible for employer matching contributions, for employees accruing benefits under defined benefit pension plan (as a percent)					6.00%
New annual employer contribution, percentage of compensation, low end of range (as a percent)					3.00%
New annual employer contribution, percentage of compensation, high end of range (as a percent)					5.00%
Costs related to defined contribution plans (in dollars)	33	50	134	132
Non-U.S. Plans
Defined contribution plans
Costs related to defined contribution plans (in dollars)	$ 17	$ 14	$ 31	$ 26

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Derivative Financial Instruments and Risk Management

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Risk Management

Derivative Financial Instruments and Risk Management

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates and commodity prices.  In addition, the amount of Caterpillar stock that can be repurchased under our stock repurchase program is impacted by movements in the price of the stock.  Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate, commodity price and Caterpillar stock price exposures.  Our policy specifies that derivatives are not to be used for speculative purposes.  Derivatives that we use are primarily foreign currency forward and option contracts, interest rate swaps, commodity forward and option contracts, and stock repurchase contracts.  Our derivative activities are subject to the management, direction and control of our senior financial officers.  Risk management practices, including the use of financial derivative instruments, are presented to the Audit Committee of the Board of Directors at least annually.

All derivatives are recognized on the Consolidated Statement of Financial Position at their fair value. On the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flow to be paid (cash flow hedge), or (3) an undesignated instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk, are recorded in current earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in Accumulated other comprehensive income (loss) (AOCI) to the extent effective on the Consolidated Statement of Financial Position until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings.  Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings. Cash flow from designated derivative financial instruments are classified within the same category as the item being hedged on the Consolidated Statement of Cash Flow.  Cash flow from undesignated derivative financial instruments are included in the investing category on the Consolidated Statement of Cash Flow.

We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as fair value hedges to specific assets and liabilities on the Consolidated Statement of Financial Position and linking cash flow hedges to specific forecasted transactions or variability of cash flow.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the designated derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items.  When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, we discontinue hedge accounting prospectively, in accordance with the derecognition criteria for hedge accounting.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costs incurred in foreign currencies. Movements in foreign currency rates also affect our competitive position as these changes may affect business practices and/or pricing strategies of non-U.S.-based competitors. Additionally, we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.

Our Machinery and Power Systems operations purchase, manufacture and sell products in many locations around the world. As we have a diversified revenue and cost base, we manage our future foreign currency cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to five years.

We generally designate as cash flow hedges at inception of the contract any Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese yuan, euro, Indian rupee, Japanese yen, Mexican peso, Singapore dollar or Swiss franc forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current quarter-end. Designation is performed on a specific exposure basis to support hedge accounting. The remainder of Machinery and Power Systems foreign currency contracts are undesignated, including any hedges designed to protect our competitive exposure.  

As of June 30, 2012, $18 million of deferred net losses, net of tax, included in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position), are expected to be reclassified to current earnings (Other income (expense) in the Consolidated Statement of Results of Operations) over the next twelve months when earnings are affected by the hedged transactions.  The actual amount recorded in Other income (expense) will vary based on exchange rates at the time the hedged transactions impact earnings.

In managing foreign currency risk for our Financial Products operations, our objective is to minimize earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions. Our policy allows the use of foreign currency forward and option contracts to offset the risk of currency mismatch between our receivables and debt. All such foreign currency forward and option contracts are undesignated.

Interest Rate Risk

Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate derivatives to manage our exposure to interest rate changes and, in some cases, lower the cost of borrowed funds.

Our Machinery and Power Systems operations generally use fixed-rate debt as a source of funding.  Our objective is to minimize the cost of borrowed funds.  Our policy allows us to enter into fixed-to-floating interest rate swaps and forward rate agreements to meet that objective with the intent to designate as fair value hedges at inception of the contract all fixed-to-floating interest rate swaps.  Designation as a hedge of the fair value of our fixed-rate debt is performed to support hedge accounting.

Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating rate) of Cat Financial’s debt portfolio with the interest rate profile of their receivables portfolio within predetermined ranges on an ongoing basis. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the receivables portfolio. This matched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.

Our policy allows us to use fixed-to-floating, floating-to-fixed, and floating-to-floating interest rate swaps to meet the match-funding objective.  We designate fixed-to-floating interest rate swaps as fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest rate.  We designate most floating-to-fixed interest rate swaps as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.

As of June 30, 2012, $3 million of deferred net losses, net of tax, included in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position), related to Financial Products floating-to-fixed interest rate swaps, are expected to be reclassified to current earnings (Interest expense of Financial Products in the Consolidated Statement of Results of Operations) over the next twelve months.  The actual amount recorded in Interest expense of Financial Products will vary based on interest rates at the time the hedged transactions impact earnings.

We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate swaps at both Machinery and Power Systems and Financial Products.  The gains or losses associated with these swaps at the time of liquidation are amortized into earnings over the original term of the previously designated hedged item.

In anticipation of issuing debt for the planned acquisition of Bucyrus International, Inc., we entered into interest rate swaps to manage our exposure to interest rate changes. For the three and six months ended June 30, 2011, we recognized a net loss of $124 million and $149 million, respectively, included in Other income (expense) in the Consolidated Statement of Results of Operations. These contracts were not designated as hedging instruments, and therefore, did not receive hedge accounting treatment. The contracts were liquidated in conjunction with the debt issuance in May 2011.

Commodity Price Risk

Commodity price movements create a degree of risk by affecting the price we must pay for certain raw material. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased materials.

Our Machinery and Power Systems operations purchase base and precious metals embedded in the components we purchase from suppliers.  Our suppliers pass on a share of the price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.

Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five-year horizon. All such commodity forward and option contracts are undesignated.

The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position are as follows:

(Millions of dollars)
	Consolidated Statement of Financial	Asset (Liability) Fair Value
	Position Location	June 30, 2012			December 31, 2011
Designated derivatives
Foreign exchange contracts
Machinery and Power Systems	Receivables – trade and other	$	32		$	54
Machinery and Power Systems	Long-term receivables – trade and other	3			19
Machinery and Power Systems	Accrued expenses	(60		)	(73		)
Machinery and Power Systems	Other liabilities	(7		)	(10		)
Interest rate contracts
Financial Products	Receivables – trade and other	15			15
Financial Products	Long-term receivables – trade and other	229			233
Financial Products	Accrued expenses	(7		)	(6		)
		$	205		$	232
Undesignated derivatives
Foreign exchange contracts
Machinery and Power Systems	Receivables – trade and other	$	8		$	27
Machinery and Power Systems	Accrued expenses	(35		)	(12		)
Machinery and Power Systems	Other liabilities	(28		)	(85		)
Financial Products	Receivables – trade and other	11			7
Financial Products	Accrued expenses	(11		)	(16		)
Interest rate contracts
Financial Products	Accrued expenses	(2		)	(1		)
Commodity contracts
Machinery and Power Systems	Receivables – trade and other	1			2
Machinery and Power Systems	Accrued expenses	(4		)	(9		)
		$	(60	)	$	(87	)

The effect of derivatives designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

Fair Value Hedges (Millions of dollars)
		Three Months Ended June 30, 2012					Six Months Ended June 30, 2012
	Classification	Gains (Losses) on Derivatives		Gains (Losses) on Borrowings			Gains (Losses) on Derivatives			Gains (Losses) on Borrowings
Interest rate contracts
Financial Products	Other income (expense)	$	6	$	(5	)	$	(3	)	$	10
		$	6	$	(5	)	$	(3	)	$	10

		Three Months Ended June 30, 2011					Six Months Ended June 30, 2011
	Classification	Gains (Losses) on Derivatives		Gains (Losses) on Borrowings			Gains (Losses) on Derivatives			Gains (Losses) on Borrowings
Interest rate contracts
Machinery and Power Systems	Other income (expense)	$	—	$	—		$	(1	)	$	1
Financial Products	Other income (expense)	42		(40		)	(11		)	12
		$	42	$	(40	)	$	(12	)	$	13

Cash Flow Hedges (Millions of dollars)
	Three Months Ended June 30, 2012
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	—		Other income (expense)	$	(4	)	$	—
Interest rate contracts	—
Financial Products	(2		)	Interest expense of Financial Products	(1		)	(1		)	1
	$	(2	)		$	(5	)	$	(1	)

	Three Months Ended June 30, 2011
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(45	)	Other income (expense)	$	(9	)	$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(1		)	Interest expense of Financial Products	(6		)	—		1
	$	(46	)		$	(16	)	$	—

	Six Months Ended June 30, 2012
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(42	)	Other income (expense)	$	1		$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(2		)	Interest expense of Financial Products	(2		)	(1		)	1
	$	(44	)		$	(2	)	$	(1	)

	Six Months Ended June 30, 2011
				Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI (EffectivePortion)			Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery and Power Systems	$	(18	)	Other income (expense)	$	9		$	—
Interest rate contracts
Machinery and Power Systems	—			Other income (expense)	(1		)	—
Financial Products	(1		)	Interest expense of Financial Products	(12		)	1		1
	$	(19	)		$	(4	)	$	1

¹ The ineffective portion recognized in earnings is included in Other income (expense).

The effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

(Millions of dollars)
	Classification of Gains (Losses)	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012
Foreign exchange contracts
Machinery and Power Systems	Other income (expense)	$	(35	)	$	30
Financial Products	Other income (expense)	(5		)	2
Commodity contracts
Machinery and Power Systems	Other income (expense)	(6		)	—
		$	(46	)	$	32

(Millions of dollars)
	Classification of Gains (Losses)	Three Months Ended June 30, 2011			Six Months Ended June 30, 2011
Foreign exchange contracts
Machinery and Power Systems	Other income (expense)	$	15		$	47
Financial Products	Other income (expense)	(2		)	(2		)
Interest rate contracts
Machinery and Power Systems	Other income (expense)	(124		)	(149		)
Commodity contracts
Machinery and Power Systems	Other income (expense)	(2		)	2
		$	(113	)	$	(102	)

Stock Repurchase Risk

Payments for stock repurchase derivatives are accounted for as a reduction in stockholders’ equity.  In February 2007, the Board of Directors authorized a $7.5 billion stock repurchase program, expiring on December 31, 2011.  In December 2011, the Board of Directors extended the $7.5 billion stock repurchase program through December 31, 2015. The amount of Caterpillar stock that can be repurchased under the authorization is impacted by movements in the price of the stock.  In August 2007, the Board of Directors authorized the use of derivative contracts to reduce stock repurchase price volatility.  There were no stock repurchase derivatives outstanding for the three and six months ended June 30, 2012 or 2011.

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Inventories

6 Months Ended

Jun. 30, 2012

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories (principally using the last-in, first-out (LIFO) method) are comprised of the following:

(Millions of dollars)	June 30, 2012		December 31, 2011
Raw materials	$	4,143	$	3,766
Work-in-process	3,504		2,959
Finished goods	9,429		7,562
Supplies	268		257
Total inventories	$	17,344	$	14,544

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Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Intangible Assets and Goodwill

A.  Intangible assets

Intangible assets are comprised of the following:

		June 30, 2012
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,822	$	(272	)	$	2,550
Intellectual property	11	1,787		(317		)	1,470
Other	10	316		(118		)	198
Total finite-lived intangible assets	14	4,925		(707		)	4,218
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,943	$	(707	)	$	4,236

		December 31, 2011
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,811	$	(213	)	$	2,598
Intellectual property	11	1,794		(244		)	1,550
Other	11	299		(97		)	202
Total finite-lived intangible assets	13	4,904		(554		)	4,350
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,922	$	(554	)	$	4,368

During the second quarter of 2012, we acquired finite-lived intangible assets aggregating $194 million due to the purchase of ERA Mining Machinery Limited. During the first quarter of 2012, we acquired finite-lived intangible assets aggregating $8 million due to the purchase of Cat Tohoku. See Note 18 for details on these business combinations.

Customer relationship intangibles of $100 million, net of accumulated amortization of $4 million, were reclassified from Intangible assets to held for sale in the first half of 2012, primarily related to the divestiture of portions of the Bucyrus distribution business, and are not included in the June 30, 2012 balances in the table above. See Note 19 for additional information on assets held for sale.

Customer relationship intangibles of $51 million, net of accumulated amortization of $29 million, from the All Other segment were impaired during the second quarter of 2012. Fair value of the intangibles was determined using an income approach based on the present value of discounted cash flows. The impairment of $22 million was recognized in Other operating (income) expenses on the Consolidated Statement of Results of Operations and included in the All Other segment.

Amortization expense for the three and six months ended June 30, 2012 was $99 million and $193 million, respectively. Amortization expense for the three and six months ended June 30, 2011 was $22 million and $44 million respectively.  Amortization expense related to intangible assets is expected to be:

(Millions of dollars)
2012	2013	2014	2015	2016	Thereafter
$393	$393	$386	$380	$371	$2,506

B.  Goodwill

During the second quarter of 2012, we recorded goodwill of $467 million related to the acquisition of ERA Mining Machinery Limited. During the first quarter of 2012, we recorded goodwill of $16 million related to the acquisition of Cat Tohoku. See Note 18 for details on these business combinations.

Goodwill of $152 million was reclassified to held for sale in the first half of 2012, primarily related to the divestiture of portions of the Bucyrus distribution business, and is not included in the June 30, 2012 balance in the table below. See Note 19 for additional information on assets held for sale.

We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. Goodwill is reviewed for impairment utilizing a qualitative assessment or a two-step process. We have an option to make a qualitative assessment of a reporting unit's goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the two-step process, the first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that an impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit's goodwill, the difference is recognized as an impairment loss. No goodwill for reporting units was impaired during the three and six months ended June 30, 2012 or 2011. See Note 19 for goodwill impairments relating to assets held for sale.

The changes in the carrying amount of the goodwill by reportable segment for the six months ended June 30, 2012 were as follows: 

(Millions of dollars)
	Construction Industries			Resource Industries			Power Systems			Other		Consolidated Total
Balance at December 31, 2011	$	378		$	4,099		$	2,486		$	117	$	7,080
Business acquisitions 1	16			467			—			—		483
Held for sale and business divestitures 2	—			(152		)	—			—		(152		)
Other adjustments 3	(5		)	(59		)	(27		)	—		(91		)
Balance at June 30, 2012	$	389		$	4,355		$	2,459		$	117	$	7,320

¹See Note 18 for additional details.

² See Note 19 for additional details.

³Other adjustments are comprised primarily of foreign currency translation.

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Environmental and Legal Matters (Details) (Shipment of Engines and Catalytic Converters Separately, USD $) In Millions, unless otherwise specified	1 Months Ended
	Jul. 31, 2012	Sep. 30, 2011	Jul. 31, 2011	Jul. 31, 2010
Environmental Contingency, Penalties and Information
Civil penalty demanded as issued by the Department of Justice	$ 2.55	$ 2.55	$ 2.55	$ 3.20
California Air Resources Board
Environmental Contingency, Penalties and Information
Payments for Environmental Liabilities	0.51
United States Government
Environmental Contingency, Penalties and Information
Payments for Environmental Liabilities		$ 2.04

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Segment Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Reportable Segments
Number of group presidents			5
Number of operating segments led by Group Presidents			3
Number of operating segment led by Group president responsible for corporate services			1
Number of smaller operating segments led by Group President			1
Number of operating segments			5
Number of reportable segments			4
External sales and revenues	$ 17,374	$ 14,230	$ 33,355	$ 27,179
Depreciation and amortization	689	599	1,350	1,174
Segment profit (loss)	2,616	1,601	4,939	3,434
Segment assets	88,838		88,838		81,446
Reportable segments
Reportable Segments
External sales and revenues	17,005	13,829	32,593	26,247
Inter-segment sales and revenues	1,131	949	2,264	1,924
Total sales and revenues	18,136	14,778	34,857	28,171
Depreciation and amortization	631	509	1,237	1,012
Segment profit (loss)	3,284	2,186	6,085	4,362
Segment assets	67,217		67,217		60,729
Capital expenditures	1,155	734	1,890	1,134
Machinery and Power Systems
Reportable Segments
External sales and revenues	16,684	13,535	31,972	25,812
Depreciation and amortization	506	415	988	810
Segment assets	59,209		59,209		54,679
Machinery and Power Systems | Reportable segments
Reportable Segments
External sales and revenues	16,241	13,065	31,068	24,753
Inter-segment sales and revenues	1,131	949	2,264	1,924
Total sales and revenues	17,372	14,014	33,332	26,677
Depreciation and amortization	454	327	886	654
Segment profit (loss)	3,096	2,014	5,692	4,054
Segment assets	32,766		32,766		28,982
Capital expenditures	698	395	1,090	615
Construction Industries | Reportable segments
Reportable Segments
External sales and revenues	5,340	4,941	10,402	9,412
Inter-segment sales and revenues	123	124	253	271
Total sales and revenues	5,463	5,065	10,655	9,683
Depreciation and amortization	139	126	270	246
Segment profit (loss)	688	482	1,304	1,026
Segment assets	9,771		9,771		7,942
Capital expenditures	219	158	350	237
Resource Industries | Reportable segments
Reportable Segments
External sales and revenues	5,390	3,206	10,168	5,974
Inter-segment sales and revenues	328	284	656	558
Total sales and revenues	5,718	3,490	10,824	6,532
Depreciation and amortization	168	72	331	143
Segment profit (loss)	1,426	796	2,594	1,592
Segment assets	13,499		13,499		12,292
Capital expenditures	242	105	374	161
Power Systems | Reportable segments
Reportable Segments
External sales and revenues	5,511	4,918	10,498	9,367
Inter-segment sales and revenues	680	541	1,355	1,095
Total sales and revenues	6,191	5,459	11,853	10,462
Depreciation and amortization	147	129	285	265
Segment profit (loss)	982	736	1,794	1,436
Segment assets	9,496		9,496		8,748
Capital expenditures	237	132	366	217
Financial Products Segment | Reportable segments
Reportable Segments
External sales and revenues	764	764	1,525	1,494
Inter-segment sales and revenues	0	0	0	0
Total sales and revenues	764	764	1,525	1,494
Depreciation and amortization	177	182	351	358
Segment profit (loss)	188	172	393	308
Segment assets	34,451		34,451		31,747
Capital expenditures	$ 457	$ 339	$ 800	$ 519

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Computations of Profit Per Share (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Earnings Per Share [Abstract]
Profit for the period (A) (in millions of dollars)	$ 1,699	[1]	$ 1,015	[1]	$ 3,285	[1]	$ 2,240	[1]
Weighted-average common shares outstanding:
Weighted-average number of common shares outstanding (B) (in shares)	652,900,000		645,500,000		651,300,000		643,300,000
Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price (in shares)	16,700,000		21,700,000		18,600,000		22,700,000
Average common shares outstanding for fully diluted computation (C) (in shares)	669,600,000	[2]	667,200,000	[2]	669,900,000	[2]	666,000,000	[2]
Profit (loss) per share of common stock:
Assuming no dilution (A/B) (in dollars per share)	$ 2.60		$ 1.57		$ 5.04		$ 3.48
Assuming full dilution (A/C) (in dollars per share)	$ 2.54	[2]	$ 1.52	[2]	$ 4.90	[2]	$ 3.36	[2]
Common shares under SARs and stock options not included in the computation of diluted earnings per share (in shares)	6,091,056		2,940,143		6,091,056		2,940,143

[1] 1 Profit attributable to common stockholders.

[2] 2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

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Inventories (Tables)

6 Months Ended

Jun. 30, 2012

Inventory Disclosure [Abstract]

Inventories

Inventories (principally using the last-in, first-out (LIFO) method) are comprised of the following:

(Millions of dollars)	June 30, 2012		December 31, 2011
Raw materials	$	4,143	$	3,766
Work-in-process	3,504		2,959
Finished goods	9,429		7,562
Supplies	268		257
Total inventories	$	17,344	$	14,544

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Derivative Financial Instruments and Risk Management (Details 4) (USD $) In Billions, unless otherwise specified	1 Months Ended
	Dec. 31, 2011	Feb. 28, 2007
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Stock repurchase program, funds authorized (in billions of dollars)	$ 7.5	$ 7.5

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Environmental and Legal Matters

6 Months Ended

Jun. 30, 2012

Environmental Remediation Obligations [Abstract]

Environmental and Legal Matters

Environmental and Legal Matters

The company is regulated by federal, state and international environmental laws governing our use, transport and disposal of substances and control of emissions. In addition to governing our manufacturing and other operations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines. Compliance with these existing laws has not had a material impact on our capital expenditures, earnings or global competitive position.

We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws.  When it is probable we will pay remedial costs at a site and those costs can be reasonably estimated, the costs are charged against our earnings.  In formulating that estimate, we do not consider amounts expected to be recovered from insurance companies or others.  The amount recorded for environmental remediation is not material and is included in Accrued expenses in the Consolidated Statement of Financial Position.

We cannot reasonably estimate costs at sites in the very early stages of remediation.  Currently, we have a few sites in the very early stages of remediation, and there is no more than a remote chance that a material amount for remedial activities at any individual site, or at all sites in the aggregate, will be required.

We have disclosed certain individual legal proceedings in this filing.  Additionally, we are involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of these unresolved actions involve disputes related to product design, manufacture and performance liability (including claimed asbestos and welding fumes exposure), contracts, employment issues, environmental matters or intellectual property rights.  The aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal actions is not material.  In some cases, we cannot reasonably estimate a range of loss because there is insufficient information regarding the matter.  However, there is no more than a remote chance that any liability arising from these matters would be material.  Although it is not possible to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will not individually or in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.

On May 14, 2007, the U.S. Environmental Protection Agency (EPA) issued a Notice of Violation to Caterpillar Inc., alleging various violations of Clean Air Act Sections 203, 206 and 207. EPA claims that Caterpillar violated such sections by shipping engines and catalytic converter after-treatment devices separately, introducing into commerce a number of uncertified and/or misbuilt engines, and failing to timely report emissions-related defects. On July 9, 2010, the Department of Justice issued a penalty demand to Caterpillar seeking a civil penalty of $3.2 million and implementation of injunctive relief involving expanded use of certain technologies. On July 28, 2011, EPA and the U.S. Department of Justice filed and lodged a civil complaint and consent decree with the U.S. District Court for the District of Columbia (Court) regarding the matter. Caterpillar agreed to the terms of the consent decree, which required payment of a civil penalty of $2.55 million, retirement of a small number of emissions credits and expanded defect-related reporting. On September 7, 2011, the Court entered the consent decree, making it effective on that date, and Caterpillar paid $2.04 million of the $2.55 million penalty due to the United States in accordance with the decree terms. On July 9, 2012, under the terms of the consent decree, and subject to a settlement agreement executed on June 21, 2012 with the California Air Resources Board, Caterpillar paid the remaining $0.51 million of the stipulated $2.55 million penalty to the California Air Resources Board.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

A.Fair value measurements

The guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques.  Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions.  In accordance with this guidance, fair value measurements are classified under the following hierarchy:

▪ Level 1 –Quoted prices for identical instruments in active markets.

▪ Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

▪ Level 3 – Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1.  In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2.  If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates.  These measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation.  A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

Fair value measurement includes the consideration of nonperformance risk.  Nonperformance risk refers to the risk that an obligation (either by a counterparty or Caterpillar) will not be fulfilled.  For financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price.  For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly.

Available-for-sale securities

Our available-for-sale securities, primarily at Cat Insurance, include a mix of equity and debt instruments (see Note 8 for additional information).  Fair values for our U.S. treasury bonds and equity securities are based upon valuations for identical instruments in active markets.  Fair values for other government bonds, corporate bonds and mortgage-backed debt securities are based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.

Derivative financial instruments

The fair value of interest rate swap derivatives is primarily based on models that utilize the appropriate market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows.  The fair value of foreign currency and commodity forward and option contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.

Guarantees

The fair value of guarantees is based upon our estimate of the premium a market participant would require to issue the same guarantee in a stand-alone arms-length transaction with an unrelated party. If quoted or observable market prices are not available, fair value is based upon internally developed models that utilize current market-based assumptions.

Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial Products, included in our Consolidated Statement of Financial Position as of June 30, 2012 and December 31, 2011 are summarized below:

(Millions of dollars)	June 30, 2012
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		123		—		123
Corporate bonds
Corporate bonds	—		623		—		623
Asset-backed securities	—		95		—		95
Mortgage-backed debt securities
U.S. governmental agency	—		278		—		278
Residential	—		26		—		26
Commercial	—		137		—		137
Equity securities
Large capitalization value	168		—		—		168
Smaller company growth	33		—		—		33
Total available-for-sale securities	211		1,282		—		1,493
Derivative financial instruments, net	—		145		—		145
Total Assets	$	211	$	1,427	$	—	$	1,638
Liabilities
Guarantees	$	—	$	—	$	15	$	15
Total Liabilities	$	—	$	—	$	15	$	15

(Millions of dollars)	December 31, 2011
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		92		—		92
Corporate bonds
Corporate bonds	—		572		—		572
Asset-backed securities	—		111		—		111
Mortgage-backed debt securities
U.S. governmental agency	—		310		—		310
Residential	—		30		—		30
Commercial	—		145		—		145
Equity securities
Large capitalization value	148		—		—		148
Smaller company growth	29		—		—		29
Total available-for-sale securities	187		1,260		—		1,447
Derivative financial instruments, net	—		145		—		145
Total Assets	$	187	$	1,405	$	—	$	1,592
Liabilities
Guarantees	$	—	$	—	$	7	$	7
Total Liabilities	$	—	$	—	$	7	$	7

Below are roll-forwards of assets and liabilities measured at fair value using Level 3 inputs for the six months ended June 30, 2012 and 2011.  These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions of a marketplace participant.

(Millions of dollars)	Guarantees
Balance at December 31, 2011	$	7
Acquisitions	6
Issuance of guarantees	3
Expiration of guarantees	(1		)
Balance at June 30, 2012	$	15
Balance at December 31, 2010	$	10
Issuance of guarantees	1
Expiration of guarantees	(4		)
Balance at June 30, 2011	$	7

In addition to the amounts above, Cat Financial had impaired loans with a fair value of $219 million and $141 million as of June 30, 2012 and December 31, 2011, respectively.  A loan is considered impaired when management determines that collection of contractual amounts due is not probable.  In these cases, an allowance for credit losses is established based primarily on the fair value of associated collateral.  As the collateral’s fair value is based on observable market prices and/or current appraised values, the impaired loans are classified as Level 2 measurements.

B.Fair values of financial instruments

In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair value measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments.

Cash and short-term investments

Carrying amount approximated fair value.

Restricted cash and short-term investments

Carrying amount approximated fair value.  Restricted cash and short-term investments are included in Prepaid expenses and other current assets in the Consolidated Statement of Financial Position.

Finance receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Wholesale inventory receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Short-term borrowings

Carrying amount approximated fair value.

Long-term debt

Fair value for Machinery and Power Systems and Financial Products fixed and floating rate debt was estimated based on quoted market prices.

Please refer to the table below for the fair values of our financial instruments.

Fair Value of Financial Instruments
	June 30, 2012				December 31, 2011
(Millions of dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Assets
Cash and short-term investments	$	5,103	$	5,103	$	3,057	$	3,057	1
Restricted cash and short-term investments	189		189		87		87		1
Available-for-sale securities	1,493		1,493		1,447		1,447		1 & 2	Note 8
Finance receivables—net (excluding finance leases1)	14,146		14,079		12,689		12,516		2	Note 15
Wholesale inventory receivables—net (excluding finance leases1)	1,441		1,372		1,591		1,505		2	Note 15
Interest rate swaps—net	235		235		241		241		2	Note 4
Liabilities
Short-term borrowings	5,047		5,047		3,988		3,988		1
Long-term debt (including amounts due within one year)
Machinery and Power Systems	10,438		12,370		8,973		10,737		2
Financial Products	23,831		24,859		21,631		22,674		2
Foreign currency contracts—net	87		87		89		89		2	Note 4
Commodity contracts—net	3		3		7		7		2	Note 4
Guarantees	15		15		7		7		3	Note 10

¹ Total excluded items have a net carrying value at June 30, 2012 and December 31, 2011 of $7,601 million and $7,324 million, respectively.

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Derivative Financial Instruments and Risk Management (Details 2) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Designated Derivatives
Derivatives Fair Value
Asset (Liability) Fair Value	$ 205	$ 232
Designated Derivatives | Foreign exchange contracts | Receivables-trade and other | Machinery and Power Systems
Derivatives Fair Value
Asset Fair Value	32	54
Designated Derivatives | Foreign exchange contracts | Long-term receivables-trade and other | Machinery and Power Systems
Derivatives Fair Value
Asset Fair Value	3	19
Designated Derivatives | Foreign exchange contracts | Accrued Liabilities | Machinery and Power Systems
Derivatives Fair Value
Liability Fair Value	(60)	(73)
Designated Derivatives | Foreign exchange contracts | Other Liabilities | Machinery and Power Systems
Derivatives Fair Value
Liability Fair Value	(7)	(10)
Designated Derivatives | Interest Rate Contract | Receivables-trade and other | Financial Products
Derivatives Fair Value
Asset Fair Value	15	15
Designated Derivatives | Interest Rate Contract | Long-term receivables-trade and other | Financial Products
Derivatives Fair Value
Asset Fair Value	229	233
Designated Derivatives | Interest Rate Contract | Accrued Liabilities | Financial Products
Derivatives Fair Value
Liability Fair Value	(7)	(6)
Undesignated Derivatives
Derivatives Fair Value
Asset (Liability) Fair Value	(60)	(87)
Undesignated Derivatives | Foreign exchange contracts | Receivables-trade and other | Machinery and Power Systems
Derivatives Fair Value
Asset Fair Value	8	27
Undesignated Derivatives | Foreign exchange contracts | Receivables-trade and other | Financial Products
Derivatives Fair Value
Asset Fair Value	11	7
Undesignated Derivatives | Foreign exchange contracts | Accrued Liabilities | Machinery and Power Systems
Derivatives Fair Value
Liability Fair Value	(35)	(12)
Undesignated Derivatives | Foreign exchange contracts | Accrued Liabilities | Financial Products
Derivatives Fair Value
Liability Fair Value	(11)	(16)
Undesignated Derivatives | Foreign exchange contracts | Other Liabilities | Machinery and Power Systems
Derivatives Fair Value
Liability Fair Value	(28)	(85)
Undesignated Derivatives | Interest Rate Contract | Accrued Liabilities | Financial Products
Derivatives Fair Value
Liability Fair Value	(2)	(1)
Undesignated Derivatives | Commodity Contract | Receivables-trade and other | Machinery and Power Systems
Derivatives Fair Value
Asset Fair Value	1	2
Undesignated Derivatives | Commodity Contract | Accrued Liabilities | Machinery and Power Systems
Derivatives Fair Value
Liability Fair Value	$ (4)	$ (9)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Reportable Segments

Reportable Segments

Three Months Ended June 30,

(Millions of dollars)

	2012
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	5,340	$	123	$	5,463	$	139	$	688	$	9,771	$	219
Resource Industries	5,390		328		5,718		168		1,426		13,499		242
Power Systems	5,511		680		6,191		147		982		9,496		237
Machinery and Power Systems	$	16,241	$	1,131	$	17,372	$	454	$	3,096	$	32,766	$	698
Financial Products Segment	764		—		764		177		188		34,451		457
Total	$	17,005	$	1,131	$	18,136	$	631	$	3,284	$	67,217	$	1,155
	2011
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	4,941	$	124	$	5,065	$	126	$	482	$	7,942	$	158
Resource Industries	3,206		284		3,490		72		796		12,292		105
Power Systems	4,918		541		5,459		129		736		8,748		132
Machinery and Power Systems	$	13,065	$	949	$	14,014	$	327	$	2,014	$	28,982	$	395
Financial Products Segment	764		—		764		182		172		31,747		339
Total	$	13,829	$	949	$	14,778	$	509	$	2,186	$	60,729	$	734

Reportable Segments

Six Months Ended June 30,

(Millions of dollars)

	2012
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	10,402	$	253	$	10,655	$	270	$	1,304	$	9,771	$	350
Resource Industries	10,168		656		10,824		331		2,594		13,499		374
Power Systems	10,498		1,355		11,853		285		1,794		9,496		366
Machinery and Power Systems	$	31,068	$	2,264	$	33,332	$	886	$	5,692	$	32,766	$	1,090
Financial Products Segment	1,525		—		1,525		351		393		34,451		800
Total	$	32,593	$	2,264	$	34,857	$	1,237	$	6,085	$	67,217	$	1,890
	2011
	External sales and revenues		Inter- segment sales & revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	9,412	$	271	$	9,683	$	246	$	1,026	$	7,942	$	237
Resource Industries	5,974		558		6,532		143		1,592		12,292		161
Power Systems	9,367		1,095		10,462		265		1,436		8,748		217
Machinery and Power Systems	$	24,753	$	1,924	$	26,677	$	654	$	4,054	$	28,982	$	615
Financial Products Segment	1,494		—		1,494		358		308		31,747		519
Total	$	26,247	$	1,924	$	28,171	$	1,012	$	4,362	$	60,729	$	1,134

Reconciliation of Sales and revenues:

Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments				Consolidated Total
Three Months Ended June 30, 2012
Total external sales and revenues from reportable segments	$	16,241		$	764	$	—			$	17,005
All Other operating segment	454			—		—				454
Other	(11		)	16		(90		)	1	(85		)
Total sales and revenues	$	16,684		$	780	$	(90	)		$	17,374
Three Months Ended June 30, 2011
Total external sales and revenues from reportable segments	$	13,065		$	764	$	—			$	13,829
All Other operating segment	475			—		—				475
Other	(5		)	13		(82		)	1	(74		)
Total sales and revenues	$	13,535		$	777	$	(82	)		$	14,230
1 Elimination of Financial Products revenues from Machinery and Power Systems.

Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments				Consolidated Total
Six Months Ended June 30, 2012
Total external sales and revenues from reportable segments	$	31,068		$	1,525	$	—			$	32,593
All Other operating segment	928			—		—				928
Other	(24		)	32		(174		)	1	(166		)
Total sales and revenues	$	31,972		$	1,557	$	(174	)		$	33,355
Six Months Ended June 30, 2011
Total external sales and revenues from reportable segments	$	24,753		$	1,494	$	—			$	26,247
All Other operating segment	1,064			—		—				1,064
Other	(5		)	23		(150		)	1	(132		)
Total sales and revenues	$	25,812		$	1,517	$	(150	)		$	27,179
1 Elimination of Financial Products revenues from Machinery and Power Systems.

Reconciliation of profit (loss) before taxes:

Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidated Total
Three Months Ended June 30, 2012
Total profit from reportable segments	$	3,096		$	188		$	3,284
All Other operating segment	188			—			188
Cost centers	(11		)	—			(11		)
Corporate costs	(400		)	—			(400		)
Timing	(137		)	—			(137		)
Methodology differences:
Inventory/cost of sales	(21		)	—			(21		)
Postretirement benefit expense	(145		)	—			(145		)
Financing costs	(112		)	—			(112		)
Equity in profit of unconsolidated affiliated companies	(5		)	—			(5		)
Currency	9			—			9
Other income/expense methodology differences	(74		)	—			(74		)
Other methodology differences	4			(4		)	—
Total profit before taxes	$	2,392		$	184		$	2,576
Three Months Ended June 30, 2011
Total profit from reportable segments	$	2,014		$	172		$	2,186
All Other operating segment	122			—			122
Cost centers	(20		)	—			(20		)
Corporate costs	(300		)	—			(300		)
Timing	(93		)	—			(93		)
Methodology differences:
Inventory/cost of sales	16			—			16
Postretirement benefit expense	(166		)	—			(166		)
Financing costs	(89		)	—			(89		)
Equity in profit of unconsolidated affiliated companies	10			—			10
Currency	(93		)	—			(93		)
Interest rate swaps	(124		)	—			(124		)
Other income/expense methodology differences	(97		)	—			(97		)
Other methodology differences	(3		)	1			(2		)
Total profit before taxes	$	1,177		$	173		$	1,350

Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidated Total
Six Months Ended June 30, 2012
Total profit from reportable segments	$	5,692		$	393		$	6,085
All Other operating segment	406			—			406
Cost centers	23			—			23
Corporate costs	(760		)	—			(760		)
Timing	(288		)	—			(288		)
Methodology differences:
Inventory/cost of sales	(35		)	—			(35		)
Postretirement benefit expense	(331		)	—			(331		)
Financing costs	(227		)	—			(227		)
Equity in profit of unconsolidated affiliated companies	(7		)	—			(7		)
Currency	140			—			140
Other income/expense methodology differences	(135		)	—			(135		)
Other methodology differences	6			(3		)	3
Total profit before taxes	$	4,484		$	390		$	4,874
Six Months Ended June 30, 2011
Total profit from reportable segments	$	4,054		$	308		$	4,362
All Other operating segment	367			—			367
Cost centers	1			—			1
Corporate costs	(571		)	—			(571		)
Timing	(169		)	—			(169		)
Methodology differences:
Inventory/cost of sales	22			—			22
Postretirement benefit expense	(358		)	—			(358		)
Financing costs	(178		)	—			(178		)
Equity in profit of unconsolidated affiliated companies	18			—			18
Currency	(75		)	—			(75		)
Interest rate swaps	(149		)	—			(149		)
Other income/expense methodology differences	(156		)	—			(156		)
Other methodology differences	(4		)	3			(1		)
Total profit before taxes	$	2,802		$	311		$	3,113

Reconciliation of Assets:

Reconciliation of Assets:
(Millions of dollars)	Machinery and Power Systems			Financial Products			Consolidating Adjustments			Consolidated Total
June 30, 2012
Total assets from reportable segments	$	32,766		$	34,451		$	—		$	67,217
All Other operating segment	2,029			—			—			2,029
Items not included in segment assets:
Cash and short-term investments	2,810			—			—			2,810
Intercompany receivables	54			—			(54		)	—
Investment in Financial Products	4,011			—			(4,011		)	—
Deferred income taxes	4,107			—			(542		)	3,565
Goodwill, intangible assets and other assets	3,988			—			—			3,988
Operating lease methodology difference	(549		)	—			—			(549		)
Liabilities included in segment assets	13,061			—			—			13,061
Inventory methodology differences	(3,164		)	—			—			(3,164		)
Other	96			(137		)	(78		)	(119		)
Total assets	$	59,209		$	34,314		$	(4,685	)	$	88,838
December 31, 2011
Total assets from reportable segments	$	28,982		$	31,747		$	—		$	60,729
All Other operating segment	2,035			—			—			2,035
Items not included in segment assets:
Cash and short-term investments	1,829			—			—			1,829
Intercompany receivables	75			—			(75		)	—
Investment in Financial Products	4,035			—			(4,035		)	—
Deferred income taxes	4,109			—			(533		)	3,576
Goodwill, intangible assets and other assets	4,461			—			—			4,461
Operating lease methodology difference	(511		)	—			—			(511		)
Liabilities included in segment assets	12,088			—			—			12,088
Inventory methodology differences	(2,786		)	—			—			(2,786		)
Other	362			(194		)	(143		)	25
Total assets	$	54,679		$	31,553		$	(4,786	)	$	81,446

Reconciliation of Depreciation and amortization:

Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments		Consolidated Total
Three Months Ended June 30, 2012
Total depreciation and amortization from reportable segments	$	454		$	177	$	—	$	631
Items not included in segment depreciation and amortization:
All Other operating segment	41			—		—		41
Cost centers	22			—		—		22
Other	(11		)	6		—		(5		)
Total depreciation and amortization	$	506		$	183	$	—	$	689
Three Months Ended June 30, 2011
Total depreciation and amortization from reportable segments	$	327		$	182	$	—	$	509
Items not included in segment depreciation and amortization:
All Other operating segment	41			—		—		41
Cost centers	19			—		—		19
Other	28			2		—		30
Total depreciation and amortization	$	415		$	184	$	—	$	599

Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments		Consolidated Total
Six Months Ended June 30, 2012
Total depreciation and amortization from reportable segments	$	886		$	351	$	—	$	1,237
Items not included in segment depreciation and amortization:
All Other operating segment	84			—		—		84
Cost centers	41			—		—		41
Other	(23		)	11		—		(12		)
Total depreciation and amortization	$	988		$	362	$	—	$	1,350
Six Months Ended June 30, 2011
Total depreciation and amortization from reportable segments	$	654		$	358	$	—	$	1,012
Items not included in segment depreciation and amortization:
All Other operating segment	86			—		—		86
Cost centers	37			—		—		37
Other	33			6		—		39
Total depreciation and amortization	$	810		$	364	$	—	$	1,174

Reconciliation of Capital expenditures:

Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments			Consolidated Total
Three Months Ended June 30, 2012
Total capital expenditures from reportable segments	$	698		$	457	$	—		$	1,155
Items not included in segment capital expenditures:
All Other operating segment	90			—		—			90
Cost centers	65			—		—			65
Timing	(81		)	—		—			(81		)
Other	(91		)	57		(29		)	(63		)
Total capital expenditures	$	681		$	514	$	(29	)	$	1,166
Three Months Ended June 30, 2011
Total capital expenditures from reportable segments	$	395		$	339	$	—		$	734
Items not included in segment capital expenditures:
All Other operating segment	51			—		—			51
Cost centers	19			—		—			19
Timing	(74		)	—		—			(74		)
Other	16			22		(24		)	14
Total capital expenditures	$	407		$	361	$	(24	)	$	744

Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery and Power Systems			Financial Products		Consolidating Adjustments			Consolidated Total
Six Months Ended June 30, 2012
Total capital expenditures from reportable segments	$	1,090		$	800	$	—		$	1,890
Items not included in segment capital expenditures:
All Other operating segment	154			—		—			154
Cost centers	103			—		—			103
Timing	321			—		—			321
Other	(123		)	74		(124		)	(173		)
Total capital expenditures	$	1,545		$	874	$	(124	)	$	2,295
Six Months Ended June 30, 2011
Total capital expenditures from reportable segments	$	615		$	519	$	—		$	1,134
Items not included in segment capital expenditures:
All Other operating segment	89			—		—			89
Cost centers	34			—		—			34
Timing	240			—		—			240
Other	(3		)	55		(45		)	7
Total capital expenditures	$	975		$	574	$	(45	)	$	1,504

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Consolidated Statement of Financial Position (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and short-term investments	$ 5,103	$ 3,057
Receivables - trade and other	10,443	10,285
Receivables - finance	8,383	7,668
Deferred and refundable income taxes	1,685	1,580
Prepaid expenses and other current assets	1,336	994
Inventories	17,344	14,544
Total current assets	44,294	38,128
Property, plant and equipment - net	14,928	14,395
Long-term receivables - trade and other	803	1,130
Long-term receivables - finance	12,955	11,948
Investments in unconsolidated affiliated companies	124	133
Noncurrent deferred and refundable income taxes	2,032	2,157
Intangible assets	4,236	4,368
Goodwill	7,320	7,080
Other assets	2,146	2,107
Total assets	88,838	81,446
Short-term borrowings:
Machinery and Power Systems	592	93
Financial Products	4,455	3,895
Accounts payable	8,470	8,161
Accrued expenses	3,532	3,386
Accrued wages, salaries and employee benefits	1,628	2,410
Customer advances	3,132	2,691
Dividends payable	339	298
Other current liabilities	2,117	1,967
Long-term debt due within one year:
Machinery and Power Systems	1,269	558
Financial Products	5,739	5,102
Total current liabilities	31,273	28,561
Long-term debt due after one year:
Machinery and Power Systems	9,169	8,415
Financial Products	18,092	16,529
Liability for postemployment benefits	10,626	10,956
Other liabilities	3,697	3,583
Total liabilities	72,857	68,044
Commitments and contingencies (Notes 10 and 12)
Redeemable noncontrolling interest	0	473
Stockholders' equity
Common stock of $1.00 par value: Authorized shares: 2,000,000,000 Issued shares: (6/30/12 and 12/31/10 - 814,894,624) at paid-in amount	4,373	4,273
Treasury stock (6/30/12 - 161,625,928 shares; 12/31/11 - 167,361,280 shares) at cost	(10,139)	(10,281)
Profit employed in the business	27,842	25,219
Accumulated other comprehensive income (loss)	(6,150)	(6,328)
Noncontrolling interests	55	46
Total stockholders' equity	15,981	12,929
Total liabilities, redeemable noncontrolling interest and stockholders' equity	$ 88,838	$ 81,446

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

6 Months Ended

Jun. 30, 2012

Basis of Presentation Abstract

Basis of Presentation

A.  Basis of Presentation

In the opinion of management, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated results of operations for the three and six month periods ended June 30, 2012 and 2011, (b) the consolidated comprehensive income for the three and six month periods ended June 30, 2012 and 2011, (c) the consolidated financial position at June 30, 2012 and December 31, 2011, (d) the consolidated changes in stockholders’ equity for the six month periods ended June 30, 2012 and 2011, and (e) the consolidated cash flow for the six month periods ended June 30, 2012 and 2011.  The financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.

Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our Company’s annual report on Form 10-K for the year ended December 31, 2011 (2011 Form 10-K).

The December 31, 2011 financial position data included herein is derived from the audited consolidated financial statements included in the 2011 Form 10-K but does not include all disclosures required by U.S. GAAP.

B.  Nature of Operations

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

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

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

C.  Accumulated Other Comprehensive Income (Loss)

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

(Millions of dollars)	June 30, 2012				June 30, 2011
Foreign currency translation	$	239			$	863
Pension and other postretirement benefits	(6,410		)		(4,499		)
Derivative financial instruments	(37		)		36
Available-for-sale securities	58				56
Total accumulated other comprehensive income (loss)	$	(6,150	)	1	$	(3,544	)

¹  In conjunction with the Cat Japan share redemption, to reflect the increase in our ownership interest in Cat Japan from 67 percent to 100 percent, $107 million was reclassified to Accumulated other comprehensive income (loss) from other components of stockholders' equity and was not included in Comprehensive income during the second quarter of 2012. The amount was comprised of foreign currency translation of $167 million, pension and other postretirement benefits of $(61) million and available-for-sale securities of $1 million.

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Available-For-Sale Securities (Details 3) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Investments, Debt and Equity Securities [Abstract]
Due in one year or less, Cost Basis	$ 125		$ 125
Due after one year through five years, Cost Basis	496		496
Due after five through ten years, Cost Basis	149		149
Due after ten years, Cost Basis	45		45
Due in one year or less, Fair Value	127		127
Due after one year through five years, Fair Value	510		510
Due after five years through ten years, Fair Value	171		171
Due after ten years, Fair Value	43		43
Cost Basis	1,241		1,241
Fair Value	1,292		1,292
Available-for-sale Securities, Proceeds, Gains and Losses
Proceeds from the sale of available-for-sale securities	65	56	177	122
Gross gains from the sale of available-for-sale securities	1	1	3	2
Gross losses from the sale of available-for-sale securities	0	0	0	(1)
Schedule of Available-for-sale Securities
Cost Basis	1,402		1,402		1,375
Available-for-sale securities	1,493		1,493		1,447
U.S. governmental agency mortgage-backed securities
Schedule of Available-for-sale Securities
Cost Basis	266		266		297
Available-for-sale securities	278		278		310
Residential
Schedule of Available-for-sale Securities
Cost Basis	29		29		33
Available-for-sale securities	26		26		30
Commercial
Schedule of Available-for-sale Securities
Cost Basis	131		131		142
Available-for-sale securities	$ 137		$ 137		$ 145

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Divestitures and Assets Held for Sale (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	6 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended
	Aug. 01, 2012 Transaction	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 Bucyrus Distribution Business Transaction	Jun. 30, 2012 Bucyrus Distribution Business Transaction	Jun. 30, 2012 Finning International Bucyrus Distribution Business	Jun. 30, 2012 WesTrac Pty Limited	Jun. 30, 2012 WesTrac Pty Limited Bucyrus Distribution Business	Jun. 30, 2012 Ferreyros S.A.A.	Jun. 30, 2012 Ferreyros S.A.A. Bucyrus Distribution Business
Disposal Groups
Goodwill Impairment				$ 27
Number of sales transactions completed	3			3
Number of transactions classified as held for sale					9
Sale value of distribution business						306		400		75
After-tax profit unfavorable impact				8	28
Other operating income				160	155
Selling, general and administrative expenses				57	83
Income tax				111	100
Intangible Assets Sold				146	146
Other Assets Sold				117	117
Allocated Goodwill				230	230
Cat Financial financing of divestiture transactions		$ 5,942	$ 4,294				$ 400		$ 75

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Segment Information (Details 4) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Segment Reporting Asset Reconciling Item
All other operating segments	$ 2,029	$ 2,035
Items not included in segment assets:
Cash and short-term investments	2,810	1,829
Intercompany receivables	0	0
Investment in Financial Products	0	0
Deferred income taxes	3,565	3,576
Goodwill, intangible assets and other assets	3,988	4,461
Operating lease methodology difference	(549)	(511)
Liabilities included in segment assets	13,061	12,088
Inventory methodology differences	(3,164)	(2,786)
Other	(119)	25
Total assets	88,838	81,446
Reportable segments
Items not included in segment assets:
Total assets	67,217	60,729
Machinery and Power Systems
Segment Reporting Asset Reconciling Item
All other operating segments	2,029	2,035
Items not included in segment assets:
Cash and short-term investments	2,810	1,829
Intercompany receivables	54	75
Investment in Financial Products	4,011	4,035
Deferred income taxes	4,107	4,109
Goodwill, intangible assets and other assets	3,988	4,461
Operating lease methodology difference	(549)	(511)
Liabilities included in segment assets	13,061	12,088
Inventory methodology differences	(3,164)	(2,786)
Other	96	362
Total assets	59,209	54,679
Machinery and Power Systems | Reportable segments
Items not included in segment assets:
Total assets	32,766	28,982
Financial Products
Segment Reporting Asset Reconciling Item
All other operating segments	0	0
Items not included in segment assets:
Cash and short-term investments	0	0
Intercompany receivables	0	0
Investment in Financial Products	0	0
Deferred income taxes	0	0
Goodwill, intangible assets and other assets	0	0
Operating lease methodology difference	0	0
Liabilities included in segment assets	0	0
Inventory methodology differences	0	0
Other	(137)	(194)
Total assets	34,314	31,553
Financial Products | Reportable segments
Items not included in segment assets:
Total assets	34,451	31,747
Consolidating Adjustments
Segment Reporting Asset Reconciling Item
All other operating segments	0	0
Items not included in segment assets:
Cash and short-term investments	0	0
Intercompany receivables	(54)	(75)
Investment in Financial Products	(4,011)	(4,035)
Deferred income taxes	(542)	(533)
Goodwill, intangible assets and other assets	0	0
Operating lease methodology difference	0	0
Liabilities included in segment assets	0	0
Inventory methodology differences	0	0
Other	(78)	(143)
Total assets	(4,685)	(4,786)
Consolidating Adjustments | Reportable segments
Items not included in segment assets:
Total assets	$ 0	$ 0

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Business Combinations

6 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Business Combinations

Business Combinations

ERA Mining Machinery Limited

During the second quarter of 2012, Caterpillar, through its wholly-owned subsidiary Caterpillar (Luxembourg) Investment Co. S.A., completed a tender offer to acquire the issued shares of ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical Manufacturing Co., Ltd., commonly known as Siwei. Substantially all of the issued shares of Siwei, a public company listed on the Hong Kong Exchange, were acquired at the end of May 2012 and approximately one percent of the issued shares remained outstanding and unacquired as of June 30, 2012. We expect to complete the compulsory acquisition of the remaining shares of Siwei common stock in the third quarter of 2012. Siwei primarily designs, manufactures, sells and supports underground coal mining equipment in mainland China and is known for its expertise in manufacturing mining roof support equipment. The tender offer allowed Siwei shareholders to choose between two types of consideration in exchange for their shares. The alternatives were either cash consideration of HK$0.88 or a HK$1.00 loan note issued by Caterpillar (Luxembourg) Investment Co. S.A. to the former shareholders of Siwei that will entitle the holder to receive on redemption a minimum of HK$0.75 up to a maximum of HK$1.15 depending on Siwei's consolidated gross profit for 2012 and 2013. Approximately 4 billion Siwei shares were tendered for the cash alternative and approximately 1.6 billion Siwei shares were tendered for the loan note alternative. The preliminary purchase price of approximately $690 million is comprised of net cash paid of approximately $453 million ($475 million in cash paid for shares and to cancel share options less cash acquired of $22 million), the fair value of the loan notes of $169 million, approximately $155 million of assumed third-party short term borrowings, a loan and interest payable to Caterpillar from Siwei of $51 million, less restricted cash acquired of approximately $138 million. The noncontrolling interest for the outstanding shares not tendered is $7 million. The acquisition supports Caterpillar's long-term commitment to invest in China in order to support our growing base of Chinese customers and will further expand our underground mining business both inside and outside of China. Siwei will be reported in the Resource Industries segment.

The transaction was financed with available cash and included the issuance of loan notes to the former shareholders of Siwei, which have a debt component and a portion that is contingent consideration. The $169 million fair value of the loan notes is comprised of $152 million of debt representing the minimum redemption amount payable in April 2013 and $17 million in contingent consideration representing the portion of the redemption amount conditionally payable in April 2013 or April 2014. The contingent consideration will be remeasured each reporting period at its estimated fair value with any adjustment included in Other operating (income) expenses in the Consolidated Results Of Operations.

Tangible assets acquired of $671 million, recorded at their fair values, primarily include cash of $22 million, restricted cash of $138 million, receivables of $213 million, inventory of $105 million and property, plant and equipment of $112 million. Finite-lived intangible assets acquired of $194 million were primarily related to customer relationships and also included trade names. The finite-lived intangible assets are being amortized on a straight-line basis over a weighted average amortization period of approximately 15 years. Liabilities assumed of $592 million, recorded at their fair values, primarily included accounts payable of $342 million, third-party short term borrowings of $155 million and accrued expenses of $50 million. Additionally, deferred tax liabilities were $38 million. Goodwill of $467 million, substantially all of which is non-deductible for income tax purposes, represents the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill will not be amortized, but will be tested for impairment at least annually. Factors that contributed to a purchase price resulting in the recognition of goodwill include expected cost savings primarily from increased purchasing power for raw materials and a reduction in other manufacturing input costs, expanded underground mining equipment sales opportunities in China and internationally, along with the acquired assembled workforce. These values represent a preliminary allocation of the purchase price subject to finalization of post-closing procedures. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

Caterpillar Tohoku Ltd

In March 2012, we acquired 100 percent of the stock of Caterpillar Tohoku Ltd (Cat Tohoku). Cat Tohoku was an independently owned and operated dealership providing sales, rental, service and after market support for Caterpillar machines and engines in the northeastern part of Japan. The purchase price, net of $18 million of acquired cash, was approximately $202 million. The purchase price included the assumption of $77 million in third party debt as well as $64 million net trade payables due to Caterpillar. We paid approximately $59 million at closing and recognized a payable of $21 million for estimated consideration due in March 2013. The acquisition of Cat Tohoku supports Caterpillar's efforts to restructure its distribution network in Japan.

The transaction was financed with available cash. Tangible assets acquired of $251 million primarily include cash of $18 million, receivables of $33 million, inventory of $26 million, and property, plant and equipment of $157 million. Finite-lived intangible assets acquired were $8 million. Liabilities assumed of $132 million, recorded at their fair values, primarily included debt of $77 million and accounts payable of $39 million. Goodwill of $16 million, which is deductible for income tax purposes, represents the excess of cost over the fair value of net tangible assets acquired. These values represent a preliminary allocation of the purchase price subject to finalization of post-closing procedures. The results of the acquired business for the period from the acquisition date are included in the accompanying consolidated financial statements and are reported in the Construction Industries segment. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

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Cat Financial Financing Activities (Details 3) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Allowance for Credit Loss Activity
Balance at beginning of year	$ 366	$ 362
Receivables written off	(50)	(210)
Recoveries on receivables previously written off	23	52
Provision for credit losses	53	168
Other	(2)	(6)
Balance at end of period	390	366
Allowance for Credit Losses
Individually evaluated for impairment	61	56
Collectively evaluated for impairment	329	310
Ending Balance	390	366
Recorded Investment in Finance Receivables
Individually evaluated for impairment	632	575
Collectively evaluated for impairment	21,094	19,405
Ending Balance - recorded investment in finance receivables	21,726	19,980
Customer
Allowance for Credit Loss Activity
Balance at beginning of year	360	357
Receivables written off	(50)	(210)
Recoveries on receivables previously written off	23	52
Provision for credit losses	51	167
Other	(2)	(6)
Balance at end of period	382	360
Allowance for Credit Losses
Individually evaluated for impairment	61	56
Collectively evaluated for impairment	321	304
Ending Balance	382	360
Recorded Investment in Finance Receivables
Individually evaluated for impairment	632	575
Collectively evaluated for impairment	17,816	17,018
Ending Balance - recorded investment in finance receivables	18,448	17,593
Dealer
Allowance for Credit Loss Activity
Balance at beginning of year	6	5
Receivables written off	0	0
Recoveries on receivables previously written off	0	0
Provision for credit losses	2	1
Other	0	0
Balance at end of period	8	6
Allowance for Credit Losses
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	8	6
Ending Balance	8	6
Recorded Investment in Finance Receivables
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	3,278	2,387
Ending Balance - recorded investment in finance receivables	$ 3,278	$ 2,387

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Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Components of net periodic cost and weighted-average assumptions used to determine net cost

(Millions of dollars)	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	June 30,						June 30,						June 30,
	2012			2011			2012			2011			2012			2011
For the three months ended:
Components of net periodic benefit cost:
Service cost	$	46		$	38		$	28		$	28		$	22		$	20
Interest cost	154			162			46			44			56			63
Expected return on plan assets	(203		)	(199		)	(53		)	(50		)	(16		)	(17		)
Amortization of:
Prior service cost (credit)1	5			5			—			—			(16		)	(13		)
Net actuarial loss (gain) 1	124			113			24			18			25			27
Net periodic benefit cost	126			119			45			40			71			80
Curtailments, settlements and special termination benefits 2	—			—			12			9			—			—
Total cost included in operating profit	$	126		$	119		$	57		$	49		$	71		$	80
For the six months ended:
Components of net periodic benefit cost:
Service cost	$	92		$	77		$	56		$	55		$	46		$	41
Interest cost	308			324			91			87			111			126
Expected return on plan assets	(406		)	(398		)	(107		)	(100		)	(32		)	(35		)
Amortization of:
Transition obligation (asset)	—			—			—			—			1			1
Prior service cost (credit)1	10			10			—			1			(33		)	(27		)
Net actuarial loss (gain) 1	248			226			48			36			50			54
Net periodic benefit cost	252			239			88			79			143			160
Curtailments, settlements and special termination benefits 2	—			—			22			9			(40		)	—
Total cost included in operating profit	$	252		$	239		$	110		$	88		$	103		$	160
Weighted-average assumptions used to determine net cost:
Discount rate	4.3		%	5.1		%	4.3		%	4.6		%	4.3		%	5.0		%
Expected return on plan assets	8.0		%	8.5		%	7.1		%	7.1		%	8.0		%	8.5		%
Rate of compensation increase	4.5		%	4.5		%	3.9		%	4.2		%	4.4		%	4.4		%
1    Prior service cost (credit) and net actuarial loss (gain) for both pension and other postretirement benefits are generally amortized using the straight-line method over the average remaining service period to the full retirement eligibility date of employees expected to receive benefits from the plan. For other postretirement benefit plans in which all or almost all of the plan's participants are fully eligible for benefits under the plan, prior service cost (credit) and net actuarial loss (gain) are amortized using the straight-line method over the remaining life expectancy of those participants.
2       Curtailments, settlements and special termination benefits were recognized in Other operating (income) expenses in the Consolidated Statement of Results of Operations.

Company costs related to U.S. and non-U.S. defined contribution plans

Total company costs related to our defined contribution plans were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(Millions of dollars)	2012		2011		2012		2011
U.S. Plans	$	33	$	50	$	134	$	132
Non-U.S. Plans	17		14		31		26
	$	50	$	64	$	165	$	158

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Computations of Profit Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Computations of Profit Per Share

Computations of Profit Per Share

(Dollars in millions except per share data)		Three Months Ended June 30,				Six Months Ended June 30,
		2012		2011		2012		2011
I.	Profit for the period (A)1:	$	1,699	$	1,015	$	3,285	$	2,240
II.	Determination of shares (in millions):	—
	Weighted-average number of common shares outstanding (B)	652.9		645.5		651.3		643.3
	Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price	16.7		21.7		18.6		22.7
	Average common shares outstanding for fully diluted computation (C) 2	669.6		667.2		669.9		666.0
III.	Profit per share of common stock:
	Assuming no dilution (A/B)	$	2.60	$	1.57	$	5.04	$	3.48
	Assuming full dilution (A/C) 2	$	2.54	$	1.52	$	4.90	$	3.36
1 Profit attributable to common stockholders. 2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

SARs and stock options to purchase 6,091,056 common shares were outstanding for both the three and six months ended June 30, 2012, respectively, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For both the three and six months ended June 30, 2011,  there were outstanding SARs and stock options to purchase 2,940,143 common shares, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.