Caterpillar PDF
Caterpillar PDF
Caterpillar PDF
Challenge
2008 Annual Report
Caterpillar 2008 ANNUAL Report 2
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Table of Contents
08
Global Supply Chain
04
Powering Oil and Gas
Transformation Russia and worldwide
U.S. and worldwide
15 06
22
Industry Leadership,
Cat Precision Equals Safety
Skallingen Beach, Denmark
Expanding Worldwide
Port Capacity
China’s ports and waterways
New Partnership
Westminster, Colorado, U.S.
05
Runways for Economic Growth
Chicago, Illinois, U.S.
21
A 360° View of Value
10
Münich, Germany
Productivity Gold in
the Mining Industry 09 11
Welcoming Caterpillar Japan
Elko, Nevada, U.S. Big Future in India Akashi, Japan
Across India
17
Cat Certified Used:
Big Demand, Big Value
Guayaquil, Ecuador 13
24 Performing in the Saudi Sand
Building CPS Momentum
Torreon, Mexico, and worldwide
19
Safeguarding Venice
Nafud Desert, Saudi Arabia
Venice, Italy
Caterpillar 2008 ANNUAL Report 4
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POWERING
OIL AND GAS
Russia and worldwide
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
RUNWAYS FOR
ECONOMIC GROWTH
Chicago, Illinois, U.S.
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
EXPANDING
WORLDWIDE PORT
CAPACITY
China’s ports and waterways
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
High-performance Cat® marine The dredging industry Excavated materials from Most dredging projects
engines power cutting devices uses a variety of vessel dredging are frequently used require extensive documen-
for dredging in clay, compacted types to meet widely to create or restore natural tation and planning as
sand and rocky conditions. varying project objectives habitats in areas nearby. part of an Environmental
and locations. Impact Assessment before
they begin.
Caterpillar 2008 ANNUAL Report 8
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Transportation management
Cat Logistics made significant improvements to Caterpillar’s
global transportation network in 2008. Track-and-trace
capabilities and better outbound mode management have
greatly improved shipment visibility and reduced transit
times by roughly 10 percent. Modern systems and tools help
us get Caterpillar shipments to the right place in less time—
in addition, improved freight bill accuracy and compliance
save millions of dollars annually.
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Strength in developing regions is critical to durable, long-term growth, regardless of economic climate.
With a well-established, balanced and fast-growing business, Caterpillar India is becoming an increasingly
important contributor to our company’s global performance.
Caterpillar India’s manufacturing facilities produce quarry and off-highway construction trucks, backhoes
and wheel loaders, engines, power generator sets and more—serving customers not only in India, but
also worldwide. And Caterpillar’s Engineering Design Center-India represents our largest research and
development capability outside of North America, playing a major role in Caterpillar’s global research
and design activities.
Caterpillar 2008 ANNUAL Report 10
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PRODUCTIVITY
GOLD IN THE
MINING INDUSTRY
Elko, Nevada, U.S.
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
WELCOMING
CATERPILLAR JAPAN
Akashi, Japan
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Caterpillar 2008 ANNUAL Report 13
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
PERFORMING IN
THE SAUDI SAND
Nafud Desert, Saudi Arabia
A MASSIVE TASK
By the time it’s complete, the Nafud rail line will require
nearly 350 million cubic meters of cut and fill
to pass through the desert’s huge dunes and gullies.
Caterpillar 2008 ANNUAL Report 14
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Caterpillar 2008 ANNUAL Report 15
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
CAT PRECISION
EQUALS SAFETY
Skallingen Beach, Denmark
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Success
In April of 2008, the Danish
Minister of Transport cut the
ribbon to publicly open
the beach, completely free
of landmines and fragments.
Caterpillar 2008 ANNUAL Report 17
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Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Caterpillar 2008 ANNUAL Report 19
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
SAFEGUARDING
VENICE
Venice, Italy
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Floodgate
Caisson
Innovative design
The gates normally are seated, full
of water, in their housings on the
bottom of the inlet channels. When
needed, compressed air forces
the water out and allows the gates to
rise, blocking the flow of seawater
into the lagoon.
Caterpillar 2008 ANNUAL Report 21
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Caterpillar 2008 ANNUAL Report 24
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
BUILDING CPS
MOMENTUM
Torreon, Mexico, and worldwide
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Letter from 2008 was a tale of two years. For the first nine months, the boom
our Chairman that began in 2004 rolled on. We were driven by solid
growth in the developing economies that was supported by
good global demand from the mining and energy sectors
as commodity prices encouraged new equipment investment.
$100.00
$119.84
$144.67
$156.09
$188.05
$118.87
$30,306
$36,339
$41,517
$44,958
$51,324
Caterpillar Inc.
S&P 500
0
03 04 05 06 07 08 04 05 06 07 08
Caterpillar 2008 ANNUAL Report 27
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Despite recessionary conditions in North America, But toward the end of the fourth quarter, we pricing strategies and overall profitability and
Europe and Japan, Team Caterpillar continued to realized a seismic shift in the global industries competitiveness. Equity markets around the world
deliver record results during the first three quarters. we serve. The global credit market crisis weakened lost significant value, and world financial markets
We shipped tens of billions of dollars in equipment already shaky business conditions in the developed remained under tremendous stress. Frankly, there
to customers, increased market share and introduced countries and, by the end of 2008, was beginning to hasn’t been a time during my 35 years at Caterpillar
new products—including the next generation have a significant negative effect on the developing when so many factors that affect our business
of mining trucks, the industry’s first electric drive world as well. changed so quickly and dramatically.
track-type tractor and the Cat C175 engine— Commodity prices dropped dramatically—many Despite this precipitous downturn, Team
to help our customers operate more cleanly and declining by as much as 60 percent in the fourth Caterpillar delivered a record year in 2008.
efficiently. Internally, the Caterpillar Production quarter—and discouraged our mining and energy Sales and revenues topped $51 billion, exceeding
System continued to gain momentum, as we met customers from opening new mines and expanding our 2010 goal of $50 billion two years ahead
our aggressive year-end assessment target and production. We realized wild swings in global of schedule. Profit per share was also a record
improved safety, quality and inventory performance. currencies, which affected our manufacturing costs, at $5.66.
Share 1
Declared Per Price 1
(diluted)
Share 1
(December 31)
$4.04
$5.17
$5.37
$5.66
$0.80
$0.96
$1.15
$1.38
$1.62
$48.76
$57.77
$61.33
$72.56
$44.67
the 2005 2-for-1
stock split.
04 05 06 07 08 04 05 06 07 08 04 05 06 07 08
Caterpillar 2008 ANNUAL Report 28
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
$1,201
$1,593
$1,700
$2,445
$928
$1,084
$1,347
$1,404
$1,728
planning as one of the critical success factors employees and their families, and I regret
when we introduced our enterprise strategy back that we had to take these steps. But preserving the
in 2005. In late 2008 and early 2009, we began long-term viability of our company requires tough
executing our trough plans in earnest including: actions. This economic crisis is shaping up to
be the most serious since the Great Depression—
›› Reducing our workforce by about 20,000 through and almost certainly will be the worst recession
a combination of voluntary and involuntary we’ve experienced since the early 1980s. All of
separations, layoffs and the elimination of most Team Caterpillar must make sacrifices to ensure
contract, agency and temporary workers the survival and future strength of our business.
›› Scheduling temporary plant shutdowns for most Even with these challenges, I am confident in
of our operations around the world and working our prospects for the future. We’re financially
04 05 06 07 08 04 05 06 07 08
shortened work weeks in certain regions sound with an investment-grade credit rating and
Caterpillar 2008 ANNUAL Report 29
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Executive Office
We have realigned our 31
divisions under seven
executive officers. This
team is a strong, globally
experienced group with
broad industry and
customer knowledge
ready to take Caterpillar
to 2010 and beyond.
Richard Lavin Stu Levenick Doug Oberhelman Jim Owens Ed Rapp Gérard Vittecoq Steve Wunning
Group President Group President Group President Chairman and CEO Group President Group President Group President
access to the capital we need to run our business. recovery comes, we will be ready to hit the ground this financial downturn. We’re poised to strengthen
Our global manufacturing footprint is the broadest running. That’s why we’re laser focused on our global leadership position. Working together,
in our industry and its efficiency and cost executing our strategy, including capital invest- Team Caterpillar can build a company that is one
are rapidly transforming under the Caterpillar ments in our production facilities, expansion of of the best in the world!
Production System powered by 6 Sigma. our business in key markets, investments in
We have a diverse lineup of products and services, new product development and training to enable
reaching a broader customer base than ever before. our people to deliver operational excellence.
The ongoing growth of our integrated services I want to thank Team Caterpillar, our dealers and
businesses, which represent 34 percent of the suppliers for their continued commitment as James W. Owens
company’s total sales and revenues, helps provide we work through these unprecedented times. There Chairman and CEO, Caterpillar Inc.
earnings stability. Our global Cat dealer are great challenges, but I have every confidence
organization remains strong, well-funded and a in our team and our strategy. We can meet this
competitive advantage unmatched in our industry. remarkably difficult challenge and emerge from
This economic downturn will not stop the world’s this recession a stronger, better company.
need for better infrastructure and more energy. Good companies become great companies when
Caterpillar’s products and services are essential for they face and conquer adversity. This is our chance
restoring economic growth globally; and when to be great. We’re not just positioned to survive
Caterpillar 2008 ANNUAL Report 30
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Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Product Range
We will meet the challenges we face by helping customers meet
the challenges they face. From massive to mini, world-class
Cat® machines and engines match versatility and range with
performance and productivity to meet virtually any need. CAT 797B Mining Truck
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
As a percent of sales and revenues 6.9% 7.9% 8.5% 7.9% 6.7% 5 In 2006, we adopted the balance sheet
recognition provisions of Statement
Profit per common share 1, 6, 7 $ 5.83 $ 5.55 $ 5.37 $ 4.21 $ 2.97 of Financial Accounting Standard 158,
Profit per common share—diluted 2, 6, 7 $ 5.66 $ 5.37 $ 5.17 $ 4.04 $ 2.88 “Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans —
Dividends declared per share of an amendment of FASB Statements
common stock $ 1.620 $ 1.380 $ 1.150 $ 0.955 $ 0.800 No. 87, 88, 106 and 132(R),” which changed
Return on average common the manner in which we account for
postemployment benefits.
stockholders’ equity 3, 5, 7 47.5% 45.0% 46.3% 35.9% 30.0%
6 In 2006, we adopted Statement of Financial
Accounting Standard 123 (revised 2004),
Capital expenditures: “Shared-Based Payment,” which changed
the manner in which we account for
Property, plant and equipment $ 2,445 $ 1,700 $ 1,593 $ 1,201 $ 926
stock-based compensation.
Equipment leased to others $ 1,566 $ 1,340 $ 1,082 $ 1,214 $ 1,188
7 In 2007, we adopted Financial Accounting
Depreciation and amortization $ 1,980 $ 1,797 $ 1,602 $ 1,477 $ 1,397 Standards Board Interpretation No. 48,
“Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB
Research and development expenses $ 1,728 $ 1,404 $ 1,347 $ 1,084 $ 928 Statement No. 109,” which changed the
manner in which we account for uncertain
As a percent of sales and revenues 3.4% 3.1% 3.2% 3.0% 3.1%
tax positions.
Wages, salaries and employee benefits $ 9,076 $ 8,331 $ 7,512 $ 6,928 $ 6,025
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
$18,844
$22,931
$26,062
$28,359
$31,804
$9,492
$11,075
$12,807
$13,603
$16,240
$1,970
$2,333
$2,648
$2,996
$3,280
$3,280 Financial Products
$31,804 Machinery
$16,240 Engines
2008 Total
$51,324
04 05 06 07 08 04 05 06 07 08 04 05 06 07 08
Caterpillar 2008 ANNUAL Report 37
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Operating Profit
(dollars in millions)
$1,756
$2,431
$3,027
$2,758
$1,803
$589
$1,071
$1,630
$1,826
$2,319
$470
$531
$670
$690
$579
$579 Financial Products
$1,803 Machinery
$2,319 Engines
2008 Total
$4,448
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Financial Products 2
$2,001
$12,769 $590
$5,445
North America
$9,220
$20,215 EAME
$16,121 $361
$6,311
$2,910
Asia Pacific
(1) Does not include internal engine transfers $328 $8,980 $5,709
of $2.822 billion, $2.549 billion and $2.310
billion in 2008, 2007 and 2006. Internal $4,106
engine transfers are valued at prices $1,574
Latin America
comparable to those for unrelated parties.
(2) Does not include revenues earned from $6,008
Machinery and Engines of $308 million,
$400 million and $466 million in 2008, 2007
and 2006, respectively.
North America EAME Asia Pacific Latin America Total Sales & Revenues
08 07 06 08 07 06 08 07 06 08 07 06 08 07 06
Machinery $ 12,769 $ 12,596 $ 14,215 $ 9,220 $ 8,588 $ 6,223 $ 5,709 $ 4,026 $ 3,080 $ 4,106 $ 3,149 $ 2,544 $ 31,804 $ 28,359 $ 26,062
Engines $ 5,445 $ 5,092 $ 5,940 $ 6,311 $ 5,245 $ 4,064 $ 2,910 $ 2,136 $ 1,701 $ 1,574 $ 1,130 $ 1,102 $ 16,240 $ 13,603 $ 12,807
Financial Products $ 2,001 $ 2,007 $ 1,852 $ 590 $ 479 $ 377 $ 361 $ 240 $ 224 $ 328 $ 270 $ 195 $ 3,280 $ 2,996 $ 2,648
Total $ 20,215 $ 19,695 $ 22,007 $ 16,121 $ 14,312 $ 10,664 $ 8,980 $ 6,402 $ 5,005 $ 6,008 $ 4,549 $ 3,841 $ 51,324 $ 44,958 $ 41,517
Caterpillar 2008 ANNUAL Report 39
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
2% Waste
3% Forestry 8% On-Highway1
14% Industrial
12% Equipment Services
25% Mining
36% Petroleum
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
(dollars in thousands)
$415
$445
$460
$461
$482
North America
54,284
EAME
26,983
04 05 06 07 08
Asia Pacific
08 07 06 08 07 06
Inside U.S. 53,509 50,545 48,709 North America 54,284 50,901 49,018
(1) Does not include flexible workforce of agency,
Outside U.S. 59,378 50,788 45,884 EAME 26,983 26,168 24,845 contract and non-Caterpillar workers.
Total 112,887 101,333 94,593 Asia Pacific 17,217 10,334 7,499 (2) Total sales and revenues divided by average
number of employees.
Latin America 14,403 13,930 13,231
Caterpillar 2008 ANNUAL Report 41
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$7,886
North America
51
51,712
EAME
32,212
$2,675
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
430
$17
$27
$29
$36
$39
The number of patents awarded to Caterpillar
increased for the fourth straight year, as
Caterpillar has continued to increase its
investment in new products and services. In
2008, over 600 employees were named on the
33% Education
more than 430 patents granted to Caterpillar
companies worldwide.
Canada $ 2,172
18% Culture and Arts
EAME $ 6,568
Asia Pacific $ 3,834 12% Environment
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Stuart L. Levenick
Steven L. Fisher Robert T. Williams
(as of December 31, 2008) Remanufacturing Americas Operations
Douglas R. Oberhelman
Gregory S. Folley Jiming Zhu
Edward J. Rapp Core Components Caterpillar China
Audit Committee Robert B. Charter
Gérard R. Vittecoq Thomas A. Gales (retiring December 2009)
Eugene V. Fife, Chair General Counsel & Secretary
Americas Distribution Services
Steven H. Wunning James B. Buda
John R. Brazil Stephen A. Gosselin
John T. Dillon Vice Presidents Solar Turbines Incorporated Chief Financial Officer
Kent M. Adams David B. Burritt
William A. Osborn Hans Haefeli
Financial Products
Advanced Systems
Chief Human Resources Officer
Compensation Committee William P. Ainsworth
John S. Heller Sidney C. Banwart
David R. Goode, Chair Progress Rail Services
Global Information Services Gregory S. Folley
Daniel M. Dickinson Ali M. Bahaj Chief Information Officer
Gwenne A. Henricks
Caterpillar Japan John S. Heller
Edward B. Rust, Jr. Industrial Power Systems
Sidney C. Banwart
Stephen P. Larson Chief Technology Officer
Governance Committee Human Services
Logistics Tana L. Utley
W. Frank Blount, Chair Michael J. Baunton (retiring May 2009)
Daniel M. Murphy
Gail D. Fosler Europe, Africa, Middle East Operations Controller
Global Purchasing
Bradley M. Halverson
Peter A. Magowan Rodney C. Beeler
James J. Parker Jiming Zhu
Marketing and Product Support Center
Americas Distribution Services Treasurer
Public Policy Committee of Excellence
Kevin E. Colgan
Charles D. Powell, Chair Mark R. Pflederer
Mary H. Bell
Electronics & Connected Worksite
Juan Gallardo Building Construction Products Chief Ethics and Compliance Officer
William J. Rohner Edward J. Scott
Joshua I. Smith Thomas J. Bluth
Electric Power
Earthmoving
Chief Accounting Officer
Cristiano V. Schena
James B. Buda Jananne A. Copeland
Europe, Africa, Middle East Operations
Legal Services
William F. Springer Assistant Treasurer
David B. Burritt
Quarry & Specialty Industries Robin D. Beran
Global Finance & Strategic Services
Gary A. Stampanato
Richard J. Case Assistant Secretaries
Excavation
Marine & Petroleum Power Tinkie E. Demmin
Gary A. Stroup Laurie J. Huxtable
Robert B. Charter
Large Power Systems
Asia Pacific Distribution
Caterpillar 2008 ANNUAL Report 45
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Supplemental Company
STOCK PURCHASE PLAN Compliance
Current stockholders and other interested For 2008, Caterpillar filed an Annual CEO
Big Challenge Chairman’s Letter Caterpillar At a Glance Financial Information Stockholder Information
Peoria, IL 61629
(309) 675-1000
YECX0021