Caterpillar Inc. (NYSE: CAT), also known as "CAT", designs, manufactures, markets and sells machinery and engines and sells financial products and insurance to customers via a worldwide dealer network.[2][3] Caterpillar is the world's largest manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines.[2] With more than US$7 billion in assets, Caterpillar was ranked number one in its industry and number 44 overall in the 2009 Fortune 500.[6] Caterpillar stock is a component of the Dow Jones Industrial Average.[7]
Caterpillar Inc. traces its origins to the 1925 merger of the Holt Manufacturing Company and the C. L. Best Tractor Company, creating a new entity, the California based Caterpillar Tractor Company.[8] In 1986, the company re-organized itself as a Delaware corporation under the current name, Caterpillar Inc.[3] Caterpillar's headquarters are located in Peoria, Illinois, United States.[1]
Caterpillar machinery is recognizable by its trademark "Caterpillar Yellow" livery and the "CAT" logo.
Caterpillar Inc. (Caterpillar) is engaged in the manufacturing of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Caterpillar operates in three principal lines of business: Machinery, Engines and Financial products. Machinery line of business includes the design, manufacture, marketing and sales of construction, mining and forestry machinery. Engines line of business includes designs, manufactures, marketing and sales of engines for Caterpillar machinery; electric power generation systems, and marine, petroleum, construction, industrial, agricultural and other applications and related parts. Financial Products principal line of business consists of Caterpillar Financial Services Corporation (Cat Financial), Caterpillar Insurance Holdings, Inc. (Cat Insurance) and their respective subsidiaries. During the year ended August 31, 2010, Caterpillar acquired Electro-Motive Diesel, Inc. (EMD), a manufacturer of diesel-electric locomotives.
Machinery
Caterpillar’s Machinery line of business includes track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment and related parts. Caterpillar’s logistics business provides integrated supply chain services for Caterpillar and approximately 50 customers. Caterpillar also provides rail-related products and services through its wholly owned subsidiary, Progress Rail. Progress Rail is a provider of a range of products and services to the railroad industry, including new and remanufactured locomotives, railcar and track products and design and maintenance services. In addition, this line of business also includes EMD.
The Company competes with Komatsu Ltd., Volvo Group AB, CNH Global N.V., Deere & Co., Hitachi Construction Machinery Co., J.C.Bamford Ltd., Doosan Infracore Co., Ltd., LiuGong Construction Machinery N.A., LLC., DHL International, CEVA Logistics, Kuehne + Nagel Inc., GE Transportation, Bombardier, Siemens and VAE Nortrak North America, Inc.
Engines
Caterpillar provides industrial turbines and turbine-related services for oil and gas and power generation applications. The Company also includes remanufacturing of Caterpillar engines and a variety of Caterpillar machine and engine components and remanufacturing services for other companies. Reciprocating engines meet power needs ranging from 10 to 21,700 horsepower (8 to over 16,000 kilowatts). The turbines range from 1,600 to 30,000 horsepower (1,200 to 22,000 kilowatts).
The Company competes with Cummins Inc., Tognum AG, GE Energy Infrastructure, Siemens Energy, Wartsila Corp, John Deere Power Systems, MAN Diesel SE, Mitsubishi Heavy Industries Ltd., Volvo Group AB, Kawasaki Heavy Industries, Rolls Royce Group plc, Generac Power Systems, Inc. and Kohler Co.
Financial Products
Caterpillar’s Financial products business provides retail and wholesale financing alternatives for Caterpillar products to customers and dealers. Retail financing consists of financing of Caterpillar equipment, machinery and engines. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. In addition to retail financing, Cat Financial provides wholesale financing to Caterpillar dealers and purchases short-term dealer receivables from Caterpillar and its subsidiaries. Cat Financials operates in North America, Asia, Australia, Europe and Latin America.
Cat Insurance provides various forms of insurance to customers and dealers to help support the purchase and lease of its equipment. The Company’s wholly owned Subsidiaries Caterpillar Insurance Company, which is licensed to conduct property and casualty insurance business in 50 states and the District of Columbia; Caterpillar Life Insurance Company, which is licensed to conduct life and accident and health insurance business in 26 states and the District of Columbia; Caterpillar Insurance Co. Ltd. is a captive insurance company, which is a Class 2 insurer; Caterpillar Product Services Corporation is a warranty company, which conducts a machine extended service contract program in Germany and France, and Caterpillar Insurance Services Corporation is a insurance brokerage company licensed in all 50 states and the District of Columbia, and it provides brokerage services for all property and casualty and life and health lines of business.
The Company competes with Wells Fargo Equipment Finance Inc., General Electric Capital Corporation, Volvo Financial Services, Komatsu Financial L.P. and John Deere Capital Corporation.
Caterpillar began feeling the effects of the early 2000s economic downturn ahead of time, as its customers began cutting back on purchases as early as 1999 in anticipation of the troubled days ahead. Sales fell that year and then stagnated, amounting to only $20.15 billion in 2002. Unlike past recessions, however, Caterpillar remained in the black throughout thanks to its leaner and more diversified operations, which made the company less vulnerable to the cyclical ups and downs of the heavy machinery industry. Caterpillar's worst year came in 2002, when profits amounted to $798 million, which translated into a profit margin of just 4 percent. Barton also initiated additional cost-cutting measures to maintain the company's profitability, announcing in August 2000 a plan to cut annual expenses by more than $1 billion over the succeeding three to five years. He also aimed to increase revenues to $30 billion by mid-decade in part by continuing Caterpillar's diversification drive into engines, compact construction equipment, financial services--mainly loans to its large network of dealers--and rental equipment. Barton also made the difficult decision of exiting from the agricultural tractor business, offloading its tractor line to AGCO Corp. late in 2001. Although this was significant from a historic standpoint given the importance of tractors in Caterpillar's early history, by 2001 agricultural equipment generated only about 4 percent of Cat's total revenues.
Caterpillar rebounded strongly in 2003, posting record revenues of $22.76 billion and profits of $1.1 billion, a 38 percent jump over 2002. Sales were strong in its two largest manufacturing operations, heavy machinery and diesel truck engines. Machinery accounted for 50 percent of the revenues, engines 40 percent, and financial services the remaining 10 percent. During the year, Caterpillar launched its new line of low-emission ACERT engines that complied with U.S. Environmental Protection Agency (EPA) regulations slated to go into effect in 2004 (ACERT stood for Advanced Combustion Emissions Reduction Technology). In February 2003 the company entered into a five-year global alliance with mining company BHP Billiton to supply about $1.5 billion in mining machinery and other equipment.
On the heels of the stellar results for 2003, Barton retired in January 2004. James W. Owens was named his successor, having served as a group president, of various business units, since 1995. Under the new leader, Caterpillar was targeting emerging markets, particularly China, India, and Russia, for future growth. The company was hoping to reach its goal of $30 billion in revenues by 2006.
Principal Subsidiaries: Caterpillar Financial Services Corporation; Caterpillar Insurance Holdings, Inc.; Caterpillar Logistics Services, Inc.; Solar Turbines Incorporated; MaK Deutschland GmbH & Co. KG (Germany); Bitelli S.p.A. (Italy); Caterpillar Overseas S.A. (Switzerland); Perkins Engines Group Limited (U.K.); Turner Powertrain Systems Limited (U.K.).
Principal Divisions: Asia-Pacific Division; Building Construction Products Division; Compact Power Systems Division; Europe, Africa & Middle East Product Development & Operations Division; Global Mining Division; Large Power Systems Division; Latin America Division; Mining & Construction Equipment Division; North American Commercial Division; Track-Type Tractors Division; Wheel Loaders & Excavators Division.
Principal Competitors: Komatsu Ltd.; CNH Global N.V.; Deere & Company; Terex Corporation; Ingersoll-Rand Company Limited; AB Volvo; Hitachi Construction Machinery Co., Ltd.; J C Bamford Excavators Ltd.; Cummins, Inc.
OVERALL
Beta: 1.71
Market Cap (Mil.): $73,733.49
Shares Outstanding (Mil.): 644.69
Annual Dividend: 1.76
Yield (%): 1.54
FINANCIALS
CAT.N Industry Sector
P/E (TTM): 20.36 23.24 17.05
EPS (TTM): 186.94 -- --
ROI: 9.19 8.41 3.26
ROE: 34.23 13.44 5.84
Caterpillar settled an involved lawsuit with Goodyear Tire & Rubber Company in 1981. Three years previously Goodyear had begun selling a radial earthmoving tire that infringed on Caterpillar's beadless-tire technology. The beadless tire lacked the beads, or edges, that attach the tire to wheel rims, and was more durable and economical than previous designs. In the out-of-court settlement Goodyear agreed to pay Caterpillar an amount mutually agreed upon, and become a licensee of Cat, paying the firm royalties for the use of beadless technology in the further manufacture of the tire.
In 1981 the firm won a political battle to be granted the right to sell $90 million in pipe-laying equipment to the Soviet Union, despite stiff opposition from the administration of President Ronald Reagan. That year the firm sold more machines than ever before, with sales in excess of $9 billion for the year. Caterpillar also became the leading supplier of industrial gas turbines that year through the $505 million acquisition of Solar Turbines Incorporated from International Harvester.
The recession of 1982 hit Caterpillar especially hard. The economic downturn caused sales to drop to $6.5 billion that year. Caterpillar laid off almost 12,000 employees at this time, and closed its plant in Mentor, Ohio. Trying to cut overhead, Cat proposed pay freezes and a cut in benefits, prompting a seven-month UAW strike, the firm's longest strike yet. To add to the company's problems, barely six weeks after the 37,500 UAW workers left their jobs, a jury awarded Kast Metals a $9.2 million settlement for Caterpillar's failure to live up to an oral agreement to buy steel castings from Kast if Kast were to build a new plant to make the castings.
Caterpillar began 1983 by announcing the first annual loss in earnings in half a century. Cat started laying off workers, and closed a plant in Newcastle-on-Tyne, England. Sales slumped to a recent history low of $5.4 billion. Yet after the new contract was signed with the UAW, Caterpillar acquired a new direction and strategy that made things look better. Despite the concession of a profit-sharing plan, the wage freeze that the firm won in the contract dispute helped stem rising costs. The anticipation of the bottled-up demand that would create a larger market after the recession made investors think that Cat stock might be a good buy. By committing itself to less expansion, more creative marketing techniques, and reduced costs, Caterpillar intended in late 1983 to ride out the economic slump and position itself to return to profitability in 1984.
Caterpillar's problems continued, however, in 1984. Despite this being the expected comeback year for the firm, the plant closings and layoffs continued. The Burlington, Iowa, parts plant locked its doors to workers and, despite optimistic projections of recalling around 3,200 workers in 1985, Cat actually laid off about 3,000 other workers during that year. Caterpillar continued to cut back operations at its factories, then eliminated cost-of-living allowances in wages, and delayed the completion of its Morton, Illinois, distribution center. The firm blamed its third straight losing year on high interest rates and stiff price competition from other companies; losses for 1992-94 totaled $953 million.
In February 1985 George A. Schaefer was named chairman and CEO of Caterpillar, and Donald V. Fites was named president. Despite a net loss of almost $430 million the year before, Schaefer confidently predicted that Cat would make a profit during his first year as company head. During this year Caterpillar made two key strategic moves, which, despite their controversial nature, would be credited with making the firm once again profitable. Caterpillar first shifted some of its production and purchasing functions overseas. This meant that jobs previously performed in Peoria were moved to Scotland or Japan. The high value of the dollar overseas made such a change necessary for company survival, management argued. Secondly, Caterpillar embarked on a $600 million factory-modernization program. It would reduce permanently the labor force needed to make tractors by automating as many manufacturing processes as possible. Approximately 2,300 workers were cut from the Caterpillar payroll during 1985. Company executives argued that the firm needed to compete with Komatsu, which had a much greater manufacturing efficiency than Cat because of its highly automated plants.
In 1986 Caterpillar Tractor Company became Caterpillar Inc. and announced that it had made a profit of almost $200 million in the previous year. The firm bounced back from its problems by marketing a new automated lift truck, which had the potential to secure part of a multibillion-dollar market for Caterpillar. The firm even directly challenged Komatsu by expanding Cat's partnership with Mitsubishi Heavy Industries to include the production of hydraulic equipment.
Caterpillar faced, however, another strike during this year. Workers in Joliet walked out for four weeks, but were brought back to work under terms much like those previously rejected. Caterpillar again won a wage freeze, but cash bonuses as well as the firm's promise to lay off other workers as long as the strike continued were enough to get the Joliet workers to settle their grievances.
The weakening of the dollar abroad raised production costs and cut into profits for Caterpillar in 1987. Though the firm improved its sales and earnings over 1986, Caterpillar was still forced to close three factories. Nevertheless, in 1988 Caterpillar again made the kind of large profits it had made in the past, reaping $616 million for the year. In early 1989 Caterpillar's stock took a sharp downturn. The modernization campaign had swelled to a cost of more than $1.8 billion and flattened profits for the year. The cost of the program continued to affect company profits through 1992, while the company also suffered from the effects of the recession of the early 1990s.
A decline in sales in 1991 contributed to Cat's first loss since 1984, $404 million--the worst loss in company history. Sales increased only marginally in 1992, while the firm suffered another loss, this time $218 million. Meanwhile, newly appointed CEO Fites initiated a corporate reorganization in 1990 which moved Cat away from a function-oriented structure to one revolving around product lines and geographic areas.
Bitter Labor Disputes in the 1990s
Labor strife returned to Peoria in late 1991 when Caterpillar tried to alter a pattern agreement that had been agreed to in October at John Deere. When the UAW and Cat workers refused to accept the company's offer, they struck two Cat plants with 2,400 workers in early November. Caterpillar responded by locking out 5,650 more workers. Over the next five months, Caterpillar used managers to fill in at the affected plants, then threatened to permanently replace 15,000 UAW workers. In April 1992 the workers returned to their jobs without a contract and eventually accepted a company-imposed contract. The striking workers, however, returned to what they believed was a hostile environment, where they faced suspension or dismissal for wearing union-supporting T-shirts or buttons. By mid-1994, more than 80 complaints against Caterpillar for such tactics were issued by the National Labor Relations Board.
In 1993 Caterpillar completed the factory modernization program and at the same time began to benefit from its results. The time to process a part from start to finish was reduced by 75 percent and in-process inventories were reduced by 60 percent. Coupled with an overhaul of the new product development process, vast improvements were made in new product introductions. Only 24 new or improved products were introduced in 1991; that figure doubled in 1992 and reached 53 in 1994. Such gains led to record sales of $11.62 billion in 1993 and record profits of $652 million. The next year brought more records: $955 million in profits on sales of $14.33 billion.
Statistics:
Public Company
Incorporated: 1925 as Caterpillar Tractor Company
Employees: 69,169
Sales: $22.76 billion (2003)
Stock Exchanges: New York Chicago Pacific London Paris Euronext Brussels Frankfurt Swiss
Ticker Symbol: CAT
NAIC: 326220 Rubber and Plastics Hoses and Belting Manufacturing; 333120 Construction Machinery Manufacturing; 333131 Mining Machinery and Equipment Manufacturing; 333611 Turbine and Turbine Generator Set Units Manufacturing; 333618 Other Engine Equipment Manufacturing; 333924 Industrial Truck, Tractor, Trailer, and Stacker Machinery Manufacturing; 522220 Sales Financing
Key Dates:
1883: Brothers Charles Henry Holt and Benjamin Holt found the Stockton Wheel Company in Stockton, California.
1885: Daniel Best produces his first combine.
1886: Stockton Wheel produces its first combine, the Link Belt Combined Harvester.
1892: Stockton Wheel is incorporated as Holt Manufacturing Company.
1904: Holt produces the first commercially successful caterpillar-style tractor, or crawler, which is soon sold under the Caterpillar brand.
1908: Holt Manufacturing produces its first gas-powered crawlers; Daniel Best sells his company to Holt.
1909: Holt establishes an eastern manufacturing operation by purchasing a plant in Peoria, Illinois.
1910: Best's son, C.L. Best, forms his own tractor manufacturing company, C.L. Best Gas Tractor Company.
1925: Holt Manufacturing and C.L. Best Gas Tractor merge to form Caterpillar Tractor Company.
Early 1930s:Remaining production in California is shifted to Peoria, where the company's headquarters are also reestablished.
1931: Caterpillar's Diesel Sixty tractor helps make the diesel the staple engine for heavy-duty vehicles.
1932: Company records its first full-year loss, $1.6 million.
1950: Caterpillar Tractor Company Ltd. was established in Great Britain as the first overseas subsidiary.
1963: Caterpillar and Mitsubishi Heavy Industries, Ltd. form a joint venture to produce Caterpillar-designed vehicles in Japan.
1982: Company suffers first loss since the Great Depression.
1985: A massive factory-modernization program is launched that will eventually cost $1.8 billion and be completed in 1993.
1986: Company is renamed Caterpillar Inc.
1990: Caterpillar reorganizes along product lines and geographic areas.
1991: A lengthy labor dispute begins with a strike at two Caterpillar plants.
1994: Record-long, 17-month strike begins.
1998: LucasVarity PLC's Perkins Engines unit is acquired for $1.3 billion; prolonged labor dispute ends with the signing of a new six-year contract.
2001: Caterpillar exits from the agricultural tractor business.
Name Age Since Current Position
Oberhelman, Douglas 58 2010 Chairman of the Board, Chief Executive Officer
Rapp, Edward 53 2010 Chief Financial Officer, Group President
Wunning, Steven 59 2004 Group President
Levenick, Stuart 57 2004 Group President
Vittecoq, Gerard 62 2004 Group President
Lavin, Richard 58 2007 Group President
Buda, James 63 2011 Senior Vice President, Chief Legal Officer
Copeland, Jananne 48 2010 Chief Accounting Officer, Corporate Controller
Gallardo, Juan 63 1998 Independent Director
Magowan, Peter 69 1993 Independent Director
Goode, David 70 1993 Independent Director
Smith, Joshua 70 1993 Independent Director
Osborn, William 63 2000 Independent Director
Powell, Charles 69 2011 Independent Director
Fife, Eugene 70 2011 Presiding Independent Director
Rust, Edward 60 2003 Independent Director
Dickinson, Daniel 49 2006 Independent Director
Schwab, Susan 56 2009 Independent Director
Greene, Jesse 66 2011 Independent Director
White, Miles 56 2011 Independent Director
Address:
100 Northeast Adams Street
Peoria, Illinois 61629-1425
U.S.A.
Caterpillar Inc. traces its origins to the 1925 merger of the Holt Manufacturing Company and the C. L. Best Tractor Company, creating a new entity, the California based Caterpillar Tractor Company.[8] In 1986, the company re-organized itself as a Delaware corporation under the current name, Caterpillar Inc.[3] Caterpillar's headquarters are located in Peoria, Illinois, United States.[1]
Caterpillar machinery is recognizable by its trademark "Caterpillar Yellow" livery and the "CAT" logo.
Caterpillar Inc. (Caterpillar) is engaged in the manufacturing of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Caterpillar operates in three principal lines of business: Machinery, Engines and Financial products. Machinery line of business includes the design, manufacture, marketing and sales of construction, mining and forestry machinery. Engines line of business includes designs, manufactures, marketing and sales of engines for Caterpillar machinery; electric power generation systems, and marine, petroleum, construction, industrial, agricultural and other applications and related parts. Financial Products principal line of business consists of Caterpillar Financial Services Corporation (Cat Financial), Caterpillar Insurance Holdings, Inc. (Cat Insurance) and their respective subsidiaries. During the year ended August 31, 2010, Caterpillar acquired Electro-Motive Diesel, Inc. (EMD), a manufacturer of diesel-electric locomotives.
Machinery
Caterpillar’s Machinery line of business includes track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment and related parts. Caterpillar’s logistics business provides integrated supply chain services for Caterpillar and approximately 50 customers. Caterpillar also provides rail-related products and services through its wholly owned subsidiary, Progress Rail. Progress Rail is a provider of a range of products and services to the railroad industry, including new and remanufactured locomotives, railcar and track products and design and maintenance services. In addition, this line of business also includes EMD.
The Company competes with Komatsu Ltd., Volvo Group AB, CNH Global N.V., Deere & Co., Hitachi Construction Machinery Co., J.C.Bamford Ltd., Doosan Infracore Co., Ltd., LiuGong Construction Machinery N.A., LLC., DHL International, CEVA Logistics, Kuehne + Nagel Inc., GE Transportation, Bombardier, Siemens and VAE Nortrak North America, Inc.
Engines
Caterpillar provides industrial turbines and turbine-related services for oil and gas and power generation applications. The Company also includes remanufacturing of Caterpillar engines and a variety of Caterpillar machine and engine components and remanufacturing services for other companies. Reciprocating engines meet power needs ranging from 10 to 21,700 horsepower (8 to over 16,000 kilowatts). The turbines range from 1,600 to 30,000 horsepower (1,200 to 22,000 kilowatts).
The Company competes with Cummins Inc., Tognum AG, GE Energy Infrastructure, Siemens Energy, Wartsila Corp, John Deere Power Systems, MAN Diesel SE, Mitsubishi Heavy Industries Ltd., Volvo Group AB, Kawasaki Heavy Industries, Rolls Royce Group plc, Generac Power Systems, Inc. and Kohler Co.
Financial Products
Caterpillar’s Financial products business provides retail and wholesale financing alternatives for Caterpillar products to customers and dealers. Retail financing consists of financing of Caterpillar equipment, machinery and engines. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. In addition to retail financing, Cat Financial provides wholesale financing to Caterpillar dealers and purchases short-term dealer receivables from Caterpillar and its subsidiaries. Cat Financials operates in North America, Asia, Australia, Europe and Latin America.
Cat Insurance provides various forms of insurance to customers and dealers to help support the purchase and lease of its equipment. The Company’s wholly owned Subsidiaries Caterpillar Insurance Company, which is licensed to conduct property and casualty insurance business in 50 states and the District of Columbia; Caterpillar Life Insurance Company, which is licensed to conduct life and accident and health insurance business in 26 states and the District of Columbia; Caterpillar Insurance Co. Ltd. is a captive insurance company, which is a Class 2 insurer; Caterpillar Product Services Corporation is a warranty company, which conducts a machine extended service contract program in Germany and France, and Caterpillar Insurance Services Corporation is a insurance brokerage company licensed in all 50 states and the District of Columbia, and it provides brokerage services for all property and casualty and life and health lines of business.
The Company competes with Wells Fargo Equipment Finance Inc., General Electric Capital Corporation, Volvo Financial Services, Komatsu Financial L.P. and John Deere Capital Corporation.
Caterpillar began feeling the effects of the early 2000s economic downturn ahead of time, as its customers began cutting back on purchases as early as 1999 in anticipation of the troubled days ahead. Sales fell that year and then stagnated, amounting to only $20.15 billion in 2002. Unlike past recessions, however, Caterpillar remained in the black throughout thanks to its leaner and more diversified operations, which made the company less vulnerable to the cyclical ups and downs of the heavy machinery industry. Caterpillar's worst year came in 2002, when profits amounted to $798 million, which translated into a profit margin of just 4 percent. Barton also initiated additional cost-cutting measures to maintain the company's profitability, announcing in August 2000 a plan to cut annual expenses by more than $1 billion over the succeeding three to five years. He also aimed to increase revenues to $30 billion by mid-decade in part by continuing Caterpillar's diversification drive into engines, compact construction equipment, financial services--mainly loans to its large network of dealers--and rental equipment. Barton also made the difficult decision of exiting from the agricultural tractor business, offloading its tractor line to AGCO Corp. late in 2001. Although this was significant from a historic standpoint given the importance of tractors in Caterpillar's early history, by 2001 agricultural equipment generated only about 4 percent of Cat's total revenues.
Caterpillar rebounded strongly in 2003, posting record revenues of $22.76 billion and profits of $1.1 billion, a 38 percent jump over 2002. Sales were strong in its two largest manufacturing operations, heavy machinery and diesel truck engines. Machinery accounted for 50 percent of the revenues, engines 40 percent, and financial services the remaining 10 percent. During the year, Caterpillar launched its new line of low-emission ACERT engines that complied with U.S. Environmental Protection Agency (EPA) regulations slated to go into effect in 2004 (ACERT stood for Advanced Combustion Emissions Reduction Technology). In February 2003 the company entered into a five-year global alliance with mining company BHP Billiton to supply about $1.5 billion in mining machinery and other equipment.
On the heels of the stellar results for 2003, Barton retired in January 2004. James W. Owens was named his successor, having served as a group president, of various business units, since 1995. Under the new leader, Caterpillar was targeting emerging markets, particularly China, India, and Russia, for future growth. The company was hoping to reach its goal of $30 billion in revenues by 2006.
Principal Subsidiaries: Caterpillar Financial Services Corporation; Caterpillar Insurance Holdings, Inc.; Caterpillar Logistics Services, Inc.; Solar Turbines Incorporated; MaK Deutschland GmbH & Co. KG (Germany); Bitelli S.p.A. (Italy); Caterpillar Overseas S.A. (Switzerland); Perkins Engines Group Limited (U.K.); Turner Powertrain Systems Limited (U.K.).
Principal Divisions: Asia-Pacific Division; Building Construction Products Division; Compact Power Systems Division; Europe, Africa & Middle East Product Development & Operations Division; Global Mining Division; Large Power Systems Division; Latin America Division; Mining & Construction Equipment Division; North American Commercial Division; Track-Type Tractors Division; Wheel Loaders & Excavators Division.
Principal Competitors: Komatsu Ltd.; CNH Global N.V.; Deere & Company; Terex Corporation; Ingersoll-Rand Company Limited; AB Volvo; Hitachi Construction Machinery Co., Ltd.; J C Bamford Excavators Ltd.; Cummins, Inc.
OVERALL
Beta: 1.71
Market Cap (Mil.): $73,733.49
Shares Outstanding (Mil.): 644.69
Annual Dividend: 1.76
Yield (%): 1.54
FINANCIALS
CAT.N Industry Sector
P/E (TTM): 20.36 23.24 17.05
EPS (TTM): 186.94 -- --
ROI: 9.19 8.41 3.26
ROE: 34.23 13.44 5.84
Caterpillar settled an involved lawsuit with Goodyear Tire & Rubber Company in 1981. Three years previously Goodyear had begun selling a radial earthmoving tire that infringed on Caterpillar's beadless-tire technology. The beadless tire lacked the beads, or edges, that attach the tire to wheel rims, and was more durable and economical than previous designs. In the out-of-court settlement Goodyear agreed to pay Caterpillar an amount mutually agreed upon, and become a licensee of Cat, paying the firm royalties for the use of beadless technology in the further manufacture of the tire.
In 1981 the firm won a political battle to be granted the right to sell $90 million in pipe-laying equipment to the Soviet Union, despite stiff opposition from the administration of President Ronald Reagan. That year the firm sold more machines than ever before, with sales in excess of $9 billion for the year. Caterpillar also became the leading supplier of industrial gas turbines that year through the $505 million acquisition of Solar Turbines Incorporated from International Harvester.
The recession of 1982 hit Caterpillar especially hard. The economic downturn caused sales to drop to $6.5 billion that year. Caterpillar laid off almost 12,000 employees at this time, and closed its plant in Mentor, Ohio. Trying to cut overhead, Cat proposed pay freezes and a cut in benefits, prompting a seven-month UAW strike, the firm's longest strike yet. To add to the company's problems, barely six weeks after the 37,500 UAW workers left their jobs, a jury awarded Kast Metals a $9.2 million settlement for Caterpillar's failure to live up to an oral agreement to buy steel castings from Kast if Kast were to build a new plant to make the castings.
Caterpillar began 1983 by announcing the first annual loss in earnings in half a century. Cat started laying off workers, and closed a plant in Newcastle-on-Tyne, England. Sales slumped to a recent history low of $5.4 billion. Yet after the new contract was signed with the UAW, Caterpillar acquired a new direction and strategy that made things look better. Despite the concession of a profit-sharing plan, the wage freeze that the firm won in the contract dispute helped stem rising costs. The anticipation of the bottled-up demand that would create a larger market after the recession made investors think that Cat stock might be a good buy. By committing itself to less expansion, more creative marketing techniques, and reduced costs, Caterpillar intended in late 1983 to ride out the economic slump and position itself to return to profitability in 1984.
Caterpillar's problems continued, however, in 1984. Despite this being the expected comeback year for the firm, the plant closings and layoffs continued. The Burlington, Iowa, parts plant locked its doors to workers and, despite optimistic projections of recalling around 3,200 workers in 1985, Cat actually laid off about 3,000 other workers during that year. Caterpillar continued to cut back operations at its factories, then eliminated cost-of-living allowances in wages, and delayed the completion of its Morton, Illinois, distribution center. The firm blamed its third straight losing year on high interest rates and stiff price competition from other companies; losses for 1992-94 totaled $953 million.
In February 1985 George A. Schaefer was named chairman and CEO of Caterpillar, and Donald V. Fites was named president. Despite a net loss of almost $430 million the year before, Schaefer confidently predicted that Cat would make a profit during his first year as company head. During this year Caterpillar made two key strategic moves, which, despite their controversial nature, would be credited with making the firm once again profitable. Caterpillar first shifted some of its production and purchasing functions overseas. This meant that jobs previously performed in Peoria were moved to Scotland or Japan. The high value of the dollar overseas made such a change necessary for company survival, management argued. Secondly, Caterpillar embarked on a $600 million factory-modernization program. It would reduce permanently the labor force needed to make tractors by automating as many manufacturing processes as possible. Approximately 2,300 workers were cut from the Caterpillar payroll during 1985. Company executives argued that the firm needed to compete with Komatsu, which had a much greater manufacturing efficiency than Cat because of its highly automated plants.
In 1986 Caterpillar Tractor Company became Caterpillar Inc. and announced that it had made a profit of almost $200 million in the previous year. The firm bounced back from its problems by marketing a new automated lift truck, which had the potential to secure part of a multibillion-dollar market for Caterpillar. The firm even directly challenged Komatsu by expanding Cat's partnership with Mitsubishi Heavy Industries to include the production of hydraulic equipment.
Caterpillar faced, however, another strike during this year. Workers in Joliet walked out for four weeks, but were brought back to work under terms much like those previously rejected. Caterpillar again won a wage freeze, but cash bonuses as well as the firm's promise to lay off other workers as long as the strike continued were enough to get the Joliet workers to settle their grievances.
The weakening of the dollar abroad raised production costs and cut into profits for Caterpillar in 1987. Though the firm improved its sales and earnings over 1986, Caterpillar was still forced to close three factories. Nevertheless, in 1988 Caterpillar again made the kind of large profits it had made in the past, reaping $616 million for the year. In early 1989 Caterpillar's stock took a sharp downturn. The modernization campaign had swelled to a cost of more than $1.8 billion and flattened profits for the year. The cost of the program continued to affect company profits through 1992, while the company also suffered from the effects of the recession of the early 1990s.
A decline in sales in 1991 contributed to Cat's first loss since 1984, $404 million--the worst loss in company history. Sales increased only marginally in 1992, while the firm suffered another loss, this time $218 million. Meanwhile, newly appointed CEO Fites initiated a corporate reorganization in 1990 which moved Cat away from a function-oriented structure to one revolving around product lines and geographic areas.
Bitter Labor Disputes in the 1990s
Labor strife returned to Peoria in late 1991 when Caterpillar tried to alter a pattern agreement that had been agreed to in October at John Deere. When the UAW and Cat workers refused to accept the company's offer, they struck two Cat plants with 2,400 workers in early November. Caterpillar responded by locking out 5,650 more workers. Over the next five months, Caterpillar used managers to fill in at the affected plants, then threatened to permanently replace 15,000 UAW workers. In April 1992 the workers returned to their jobs without a contract and eventually accepted a company-imposed contract. The striking workers, however, returned to what they believed was a hostile environment, where they faced suspension or dismissal for wearing union-supporting T-shirts or buttons. By mid-1994, more than 80 complaints against Caterpillar for such tactics were issued by the National Labor Relations Board.
In 1993 Caterpillar completed the factory modernization program and at the same time began to benefit from its results. The time to process a part from start to finish was reduced by 75 percent and in-process inventories were reduced by 60 percent. Coupled with an overhaul of the new product development process, vast improvements were made in new product introductions. Only 24 new or improved products were introduced in 1991; that figure doubled in 1992 and reached 53 in 1994. Such gains led to record sales of $11.62 billion in 1993 and record profits of $652 million. The next year brought more records: $955 million in profits on sales of $14.33 billion.
Statistics:
Public Company
Incorporated: 1925 as Caterpillar Tractor Company
Employees: 69,169
Sales: $22.76 billion (2003)
Stock Exchanges: New York Chicago Pacific London Paris Euronext Brussels Frankfurt Swiss
Ticker Symbol: CAT
NAIC: 326220 Rubber and Plastics Hoses and Belting Manufacturing; 333120 Construction Machinery Manufacturing; 333131 Mining Machinery and Equipment Manufacturing; 333611 Turbine and Turbine Generator Set Units Manufacturing; 333618 Other Engine Equipment Manufacturing; 333924 Industrial Truck, Tractor, Trailer, and Stacker Machinery Manufacturing; 522220 Sales Financing
Key Dates:
1883: Brothers Charles Henry Holt and Benjamin Holt found the Stockton Wheel Company in Stockton, California.
1885: Daniel Best produces his first combine.
1886: Stockton Wheel produces its first combine, the Link Belt Combined Harvester.
1892: Stockton Wheel is incorporated as Holt Manufacturing Company.
1904: Holt produces the first commercially successful caterpillar-style tractor, or crawler, which is soon sold under the Caterpillar brand.
1908: Holt Manufacturing produces its first gas-powered crawlers; Daniel Best sells his company to Holt.
1909: Holt establishes an eastern manufacturing operation by purchasing a plant in Peoria, Illinois.
1910: Best's son, C.L. Best, forms his own tractor manufacturing company, C.L. Best Gas Tractor Company.
1925: Holt Manufacturing and C.L. Best Gas Tractor merge to form Caterpillar Tractor Company.
Early 1930s:Remaining production in California is shifted to Peoria, where the company's headquarters are also reestablished.
1931: Caterpillar's Diesel Sixty tractor helps make the diesel the staple engine for heavy-duty vehicles.
1932: Company records its first full-year loss, $1.6 million.
1950: Caterpillar Tractor Company Ltd. was established in Great Britain as the first overseas subsidiary.
1963: Caterpillar and Mitsubishi Heavy Industries, Ltd. form a joint venture to produce Caterpillar-designed vehicles in Japan.
1982: Company suffers first loss since the Great Depression.
1985: A massive factory-modernization program is launched that will eventually cost $1.8 billion and be completed in 1993.
1986: Company is renamed Caterpillar Inc.
1990: Caterpillar reorganizes along product lines and geographic areas.
1991: A lengthy labor dispute begins with a strike at two Caterpillar plants.
1994: Record-long, 17-month strike begins.
1998: LucasVarity PLC's Perkins Engines unit is acquired for $1.3 billion; prolonged labor dispute ends with the signing of a new six-year contract.
2001: Caterpillar exits from the agricultural tractor business.
Name Age Since Current Position
Oberhelman, Douglas 58 2010 Chairman of the Board, Chief Executive Officer
Rapp, Edward 53 2010 Chief Financial Officer, Group President
Wunning, Steven 59 2004 Group President
Levenick, Stuart 57 2004 Group President
Vittecoq, Gerard 62 2004 Group President
Lavin, Richard 58 2007 Group President
Buda, James 63 2011 Senior Vice President, Chief Legal Officer
Copeland, Jananne 48 2010 Chief Accounting Officer, Corporate Controller
Gallardo, Juan 63 1998 Independent Director
Magowan, Peter 69 1993 Independent Director
Goode, David 70 1993 Independent Director
Smith, Joshua 70 1993 Independent Director
Osborn, William 63 2000 Independent Director
Powell, Charles 69 2011 Independent Director
Fife, Eugene 70 2011 Presiding Independent Director
Rust, Edward 60 2003 Independent Director
Dickinson, Daniel 49 2006 Independent Director
Schwab, Susan 56 2009 Independent Director
Greene, Jesse 66 2011 Independent Director
White, Miles 56 2011 Independent Director
Address:
100 Northeast Adams Street
Peoria, Illinois 61629-1425
U.S.A.