caterpillar JPMorgan Basics & Industrials Conference

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caterpillar JPMorgan Basics & Industrials Conference

  1. 1. JPMorgan Basics and Caterpillar Industrials Conference Dave Burritt Chief Financial Officer & Vice President of Global Finance & Strategic Support MAKING PROGRESS POSSIBLE
  2. 2. 2 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements contained in this presentation are forward-looking and involve risks, assumptions and uncertainties that cause actual results of Caterpillar to be materially different from those projected or implied in the forward looking statements. In this context, words such as quot;willquot;, “believes,” “expects,” “estimates,” “anticipates,” “will be,” “should” and similar words or expressions identify forward- looking statements made on behalf of Caterpillar. It is important to note that actual results of Caterpillar may differ materially from those described or implied in such forward-looking statements based on a number of factors and uncertainties, including, but not limited to, changes in economic conditions; currency exchange or interest rates; political stability; market acceptance of Caterpillar's products and services; significant changes in the competitive environment; changes in law, regulations and tax rates; and other general economic, business and financing conditions and factors. A more complete summary of risks and uncertainties is described in more detail in Caterpillar's Form 10Q filed with the Securities and Exchange Commission on May 2, 2008. Caterpillar undertakes no obligation to update these forward-looking statements.
  3. 3. 3 Strategy Unchanged Vision 2020 But, there’s big opportunity for Economic uncertainty, particularly in Caterpillar over the next decade, the US, is making the short-term particularly related to mining, environment a challenge VISION energy, and infrastructure 2020 STRATEGIC PROFILE STRATEGIC GOALS Performance Profitable People Product & Growth Process CRITICAL SUCCESS FACTORS EMERGING PEOPLE QUALITY PRODUCT VELOCITY DISTRIBUTION MARKETS Trough New Product Introduction ENTERPRISE Order-to-Delivery STRATEGIC AREAS Encoding 6 Sigma OF Sustainable Development IMPROVEMENT Growth Beyond Core Our Values in Action – INTEGRITY, EXCELLENCE, TEAMWORK, COMMITMENT WORLDWIDE CODE OF CONDUCT
  4. 4. 4 What I’ll Cover Today Overview of Caterpillar and recent history Brief review of 2008 A broader look forward
  5. 5. 5 36% EPS CAGR 2002 to 2007 5 Years of Growth Sales and Revenues Earnings Per Share $5.37 $5.17 $41.5 $45.0 $43 $41 $36.3 $36 $4.04 $30.3 $30 $2.88 $22.8 $23 $20.2 $20 $1.56 $1.15 2007 2005 2004 2006 2003 2002 2007 2005 2004 2006 2003 2002
  6. 6. 6 Product Range Machines About 300 Models in a broad range of product categories … Backhoe Loaders Skid Steer Loaders Multi Terrain Loaders Integrated Tool Carriers Wheel Loaders Excavators Wheel Excavators Track-Type Tractors Track Loaders Pipelayers Landfill Compactors Soil Compactors Wheel Dozers Motor Graders Wheel Tractor Scrapers Articulated Trucks Off Highway Trucks Underground Trucks Underground Loaders Track Skidders Wheel Skidders Feller Bunchers Vibratory Compactors Asphalt Compactors Asphalt Pavers Pneumatic Compactors Cold Planers Rotary Mixers
  7. 7. 7 From a mini-excavator that fits in Machines the back of a pick-up to … big iron Operator
  8. 8. 8 New D7E at CONEXPO … Innovative From the Inside Out 35% more visibility 50% better steering performance 50% less Up to 20% less operator noise fuel consumed per hour 35-70% lower undercarriage operating cost Less fluids 60% fewer moving parts used in the electric drive train
  9. 9. 9 End markets Machines Infrastructure Nonresidential Industrial Residential Waste Forestry Energy Mining & Quarrying
  10. 10. 10 Product Range Broadest Range of Engines in Our Industry From 100 KW to 22,000 KW
  11. 11. 11 Engines … and everything in between Model 3616 Model 3003
  12. 12. 12 End markets Engines Petroleum Cat Machines Electric Power Industrial On-Highway Marine Truck
  13. 13. 13 Geographic Diversity The Global Leader Geographic Mix - Sales and Revenues Caterpillar • Broadest footprint in the industry Outside Outside • About 101,000 Employees North North North North America America America America • About 300 Facilities 44% 43% 56% 57% • In about 50 countries 1997 2007 Caterpillar Dealers • 181 Cat dealers • 3,000+ branches & rental stores • Over 120,000 employees
  14. 14. 14 Sales and Costs Caterpillar Overview Machinery & Engines Sales & Revenues Operating Costs $37B in 2007 $45B in 2007 up 8% from 2006 Factory Machines Labor & Material Up 9% Overhead Costs 63% 56% 31% 30% 7% Engines 9% 4% Up 6% SG & A R&D Financial Products Up 13%
  15. 15. 15 Increase Capacity and Investing in the future Product Development Capital Expenditures Research & Development Up $2.3B 15-20% $1.3B $1.4B $1.7B $1.6B $1.1B $928M $1.2B $926M $669M $682M 08* 03 04 05 06 07 08* 03 04 05 06 07 3.2% 3.3% 3.5% 4.1% 4.1% 4.7% 3.2% 3.3% 3.3% 3.4% 3.2% 3.3% % of Sales % of Sales * Outlook
  16. 16. 16 Synergistic growth & Sales and Revenues improved earnings stability 2007 Sales and Revenues Genuine Cat $45 Billion Replacement Parts Products 64% $29 Billion Integrated Services 36% Solar Customer Services $16 Billion
  17. 17. 17 Sales & Revenues and 1st Quarter 2008 Results EPS up 18% despite a very weak US economy 1st Q 1st Q 2007 2008 Change Sales and Revenues $10.0B $11.8B $1.8B 18% Earnings Per Share $1.26 $1.45 $0.22 18%
  18. 18. 18 Growth is largely 1st Qtr Sales & Revenue outside North America Sales and Revenues were up $1.8 Billion …. or 18% vs. the 1st Quarter of 2007 Increase by – Price, Volume, Percentage Increase by Region Currency, Financial Products 37% 40% Financial 35% Products 30% Price $.1B 30% Realization 24% $.3B 25% 20% Currency Volume 15% Translation $1.1B $.3B 10% 4% 5% 0% Asia EAME Latin North Pacific America America
  19. 19. 19 Priorities for Use of Cash Well Established Priorities Cash From Fund Growth Operations Pension/Benefit Plans Maintain Financial Strength Dividend Growth “A” Credit Rating Stock Repurchase
  20. 20. 20 How we’ve spent Cash Flow increasing cash flow Machinery & Engines Operating Cash Flow Billions of Dollars 2005 2006 2007 Actual Actual Actual Operating Cash Flow $ 2.8 $ 4.6 $ 5.4 Key Uses of Cash - Growth (CAPEX & Acquisitions) $ 1.2 $ 2.1 $ 1.9 - Dividends $ 0.6 $ 0.7 $ 0.8 - Stock Repurchase $ 1.7 $ 3.2 $ 2.4
  21. 21. 21 What I’ll Cover Today Overview of Caterpillar and recent history Brief review of 2008 A broader look forward
  22. 22. 22 Sales patterns Sales patterns Worldwide Machine Industry diverging diverging 350 Machine Industry Unit Index 18% 2002 = 100 300 Outside 28% North America 250 200 -11% 150 -10% to -15% North America 100 50 2002 2003 2004 2005 2006 2007 2008 Caterpillar Estimate
  23. 23. 23 By Geographic 2008 Sales and Revenues Region Worldwide up 5 to 10% North America +/- 2% EAME Up 7 to 12% Asia Pacific Up 15 to 20% Latin America Up 15 to 20%
  24. 24. 24 We expect another 2008 Outlook record year despite U.S. weakness 2007 2008 Actual Outlook Sales and Revenues $45 B Up 5 - 10% Earnings Per Share $5.37 Up 5 - 15%
  25. 25. 25 What I’ll Cover Today Overview of Caterpillar and recent history Brief review of 2008 A broader look forward
  26. 26. 26 Strong World World Economic Growth Economic Growth Continues 6.6 6.4 6.1 3.6 3.4 3.2 3.2 3.1 3.0 2.9 2.8 2.8 2.6 2.6 2.5 1.6 1.5 1.3 World North America EAME Latin America Asia Pacific Japan 1990 - 1999 2000 - 2008 2009 - 2017
  27. 27. 27 Long-term Positive Key Longer-term Trends for Caterpillar We expect continued strong growth in worldwide infrastructure spending over the next decade Significant growth in the developing world … and they have the money! Significant need to improve and rebuild infrastructure in the developed world … after years of under investment
  28. 28. 28 Years of Factors Driving Construction construction underinvestment Developed Economies Developing Economies • Old, outdated buildings • Large, rapidly growing populations • Insufficient infrastructure • Inadequate infrastructure • Modest economic growth • Rapid economic growth We expect continued good growth in construction
  29. 29. 29 Mining & Energy A Very Positive Future • Growing world demand • Prolonged underinvestment • Tight inventories & spare capacity
  30. 30. 30 Generally positive Commodity Prices Are Favorable for investment 2006 Average Price Dollars per Market Unit 2007 Average Price 2008 Forecast Average Price Estimated Threshold for investment 9.60 117 6.98 6.74 92 6.50 72 66 3.80 50 50 47 3.23 3.05 41 1.30 Natural Gas Copper Oil Coal Source: Haver Analytics, Business Economics
  31. 31. 31 31 Replacement Worldwide Mining Fleets opportunity % of Machines More Than 10 Years Old (2007) 657 Units 1,160 1,075 10,254 907 7,838 69% 65% 57% 56% 54% 50% Coal Mines Metals Mines Source: Parker Bay. Crawlers Trucks Wheel Loaders
  32. 32. 32 Our goals for 2010 Sales and Profit Last Year Today 2010 Sales & Revenues Approaching $50 billion “plus” $60 billion In a plausible range of $45 to $60 billion EPS Growth No Change EPS CAGR of 15% to 20% from a 2005 base That means EPS in a range of about $8 to $10 per share
  33. 33. 6.6 6.4 6.1 33 3.6 3.4 3.2 3.2 3.1 3.0 2.9 2.8 2.8 2.6 2.6 2.5 1.6 1.5 1.3 World North America EAME Latin America Asia Pacific Japan 1990 - 1999 2000 - 2008 2009 - 2017 World Economic Growth Global infrastructure needs Our customers “Make Progress Possible” No company is better positioned than Caterpillar Broadest product line On a foundation of a large population of machines & engines Unparalleled global dealer network Global manufacturing footprint
  34. 34. Questions?

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