Caterpillar Inc.Kyle Abbey Nigel Jordan Ken RatliffScott Spencer Kyle Zaunbrecher

Company Overview

World’s largest manufacturer of heavy equipment

Markets include construction, mining, agriculture, forestry, and many others

Recent acquisition of Bucyrus

Competitors Deere & Co., Komatsu Ltd., Joy

Mining, CNH Global

Additional Brands

CAT Logistics World-class supply chain management Serves more than 60 global firms▪ Aerospace, oil and gas, industrial, and high

tech CAT Financial

Provide customers with a means of financing equipment purchases

Insurance provided as well

Financial Analysis

  3 Months Ending June 30 Fiscal Year EndingIn Millions (Except EPS) 2011 2010 % Change 2010 2009 % ChangeTotal Assets $ 73,611 $ 58,793 25% $ 64,020 $ 60,038 7%Total Stockholder's Equity $ 13,436 $   9,185 46% $ 10,864 $   8,823 23%Total Debt $ 60,175 $ 49,608 21% $ 53,156 $ 51,215 4%Sales $ 14,230 $ 10,409 37% $ 42,588 $ 32,396 31%Cost of Goods Sold $ 10,303 $   7,372 40% $ 30,367 $ 23,886 27%Gross Margin (%) 28% 29% -5% 29% 26% 9%EBIT $   1,601 $      977 64% $   3,963 $      577 587%Interest Expense $      299 $      315 -5% $      343 $      389 -12%Net Income $   1,015 $      707 44% $   2,700 $      895 202%EPS (Undiluted) $     1.57 $     1.12 40% $     4.28 $     1.45 195%

Strong recovery in 2010 from 2009. Surpassed 2010 2nd quarter figures for

2011. Growth of company continues.

Financial Analysis

Ratio Category Ratios 2010 2009 % Change Efficiency Total Asset Turnover 0.69 0.51 35%

Fixed Asset Turnover 3.42 2.60 31%

Inventory Turnover 3.17 3.76 -16%

Days Receivable 60.44 84.55 -29%Liquidity Current Ratio 1.44 1.39 4%Profitability Return on Assets 0.04 0.01 211%

Return on Equity 0.28 0.12 129%Return on Sales 0.09 0.02 422%

Increased efficiency of assets. Exceptional profitability increase after

2009 economic downturn.

Financial Analysis

SWOT Analysis

STRENGTHS

Operational Efficiency Wide Product Base Extensive

Distributorship Research and Design

WEAKNESSES

Legal Proceedings

SWOT Analysis

OPPORTUNITIES

Emerging Markets Inorganic Growth Facility Expansion

THREATS

Environmental Regulations

Currency Rates

Strategy

Execute the Business Model

Execute at Product Development

Simplify and attack cost structure

Achieve profit and cash pull through

Win in China… grow to leadership in India, ASEAN and CIS

Achieve profitable global machine leadership

Expand leadership in Mining and Quarry & Aggregates

Aggressively grow Power Systems

“BIG 8” IMPERATIVES

Vision

Caterpillar is the recognized leader everywhere it does business

Our Products, services and solutions help the customer succeed

Our distribution system is the competitive advantage

Our supply chain is world class

Vision

Our business model drives superior results

Our people are talented and live Our Values in Action

Our work today helps our customers create a more sustainable world

Our financial performance consistently rewards our stockholders

Values

Integrity The Power of Honesty

Excellence The Power of Quality

Teamwork The Power of Working Together

Commitment The Power of Responsibility

Goals

Delivering Superior Results EPS, OPACC, Cash Flow

Delivering the Best Team of People World class safety and inclusion

Global Leader Everywhere We Do Business Product Quality, PINS, aftermarket parts

growth

Porter’s Generic Strategies – Construction/Farming/Mining Equipment

            Market Share

ROI

Porter Generic Strategy

Differentiation Strategy Michael Porter uses Caterpillar as an

example for this strategy Vast Dealer Network - 3,500 Dealers

Worldwide in more than 180 Countries Spare-Parts Availability Brand Identity- Quality/Durable Products

Worldwide Coverage

Porter’s “Five Forces” Strategy

Low toModerate

Low toModerate Low

Low to Moderate

Moderate

Collins’ Analysis

• Level 5 Leadership– Doug Oberhelman• Millikin University (Finance)• Positions in South America, Japan, Florida,

Canada, Illinois

• First Who, Then What– Picked top team of 16 people prior to

taking over– Examined company’s strategy &

strengths

Collins’ Analysis

• Confront the Brutal Facts– Forced managers to model worst periods

in history– Threat from Komatsu

• Hedgehog Concept– “Ensure that customers make more

money using Caterpillar equipment than using competitors’ equipment”

Collins’ Analysis

• Technology Accelerators– Electro-Motive Diesel– MWM– Bucyrus– Opportunities in China

• The Flywheel– Large dealers help company sell most of

their machines.

Strategy Recommendations

Increased emphasis on mining Emerging markets will require coal

and other resourcesStrong positioning in BRIC

countries Firm grasp on US and China

markets

Questions for the CEO

With the recent acquisition of Bucyrus, do you see Caterpillar continuing to pursue further mining acquisitions to increase its market coverage?

Caterpillar has acknowledged that their competitor Komatsu is beating them in price.  What are some of the ways the Caterpillar is looking at to lower total ownership costs, to better position the company to compete with Komatsu on a cost basis?