Caterpillar 2014 Annual Report Download

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2014 YEAR IN REVIEW
GLOBAL TEAM
Working Together for Mutual Success

Table of contents

  • Page 1
    GLOBAL TEAM Working Together for Mutual Success 2014 YEAR IN REVIEW

  • Page 2
    ...LEADERSHIP Chairman's Message ...2 Executive Officers/Officers ...4 Board of Directors ...5 SEGMENTS AND CORPORATE DIVISIONS Construction Industries ...7 Customer & Dealer Support ...11 Energy & Transportation ...15 Caterpillar Enterprise System Group ...18 Financial Products & Corporate Services...

  • Page 3
    ... the second half of 2014. While lower oil prices may be positive for the overall world economy and help support infrastructure and construction spending down the road, in the short term it will likely be a net negative for our business. Doug Oberhelman Chairman & CEO Caterpillar Inc. WE'VE DONE...

  • Page 4
    ... for 90 years, employee donations and Caterpillar Foundation matching grants gave more than $6.6 million to fund local United Way programs in 2014 alone. Those are just a few examples; I could cite many, many more. In December 2014 we celebrated our 85th year trading on the New York Stock Exchange...

  • Page 5
    ... OFFICERS/OFFICERS SECTION HEADING From Left to Right: James B. Buda; D. James Umpleby III; Bradley M. Halverson; Steven H. Wunning; Edward J. Rapp; Stuart L. Levenick; David P. Bozeman; Douglas R. Oberhelman Officers Chairman of the Board & Chief Executive Officer Douglas R. Oberhelman Group...

  • Page 6
    ... Officer of Boeing Defense, Space & Security (2009-2013); President of Boeing Global Services & Support (2008-2009); and Vice President and General Manager of the Boeing Combat Systems division (2006-2008). Mr. Muilenburg has been a director since 2011. CATERPIL L AR INC. 5 2014 YEAR IN REVIEW

  • Page 7
    ... and as a Group President of Caterpillar Inc. Other current directorships: Eli Lilly and Company. Other directorships within the last five years: Ameren Corporation. Mr. Oberhelman has been a director of the Company since 2010. WILLIAM A. OSBORN, 66, was formerly Chairman and CEO of Northern Trust...

  • Page 8
    ...ll measure success. Construction Industries is built to support 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...

  • Page 9
    ...mean for the Construction Industries team at our Victoria, Texas, facility. View here The Road to Progress Begins with a Road James Construction Group counts on Cat ® machines to keep things moving on a major highway project. See how the reliability of Caterpillar products, services and the dealer...

  • Page 10
    ... increase. To better support the quarry's accelerated operations, Cat ® dealer CEL Engineering Co., Ltd., set up a parts warehouse on site and assigned two service engineers to monitor equipment and train managers and operators to manage issues that may arise. CATERPIL L AR INC. 9 2014 YEAR...

  • Page 11
    ... INDUSTRIES HEADING Cat Products Cement China Quarry Manager's Success (continued) Next, Mr. He introduced Cat® Connect, so managers could continuously monitor equipment location, status and fuel consumption data in real time. The monitoring services also reduced downtime and extended service life...

  • Page 12
    ... employee equipment training on job sites, supplying aftermarket parts and service support and offering e-business and equipment management solutions. Also includes the product portfolio for forestry, paving, industrial and waste products, and global on-highway trucks. This group is also responsible...

  • Page 13
    CUSTOMER & DEALER SECTION SUPPORT HEADING Built In Quality (BIQ) Sets Best Foundation for New Cat® 555D Wheel Skidder CUSTOMERS CAN ENJOY UP TO A In 2014 we rolled out the impressive new Cat ® 555D Wheel Skidder, which is already gaining ground in the forestry industry - for one thing, simply by ...

  • Page 14
    ..., Caterpillar has developed our Technology Enabled Solutions (TES) strategy to bring value to our customers' businesses and job sites. Technologies that enable equipment connectivity, plus the data ï¬,ow from that equipment to Caterpillar to the dealer, form the heart of our connected services. When...

  • Page 15
    ... buying patterns, purchase cycles and financing needs. Through the Dealer Data Integrity Process, dealers have access to a robust suite of services that results in improved data quality, supporting everything from marketing initiatives to resource planning. Connectivity among customers' equipment...

  • Page 16
    ... and coal mine methane gas. Energy & Transportation supports customers in oil & gas, power generation, marine, rail and industrial applications, including Cat ® machines. The product and services portfolio includes reciprocating engines, generator sets, marine propulsion systems, gas turbines and...

  • Page 17
    ...enable fuel savings as well as reduce emissions for these locomotives. On later EMDâ„¢ units, new innovations like these, provide real savings to the bottom line. More Than You Know Life Is Beautiful is an annual music, culinary, art and learning festival held in Downtown Las Vegas. In 2014, nearly...

  • Page 18
    ... the confidence and product support you can get only from Caterpillar," noted Chris Chenette, Caterpillar Marine product value manager. WHILE OFFERING CUSTOMERS ENHANCED FUEL FLEXIBILITY AND POWER REDUNDANCY TO RUN DIESEL OR GAS" 3500 DIESEL ENGINE, CATERPIL L AR INC. 17 2014 YEAR IN REVIEW

  • Page 19
    ... and execution to a new level for Caterpillar and prove to be a competitive advantage in the long term. Q: What value does the Global Supply Network bring to the Enterprise Excellence strategy? A: Caterpillar does business in over 180 countries around the world. Having a network model that's linked...

  • Page 20
    ... initiative, Enterprise Excellence, launched in 2014, that represents Caterpillar's holistic vision for our end-to-end business. The strategy to achieve Enterprise Excellence was developed by a diverse group of officers who are responsible for Caterpillar's key product lines and service offerings...

  • Page 21
    ... service promise and leverage the data to align critical processes and support groups that further enhance our end-to-end business. "I've seen a big change in communication," observed Dino Colbourne with Shell Albian, who is a customer in the oil sands industry. "I've seen engineers from Caterpillar...

  • Page 22
    ...Capabilities Processes and guidelines to drive sustainable success. • Customer Service Promise • Product Strategies • Global Supply Network • Lean Transformation • Business Systems Strategy • Governance The goal of the Global Supply Network is to procure the right quality part or service...

  • Page 23
    ... GROUP The Power of Perfect A perfect tractor is achieved when a machine starts online and is fully assembled with zero missed defects from start to finish. Caterpillar strives for perfection and is a company built on a reputation of high quality products and services. In 2014, perfection started...

  • Page 24
    ...Building on Success Perfect work is possible at Caterpillar due to a continuous improvement journey that started with 6 Sigma, the Caterpillar Production System and now Lean. Caterpillar introduced its Lean Methodology in 2013. 6 Sigma standardizes problem-solving methodology by using facts and data...

  • Page 25
    ...insurance to customers and dealers to help support the purchase and lease of our equipment. Corporate Services is built to provide business and human resources, information technology, accounting and finance services to Caterpillar, serving as the enterprise resource for business-related activities...

  • Page 26
    ... needed in the developed markets. There is a lot of opportunity for Caterpillar and our customers! When our industries recover, we will be well-positioned to take advantage of the operational and structural improvements we have made over the past few years as well as the increased investment we are...

  • Page 27
    FINANCIAL PRODUCTS & CORPORATE SECTION SERVICES HEADING Strengthening Stockholder Value for the Long Haul In 2014, Caterpillar marked its 85th anniversary as a New York Stock Exchange listed company, a milestone in our long legacy of strategy execution, operational performance and returning value ...

  • Page 28
    FINANCIAL PRODUCTS & CORPORATE SECTION SERVICES HEADING U.S. Manufacturing Day Builds Pride and Possibilities U.S. Manufacturing 12.5% of GDP1 $2.08 trillion contributed to economy in 20131 Autumn Cohan, a seventh-grader in Decatur, Ill., adjusted the motor assembly of her "brush bot," a toothbrush...

  • Page 29
    ... PRODUCTS & CORPORATE SECTION SERVICES HEADING U.S. Manufacturing Day (continued) Our customers are literally building the world and couldn't do it without the hard work and expertise of the men and women who design and build reliable, durable Cat® engines and equipment. It's our responsibility...

  • Page 30
    ... Caterpillar's Global Construction and Infrastructure (GCI) group, Cat Financial and Finning put together a program for customers who value a high level of service. Built around an Operating Lease that includes an Extended Protection Plan (EPP) and Finning's Preventive Maintenance Agreement, Just...

  • Page 31
    ... Affairs Division. Responsibilities include legal and compliance services; media relations; internal communications; government affairs advocacy; sustainability consulting; and global environmental, health and safety services. Support for the Caterpillar Foundation is also provided by our group...

  • Page 32
    ... other business managers plan and deliver on their commitments. Q: Can you quantify the cost and efficiency improvements? A: Since we implemented the program in 2011, Caterpillar has saved over $25 million. In 2014, we delivered over 55,000 hours of legal support through Legal Lane Strategies. We...

  • Page 33
    ...Our Core In 2014, Caterpillar elevated Sustainability to a core value. In the ancient city of Wuxi, Jiangsu province, China, white blossoms sway on rows of newly planted pear trees that bring an ecological and economic boost to the community. Best known as a birthplace of China's modern industry and...

  • Page 34
    ... Program. In 2014, our Office of Business Practices invested in human and program resources to better address the 17 key compliance risks across the enterprise through continuing development and deployment of employee communications and training, audits and assessments, investigations and strategic...

  • Page 35
    ... in online channels than other types of content, and the response to Caterpillar's history has been overwhelming. In addition to its partnership with the center, our Corporate Heritage Services serves a broad spectrum of clients, including legal, product groups, brand, marketing, public affairs and...

  • Page 36
    ... specific product lines and production processes, the center offers a global perspective into the breadth and depth of the industries we serve; our culture of continuous improvement and future technologies; the brands within the Caterpillar family; and an in-depth look at our company history and...

  • Page 37
    ... Association for Corporate Counsel (ACC) recognized the division as a 2014 ACC Value Champion. ACC, the global bar association for in-house counsel with more than 33,000 members worldwide, selected Caterpillar from a variety of industries, including technology, finance and auto manufacturing, and...

  • Page 38
    ... and build community among our employees. Additionally, the External Resources subcommittee was formed in 2014 to coordinate with external groups to benchmark on diversity and inclusion topics and implement best practices. To further support D&I efforts, Caterpillar joined the Leadership Council...

  • Page 39
    ... to support 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 mining trucks, off-highway trucks...

  • Page 40
    ... enhance safety and reduce greenhouse gas emissions. We're making great progress so far. In 2014, the technology strategy came to life in the form of several innovative technologies and products with customer value outcomes. • Energy & Transportation Solutions - Caterpillar customers face constant...

  • Page 41
    ... line and adding significant value to their business." • Machines & Machine Systems - Applying proven technologies systematically and strategically helps to meet customers' high expectations for productivity and fuel efficiency. With an advanced powertrain, the new Cat® 966MXE wheel loader has...

  • Page 42
    ... more automated technologies and equipment to the mining industry. As we commercialize these technologies, we move ever closer to our vision of a fully automated mine site." We know the future holds many challenges for Caterpillar customers. Our global product development community is working now to...

  • Page 43
    ... integrated operation of autonomous, semi-autonomous and remotely controlled mining systems. Highly advanced safety systems enable the autonomous trucks to work reliably around other mining equipment, light vehicles and mine site employees, helping customers work safely and use fewer resources in...

  • Page 44
    ... jointly to develop maintenance strategies and best practices. Caterpillar product groups can see how their machines are performing against worldwide benchmarks. In turn, these insights can inform development of new and improved products. Cat dealers use Cat ECA to take their services to a higher...

  • Page 45
    ... our control. Our emphasis on cost management, operational execution and cash ï¬,ow helped us to deliver increased profit per share, compared with 2013. In addition, operating cash ï¬,ow from Machinery, Energy and Transportation was the third-highest in our history. Our balance sheet continues...

  • Page 46
    ...135 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 $1.5 BILLION Capital Expenditures were lower in 2014 as we aligned investments with market conditions. $2.1 BILLION The majority of R&D spending was tied to new product introductions. Profit per Share (diluted) $8.48 $7.40 $5.75...

  • Page 47
    ... S&P 500 Machinery Index (S5MACH) Cumulative stockholder return assuming an investment of $100 on December 31, 2009, and reinvestment of dividends issued thereafter. Caterpillar common stock is traded on the New York Stock Exchange under the symbol CAT. CATERPIL L AR INC. 46 2014 YEAR IN REVIEW

  • Page 48
    ... Dealer Employees (in thousands) 141.3 152.5 162.2 161.7 126.7 177 GLOBAL DEALERS Dealer Net Worth ($ in billions) $21.3 $22.3 $23.4 $17.7 $18.9 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 161,700 DEALER EMPLOYEES BILLION 23.4 CATERPIL L AR INC. 47 2014 YEAR IN REVIEW

  • Page 49
    ... work takes place. In certain geographic areas, the facility symbol may represent multiple facilities. $9,612 $8,403 $3,193 $1,782 $1,206 Energy & Transportation Construction Industries Resource Industries Financial Products All Other EAME 48 DEALERS 23,246 CATERPILLAR EMPLOYEES 2014 Sales...

  • Page 50
    ... facility symbol may represent multiple facilities. LATIN AMERICA 33 DEALERS 14,412 CATERPILLAR EMPLOYEES 2014 Sales and Revenues by Segment ($ in millions) OFFICES FACILITIES* $1,963 $2,445 $1,514 $468 $199 Energy & Transportation Construction Industries Resource Industries Financial Products...

  • Page 51
    ... declared per share of common stock Return on average common stockholders' equity Capital expenditures: Property, plant and equipment Equipment leased to others Depreciation and amortization Research and development expenses As a percent of sales and revenues Wages, salaries and employee benefits...

  • Page 52
    ...DRILL ELECTRIC ROPE SHOVEL ENGINE GENERATOR SET HIGHWALL MINER HYDRAULIC EXCAVATOR HYDRAULIC SHOVEL LOCOMOTIVE MARINE PROPULSION SYSTEMS MOTOR GRADER OFF-HIGHWAY TRUCK ON-HIGHWAY TRUCK PIPELAYER SKID STEER LOADER TRACK EXCAVATOR TRACK LOADER TRACK-TYPE TRACTOR TUNNEL BORING TURBINE WHEEL DOZER WHEEL...

  • Page 53
    ... Global Footprint Offices Facilities * *Facilities include principal locations where manufacturing, parts distribution, rail and remanufacturing work takes place. In certain geographic areas, the facility symbol may represent multiple facilities. CATERPIL L AR INC. 52 2014 YEAR IN REVIEW

  • Page 54
    ... by 2020. First public-private partnership for the Caterpillar Foundation and the U.S. State Department to support the building of centers for women entrepreneurs in Africa. MILLION CATERPIL L AR INC. $54 Donated by Caterpillar Inc. to the Caterpillar Foundation 53 2014 YEAR IN REVIEW

  • Page 55
    ... N D AT I O N Our partnership with PADF is saving the Araucaria Forest ecosystem while teaching sustainable agriculture and forestry techniques to residents of Campo Largo, Brazil. DOLLARS CATERPIL L AR INC. 12.8 MILLION Total donations with employee match to United Way. 54 2014 YEAR IN REVIEW

  • Page 56
    THE CATERPILLAR FOUNDATION PATH TO PROSPERITY Basic Needs The path to prosperity results in active community leaders who are able to help others. Lack of Education With Jobs No Jobs With Education The spiral of poverty repeats across generations. Basic Needs CATERPIL L AR INC. 55 2014 YEAR...

  • Page 57
    ...and economies grow. BASIC HUMAN NEEDS Energy Food Shelter Disaster Relief Water & Sanitation EDUCATION Literacy & Numeracy Workforce Readiness S.T.E.M. Mentoring Leadership ENVIRONMENT Environmental programs that alleviate poverty by building strong economies CATERPIL L AR INC. 56 2014 YEAR IN...

  • Page 58
    ...to get 2 million signatures in support of its "Do Agric" petition. This public policy and advocacy program calls on African governments to live up to their 2003 pledge to invest more and more strategically in African agriculture by providing jobs, boosting the continent's economy and helping lift 85...

  • Page 59
    ... by focusing on housing, business development and crime. To support them, the Caterpillar Foundation has made grants in support of LISC's mission in Milwaukee, Phoenix and Peoria. Over the past three years, the Caterpillar Foundation invested $3 million in LISC's work in Peoria. The same year, LISC...

  • Page 60
    ... our ability to develop, produce and market quality products that meet our customers' needs; (xiv) the impact of the highly competitive environment in which we operate on our sales and pricing; (xv) failure to realize all of the anticipated benefits from initiatives to increase our productivity, ef...