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MAKING PROGRESS POSSIBLE
WelcomeConExpo Analyst MeetingMarch 11, 2008
Jim OwensChairman & CEO
2SAFE 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 "will", “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 10-K filed with the Securities and Exchange Commission on February 22, 2008. Caterpillar undertakes no obligation to update these forward-looking statements.
3
What I’ll Cover Today
• A quick overview of Caterpillar and recent history
• Our view of 2008
• A broader look forward– Prospects for the world economy – Continued need for, and robust investment in, the world’s
infrastructure– Caterpillar … in 2010 and beyond
4
$0B
$10B
$20B
$30B
$40B
$50B
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
1990-2007 sales and revenues CAGR of 8.4%
Historical Performance Sales and revenues
5
$40 $4.52to
$4.91
-$1.00
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
1992 EPS excludes impact of OPEB accounting adjustment. $3.02 loss as reported.and all years adjusted for stock splits
*
Historical Performance EPS Growth
1990-2007 EPS CAGR of 20%
6
5 Years of Growth
$20
$23
$30
$36
$41$43
$1.15$1.56
$2.88
$4.04
$5.17$5.37
2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007
Sales and Revenues Earnings Per Share$45.0$41.5
$36.3
$30.3
36% EPS CAGR 2002 to 2007
$22.8$20.2
7
Product Range
Backhoe Loaders Skid Steer Loaders Multi Terrain Loaders Integrated Tool Carriers Wheel Loaders Excavators Wheel Excavators Track-Type TractorsTrack Loaders Pipelayers Landfill Compactors Soil CompactorsWheel Dozers Motor Graders Wheel Tractor Scrapers Articulated TrucksOff Highway Trucks Underground Trucks Underground Loaders Track SkiddersWheel Skidders Feller Bunchers Vibratory Compactors Asphalt CompactorsAsphalt Pavers Pneumatic Compactors Cold Planers Rotary Mixers
About 300 Models in a broad range of product categories …
Machines
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Nonresidential BuildingSite PrepLandscapingUnderground Utilities
EnergyCoalOil SandsPetroleum
Mining & QuarryingMetalsNon-metals Quarrying
Infrastructure Road Construction PavingMilitaryCivilAggregate Recycling
ResidentialBuilding Site PrepLawn CareSewer & Water Tie-in
IndustrialIndustrial Processing DemolitionScrapPorts
ForestryLogging Mill Yard
WasteLandfill OperationsWaste HandlingSpecialized Waste
End markets Machines
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35-70% lower undercarriage operating cost
50% better steering performance
25% morematerial moved per gallon of fuel
Up to 20% lessfuel consumed per hour
60% fewer moving partsin the electric drive train
35% more visibility
50% lessoperator noise
Less fluidsused
New D7E at CONEXPO … Innovative From the Inside Out
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100 200 1600010000300 500 750 1500 2500 4000 6000KW
MediumSpeed
C175
3500
Vees
Heavy Duty
Mid-Range
1100
Small
M20/25, M32, M43
C175
3500
C27/32, C43
C11, C13, C15, C18
C7,C9
400, 800
1100
MaKCatPerkins
3600
Turbines
Solar
Saturn, Centaur, Mercury, Taurus, Mars, Titan
22000
4000 4000
1300 - 2800 1300, 2300, 2500, 2800
Product Range Engines
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On-HighwayTruck
Marine Industrial
Cat Machines PetroleumElectric Power
End markets Engines
12
Geographic Diversity
Caterpillar Dealers• 181 Cat dealers• 3,000+ branches & rental stores• Over 120,000 employees
The Global Leader
2007 1997
Geographic Mix - Sales and RevenuesCaterpillar• Broadest footprint in the industry• About 101,000 Employees• In about 50 countries
OutsideNorth
America43%
NorthAmerica
57%
OutsideNorth
America56%
NorthAmerica
44%
13
Caterpillar Overview
Sales & RevenuesUp over 8% in 2007
Sales and Costs
7%
30%
63%
MachinesUp 9%
EnginesUp 6%
Financial ProductsUp 13%
4% 9%
31%56%
Material Costs
Factory Labor & Burden
SG & AR&D
Machinery & Engines 2007 Operating Costs
$37.4 Billion
14
Capital Expenditures Research & Development
03 04 05 06 07
$682M$926M
$1.2B
$1.6B $1.7B
$2.3B
08* 03 04 05 06 07
$669M$928M
$1.1B$1.3B $1.4B
08*
Up 15-20%
* Outlook
Investing in the future Capacity and Product Development
Excluding Equipment Leased to Others
15
Sales and Revenues Synergistic growth & improved earnings stability
Products 64%
Integrated Services 36%
$29 Billion
$16 BillionSolar Customer Services
Genuine Cat Replacement Parts
2007 Actual
16
• A very tough environment in North America, primarily the United States – sales and revenues down 11%
• Sales & revenues outside North America up 29% – withbooming demand in emerging markets
• Focused on the global deployment of the Cat Production System – Safety, quality, velocity, and costs
2007 Retrospective
Caterpillar reported record sales and revenues and profit
• Sales and revenues were up over 8% to $45 billion• EPS improved from $5.17 to $5.37
17
2008 Outlook
18
2008 Economic Forecast
4.0
2.93.6
5.5
7.9
2.4
3.8
2.2
3.3
5.4
8.2
2.1
3.1
1.1
3.0
4.7
7.5
1.9
World NorthAmerica
EuropeAME
LatinAmerica
Asia Pacific Japan
2006 2007 2008
GDP Growth (%)
U.S. slowing, butbetter conditions elsewhere
U.S. slowing, butbetter conditions elsewhere
19
50
100
150
200
250
300
350
2002 2003 2004 2005 2006 2007 2008
Machine Industry Unit Index 2002 = 100
North America
Outside North America
Caterpillar Estimate
Worldwide Machine Industry Sales patterns diverging
Sales patterns diverging
-11%-10%
28%
18%
20
North AmericaFlat to up 5% EAME
Up 5 to 10%
Worldwide up 5 to 10%
Latin AmericaUp 10 to 15%
Asia PacificUp 10 to 15%
By Geographic Region2008 Sales and Revenues
21Expect a record year despite U.S. weakness
2007 2008Actual Outlook
Sales and Revenues $45 B Up 5 - 10%Earnings Per Share $5.37 Up 5 - 15%
Key Elements of the Outlook for 2008
• Price Realization about 2% … similar to 2007 • Material Costs up 1.0 to1.5% … similar to 2007, up less than inflation• R&D costs up 15 to 20% … Tier IV machines• SG&A up in dollars, down as a percent of sales• Factory labor and overhead costs about flat … CPS benefits offset inflation• Net currency impacts slightly negative• CAPEX up from $1.7 to about $2.3 billion … we need more capacity
2008 Outlook
22
Beyond 2008• The world economy is positioned to grow – low
inflation and interest rates
• Past underinvestment in key industries – energy, mining, and infrastructure
• Our sales and profit expectations through 2010
• Caterpillar … 5 years out
23
Key Longer-term Trends Long-Term Positive 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
24
0
2
4
6
8
10
12
14
16
18
1969 1973 1977 1981 1985 1989 1993 1997 2001 20050
10
20
30
40
50
60
70
80
90
100
24
Inflation Is LowGood progress in reducing inflation
Developed countries Developing countries
Percent Change in Consumer Price Inflation
25
Historically Low Rates in Developing Countries
Interest Rates 1998 - Present Near lows of past 10 years
Source: Haver Analytics
7.03.8
11.015.4
2.8
7.55.1 5.0
11.27.4
0
10
20
30
40
50
60
Poland
Czech
S. Afric
a
Turke
y
Russia
China
Indon
esia
S. Kor
ea
Brazil
Mexico
140436 80
Historical range
Latest
2626
Average Annual GDP Growth (%)
A Solid Economic Growth Forecast
2.63.1
1.5
3.1
6.5
1.3
3.12.6 2.8
3.4
6.8
1.7
3.63.0 2.9
4.1
6.5
2.1
World NorthAmerica
EAME LatinAmerica
AsiaPacific
Japan
1990 - 1999 2000 - 2007 2008 - 2017
Solid world growth
2727
Factors Driving Construction
Developed Economies• Old, outdated buildings• Insufficient infrastructure• Modest economic growth
Developing Economies• Large, rapidly growing populations• Inadequate infrastructure• Rapid economic growth
We expect continued good growth in
construction
Years of construction
underinvestment
2828
10.5
8.7
5.66.4
5.14.3
3.8
6.6
11.4
13.4
8.0
14.4 14.0
4.24.7
12.3
China India Indonesia Turkey S. Africa Brazil Mexico Russia
GDP Construction
Developing Country ConstructionAverage Yearly Percent Growth, 2003 - 2007
Source: Haver Analytics
Rapid Growth Rates
2929
Developing Countries Have Improved FinancesThey have money
to spend on infrastructure
Source: IMF, World Bank, Haver Analytics
587841
429
2,929
314
1,047
731868
AME Europe/CIS Latin America Asia
Foreign Exchange Reserves and Debt
Billions of Dollars
Reserves 4.8Sovereign Wealth Funds 2.0Total external debt 3.0
6.8 3.0
Developing Countries’Balance Sheet
(Trillions of Dollars)
Adding over $1 trillion yearly
Reserves
Debt
3030
Mining & Energy
• Growing world demand• Prolonged underinvestment• Insufficient shipping capacity• Low inventories & tight spare capacity
A Very Positive Future
3131
Commodity Prices Are Favorable Generally positive for investment
Dollars per Market Unit
66
50
72
47
81
63
40 41
WTI Crude Oil CA Coal
6.74
3.05
6.98
3.23
4.50
1.30
3.00
7.00
HH Natural Gas Copper
Source: Haver Analytics, Business Economics
Estimated Threshold for investment
2006 Average Price2007 Average Price2008 Forecast Average Price
32
Spare Oil Production Capacity
3.1
4.1
1.9
1.31.0
1.5
2.2
0
1
2
3
4
5
2001 2002 2003 2004 2005 2006 2007
Source: Spare capacity from EIA, Reserves from BP 2007 Statistical Review
Safety Zone
Millions of barrels per day
Continued lowspare capacity
33
18 1610 11
4
2529
3630
22
4 62
6 5
5349
52 53
69
Aluminum Copper Nickel Zinc Iron Ore
North America Europe/AME/CIS Latin America Asia/Pacific
33
Regional Metals Demand
Percent Share of Worldwide Demand
Source: Barclays Capital, AME
Fast Growing Asian Economies are Largest Users of Metals
3434
Worldwide Mining Fleets
Source: Parker Bay.
65% 69%
50%56%54% 57%
Coal Mines Metals Mines
Crawlers Trucks Wheel Loaders
1,160
7,838 907
657
10,254 1,075
% of Machines More Than 10 Years Old (2007)
Replacement opportunity
Units
35
VISION 2020
STRATEGIC GOALSPeople
CRITICAL SUCCESS FACTORSPEOPLE QUALITY PRODUCT VELOCITY DISTRIBUTION CHINA Trough
Our Values in Action – INTEGRITY, EXCELLENCE, TEAMWORK, COMMITMENTWORLDWIDE CODE OF CONDUCT
ENTERPRISE STRATEGIC AREAS OF IMPROVEMENT
STRATEGIC PROFILE
Performance Product & Process
New Product Introduction
Order-to-Delivery
Encoding 6 Sigma
Sustainable Development
Growth Beyond Core
Profitable Growth
• Safety• Quality• Velocity … CPS
Near term commitment to
executionOriginal focus on China Has been broadened to “Emerging Markets”
Explicit goals for 2010!
36
Development of the complete Caterpillar business model in China is progressing rapidly :
New engine factory under constructionWheel loader factory under constructionHydraulic component facility under construction Completed the acquisition of SEM … China domestic wheel loader manufacturer – Cat now owns 100%Product strategy being executed with a growing array of products in ChinaCat Logistics, Cat Financial, and Cat Remanufacturing are all in place and growing in ChinaThe dealer strategy is in place and dealers are expandingOwnership change at SCM could help accelerate growthSales in China in 2008 are expected to be close to $2 billion
With the China strategy in full swing, it’s time to broaden the focus to include other emerging markets – there’s been significant growth, and a big opportunity in India and the CIS.
China / Emerging Markets
37
Our goals for 2010 Sales and Profit
2010 Sales & Revenues
EPS Growth
$50 billion “plus”
In a plausible range of $45 to $60 billion
EPS CAGR of 15% to 20% from a 2005 base
That means EPS in a range of about $8 to $10 per share
Last Year Today
Approaching$60 billion
No Change
38
The Road Map
2007 Actual$5.37
Profitability – Improved after-tax ROS
• Pull through on higher volume
• Modest price realization expectations
• Operational improvement – CPS
Sales growth – at our 2007 after tax profit rate, plus Financial Products profit growth
Share repurchase
$1.10 - $1.75
$.83 - $1.78
$0.70-$1.10
2010 EPS GoalGoal
$8 to $10Per Share
39
We expect continued growth in the world economy and a positive environment for most of our end markets … notably Mining, Energy, Power Generation, and Infrastructure.
We expect Caterpillar Sales and Revenues to continue growing at an attractive rate … largely organically.
We are investing heavily in new products and capacity.
We are focused on execution in the areas of Safety, Quality,Velocity, and Cost … and we expect to be able to continue our compound annual EPS growth of 15 to 20% through 2012!
2012 – Five Years OutThe positive
story continues
40
Cash FlowMachinery & Engines Operating Cash Flow
A promising future with good options
Billions of Dollars2004 2005 2006 2007
Actual Actual Actual Actual
Operating Cash Flow before Pension/Benefits 2.9$ 4.3$ 5.0$ 5.7$ Contributions to Pension & Other Post Retirement Benefits (1.0) (1.5) (0.4) (0.3) Operating Cash Flow 1.9 2.8 4.6 5.4
Key Uses of Cash- Growth - CAPEX 0.8$ 1.2$ 1.6$ 1.7$ - Growth - Acquisitions 0.3 0.5 0.2 - Dividends 0.5 0.6 0.7 0.8 - Stock Repurchase 0.5 1.7 3.2 2.4
41
Maintain Financial Strength
“A” Credit Rating
Priorities for Use of Cash
Cash From OperationsCash From Operations
Fund GrowthFund Growth
Pension/Benefit PlansPension/Benefit Plans
Dividend GrowthDividend Growth
Stock RepurchaseStock Repurchase
Well Established Priorities
42
We expect continued growth in the world economy
Most of the industries we serve are strong and our long-term view is very positive
Our strategy is comprehensive and our 2010 goals are challenging but achievable
We are focused on execution in the areas of Safety, Quality, Velocity, and Cost
Delivering the strategy will be rewarding our customers, employees … and of course, to stockholders.
Takeaways from Today
43
2.6
3.1
1.5
3.2
6.6
1.3
3.0 2.92.6
2.8
6.4
1.6
3.43.2
2.8
3.6
6.1
2.5
World North America EAME Latin America Asia Pacific Japan
1990 - 1999 2000 - 2008 2009 - 2017
World Economic Growth
Global infrastructure needs
Broadest product line
Global manufacturing footprintUnparalleled global dealer network
Strong business built on a foundation of a large population
of machines and engines & significant service opportunity
Our customers “Make Progress Possible”
No company is better positioned than Caterpillar
4418
As well positioned as any company to win in the global economy
Excited to take on challenges – we have the right product, technology, strategy, footprint, and people
Caterpillar is Ready!
