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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
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FORM 10-K
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(Mark One)
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[X]
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ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December
31, 2007
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from
__________ to __________.
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Commission File No.
1-768
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CATERPILLAR
INC.
(Exact name of Registrant as
specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation)
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37-0602744
(IRS Employer I.D.
No.)
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100 NE Adams Street, Peoria,
Illinois
(Address of principal executive
offices)
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61629
(Zip Code)
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Registrant's telephone number,
including area code: (309)
675-1000
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Securities registered pursuant to
Section 12(b) of the Act:
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Title of each
class
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Name of each
exchange
on
which registered
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Common Stock ($1.00 par
value)(1)
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Chicago Stock
Exchange
New York Stock
Exchange
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Preferred Stock Purchase
Rights
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Chicago Stock
Exchange
New York Stock
Exchange
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9 3/8% Debentures due August 15,
2011
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New York Stock
Exchange
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9 3/8% Debentures due March 15,
2021
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New York Stock
Exchange
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8% Debentures due February 15,
2023
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New York Stock
Exchange
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5.3% Debentures due September 15,
2035
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New York Stock
Exchange
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In addition to the exchanges in
the United States, Caterpillar common stock is also listed on stock
exchanges in Belgium, France, Germany, Great Britain and
Switzerland.
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Securities registered pursuant to
Section 12(g) of the
Act: None
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Indicate by check mark whether the
Registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes [ ü ] No
[ ]
Indicate by check mark if the Registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes
[ ] No [ ü ]
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ü] No
[ ]
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
[ ]
Indicate by check mark whether the
Registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company. See definitions of "large accelerated
filer,” and “smaller reporting company" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer [ ü ] Accelerated filer
[
] Non-accelerated filer
[
] Smaller Reporting
Company [ ]
Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
Yes
[ ] No [ ü ]
As of June 30, 2007, there were
639,155,181 shares of common stock of the Registrant outstanding, and the
aggregate market value of the voting stock held by non-affiliates of the
Registrant (assuming only for purposes of this computation that directors and
executive officers may be affiliates) was approximately $ 49.5 billion.
As of December 31, 2007, there were
623,986,134 shares of common stock of the Registrant outstanding, and the
aggregate market value of the voting stock held by non-affiliates of the
Registrant (assuming only for purposes of the computation that directors and
executive officers may be affiliates) was approximately $44.8
billion.
Documents Incorporated by
Reference
Portions of the documents listed below
have been incorporated by reference into the indicated parts of this Form 10-K,
as specified in the responses to the item numbers involved.
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Part III
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2008 Annual Meeting Proxy
Statement (Proxy Statement) expected to be filed with the Securities and
Exchange Commission (SEC) on April 21, 2008 but not later than June 30,
2008 (within 120 days after the end of the calendar
year).
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Parts I, II,
IV
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General and Financial Information
for 2007 containing the information required by SEC Rule 14a-3 for an
annual report to security holders filed as Exhibit 13 to this Form
10-K.
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TABLE OF
CONTENTS
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Part I
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Business
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Risk Factors
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Unresolved Staff
Comments
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Executive Officers of the
Registrant as of December 31, 2007
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Properties
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Legal
Proceedings
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Submission of Matters to a Vote of
Security Holders
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Part II
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Market for Registrant's Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
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Selected Financial
Data
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Management's Discussion and
Analysis of Financial Condition and Results of
Operations
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Quantitative and Qualitative
Disclosures About Market Risk
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Financial Statements and
Supplementary Data
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Changes in and Disagreements With
Accountants on Accounting and Financial Disclosure
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Controls and
Procedures
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Other
Information
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Part III
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Directors, Executive Officers and
Corporate Governance
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Executive
Compensation
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Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
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Certain Relationships and Related
Transactions, and Director Independence
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Principal Accountant Fees and
Services
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Part IV
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Exhibits and Financial Statement
Schedules
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General
The
company was originally
organized as Caterpillar Tractor Co. in 1925 in the State of
California. In 1986, the company reorganized as Caterpillar Inc. in
the State of Delaware. As used herein, the term "Caterpillar," "we,"
"us," "our" or "the company" refers to Caterpillar Inc. and its subsidiaries
unless designated or identified otherwise.
Principal
Lines of Business / Nature of Operations
We operate in three
principal lines of business:
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1.
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Machinery— A principal line of business
which includes the design, manufacture, marketing and sales of
construction, mining and forestry machinery—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 and related parts. Also includes logistics
services for other companies and the design, manufacture, remanufacture,
maintenance and services of rail-related products.
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2.
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Engines— A principal line of business
including the design, manufacture, marketing and sales of engines for
Caterpillar machinery; electric power generation systems; on-highway
vehicles and locomotives; marine, petroleum, construction, industrial,
agricultural and other applications; and related parts. 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 5 to 21,500 horsepower (4 to over 16 000
kilowatts). Turbines range from 1,600 to 20,500 horsepower (1
200 to 15 000 kilowatts).
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3.
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Financial
Products— A principal line of
business consisting primarily of Caterpillar Financial Services
Corporation (Cat Financial), Caterpillar Insurance Holdings, Inc. (Cat
Insurance), Caterpillar Power Ventures Corporation (Cat Power Ventures)
and their respective subsidiaries. Cat Financial provides a
wide range of financing alternatives to customers and dealers for
Caterpillar machinery and engines, Solar gas turbines as well as other
equipment and marine vessels. Cat Financial also extends loans
to customers and dealers. Cat Insurance provides various forms
of insurance to customers and dealers to help support the purchase and
lease of our equipment. Cat Power Ventures is an investor in
independent power projects using Caterpillar power generation equipment
and services.
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Due to financial information required by
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information, we have also divided our business into
nine reportable segments for financial reporting
purposes. Information about our reportable segments, including
geographic information, appears in Note 24 – “Segment information” of Exhibit 13.
Other information about our operations
in 2007 and our outlook for 2008, including risks associated with foreign
operations, is incorporated by reference from "Management's
Discussion and Analysis" of Exhibit 13.
Company
Strengths
Caterpillar is the leader in
construction and mining equipment, and diesel and natural gas engines and
industrial gas turbines in our size range. The company is also a leading
services provider through Cat Financial, Caterpillar Logistics Services Inc.,
Caterpillar Remanufacturing Services Inc. and Progress Rail Services Corporation
(Progress Rail). Annual sales and revenues were $ 44.958 billion,
making Caterpillar the largest manufacturer in its
industry. Caterpillar is also a leading U.S.
exporter. Through direct sales of certain products and a global
network of independent dealers, Caterpillar builds long-term relationships with
customers around the world. For over 80 years, the Caterpillar name
has been associated with the highest level of quality products and
services. More information is available at www.CAT.com.
Page 1
Competitive
Environment
Caterpillar
products and product support services are sold worldwide into a variety of
highly competitive markets. In all markets, we compete on the basis
of product performance, customer service, quality and price. From
time to time, the intensity of competition results in price discounting in a
particular industry or region. Such price discounting puts pressure
on margins and can negatively impact operating profit.
Outside of the
United States, certain competitors enjoy competitive advantages inherent to
operating in their home countries or regions.
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Machinery
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The competitive environment for
Caterpillar’s machinery business consists of some global competitors and many
regional and specialized local competitors. Examples of global
competitors include, but are not limited to, Komatsu Ltd., Volvo Construction
Equipment (part of the Volvo Group AB), CNH Global N.V., Hitachi Construction
Machinery Co., Terex Corporation, J.C. Bamford Ltd. and Doosan Infracore Co.,
Ltd. Each of these companies have varying numbers of product lines
that compete with Caterpillar product lines and each have varying degrees of
regional focus. John Deere Construction and Forestry Division (part
of Deere & Co.), for example, has numerous product lines that compete with
Caterpillar primarily in North America and Latin America. Others,
like Hitachi, offer a limited range of products that compete globally against
Caterpillar.
During 2007, global
industry demand continued to be strong and most competitors experienced
increased sales and operating profits, despite weak construction activity in
North America. Solid economic and industry growth was experienced in most of the
world outside North America, particularly in emerging markets. The
overall competitive environment in the machinery business continues to be
intense, and the overall financial health of the industry continues to
improve.
Caterpillar's logistics business
provides integrated supply chain services for Caterpillar and over 65 other
companies worldwide. It competes with global, regional and local
competitors, including companies such as DHL Express USA, Inc. and United Parcel
Service, Inc. The unit has grown rapidly since its inception in 1987,
and the contract logistics industry is expected to continue to grow at rates
above that of the global economy as a whole.
Since its acquisition by Caterpillar in
June 2006, wholly owned subsidiary Progress Rail has continued its position in
North America as a leading provider of a broad range of
products. Based in Albertville, Alabama, Progress Rail is a leading
provider of remanufactured locomotive, railcar and track products and services
to the North American railroad industry. The company also has one of
the most extensive rail service and supply networks in North
America. Expansion into the railroad aftermarket business is a strong
fit with our strategic direction and will leverage Caterpillar’s global
remanufacturing capabilities.
In February 2007, Caterpillar acquired
certain assets and assumed certain liabilities of Franklin Power Products and
International Fuel Systems, Inc., subsidiaries of Remy
International. These businesses joined other
Caterpillar remanufacturing facilities in the United States, Mexico, Europe and
Asia, increasing our overall product and service offering and providing a
platform for future growth opportunities for remanufactured
products.
In November 2007, Caterpillar announced
the acquisition of the assets of the Blount Forestry Division and assumed
product design, development and manufacturing responsibilities, offering a full
range of products and services for logging, millyard, road-building and land
management. Competition in this market comes from John Deere Forestry
Division (part of Deere & Co), Komatsu Ltd. and others.
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Engines
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Caterpillar operates in a very
competitive engine/turbine manufacturing and packaging environment. The company
designs, manufactures, markets and sells diesel, heavy fuel and natural gas
reciprocating engines for Caterpillar machinery; electric power generation
systems; on-highway vehicles and locomotives; marine, petroleum, construction,
industrial, agricultural and other applications. In addition,
Caterpillar provides industrial turbines and turbine related services for oil
and gas and power generation applications.
Page 2
The competitive environment for
reciprocating engines in marine, petroleum, construction, industrial,
agriculture and electric power generation systems along with turbines consists
of a few global competitors who compete in a variety of Caterpillar’s markets,
and a larger set of companies who compete in a limited size range and/or
application. Principal global competitors include, but are not limited to,
Cummins Inc., MTU Friedrichshafen and MTU Detroit Diesel (both part of Tognum
GmbH) and Wartsila Corp. Other competitors, such as John Deere Power Systems
(part of Deere & Co.), Siemens Power Generation (part of Siemens AG), GE
Energy, MAN AG, Mitsubishi Heavy Industries LTD and Volvo Penta (part of Volvo
Group AB) compete in a portion of Caterpillar’s markets. An additional set of
competitors, including Generac Power Systems, Inc., Kohler Co., Kawasaki Heavy
Industries, Ltd., Rolls-Royce Group plc and others, are packagers who source
engines and/or other components from domestic and international suppliers and
market products regionally and internationally through a variety of distribution
channels.
In the North American on-highway
heavy-duty and mid-range diesel engine markets, competitors include, but are not
limited to, Cummins Inc., Detroit Diesel Corp. and Mercedes-Benz (both
part of Daimler AG), Navistar International Corp. and Volvo Group AB. On-highway diesel engine competitors in
overseas markets include, but are not limited to, Mercedes-Benz and Mitsubishi
Fuso Truck & Bus Corp. (both part of Daimler AG), DAF Trucks N.V., Iveco
Motors (part of Fiat S.p.A), MAN AG, Scania AB and Volvo Group AB. Some of these
competitors are truck and/or bus manufacturers with proprietary diesel engines
who also offer engines from independent manufacturers such as
Caterpillar.
Since the introduction of our four
engine models with ACERT® Technology beginning in 2003, Caterpillar has shipped
over 550,000 ACERT engines into the North American on-highway truck
market. Customer acceptance of Caterpillar engine performance,
quality and reliability continues to be strong, as evidenced by receiving a J.D.
Power and Associates Award in customer satisfaction in 2007 for an unprecedented
seventh year.
Caterpillar also
continued to focus investment and resources on leveraging ACERT Technology into
off-road markets, as well as into more of our engine platforms. The building
blocks for ACERT Technology are very flexible and scaleable and are being
applied as needed based on engine platform and application. From
October 2004 through year-end 2007, Caterpillar has shipped over 65,000
Caterpillar machines powered by engines with ACERT Technology. A line
of ACERT industrial, electric power and marine engines has been released to
further leverage the technology throughout Caterpillar’s businesses and engine
platforms.
We believe ACERT
provides Caterpillar a valuable foundation now and in the future to meet
emissions and performance requirements, and we plan to continue investing in
developing and leveraging ACERT Technology systems and components.
Caterpillar’s
remanufacturing business provides services for a variety of products and
services to Caterpillar and other external clients. The
remanufacturing business competes on a regional basis with similarly sized or
smaller companies. The company launched the remanufacturing business
in the 1970s with engines/turbines and is now one of the world’s largest
remanufacturers, processing more than two million units annually and recycling
more than 100 million pounds of remanufactured products each
year. The business continues to grow at rates well above that
of the global economy as a whole.
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Financial Products
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Cat Financial, incorporated in Delaware, is a wholly owned finance subsidiary of Caterpillar. Cat Financial's primary business is to provide retail financing alternatives for Caterpillar products to customers around the world. Such retail financing is primarily comprised of financing of Caterpillar equipment, machinery and engines. In addition, 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. The various financing plans offered by Cat Financial are designed to increase the opportunity for sales of Caterpillar products and generate financing income for Cat Financial. A significant portion of Cat Financial's activities is conducted in North America. However, Cat Financial has additional offices and subsidiaries in Asia, Australia, Europe and Latin America.
For over 25 years,
Cat Financial has been providing financing in the various markets in which it
participates, contributing to its knowledge of asset values, industry trends,
product structuring and customer needs.
Page 3
In certain
instances, Cat Financial's operations are subject to supervision and regulation
by state, federal and various foreign governmental authorities, and may be
subject to various laws and judicial and administrative decisions imposing
various requirements and restrictions which, among other things, (i) regulate
credit granting activities and the administration of loans, (ii) establish
maximum interest rates, finance charges and other charges, (iii) require
disclosures to customers, (iv) govern secured transactions, (v) set collection,
foreclosure, repossession and other trade practices and (vi) regulate the use
and reporting of information related to a borrower's credit
experience.
Cat Financial's
retail financing leases and installment sale contracts (totaling 64 percent*)
include:
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Tax leases
that are classified as either operating or finance leases for financial
accounting purposes, depending on the characteristics of the
lease. For tax purposes, Cat Financial is considered the owner
of the equipment (18 percent*).
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Finance
(non-tax) leases where the lessee is considered the owner of the equipment
during the term of the lease, and the agreement either requires or allows
the customer to purchase the equipment for a fixed price at the end of the
term (20
percent*).
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Installment
sale contracts, which are equipment loans that enable customers to
purchase equipment with a down payment or trade-in and structured payments
over time (25 percent*).
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Governmental
lease-purchase plans in the United States that offer low interest rates
and flexible terms to qualified non-federal government agencies (1
percent*).
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Retail notes
receivables (21 percent*) include:
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Loans that
allow customers and dealers to use their Caterpillar equipment as
collateral to obtain financing.
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Wholesale notes
receivables, finance leases and installment sale contracts (totaling 15
percent*) include:
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Inventory/rental
programs which provide assistance to dealers by financing their inventory,
rental fleets and rental facilities (6
percent*).
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Short-term
dealer receivables that Cat Financial purchases from Caterpillar and
subsidiaries at a discount (9
percent*).
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__________
*Indicates the
percentage of Cat Financial's total portfolio at December 31,
2007. We define total portfolio as total finance receivables (net of
unearned income and allowance for credit losses) plus equipment on operating
leases, less accumulated depreciation. For more information on the above and Cat
Financial's concentration of credit risk, please refer to Note 8 – “Finance
receivables” of Exhibit 13.
The retail
financing business is highly competitive, with financing for users of
Caterpillar equipment available through a variety of sources, principally
commercial banks and finance and leasing companies. Cat Financial's
competitors include CIT Group Inc.; CitiCapital, a business unit of Citigroup;
General Electric Capital Corporation and various local banks and finance
companies. In addition, many of our manufacturing competitors use
below-market interest rate programs (subsidized by the manufacturer) to assist
machine sales. Caterpillar and Cat Financial work together to provide
a broad array of financial merchandising programs around the world to respond to
these competing offers.
Cat Financial's results are largely
dependent upon Caterpillar dealers' ability to sell equipment and customers'
willingness to enter into financing or leasing agreements. It is also
affected by the availability of funds from its financing sources and general
economic conditions such as inflation and market interest
rates.
Cat Financial has a "match funding"
policy that addresses interest rate risk by aligning the interest rate profile
(fixed rate or floating rate) of its debt portfolio with the interest rate
profile of its receivable portfolio (loans and leases with customers and
dealers) within predetermined ranges on an ongoing basis. In
connection with that policy, Cat Financial issues debt with a similar interest
rate profile to its receivables, and also uses interest rate swap agreements to
manage its interest rate risk exposure to interest rate changes and in some
cases to lower its cost of borrowed funds. For more information regarding match
funding, please see Note 3 – “Derivative financial instruments and risk
management” of Exhibit 13.
Page 4
In managing foreign currency risk for
Cat Financial's operations, the objective is to minimize earnings volatility
resulting from conversion and the remeasurement of net foreign currency balance
sheet positions. This policy allows the use of foreign currency
forward and option contracts to address the risk of currency mismatch between
the receivable and debt portfolios. None of these foreign currency
forward and option contracts are designated as a hedge.
Cat Financial
provides financing only when acceptable criteria are met. Credit
decisions are based on, among other things, the customer's credit history,
financial strength and equipment application. Cat Financial typically
maintains a security interest in retail-financed equipment and requires physical
damage insurance coverage on financed equipment. Cat Financial
finances a significant portion of Caterpillar dealers' sales and inventory of
Caterpillar equipment, especially in North America. Cat Financial's
competitive position is improved by marketing programs, subsidized by
Caterpillar and/or Caterpillar dealers, which allow it to offer below-market
interest rates. Under these programs, Caterpillar, or the dealer,
subsidizes an amount at the outset of the transaction, which Cat Financial then
recognizes as revenue over the term of the financing. Transaction
processing time and supporting technologies continue to drive Cat Financial in
its efforts to respond quickly to customers and improve internal processing
efficiencies. We believe Cat Financial's web-based Cat FinancExpressSM
transaction processing and information tool currently available in the United
States, France, Canada and Australia provides Cat Financial a competitive
advantage in those areas. Cat FinancExpress collects information
on-line to provide finance quotes and credit decisions and then prints the
related documents, all in a very short time frame.
Caterpillar Insurance Company, a wholly
owned subsidiary of Cat Insurance is a U.S. insurance company domiciled in
Missouri and primarily regulated by the Missouri Department of
Insurance. The insurance company is licensed to conduct property and
casualty insurance business in 49 states and the District of Columbia, and as
such, is regulated in those jurisdictions as well. The State of
Missouri acts as the lead regulatory authority and monitors Caterpillar
Insurance Company’s financial status to ensure that it is in compliance with
minimum solvency requirements, as well as other financial ratios prescribed by
the National Association of Insurance Commissioners.
Caterpillar Life Insurance Company, a
wholly owned subsidiary of Caterpillar, is a U.S. insurance company domiciled in
Missouri and primarily regulated by the Missouri Department of
Insurance. The insurance company is licensed to conduct life and
accident and health insurance business in 26 states and the District of
Columbia, and as such, is regulated in those jurisdictions as well. The State of
Missouri acts as the lead regulatory authority and it monitors the financial
status to ensure that it is in compliance with minimum solvency requirements, as
well as other financial ratios prescribed by the National Association of
Insurance Commissioners. Caterpillar Life Insurance Company also
provides stop loss insurance protection to a Missouri Voluntary Employees'
Beneficiary Association (VEBA) trust used to fund medical claims of salaried
retirees of Caterpillar under the VEBA.
Caterpillar
Insurance Co. Ltd., a wholly owned subsidiary of Cat Insurance is a captive
insurance company domiciled in Bermuda and regulated by the Bermuda Monetary
Authority. Caterpillar
Insurance Co. Ltd. is a Class 2 insurer (as defined by the Bermuda Insurance
Amendment Act of 1995), which primarily insures affiliates and, as such, the
Bermuda Monetary Authority requires an Annual Financial Filing for purposes of
monitoring compliance with solvency requirements.
Caterpillar Product Services
Corporation, a wholly owned subsidiary of Caterpillar, is a warranty company
domiciled in Missouri. It conducts a machine extended service
contract program in Italy, France and Germany by providing machine extended
warranty reimbursement protection to dealers in those
countries.
Caterpillar Insurance Services
Corporation, a wholly owned subsidiary of Cat Insurance, is a Tennessee
insurance brokerage company licensed in all 50 states and the District of
Columbia. It provides brokerage services for all property and
casualty and life and health lines of business.
Caterpillar’s insurance group provides
protection for claims under the following programs:
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Contractual
Liability Insurance to Caterpillar dealers and Original Equipment
Manufacturers (OEMs) for extended service contracts (parts and labor)
offered by third party dealers and
OEMs.
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Cargo
insurance for the worldwide cargo risks of Caterpillar
products.
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Contractors'
Equipment Physical Damage Insurance for equipment manufactured by
Caterpillar’s OEMs, which is leased, rented or sold by third party
dealers.
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Page 5
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General
liability, employer's liability, auto liability and property insurance for
Caterpillar.
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Mortgagee’s
Interest Insurance to Cat Financial for its marine loan
portfolio.
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Retiree
Medical Stop Loss Insurance for medical claims under the
VEBA.
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Brokerage
services for property and casualty and life and health
business.
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Cat Power Ventures,
a wholly owned subsidiary of
Caterpillar, primarily invested equity and took ownership interests in power
generation projects throughout the world that utilize Caterpillar power
generation equipment. In some cases, these projects also utilize construction
and operations and maintenance services that are provided by other Caterpillar
subsidiaries. Cat Power Ventures has investments in power projects in Poland,
the Dominican Republic and Tunisia and has created direct and indirect
subsidiaries and affiliates to hold these investments. In December
2005, Cat Power Ventures decided that it would no longer invest equity in power
generation projects. As a result, Cat Power Ventures will not make
any new equity investments in power generation projects and will sell its
project investment portfolio.
Business
Developments in 2007
In 2007, Caterpillar continued to focus on the execution of
our Vision 2020 strategy that was introduced in
2005. Through
Vision 2020, we established key enterprise goals for 2010 grouped under the
“3Ps” of people, performance and profitable growth. Our people goals
include a highly engaged workforce and world-class safety. The
performance, product and process goals are related to improved quality and
market leadership in every major product group we serve. The
profitable growth goals include a 2010 sales and revenues target and earnings
per share growth.
Strategy Update
In April 2007, the
company’s Chairman and CEO, Jim Owens, updated analysts and investors on the
execution of the company’s strategy. Highlights of the 2007 status
update include:
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On track to
reach 2010 goals of $50+ billion of sales and revenues and profit per
share growth in a range of 15 to 20
percent;
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Implementation
of the Caterpillar Production System (CPS) expected to improve safety,
employee engagement, dealer repair frequency, product availability,
inventory turns and labor productivity through
2010;
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Improvement
in recordable injuries and lost time
cases;
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Continued
growth in China; and
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Continued
planning to managing earnings per share and return on assets in a trough
cycle.
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Financial
Results and Stockholder Value
Further progress toward financial goals
and increased stockholder value was made in 2007. Full year 2007
results marked the fifth straight year of record sales and revenues and the
fourth consecutive year of record profit for Caterpillar, including sales and
revenues of $44.958 billion and profit of $3.541 billion, or $5.37 per
share. We also reduced the number of shares outstanding by
repurchasing 33.5 million shares in 2007 at a cost of $2.405 billion
in support of our Board authorized $7.5 billion stock repurchase program
approved in February 2007 to be completed by 2011.
Caterpillar
Production System
We continued our
internal focus on global deployment of CPS with 6
Sigma. Implementation of CPS is fundamental to reaching our 2010
goals to reduce product availability by three times and improve inventory turns
by more than 40 percent.
Sustainability
In 2007, the
company continued our efforts in sustainable development and commitment to make
sustainable development a "strategic area of improvement" in our enterprise
strategy. The company was selected as a member of the Dow Jones
Sustainability World Index (DJSI World) for the seventh consecutive
year. DJSI uses a best-in-class approach designed to identify best
practices across the economic, social and environmental dimensions of corporate
sustainability. In October 2007, Caterpillar received a prestigious
J.D. Power and Associates Award for ranking highest in customer satisfaction in
the “Pickup and Delivery” category of their 2007 Heavy Duty Truck
Engine/Transmission Customer Satisfaction Study. This award is the
tenth Caterpillar has received from J.D. Power and Associates for heavy-duty
truck engine customer satisfaction.
Page 6
Growth in China
In 2007, the company made progress
toward its commitment to continue expansion of our business in China in
support of our overall enterprise strategy and Vision 2020.
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In March
2007, Caterpillar Marine Asia Pacific, the regional headquarters of
Caterpillar Marine Power Systems in Shanghai, P. R. China, moved to a new
office shared with Lei Shing Hong Machinery Ltd., Caterpillar’s marine
dealer for Eastern China. This move better allows Caterpillar
Marine Asia Pacific to serve the fast-growing marine markets in China, as
well as India, Vietnam, Indonesia, Singapore, Malaysia and
Australia.
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As part of
our long-term strategic plan to support manufacturing growth in China and
at its operations around the world, Caterpillar celebrated the grand
opening of new manufacturing operations in Wuxi, China in May
2007. The Wuxi campus is located in Jiangsu Province in East
China and includes nearly 47 acres. Caterpillar (China)
Machinery Components Co. Ltd. (CCMC), a wholly owned Caterpillar company,
will manufacture a range of components to be used primarily in Caterpillar
machines and to be sold to select original equipment manufacturers
(OEMs). Using leased buildings, Caterpillar has produced
hydraulic hose assemblies in Wuxi since mid-2006 and it has fabricated and
assembled cabs for core Caterpillar machines since early
2007. The establishment of the Wuxi campus for key components
is an important element in our enterprise strategy for 2010, as we
continue to support our growing customer base in China and other key Asian
markets.
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In August
2007, Caterpillar announced a major investment In China with plans to
build state-of-the-art small and medium diesel engines in Wuxi, Jiangsu
Province, China. Caterpillar signed a non-binding memorandum of
understanding with the Wuxi National High-Tech Industrial Development Zone
outlining a significant multi-year investment to develop and manufacture
Perkins and Caterpillar branded engines in Wuxi. Construction
of the engine facilities in Wuxi is subject to a final agreement being
reached between Caterpillar and the Wuxi government and to other
applicable approvals. The plan to build these engines in China
demonstrates our long-term commitment to this critically important market
and to our customers.
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Other Growth
Initiatives
In support of our efforts toward
achieving market leadership and planning for performance through a trough cycle,
Caterpillar took the following actions during 2007.
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In February 2007, Caterpillar
acquired certain assets and assumed certain liabilities of Franklin Power
Products and International Fuel Systems, Inc., subsidiaries of Remy
International. The acquisition increased our overall
product and service offering and provided a platform for future growth
opportunities for remanufactured
products.
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In February
2007, Caterpillar, Mitsubishi Heavy Industries Ltd. (MHI) and Shin
Caterpillar Mitsubishi Ltd. (SCM) signed a nonbinding memorandum of
understanding to conclude a plan that would result in a new ownership
structure for SCM, whereby Caterpillar would own the majority of the
outstanding shares of SCM and MHI would own the remaining
shares. As of the end of 2007, definitive agreements for the
plan had not yet been finalized.
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In April
2007, Caterpillar completed its purchase of Eurenov S.A.S. (Eurenov), a
remanufacturer of engines, transmissions and components for leading
European automotive manufacturers. Caterpillar Remanufacturing Services
(Cat Reman) recently concluded the two-phase purchase process, which was
first announced in June 2005. Eurenov operates its primary facility in
Chaumont, France, and another facility in Radom, Poland. The
acquisition strengthens our position in the remanufacturing market by
allowing Cat Reman greater access to the European automotive and
industrial engine and transmission remanufacturing market with expansion
into Eastern Europe.
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In November
2007, Caterpillar acquired the assets of Blount International,
Inc.'s Forestry Division. The acquisition included manufacturing
and other facilities that will join Caterpillar's global facilities that
produce and support forestry equipment. Since 2003, Caterpillar and Blount
have had an agreement to jointly produce and market products globally
under the Caterpillar and former Timberking brands. The acquisition of
Blount's operations will bring all product design, development and
manufacturing under Caterpillar and support our corporate objective to be
the forestry market leader. Cat Forest Products now offers the
broadest product line in the industry with a full range of products and
services for logging, millyard, road-building and land
management.
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In December
2007, six Caterpillar dealers purchased certain assets of PMHC LLC (the
Pioneer group), including Pioneer Machinery LLC, a premier distributor of
forestry products in the southeastern United States. Prior to
this sale, PMHC LLC and its operating companies were jointly owned by
Caterpillar and these six Caterpillar dealers, whose service territories
cover the same area of the southeastern United States. As a
result of the sale, operations of the Pioneer group were transitioned to
these six Caterpillar dealers. This strategic move is expected
to strengthen Caterpillar's Customer Support Network in the Forestry
Industry and enhance the Company's ability to serve its forestry customers
in the southeastern United States, while also providing better continuity
for the strong Pioneer brand and the Company's forestry product
distribution channel with that of the traditional Caterpillar dealer
business model. The Caterpillar dealers involved in the
transaction were Blanchard Machinery, Carolina Tractor, Carter Machinery,
Gregory Poole, Ring Power and Yancey
Brothers.
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Acquisitions
and Alliances
Information related to acquisitions and
alliances appears in Note 25 – “Alliances and
acquisitions” of Exhibit
13.
Order
Backlog
The dollar amount of backlog believed to
be firm was approximately $17.8 billion at December 31, 2007, and $14.5 billion
at December 31, 2006. Of the total backlog, approximately $2.5
billion at December 31, 2007, and $1.9 billion at December 31, 2006, was not
expected to be filled in the following year. Our backlog is generally
highest in the first and second quarters because of seasonal buying trends in
our industry.
Dealers
Our machines are distributed
principally through a worldwide organization of independent dealers (dealer
network), 53
located in the United States and 128 located outside the United
States. Worldwide, these dealers serve 182 countries and
operate 3,645
places of
business, including 1,606 dealer rental outlets.
Reciprocating engines are sold principally through the dealer network and
to other manufacturers for use in their products. Some of the reciprocating
engines manufactured by Perkins Engines Company Limited (Perkins) also are sold
through a worldwide network of 132 distributors located in 181
countries. The FG Wilson branded electric power generation
systems are sold through a worldwide network of 200 dealers located in 180
countries.
These dealers do
not deal exclusively with our products; however, in most cases sales and
servicing of our products are the dealers' principal
businesses. Turbines and large medium speed reciprocating engines are
sold through sales forces employed by the company. At times, these
employees are assisted by independent sales representatives.
The company's
relationship with each of its independent dealers is memorialized in a standard
sales and service agreement. Pursuant to this agreement, the company
grants the dealer the right to purchase and sell its products and to service the
products in a specified geographic service territory. Prices to
dealers are established by the company after receiving input from dealers on
transactional pricing in the marketplace. The company also agrees to
defend its intellectual property and to provide warranty and technical support
to the dealer. The agreement further grants the dealer a
non-exclusive license to use the company's trademarks, service marks and brand
names. In some instances a separate trademark agreement exists
between the company and a dealer.
In exchange for
these rights, the agreement obligates the dealer to develop and promote the sale
of the company's products to current and prospective customers in the dealer's
service territory. Each dealer specifically agrees to employ adequate
sales and support personnel to market, sell and promote the company's products,
demonstrate and exhibit the products, perform the company's product improvement
programs, inform the company concerning any features that might affect the safe
operation of any of the company's products and maintain detailed books and
records of the dealer's financial condition, sales and inventories and make
these books and records available at the company's reasonable
request.
These sales and
service agreements are terminable at will by either party upon 90 days written
notice and provide for termination automatically if the dealer files for
bankruptcy protection or upon the occurrence of comparable action seeking
protection from creditors.
Page 8
Patents
and Trademarks
Our products are sold primarily under
the brands "Caterpillar," "CAT," design versions of "CAT" and "Caterpillar,"
"Solar Turbines," "MaK," "Perkins," "FG Wilson," "Olympian" and “Progress
Rail.” We own a number of patents and trademarks, which have been
obtained over a period of years and relate to the products we manufacture and
the services we provide. These patents and trademarks have been of
value in the growth of our business and may continue to be of value in the
future. We do not regard any of our business as being dependent upon
any single patent or group of patents.
Research and
Development
We have always
placed strong emphasis on product-oriented research and development relating to
the development of new or improved machines, engines and major
components. In 2007, 2006 and 2005, we spent $1,404 million, $1,347 million and
$1,084 million, or 3.1 percent, 3.2 percent and 3.0 percent of our sales and
revenues, respectively, on our research and development programs.
Employment
As of December 31,
2007, we employed 101,333 persons of whom 50,788 were located outside the United
States. From a global, enterprise perspective, we believe our
relationship with our employees is very good. We build and maintain a
productive, motivated workforce by treating all employees fairly and
equitably.
In the United States, most of our 50,545
employees are at-will employees and, therefore, not subject to any type of
employment contract or agreement. At select business units, certain
highly specialized employees have been hired under employment contracts that
specify a term of employment and specify pay and other
benefits.
As of December 31, 2007, there were
15,045 U.S. hourly production employees who were covered by collective
bargaining agreements with various labor unions. The United
Automobile, Aerospace and Agricultural Implement Workers of America represents
12,235 Caterpillar employees under a six-year central labor agreement that will
expire March 1, 2011. The International Association of Machinists
represents 2,002 employees under labor agreements that expire on May 23, 2010,
and April 30, 2012.
Outside the United States, the company
enters into employment contracts and agreements in those countries in which such
relationships are mandatory or customary. The provisions of these
agreements correspond in each case with the required or customary terms in the
subject jurisdiction.
Sales
Sales outside the United States were 63
percent of consolidated sales for 2007, 54 percent for 2006 and 53
percent for 2005.
Environmental
Matters
The company is regulated by federal,
state and international environmental laws governing our use, transport and
disposal of substances and control of emissions. In addition to governing our
manufacturing and other operations, these laws often impact the development of
our products, including, but not limited to, required compliance with air
emissions standards applicable to internal combustion engines. Compliance with
these existing laws has not had a material impact on our capital expenditures,
earnings or global competitive position.
We are engaged in remedial activities at
a number of locations, often with other companies, pursuant to federal and state
laws. When it is reasonably probable we will pay remedial costs at a
site, and those costs can be reasonably estimated, the costs are charged against
our earnings. In formulating that estimate, we do not consider
amounts expected to be recovered from insurance companies or
others. The amount recorded for environmental remediation is not
material and is included in the line item “Accrued Expenses” in Statement
2 – “Consolidated Financial Position at December 31” of Exhibit 13.
We cannot reasonably estimate costs at
sites in the very early stages of remediation. Currently, we have a
few sites in the very early stages of remediation, and there is no more than a
remote chance that a material amount for remedial activities at any individual
site, or at all sites in the aggregate, will be required.
Page 9
Available
Information
The company files electronically with
the Securities and Exchange Commission (SEC) required reports on Form 8-K, Form
10-Q, Form 10-K and Form 11-K; proxy materials; ownership reports for insiders
as required by Section 16 of the Securities Exchange Act of 1934; and
registration statements on Forms S-3 and S-8, as necessary; and any other form
or report as required. The public may read and copy any materials the
company has filed with the SEC at the SEC's Public Reference Room at 100 F
Street, N.E., Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
(800) SEC-0330. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC. Copies of our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any
amendments to these reports filed or furnished with the SEC are available free
of charge through our Internet site (www.CAT.com/secfilings) as soon as reasonably practicable
after filing with the SEC. Copies of our board committee charters,
our board's Guidelines on Corporate Governance Issues, Worldwide Code of Conduct
and other corporate governance information are available on our Internet site
(www.CAT.com/governance), or upon written request to the
Corporate Secretary at 100 NE Adams Street, Peoria, Illinois
61629-7310.
Additional company information may
be obtained as follows:
Current information
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phone our Information Hotline -
(800) 228-7717 (U.S. or Canada) or (858) 244-2080 (outside U.S. or Canada)
to request company publications by mail, listen to a summary of
Caterpillar's latest financial results and current outlook, or to request
a copy of results by facsimile or
mail
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request, view, or download
materials on-line or register for email alerts at www.CAT.com/materialsrequest
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Historical information
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view/download on-line at
www.CAT.com/historical
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The statements in
this section describe the most significant risks to our business and should be
considered carefully in conjunction with the “Management’s Discussion and
Analysis” of Exhibit
13. In addition, these statements constitute our cautionary
statements under the Private Securities Litigation Reform Act of 1995. The
discussion and analysis in this Form 10-K and in our 2007 Annual Report to
Stockholders that are forward-looking and involve uncertainties that could
significantly impact results. From time to time, we also provide forward-looking
statements in other materials we issue to the public or in the form of oral
presentation to the public. Forward-looking statements give current expectations
or forecasts of future events about the company. You can identify these
statements by the fact they do not relate to historical or current facts and by
the use of words such as "believe," "expect," "estimate," "anticipate," "will
be," "should," “plan,” “project,” “intend,” “could,” and similar words or
expressions that identify forward-looking statements made on behalf of
Caterpillar.
In particular,
these forward-looking statements include statements relating to future actions,
prospective products, products’ approvals, future performance or results of
current and anticipated products, sales efforts, expenses, interest rates,
foreign exchange rates, the outcome of contingencies and financial results. The
statements are based on assumptions or on known or unknown risks and
uncertainties. Although, we believe we have been prudent in our assumptions, we
cannot guarantee the realization of these statements. Achievement of future
results is subject to risks, uncertainties and potentially inaccurate
assumptions. Should known or unknown risks or uncertainties materialize or
underlying assumptions prove inaccurate, actual results could materially differ
from past results and those anticipated, estimated or projected. Uncertainties
include factors that affect international businesses, as well as matters
specific to the company and the markets it serves.
The company
undertakes no obligation to publicly update forward-looking statements, whether
as a result of new information, future events or otherwise. You may; however,
consult any further related disclosures we make in our Form 10-Q or any Form 8-K
reports to the SEC.
The following is a
cautionary discussion of risks, uncertainties and assumptions that we believe
are significant to our business. These are factors that, individually or in the
aggregate, we believe could make our actual results differ materially from
expected and past results. You should note it is impossible to predict or
identify all such factors and, as a result, you should not consider the
following factors to be a complete discussion of risks and
uncertainties.
Page 10
Changes in
Government Monetary and Fiscal Policies
Most countries have
established central banks to regulate monetary systems and influence economic
activities, generally by adjusting interest rates. Interest rate
changes affect overall economic growth, which alter demand for residential and
nonresidential structures, energy and mined products, which in turn affect sales
of our products that serve these activities. Also, interest rates
affect customers’ abilities to finance machine purchases and can change the
optimal time to keep machines in a fleet. Our outlooks typically
include assumptions about interest rates in a number of
countries. Interest rates higher than those assumptions could result
in lower sales than anticipated.
Government policies
on taxes and spending affect our businesses. Throughout the world,
government spending finances much infrastructure development, such as highways,
airports, sewer and water systems and dams. Tax regulations determine
depreciation lives and the amount of money users can retain, both of which
influence investment decisions. Developments more unfavorable than
anticipated, such as declines in government revenues, decisions to reduce public
spending or increases in taxes, could negatively impact our
results.
Government can also
impact international trade and investment through a variety of policies, such as
import quotas, inspections, capital controls or tariffs. Developments
worse than anticipated in the outlook, which could include lower import quotas,
more detailed inspections or higher tariffs, could negatively impact our
results.
Environmental
Regulations
Our facilities and
operations are subject to increasingly stringent environmental laws and
regulations, including laws and regulations governing emissions to air,
discharges to water and the generation, handling, storage, transportation,
treatment and disposal of general, non-hazardous and hazardous waste materials.
While we believe we are in compliance in all material respects with these
environmental laws and regulations, we cannot ensure that we will not be
adversely affected by costs, liabilities or claims with respect to existing or
subsequently acquired operations, under present laws and regulations or those
that may be adopted or imposed in the future.
Particularly our
engines are subject to extensive statutory and regulatory requirements governing
emissions and noise, including standards imposed by the EPA, state regulatory
agencies in the U.S. and other various regulatory agencies around the
world. For instance, governments may set new standards that could
impact our operations in ways that are difficult to anticipate with
accuracy. Thus, significant changes in standards, or the adoption of
new standards, have the potential to impact our results negatively.
Changes in
Economic Conditions of Industries We Serve
The energy and
mining industries are major users of our machines and
engines. Decisions to purchase our machines and engines are dependent
upon performance of these industries. If demand of output in these industries
increases, the demand for our products would likely increase and vice
versa. Prices of commodities in these industries are frequently
volatile and change in response to economic growth, commodity inventories and
any disruptions in production. We assume certain prices for key
commodities in preparing our outlooks. Commodity prices lower than
those assumed have the potential to negatively impact our sales.
The rates of
infrastructure spending, housing starts, and commercial construction, play a
significant role in our results. Our products are an integral
component of these activities, and as these activities increase or decrease in
the U.S. or abroad, demand for our products may be significantly
impacted.
Changes in
Price and Significant Shortages of Component Products
We are a
significant user of steel and many commodities required for the manufacture of
our products. So, increases in the prices of such commodities likely
would boost costs higher than expected, negatively impacting
profits.
We rely on
suppliers to secure component products, particularly steel, required for the
manufacture of our products. A disruption in deliveries from our suppliers or
decreased in availability of such components or commodities could have an
adverse affect on our ability to meet our commitments to customers or increase
our operating costs. We believe our source of supply of raw materials will be
generally sufficient for our need in the foreseeable future. However, our
results of operations or financial condition could be negatively impacted should
the supply turn out to be insufficient for our operations.
Page 11
Currency
Fluctuations
The reporting
currency for our financial statements is the U.S. dollar. Certain of our assets,
liabilities, expenses and revenues, are denominated in currencies other than the
U.S. dollar. To prepare our consolidated financial statements, we must translate
those assets, liabilities, expenses and revenues into U.S. dollars at the
applicable exchange rates. As a result, increases and decreases in the value of
the U.S. dollar vis-à-vis other currencies will affect the amount of these items
in our consolidated financial statements, even if their value has not changed in
their original currency. This
could have significant impact on our results if such increase or decrease in the
value of the U.S. dollar is substantial.
Dealer/Original
Equipment Manufacturers Sourcing Practices
We sell finished
products through an independent dealer network or directly to
OEMs. Both carry inventories of finished products as part of ongoing
operations and adjust those inventories based on their assessments of future
needs. Such adjustments can impact our results either positively or
negatively.
In particular, some
of our engine customers are truck manufacturers or OEMs that manufacture or
could in the future manufacture engines for their own
products. Despite their engine manufacturing abilities, these
customers have chosen to outsource certain types of engine production to us due
to the quality of our engine products and in order to reduce costs, eliminate
production risks and maintain company focus. However, we cannot
assure that these customers will continue to outsource engine manufacture in the
future. Increased levels of production insourcing by these customers could
result from a number of factors, such as shifts in our customers’ business
strategies, acquisition by a customer of another engine manufacturer, the
inability of third-party suppliers to meet specifications and the emergence of
low-cost production opportunities in foreign countries. A significant
reduction in the level of engine production outsourcing from our truck
manufacturers or OEM customers could significantly impact our revenues and,
accordingly, have a material adverse effect on our business, results of
operations and financial condition.
Impact of
Acquisitions
We may from time to
time engage in acquisitions involving some potential risks, including failure to
successfully integrate and realize the expected benefits of such
acquisitions. For example, with any past or future acquisitions,
there is the possibility that:
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the business
culture of the acquired business may not match well with our
culture;
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technological
and product synergies, economies of scale and cost reductions may not
occur as expected;
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the company
may acquire or assume unexpected
liabilities;
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unforeseen
difficulties may arise in integrating operations and
systems;
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the company
may fail to retain and assimilate employees of the acquired
business;
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higher than
expected finance costs due to unforeseen changes in tax, trade,
environmental, labor, safety, payroll or pension policies in any
jurisdiction in which the acquired business conducts its operations;
and
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the company
may experience problems in retaining customers and integrating customer
bases.
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Failure to continue
implementing the company’s acquisition strategy, including successfully
integrating acquired businesses, could have a material adverse effect on our
business, financial condition and results of operations.
Competition
We operate in a
highly competitive environment, and our outlook depends on a forecast of the
company's share of industry sales predicated on our ability to compete with
others in the marketplace. The company competes on the basis of
product performance, customer service, quality and price. There can be no
assurance that our product will be able to compete successfully with these other
companies. Thus, our share of industry sales could be reduced due to aggressive
pricing or product strategies pursued by competitors, unanticipated product or
manufacturing difficulties, our failure to price our products competitively or
an unexpected buildup in competitors' new machine or dealer-owned rental fleets,
leading to severe downward pressure on machine rental rates and/or used
equipment prices.
The environment
remains competitive from a pricing standpoint. Our sales outlook assumes certain
price increases that we announced from time to time will hold in the
marketplace. While we expect that the environment will continue to
absorb these price actions, changes in marketplace acceptance would negatively
impact our results. Moreover, additional price discounting to
maintain our competitive position could result in lower than anticipated
realization.
Page 12
In addition, our
results and ability to compete may be impacted positively or negatively by
changes in the sales mix. Our outlook assumes a certain geographic
mix of sales as well as a product mix of sales. If actual results
vary from this projected geographic and product mix of sales, our results could
be negatively impacted.
Litigation
and Contingency
We face an inherent
business risk of exposure to various types of claims and lawsuits. We are
involved in various intellectual property, product liability, product warranty,
environmental claims and lawsuits, including other legal proceedings that arise
in the ordinary course of our business. Although it is not possible to predict
with certainty the outcome of every claim and lawsuit, we believe these lawsuits
and claims will not individually or in the aggregate have a material impact on
our results. However, we could in the future incur judgments or enter into
settlements of lawsuits and claims that could have a material adverse effect on
our results of operations in any particular period. In addition, while we
maintain insurance coverage with respect to certain claims, we may not be able
to obtain such insurance on acceptable terms in the future, if at all, and any
such insurance may not provide adequate coverage against any such
claims.
As required by U.S.
generally accepted accounting principles, we establish reserves based on our
assessment of such contingencies. Subsequent developments in legal
proceedings, may affect our assessment and estimates of the loss contingency
recorded as a reserve requiring us to make additional materials payments, which
could result in an adverse effect on our results of operations.
Risks to
Global Operations
Our global
operations are dependent upon products manufactured, purchased and sold in the
U.S. and internationally, countries with political and economic instability,
exposing our business operations to certain political and economic risks
inherent in operating in some countries. These risks include:
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changes in
regulations; imposition of currency restrictions and other
restraints;
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imposition of
burdensome tariffs and quotas;
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national and
international conflict, including terrorist acts;
and
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economic
downturns, political instability and war or civil unrest may severely
disrupt economic activity in affected
countries.
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As
a normal
practice, we do not assume such events in our outlooks unless already happening
when the outlook is issued. So the occurrence of one of these events
has the potential to negatively impact our results.
Risks
to Financial Services Segment
Inherent
in the operation of Cat Financial is the credit risk associated with its
customers. The creditworthiness of each customer, and the rate of
delinquencies, repossessions and net losses on customer obligations are directly
impacted by several factors, including, but not limited to, relevant industry
and economic conditions, the availability of capital, the experience and
expertise of the customer's management team, commodity prices, political events
and the sustained value of the underlying collateral.
Changes
in interest rates, foreign currency exchange rates and market liquidity
conditions could have a materially adverse effect on our earnings and cash
flows. Because a significant amount of loans made by us are made at
fixed interest rates, our business is subject to fluctuations in interest
rates. Changes in market interest rates may influence our financing
costs, returns on financial investments and the valuation of derivative
contracts and could reduce our earnings and cash flows. In addition,
since we make a significant amount of loans in currencies other than the U.S.
dollar, fluctuations in foreign currency exchange rates could also reduce our
earnings and cash flows. We also rely on a number of diversified
global debt capital markets and funding programs to provide liquidity for our
global operations, including commercial paper, medium term notes, retail notes,
variable denomination floating rate demand notes, asset-backed securitizations
and bank loans. Significant changes in market liquidity
conditions could impact our access to funding and the associated funding cost
and reduce our earnings and cash flows. Although we manage interest
rate, foreign currency exchange rate and market liquidity risks with a variety
of techniques, including a match funding program, the selective use of
derivatives and a broadly diversified funding program, there can be no assurance
that fluctuations in interest rates, currency exchange rates and market
liquidity conditions will not have a material adverse effect on our earnings and
cash flows. If any of the variety of instruments and strategies we
use to hedge our exposure to these various types of risk are ineffective, we may
incur losses.
Page 13
With
respect to our insurance and investment management operations, changes in the
equity and bond markets could cause an impairment of the value of our investment
portfolio, thus requiring a negative adjustment to earnings.
Market
Acceptance of Products
Our business relies
on continued global demand for our brands and products. To achieve
business goals, we must develop and sell products that appeal to our dealers,
OEMs and customers. This is dependent on a number of factors
including our ability to manage and maintain key dealer relationships and our
ability to develop effective sales, advertising and marketing
programs. In addition, our continued success is dependent on
leading-edge innovation, with respect to both products and
operations. This means we must be able to obtain patents that lead to
the development of products that appeal to our consumers across the
world. Failure to continue to deliver quality and competitive
products to the marketplace, or to predict market demands for, or gain market
acceptance of, our products, could have material impact on our
business.
Natural
Disasters
The occurrence of
one or more natural disasters, such as tornadoes, hurricanes, earthquakes and
other forms of severe weather in the U.S. or in a country in which we operate or
in which our suppliers are located could adversely affect our operations and
financial performance. Such events could result in physical damage to
and complete or partial closure of one or more of our manufacturing facilities
or distribution centers, temporary or long-term disruption in the supply of
component products from some local and overseas suppliers, disruption in the
transport of our products to dealers and end-users and delay in the delivery of
our products to our distribution centers.
For instance, on
February 5, 2008, a certain portion of our facility in Oxford, Mississippi that
manufactures hose couplings for most of our machinery was physically damaged by
a tornado. For the next few months, assembly operations covering a broad range
of machinery will be sporadically impacted as a result of the tornado damage.
This event could adversely impact our results.
|
Item 1B. Unresolved
Staff Comments as of December 31,
2007.
|
Not
applicable.
|
Item 1C. Executive
Officers of the Registrant as of December 31,
2007.
|
|
Name
|
Present
Caterpillar Inc.
position
and date of
initial
election
|
Principal
positions held during the
past
five years if other than
Caterpillar
Inc. position currently held
|
||
|
James
W. Owens (61)
|
Chairman
and Chief Executive Officer (2004)
|
· |
Group
President (1995-2003)
|
|
| · |
Vice
Chairman (2003-2004)
|
|||
|
Richard
P. Lavin (55)
|
Group
President (2007)
|
· |
Vice
President (2004-2007)
|
|
|
Stuart
L. Levenick (54)
|
Group
President (2004)
|
· |
Chairman,
Shin Caterpillar Mitsubishi Ltd. (2000-2004)
|
|
| · |
Vice
President (2000-2004)
|
|||
|
Douglas
R. Oberhelman (54)
|
Group
President (2001)
|
|||
|
Edward
J. Rapp (50)
|
Group
President (2007)
|
· |
Vice
President (2000-2007)
|
|
|
Gerald
L. Shaheen (63)(1)
|
Group
President (1998)
|
|||
|
Gérard
R. Vittecoq (59)
|
Group
President (2004)
|
· |
Vice
President (2000-2004)
|
|
|
Steven
H. Wunning (56)
|
Group
President (2004)
|
· |
Vice
President (1998-2004)
|
|
|
James
B. Buda (60)
|
Vice
President, General Counsel and Secretary (2001)
|
|||
|
David
B. Burritt (52)
|
Vice
President and Chief Financial Officer (2004)
|
· |
Controller
(2002-2004)
|
|
|
Bradley
M. Halverson (47)
|
Controller
(2004)
|
· |
Corporate
Business Development Manager, Corporate Services Division
(2002-2004)
|
|
|
Jananne
A. Copeland (45)
|
Chief
Accounting Officer (2007)
|
· |
Corporate
Consolidations & Tax Accounting Manager
(2002-2004)
|
|
| · |
Corporate
Financial Reporting Manager, Corporate Services Division
(2004–2006)
|
|||
| · |
Corporate
Financial Reporting Manager, Global Finance & Strategic Support
Division (2006 – 2007)
|
|||
|
(1)
|
Retired
effective February 1,
2008
|
|||
Page 14
|
Item 2.
Properties.
|
General
Information
Caterpillar's operations are highly
integrated. Although the majority of our plants are involved
primarily in the production of either machines or engines, several plants are
involved in the manufacturing of both. In addition, several plants
are involved in the manufacturing of components which are used in the assembly
of both machines and engines. Caterpillar's parts distribution
centers are involved in the storage and distribution of parts for machines and
engines. Also, the research and development activities carried on at
our Technical Center involve both machines and engines.
Properties we own are believed to be
generally well maintained and adequate for present use. Through
planned capital expenditures, we expect these properties to remain adequate for
future needs. Properties we lease are covered by leases expiring over
terms of generally one to ten years. We anticipate no difficulty in
retaining occupancy of any leased facilities, either by renewing leases prior to
expiration or by replacing them with equivalent leased
facilities.
Headquarters
and Other Key Offices
Our corporate headquarters are in
Peoria, Illinois. Additional marketing headquarters are located both
inside and outside the United States. The Financial Products Division
is headquartered in leased offices located in Nashville,
Tennessee.
Distribution
Distribution of our parts is conducted
from parts distribution centers inside and outside the United States. Cat
Logistics distributes other companies' products, utilizing certain of our
distribution facilities as well as other non-Caterpillar facilities located both
inside and outside the United States. We also own or lease other
storage facilities that support distribution activities.
Changes in
Fixed Assets
During the five years ended December 31,
2007, changes in our investment in property, plant and equipment were as follows
(stated in millions of dollars):
|
Disposals
|
Net
Increase
|
|||||||||||||||||||||||||
|
Expenditures
|
Acquisitions
|
Provision
for
|
and
Other
|
(Decrease)
|
||||||||||||||||||||||
|
Year
|
U.S.
|
Outside
U.S.
|
U.S.
|
Outside
U.S.
|
Depreciation
|
Adjustments
|
During
Period
|
|||||||||||||||||||
|
2003
|
$
|
1,000
|
$
|
765
|
$
|
0
|
$
|
0
|
$
|
(1,332)
|
$
|
(191)
|
$
|
242
|
||||||||||||
|
2004
|
$
|
1,212
|
$
|
902
|
$
|
10
|
$
|
44
|
$
|
(1,366)
|
$
|
(371)
|
$
|
431
|
||||||||||||
|
2005
|
$
|
1,383
|
$
|
1,032
|
$
|
0
|
$
|
0
|
$
|
(1,444)
|
$
|
(665)
|
$
|
306
|
||||||||||||
|
2006
|
$
|
1,621
|
$
|
1,054
|
$
|
298
|
$
|
0
|
$
|
(1,554)
|
$
|
(556)
|
$
|
863
|
||||||||||||
|
2007
|
$
|
1,595
|
$
|
1,445
|
$
|
40
|
$
|
33
|
$
|
(1,726)
|
$
|
(241)
|
$
|
1,146
|
||||||||||||
At December 31, 2007, the net book value
of properties located outside the United States represented about 44.2 percent
of the net book value of all properties reflected in our consolidated financial
position. Additional information about our investment in property,
plant and equipment appears in Note 1F – “Depreciation and amortization” and
Note 10 – “Property, plant and equipment” of Exhibit 13.
Technical
Center, Training Centers, Demonstration Areas and Proving
Grounds
We own a Technical Center located in
Mossville, Illinois, and various other training centers, demonstration areas and
proving grounds located both inside and outside the United
States.
Manufacturing,
Remanufacturing, and Overhaul
Manufacturing, remanufacturing and
overhaul of our products are conducted primarily at the following
locations. These facilities are believed to be suitable for their
intended purposes with adequate capacities for current and projected needs for
existing products.
Page 15
|
Inside
the U.S.
|
Kansas
|
Ohio
|
· Surrey
|
Malaysia
|
|
Arkansas
|
· Fort
Scott
|
· Dayton1
|
· Winnipeg
|
· Kuala
Lumpur1
|
|
· Little
Rock
|
· Lawrence
|
Pennsylvania
|
England
|
Mexico
|
|
Alabama
|
· Wamego
|
· Steelton
|
· Barwell
|
· Monterrey
|
|
· Albertville
|
Kentucky
|
South
Carolina
|
· Desford
|
· Nuevo
Laredo
|
|
· Montgomery
|
· Ashland
|
· Greenville
|
· Ferndown
|
· Reynosa
|
|
California
|
· Corbin
|
· Jackson
|
· Peterborough
|
· Saltillo
|
|
· Gardena
|
· Danville
|
· Lexington
|
· Peterlee
|
· Santa
Catarina
|
|
· Mohave
|
· Decoursey
|
· Newberry
|
· Skinningrove
|
· Tijuana
|
|
· Rocklin
|
· Louisville
|
· Summerville
|
· Rushden
|
· Torreon
|
|
· San
Diego
|
· Mayfield
|
· Sumter
|
· Shrewsbury
|
· Veracruz
|
|
Colorado
|
· Raceland
|
Tennessee
|
· Stafford
|
The
Netherlands
|
|
· Pueblo
|
Louisiana
|
· Dyersburg
|
· Stockton
|
· Almere
|
|
Florida
|
· New
Orleans
|
· Knoxville
|
· Wimborne
|
· Den
Bosch
|
|
· Jacksonville
|
Michigan
|
Texas
|
· Wolverhampton
|
· s'-Hertogenbosch
|
|
· Wildwood
|
· Menominee
|
· Amarillo
|
France
|
Nigeria
|
|
Georgia
|
Minnesota
|
· Channelview
|
· Arras
|
· Port
Harcourt2
|
|
· Alpharetta
|
· Grand
Rapids1
|
· De
Soto
|
· Chaumont1
|
Northern
Ireland
|
|
· Griffin
|
· Minneapolis
|
· Mabank
|
· Echirolles
|
· Larne
|
|
· Jefferson
|
· New
Ulm
|
· San
Antonio
|
· Grenoble
|
· Monkstown
|
|
· LaGrange
|
· Owatonna
|
· Sherman
|
· Rantigny
|
· Springvale
|
|
· Patterson
|
Mississippi
|
· Waco
|
Germany
|
Peoples
Republic
|
|
· Thomasville
|
· Corinth
|
· Waskom
|
· Kiel
|
of China
|
|
· Toccoa
|
· Oxford
|
Virginia
|
· Rostock
|
· Erliban1
|
|
Illinois
|
· Prentiss
County
|
· Petersburg
|
Hungary
|
· Foshan
|
|
· Alorton
|
Missouri
|
· Roanoke
|
· Gödöllö
|
· Qingzhou1
|
|
· Aurora
|
· Boonville
|
Wisconsin
|
India
|
· Shanghai
|
|
· Champaign1
|
· Kansas
City
|
· Prentice
|
· Bangalore
|
· Tianjin2
|
|
· Chicago
|
· West
Plains
|
Wyoming
|
· Pondicherry
|
· Wuxi
|
|
· Decatur
|
Montana
|
· Bill
|
· Thiruvallur
|
· Xuzhou2
|
|
· Dixon
|
· Laurel
|
· Laramie
|
Indonesia
|
Poland
|
|
· East
Peoria
|
Nebraska
|
· Rock
Springs
|
· Bandung2
|
· Janow
Lubelski
|
|
· Granite
City
|
· Alliance
|
Outside
the U.S.
|
· Jakarta
|
· Radom1
|
|
· Joliet
|
· Gering
|
Australia
|
Italy
|
· Sosnowiec
|
|
· Mapleton
|
· Lincoln
|
· Burnie
|
· Anagni
|
Russia
|
|
· Mossville
|
· Northport
|
· Melbourne
|
· Atessa
|
· Tosno
|
|
· Peoria
|
· Sidney
|
· Wivenhoe
|
· Bazzano
|
Scotland
|
|
· Pontiac
|
· South
Morrill
|
Belgium
|
· Fano
|
· Aberdeen
|
|
· Sterling
|
Nevada
|
· Gosselies
|
· Frosinone
|
South
Africa
|
|
· Woodridge1
|
· Sparks
|
Brazil
|
· Jesi
|
· Boksburg
|
|
Indiana
|
North
Carolina
|
· Curitiba
|
· Marignano
|
Switzerland
|
|
· Charlestown
|
· Clayton
|
· Parana
|
· Milan
|
· Riazzino
|
|
· East
Chicago
|
· Franklin
|
· Piracicaba
|
· Minerbio
|
Tunisia
|
|
· Franklin
|
· Morganton
|
Canada
|
Japan
|
· Sfax
|
|
· Lafayette
|
· Sanford
|
· Edmonton
|
· Akashi1
|
|
|
· Zebulon
|
· Montreal
|
· Sagamihara1
|
||
| 1 | Facility of affiliated company (50 percent or less owned) |
| 2 | Facility of partially owned subsidiary (more than 50 percent, less than 100 percent) |
We have disclosed certain individual
legal proceedings in this filing. Additionally, we are involved in
other unresolved legal actions that arise in the normal course of business. The
most prevalent of these unresolved actions involve disputes related to product
design, manufacture and performance liability (including claimed asbestos and
welding fumes exposure), contracts, employment issues or intellectual property
rights. Although it is not possible to predict with certainty
the outcome of these unresolved legal actions we believe that these actions will
not individually or in the aggregate have a material adverse effect on our
consolidated financial position, liquidity or results of
operations.
On May 14, 2007, the U.S. Environmental
Protection Agency (EPA) issued a Notice of Violation to Caterpillar Inc.,
alleging various violations of Clean Air Act Sections 203, 206 and
207. EPA claims that Caterpillar violated such sections by shipping
engines and catalytic converter after-treatment devices separately, introducing
into commerce a number of uncertified and/or misbuilt engines, and failing to
timely report emissions-related defects. Caterpillar is currently
engaging in negotiations with EPA to resolve these issues, but it is too early
in the process to place precise estimates on the potential exposure to
penalties. However, Caterpillar is cooperating with EPA and, based
upon initial discussions, and although penalties could potentially exceed $100
thousand, management does not believe that this issue will have a material
adverse impact on our financial position.
On September 29,
2004, Kruse Technology Partnership (Kruse) filed a lawsuit against Caterpillar
in the United States District Court for the Central District of California
alleging that certain Caterpillar engines built from October 2002 to the present
infringe upon certain claims of three of Kruse's patents on engine fuel
injection timing and combustion strategies. Kruse seeks monetary
damages, injunctive relief and a finding that the alleged infringement by
Caterpillar was willful. Caterpillar denies Kruse's allegations,
believes they are without merit and filed a counterclaim seeking a declaration
from the court that Caterpillar is not infringing upon Kruse's patents and that
the patents are invalid and unenforceable. The counterclaim filed by
Caterpillar is pending, and no trial date is currently scheduled. In
the opinion of management, the ultimate disposition of this matter will not have
a material adverse effect on our consolidated financial position, liquidity or
results of operations.
Not
applicable.
| PART II |
|
Item
5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity
Securities.
|
Information required by Item 5 is
incorporated by reference from the “Management’s Discussion and Analysis” and
“Supplemental Stockholder Information” of Exhibit 13.
Non-U.S.
Employee Stock Purchase Plans
We have 30 employee stock purchase plans
administered outside the United States for our foreign employees. As
of December 31, 2007, those plans had approximately 11,600 participants in the
aggregate. During the fourth quarter of 2007, approximately 117,000
shares of Caterpillar common stock or foreign denominated equivalents were
distributed under the plans. Participants in some foreign plans have
the option of receiving non-U.S. share certificates (foreign-denominated
equivalents) in lieu of U.S. shares of Caterpillar common stock upon withdrawal
from the plan. These equivalent certificates are tradable only on the
local stock market and are included in our determination of shares
outstanding.
Page 17
Issuer
Purchases of Equity Securities
|
Period
|
Total
number
of
Shares
Purchased
|
Average
Price
Paid
per Share
|
Total
Number
of
Shares Purchased Under the Program
|
Approximate
Dollar Value of Shares that may yet be Purchased under the Program
(dollars in billions)
|
||||||||||
|
October 1-31,
2007
|
4,021,000
|
$
|
74.60
|
4,021,000
|
$
|
6.253
|
(1) | |||||||
|
November 1-30,
2007
|
3,081,000
|
71.41
|
3,081,000
|
6.033
|
(1) | |||||||||
|
December 1-31,
2007
|
5,531,000
|
72.31
|
5,531,000
|
5.633
|
(1) | |||||||||
|
Total
|
12,633,000
|
$
|
72.82
|
12,633,000
|
||||||||||
| (1) |
In February
2007, the Board of Directors authorized a $7.50 billion stock repurchase
program over the next five years, expiring on December 31, 2011. Through
December 31, 2007, all share repurchases were open market
purchases. In August 2007, the Board of Directors authorized
the use of derivative contracts for stock repurchases in addition to open
market purchases.
|
Other
Purchases of Equity Securities
|
Period
|
Total
number
of
Shares
Purchased(1)
|
Average
Price
Paid
per Share
|
Total
Number
of
Shares Purchased Under the Program
|
Approximate
Dollar Value of Shares that may yet be Purchased under the
Program
|
||||||||||
|
October 1-31,
2007
|
—
|
$
|
—
|
N/A
|
N/A
|
|||||||||
|
November 1-30,
2007
|
5,768
|
73.74
|
N/A
|
N/A
|
||||||||||
|
December 1-31,
2007
|
2,757
|
77.77
|
N/A
|
N/A
|
||||||||||
|
Total
|
8,525
|
$
|
75.05
|
|||||||||||
|
(1)
|
Represents shares delivered
back to issuer for the payment of taxes resulting from
the exercise of stock options by employees and
Directors
|
|||||||||||||
|
Item
6. Selected Financial
Data.
|
Information required by Item 6 is
incorporated by reference from the "Five-year Financial Summary" and
"Management’s Discussion and Analysis” of Exhibit 13.
Information
required by Item 7 is incorporated by reference from the “Management’s
Discussion and Analysis” of Exhibit 13.
This Management’s Discussion and
Analysis of Financial Condition and Results of Operations should be read in
conjunction with our discussion of cautionary statements and significant risks
to the company’s business under Item 1A. (Risk Factors and Cautionary Factors
That May Affect Future Results) of this Form 10-K.
Page 18
Information required by Item 7A appears
in Note 1 – “Operations and summary of significant accounting policies,” Note 3
–“Derivative financial instruments and risk management,” Note 19 – “Fair values
of financial instruments” and Note 20 – “Concentration of credit risk” of
Exhibit 13. Other information required by Item 7A is incorporated by
reference from the “Management’s Discussion and Analysis” of Exhibit
13.
Information required by Item 8 is
incorporated by reference from the “Report of Independent Registered
Public Accounting Firm” and from the “Financial Statements and Notes
to Consolidated Financial Statements” of Exhibit 13. Other
information required by Item 8 is included in "Computation of Ratios of Earnings
to Fixed Charges" filed as Exhibit 12 to this Form 10-K.
|
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
Not Applicable.
|
Item
9A. Controls and
Procedures
|
Disclosure
Controls and Procedures
Under the supervision and with the
participation of our management, including our chief executive officer and our
chief financial officer, we conducted an evaluation of our disclosure controls
and procedures; as such term is defined under Exchange Act Rule
13a-15(e). Based on this evaluation, our chief executive officer and
our chief financial officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this annual
report.
Management’s
Report on Internal Control Over Financial Reporting
The management of Caterpillar is
responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Our
internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial
statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Management assessed the effectiveness of the
company's internal control over financial reporting as of December 31, 2007. In
making this assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —
Integrated Framework. Based
on our assessment we concluded that, as of December 31, 2007, the company's
internal control over financial reporting was effective based on those
criteria.
The effectiveness
of the company's internal control over financial reporting as of December 31,
2007, has been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm. The report appears under the “Report of Independent
Registered Public Accounting Firm” of Exhibit 13.
Page 19
Changes in Internal Control
over Financial Reporting
During the last fiscal quarter, there
has been no significant change in the company's internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the company's internal control over financial
reporting.
Not Applicable.
Identification
of Directors and Business Experience
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
Identification
of Executive Officers and Business Experience
Information required by this Item
appears in Item 1C of this Form 10-K.
Family
Relationships
There are no family relationships
between the officers and directors of the company. All officers serve
at the pleasure of the board of directors and are elected annually at a meeting
of the board.
Legal
Proceedings Involving Officers and Directors
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
Audit
Committee Financial Expert
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
Identification
of Audit Committee
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
Stockholder
Recommendation of Board Nominees
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
Compliance
with Section 16(a) of the Exchange Act
Information required by this Item
relating to compliance with Section 16(a) of the Securities Exchange Act of 1934
is incorporated by reference from the 2008 Proxy Statement.
Code of
Ethics
Our Worldwide Code of Conduct (Code),
first published in 1974 and most recently amended in 2005, sets a high standard
for honesty and ethical behavior by every employee, including the principal
executive officer, principal financial officer, controller and principal
accounting officer. The Code is posted on our website at www.CAT.com/governance and is incorporated by reference as
Exhibit 14 to this Form 10-K. To obtain a copy of the Code at no
charge, submit a written request to the Corporate Secretary at 100 NE Adams
Street, Peoria, Illinois 61629-7310. We will post on our
website any required amendments to or waivers granted under our Code pursuant to
SEC or New York Stock Exchange disclosure rules.
Page 20
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
|
Item
12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder
Matters.
|
Information required by this Item
relating to security ownership of certain beneficial owners and management is
incorporated by reference from the 2008 Proxy Statement.
Information
required by this item relating to securities authorized for issuance under
equity compensation plans is included in the following table:
|
Equity
Compensation Plan Information
(as
of December 31, 2007)
|
||||||||||
|
|
(a)
|
(b)
|
(c)
|
|||||||
|
Plan
category
|
Number of securities to be
issued upon exercise of outstanding options, warrants and rights1
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||||||
|
Equity
compensation plans approved by
security holders
|
62,609,222
|
$42.1844
|
31,630,499
|
|||||||
|
Equity
compensation plans not approved
by security holders
|
n/a
|
n/a
|
n/a
|
|||||||
|
Total
|
62,609,222
|
$42.1844
|
31,630,499
|
|||||||
| 1 |
Excludes any
cash payments in-lieu-of stock.
|
|||||||||
|
Item
13. Certain Relationships and Related Transactions, and Director
Independence.
|
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
Information required by this Item is
incorporated by reference from the 2008 Proxy Statement.
Page 21
| PART IV |
|
Item
15. Exhibits and Financial Statement
Schedules.
|
(a) The following documents are incorporated
by reference from Exhibit 13:
1. Financial
Statements:
|
·
|
Report of Independent Registered
Public Accounting Firm
|
|
·
|
Statement 1
- Consolidated Results of
Operations
|
|
·
|
Statement 2
- Consolidated Financial
Position
|
|
·
|
Statement 3 - Changes
in Consolidated Stockholders'
Equity
|
|
·
|
Statement 4
- Consolidated Statement of Cash
Flow
|
|
·
|
Notes to Consolidated Financial
Statements
|
2. Financial Statement
Schedules:
|
·
|
All
schedules are omitted because the required information is shown in the
financial statements or the notes thereto incorporated by reference from
Exhibit 13 or considered to be immaterial.
|
|
(b)
|
Exhibits:
|
|
|
3.1
|
Restated
Certificate of Incorporation (incorporated by reference from Exhibit 3(i)
to the Form 10-Q filed for the quarter ended March 31,
1998).
|
|
|
3.2
|
Bylaws amended
and restated as of February 11, 2004 (incorporated by reference from
Exhibit 3.3 to the Form 10-Q filed for the quarter ended March 31,
2004).
|
|
|
4.1
|
Indenture
dated as of May 1, 1987, between the Registrant and The First
National Bank of Chicago, as Trustee (incorporated by reference from
Exhibit 4.1 to Form S-3 (Registration No. 333-22041) filed
February 19, 1997).
|
|
|
4.2
|
First
Supplemental Indenture, dated as of June 1, 1989, between Caterpillar
Inc. and The First National Bank of Chicago, as Trustee (incorporated by
reference from Exhibit 4.2 to Form S-3 (Registration
No. 333-22041) filed February 19, 1997).
|
|
|
4.3
|
Appointment of
Citibank, N.A. as Successor Trustee, dated October 1, 1991, under the
Indenture, as supplemented, dated as of May 1, 1987 (incorporated by
reference from Exhibit 4.3 to Form S-3 (Registration
No. 333-22041) filed February 19, 1997).
|
|
|
4.4
|
Second
Supplemental Indenture, dated as of May 15, 1992, between Caterpillar
Inc. and Citibank, N.A., as Successor Trustee (incorporated by reference
from Exhibit 4.4 to Form S-3 (Registration No. 333-22041)
filed February 19, 1997).
|
|
|
4.5
|
Third
Supplemental Indenture, dated as of December 16, 1996, between
Caterpillar Inc. and Citibank, N.A., as Successor Trustee (incorporated by
reference from Exhibit 4.5 to Form S-3 (Registration
No. 333-22041) filed February 19, 1997).
|
|
|
4.6
|
Tri-Party
Agreement, dated as of November 2, 2006, between Caterpillar Inc.,
Citibank, N.A. and U.S. Bank National Association appointing U.S. Bank as
Successor Trustee under the Indenture dated as of May 1, 1987, as
amended and supplemented (incorporated by reference from Exhibit 4.6 to
the 2006 Form 10-K).
|
|
|
10.1
|
Caterpillar
Inc. 1996 Stock Option and Long-Term Incentive Plan amended and restated
through third amendment.
|
|
|
10.2
|
Caterpillar
Inc. 2006 Long-Term Incentive Plan as amended and restated through third
amendment.
|
|
|
10.3
|
Supplemental
Pension Benefit Plan, as amended and restated January 2003 (incorporated
by reference from Exhibit 10.3 to the 2004 Form 10-K).
|
|
|
10.4
|
Supplemental
Employees' Investment Plan, as amended and restated through December 1,
2002 (incorporated
by reference from Exhibit 10.4 to the 2002 Form
10-K).
|
|
Page 22
|
10.5
|
Caterpillar
Inc. Executive Incentive Compensation Plan, effective as of January 1,
2002 (incorporated
by reference from Exhibit 10.5 to the 2002 Form
10-K).
|
|
|
10.6
|
Directors'
Deferred Compensation Plan, as amended and restated through January 1,
2005 (incorporated by reference from Exhibit 10.6 to the 2006 Form
10-K).
|
|
|
10.7
|
Directors'
Charitable Award Program (incorporated by reference from Exhibit 10(h) to
the 1993 Form 10-K).
|
|
|
10.8
|
Deferred
Employees' Investment Plan, as amended and restated through February 16,
2005 (incorporated by reference as Exhibit 10.8 to the 2005 Form
10-K).
|
|
|
10.9
|
Five year
Credit Agreement dated September 21, 2006 among Caterpillar Inc.,
Caterpillar Financial Services Corporation, Caterpillar International
Finance p.l.c and Caterpillar Finance Corporation, certain financial
institutions named therein, Citibank, N.A., The Bank of Tokyo-Mitsubishi
UFJ, Ltd., Citibank International p.l.c., ABN AMRO Bank N.V., Bank of
America, N.A., Barclays Bank PLC, J.P. Morgan Securities, Inc., Société
Générale and Citigroup Global Markets Inc. (incorporated by reference from
Exhibit 99.1 to Form 8-K filed September 26, 2006).
|
|
|
10.10
|
Japan Local
Currency Addendum to the Five year Credit Agreement dated September 21,
2006 among Caterpillar Financial Services Corporation, Caterpillar Finance
Corporation, the Japan Local Currency Banks named therein, Citibank, N.A.,
and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (incorporated by reference from
Exhibit 99.2 to Form 8-K filed September 26,
2006).
|
|
|
10.11
|
Local Currency
Addendum to the Five year Credit Agreement dated September 21, 2006 among
Caterpillar Financial Services Corporation, Caterpillar International
Finance p.l.c., the Local Currency Banks named therein, Citibank,
N.A., and Citibank International plc (incorporated by reference
from Exhibit 99.3 to For 8-K filed September 26, 2006).
|
|
|
10.12
|
Five year
Credit Agreement dated September 20, 2007 among Caterpillar Inc.,
Caterpillar Financial Services Corporation and Caterpillar Finance
Corporation, certain financial institutions named therein, Citibank, N.A.,
The Bank of Tokyo-Mitsubishi UFJ, Ltd., ABN AMRO Bank N.V., Bank of
America, N.A., Barclays Bank PLC, J.P. Morgan Securities, Inc., Société
Générale and Citigroup Global Markets Inc. (incorporated by reference from
Exhibit 99.1 to Form 8-K filed September 25, 2007).
|
|
|
10.13
|
Japan Local
Currency Addendum to the Five year Credit Agreement dated September 20,
2007 among Caterpillar Financial Services Corporation, Caterpillar Finance
Corporation, the Japan Local Currency Banks named therein, Citibank, N.A.
and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (incorporated by reference from
Exhibit 99.2 to Form 8-K filed September 25,
2007).
|
|
|
11
|
Computations
of Earnings per Share.
|
|
|
12
|
Computation of
Ratios of Earnings to Fixed Charges.
|
|
|
13
|
General and
Financial Information for 2007 containing the information required by SEC
Rule 14a-3 for an annual report to security holders.
|
|
|
14
|
Caterpillar
Worldwide Code of Conduct (incorporated by reference from Exhibit 14 to
the 2005 Form 10-K).
|
|
|
21
|
Subsidiaries
and Affiliates of the Registrant.
|
|
|
23
|
Consent of
Independent Registered Public Accounting Firm.
|
|
|
31.1
|
Certification
of James W. Owens, Chairman and Chief Executive Officer of Caterpillar
Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
|
31.2
|
Certification
of David B. Burritt, Vice President and Chief Financial Officer of
Caterpillar Inc., as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
32
|
Certification
of James W. Owens, Chairman and Chief Executive Officer of Caterpillar
Inc. and David B. Burritt, Vice President and Chief Financial Officer of
Caterpillar Inc., as required pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
99.1
|
Annual CEO
certification to the New York Stock Exchange for fiscal year
2007.
|
Page 23
|
Form 10-K
SIGNATURES
|
|||||||
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|||||||
|
CATERPILLAR
INC.
(Registrant)
|
|||||||
|
February 22,
2008
|
By:
|
/s/James
B. Buda
|
|||||
|
James B.
Buda, Secretary
|
|||||||
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
|
|||||||
|
February 22,
2008
|
/s/James W.
Owens
|
Chairman of the Board,
Director
and Chief Executive
Officer
|
|||||
|
(James W.
Owens)
|
|||||||
|
February 22,
2008
|
/s/Richard P.
Lavin
|
Group
President
|
|||||
|
(Richard P.
Lavin)
|
|||||||
|
February 22,
2008
|
/s/Stuart L.
Levenick
|
Group
President
|
|||||
|
(Stuart L.
Levenick)
|
|||||||
|
February 22,
2008
|
/s/Douglas R.
Oberhelman
|
Group
President
|
|||||
|
(Douglas R.
Oberhelman)
|
|||||||
|
February 22,
2008
|
/s/Edward J.
Rapp
|
Group
President
|
|||||
|
(Edward J.
Rapp)
|
|||||||
|
February 22,
2008
|
/s/Gerard R.
Vittecoq
|
Group
President
|
|||||
|
(Gerard R.
Vittecoq)
|
|||||||
|
February 22,
2008
|
/s/Steven H.
Wunning
|
Group
President
|
|||||
|
(Steven H.
Wunning)
|
|||||||
|
February 22,
2008
|
/s/David B.
Burritt
|
Chief Financial
Officer
and Vice
President
|
|||||
|
(David B.
Burritt)
|
|||||||
|
February 22,
2008
|
/s/Bradley M.
Halverson
|
Controller
|
|||||
|
(Bradley M.
Halverson)
|
|||||||
|
February 22,
2008
|
/s/Jananne A.
Copeland
|
Chief Accounting
Officer
|
|||||
|
(Jananne A.
Copeland)
|
|||||||
Page 24
|
February
22, 2008
|
/s/W. Frank
Blount
|
Director
|
|
|
(W. Frank
Blount)
|
|||
|
February
22, 2008
|
/s/John R.
Brazil
|
Director
|
|
|
(John R.
Brazil)
|
|||
|
February 22, 2008
|
/s/Daniel M.
Dickinson
|
Director
|
|
|
(Daniel M.
Dickinson)
|
|||
|
February
22, 2008
|
/s/John T.
Dillon
|
Director
|
|
|
(John T.
Dillon)
|
|||
|
February
22, 2008
|
/s/Eugene V.
Fife
|
Director
|
|
|
(Eugene V.
Fife)
|
|||
|
February
22, 2008
|
/s/Gail D.
Fosler
|
Director
|
|
|
(Gail D.
Fosler)
|
|||
|
February
22, 2008
|
/s/Juan
Gallardo
|
Director
|
|
|
(Juan
Gallardo)
|
|||
|
February
22, 2008
|
/s/David R.
Goode
|
Director
|
|
|
(David R.
Goode)
|
|||
|
February
22, 2008
|
/s/Peter A.
Magowan
|
Director
|
|
|
(Peter A.
Magowan)
|
|||
|
February
22, 2008
|
/s/William A.
Osborn
|
Director
|
|
|
(William A.
Osborn)
|
|||
|
February
22, 2008
|
/s/Charles D.
Powell
|
Director
|
|
|
(Charles D.
Powell)
|
|||
|
February
22, 2008
|
/s/Edward B. Rust,
Jr.
|
Director
|
|
|
(Edward B. Rust,
Jr.)
|
|||
|
February
22, 2008
|
/s/Joshua I.
Smith
|
Director
|
|
|
(Joshua I.
Smith)
|
Page 25