ground
COMMONSTRENGTHS WE SHARE AROUND THE WORLD

2013 YEAR IN REVIEW

ground
COMMON

Strengths We Share Around the World
Quality that Sets World-Class Standards
We’ve built a global reputation for quality products that help keep our customers
working day in and day out. It’s the basis of our value proposition to them andwhy they stand to be more proﬁ table with a Cat product than with one from ourcompetition. Read more on page 9.

A Network that Always Has Our BackThroughout our history, the relationship between Caterpillar and our vast
independent dealer network has been a critical competitive differentiator forour business. Today, this relationship is continuing to evolve to ensure that we
provide our customers with the support they need. Read more on page 16.

Markets that Make the World Go ‘RoundCat ® products and solutions help perform all types of jobs around the world,from constructing roads and airports to mining commodities to powering ships
and towns. It’s hard to think of a business that serves more essential end markets
and customers. Read more on page 22.

Better Ways to Do a Better Job
The Caterpillar Production System (CPS) provides our global manufacturing
operations with a common platform to achieve consistent quality and cost aroundthe world. Now, the Caterpillar Enterprise System Group is helping us engineer
a new end-to-end Lean value chain. Read more on page 29.

A Plan to Point Us in the Right Direction
Our Vision 2020 strategy keeps us focused on our customers and committed to
our Business Model. When we stick to our Enterprise Strategy, Caterpillar andour customers win. Read more on page 35.

Good Deeds that Serve the Greater GoodWe manufacture heavy equipment and we wear hard hats, but we also have amuch softer side as evidenced by the generosity of our people. Around the world,
Caterpillar and our people give back to the communities where we live and work.
Our legal team is a great example. Read more on page 40.

Long-Term Fundamentals that Go the DistanceOur brands stand for it, our products are built for it and our business is managed
for it. We’re talking about solid long-term business fundamentals, and there’s nobetter example than our participation in the mining sector. Read more on page 46.

Table of Contents

2
Chairman’s Message
Chairman & Chief Executive Ofﬁcer
Doug Oberhelman shares his thoughts
on our performance in 2013 and where
we’re headed in the future.

4
LeadershipA look at the executive management
team and Board of Directors who leadour company.

8
Segments
An overview of our business segments,
thoughts from our leadership on current
business topics and some of thecompelling stories from the year.

55

51

CONSOLIDATED SALES AND REVENUES ($ IN MILLIONS)$32,396$42,588$60,138$65,875$55,656

2009

2010

2011

2012

2013

Performance
A summary of our ﬁnancial
performance in 2013 andother fast facts about ourbusiness and operations.

Caterpillar At-A-Glance60

An overview of our global operations.

The Caterpillar Foundation
A look at how the Caterpillar Foundation
makes sustainable progress possible.

CATERPIL L AR INC.

2013 YEAR IN REVIEW

1“ The strengths we share – our common ground – remain Our Values in Action.”
DOUG OBERHELMAN, CHAIRMAN & CEO

From Left to Right: Jim Buda, Law and Public Policy; Steve Wunning, Resource Industries; Stu Levenick, Customer & Dealer Support; Doug Oberhelman, Chairman & CEO;
Brad Halverson, Financial Products & Corporate Services; Jim Umpleby, Energy & Power Systems; Dave Bozeman, Caterpillar Enterprise System Group; Ed Rapp,
Construction Industries

Chairman’s Message
In uncertain times, it is the shared strengths and resolve of a community that determine the course of history. This is true
whether it be a family, a country or a company. And for us, the people of Caterpillar, the strengths we share – our common
ground – remain Our Values in Action.
proﬁ t near its 2012 record despite lower sales. In addition, our Financial
Products segment achieved a record proﬁ t. So while we saw a top
line sales decline in 2013 – and nobody likes that, especially me – theperformance of our people and the balance in our business helped us
reduce the proﬁ t impact of lower sales.

Certainly, we’ll all remember 2013 as a challenging year. But it was atime of solid accomplishments as well, and right at the top of the list is
the performance by our people resulting in the strongest balance sheet
we’ve had in more than 25 years. Despite a sales and revenues decline
of about $10 billion, we set a record for Machinery and Power Systems(M&PS) operating cash ﬂow, strengthened our balance sheet andimproved our overall market position for machines, including strong
gains for excavators in China – all outstanding successes. But getting
here wasn’t fun. And it wasn’t easy, especially for our employees who
endured an incredibly tough year.

So what does our 2013 performance mean? Well, a strong balance
sheet means we can weather a storm and grow the company, and ofcourse it affords returns to shareholders. We recently announced a new$10 billion stock repurchase program – an indicator of our conﬁdence inthe long-term future of Caterpillar. Our increased market share aroundthe world results in thousands more machines in the ﬁeld, affording ourdealer network the opportunity to sell more parts and service. That’s
a tremendous accomplishment.

The good news is our performance in 2013 demonstrated the balance inour business that helped us withstand divergent economic cycles. In ayear overshadowed by a substantial decline in sales of relatively highmargin mining products, our largest segment, Power Systems, delivered

CATERPIL L AR INC.

2013 YEAR IN REVIEW

2YEARS

25

Strongest balance
sheet in 25 years
Our commitment to sustainability extends beyond helping protect theenvironment. We also recognize an obligation to our people and thecommunities where we live and work. This isn’t something new. The
Caterpillar Foundation has been around since 1952, and has invested
more than $550 million to provide support for not only environmental
sustainability, but also access to education, basic human needs andemergency relief. It’s a legacy we can all be proud of.

From an operational perspective, we have continued to make
improvements in safety and quality. This is something I’m particularly
proud of. We’ve been on a safety journey for nearly 15 years now. Since
2001, we’ve moved from the bottom in the rankings of safe places towork, to being a global leader in safety. We remain vigilant about safety
and our ultimate goal is zero injuries. Likewise, quality is absolutely
essential to living our brand promise. Our products are built to last, andthrough our disciplined execution of Lean and leveraging our Caterpillar
Production System (CPS), we are holding ourselves accountable to thatstandard. It’s working. Nearly every day, I hear from dealers and customers who say we have the best product line we’ve had in decades.

“We’ve made good progress overthe past few years in our operational
performance – safety, quality, market
share and costs.“

Of course, with these successes comes responsibility. I’m very
pleased to announce that in early 2014, we added Sustainability
to Our Values in Action, clearly stating our responsibility to produce
sustainable solutions. Raising sustainability to a stand-alone value
acknowledges both what we have done in the past and will do in
the future.

What will 2014 hold for Caterpillar? We see some signs of improvement in
the world economy and anticipate 2014 sales and revenues will besimilar to 2013. Although there’s a lot of uncertainty in the industries
we serve, especially mining, I feel optimistic. We’ve made good progressover the past few years in our operational performance – safety, quality,
market share and costs – and I’m conﬁdent that we are well-positioned
for much better ﬁnancial results when economic conditions and the key
industries we serve improve. Despite the challenges that may lay ahead,
the successes we achieved in 2013 and the commitment of our people
will serve us well in 2014 and beyond.

For instance, our new Tier 4 designs promise customers better fuelefﬁciency and productivity, allowing them to leave a smaller environmental footprint. It’s important to the world, it’s important to our customers and it’s important to us. We think about it every day. Anotherexample is our Reman – remanufactured parts – business, where we
return end-of-life components to like-new condition. This business
reduces waste in landﬁlls and minimizes the need for raw materials to
produce new parts by keeping nonrenewable resources in circulation
longer. At the same time, remanufacturing allows us to provide costeffective options for our customers.

Doug Oberhelman
Caterpillar Inc. Chairman & CEO

CATERPIL L AR INC.

2013 YEAR IN REVIEW

3

From Left to Right: Ed Rapp, Construction Industries; Jim Umpleby, Energy & Power Systems; Doug Oberhelman, Chairman & CEO; Brad Halverson, Financial
Products & Corporate Services; Dave Bozeman, Caterpillar Enterprise System Group; Steve Wunning, Resource Industries; Jim Buda, Law and Public Policy;
Stu Levenick, Customer & Dealer Support

Executive Ofﬁcers
Douglas R. Oberhelman
Chairman & Chief Executive Ofﬁcer

James B. Buda
Executive Vice President, Law and Public Policy& Chief Legal Ofﬁcer

Doug Oberhelman joined Caterpillar in 1975 and was elected a vicepresident in 1995. In 2001, he was elected a group president andbecame a member of Caterpillar’s Executive Ofﬁce. In October 2009,
the Caterpillar Board of Directors named Oberhelman vice chairman
and CEO-elect. During this time, he led a team that developed thefuture strategic plan for the company. Oberhelman was elected chief
executive ofﬁcer and a member of the Board of Directors effective
July 1, 2010, and became chairman effective November 1, 2010.

Jim Buda is an executive vice president with responsibility for the
Law and Public Policy Division at Caterpillar Inc., which includes theLegal Services and Global Government & Corporate Affairs Divisions.
Buda is also chief legal ofﬁcer of Caterpillar Inc. and joined the company
in 1987.

Bradley M. Halverson
Group President & Chief Financial Ofﬁcer

David P. Bozeman
Senior Vice President

Brad Halverson is a group president with responsibility for Caterpillar’sFinancial Products Division and Corporate Services, which includes
the Finance Services, Human Services, Global Information Services
and Strategic Services Divisions, as well as Corporate Accounting.
Halverson is also chief ﬁnancial ofﬁcer of Caterpillar Inc. and joined
the company in 1988.

Dave Bozeman is a senior vice president with responsibility for theCaterpillar Enterprise System Group. The new order-to-delivery organization was formed in 2013 and brings together critical processes andsupport groups to further improve our manufacturing and supply chain
capabilities worldwide. Bozeman joined Caterpillar in 2008.

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2013 YEAR IN REVIEW

4

Stuart L. Levenick
Group President

D. James Umpleby, III
Group President

Stu Levenick is a group president with responsibility for Customer& Dealer Support at Caterpillar Inc., which includes the Europe/Africa/
Middle East, Americas and Asia Paciﬁc Distribution, Remanufacturing,
Components & Work Tools and Customer Services Support Divisions.
Levenick joined Caterpillar in 1977.

Jim Umpleby is a group president with responsibility for Energy & Power
Systems at Caterpillar Inc., which includes the Marine & Petroleum Power,
Electric Power, Industrial Power Systems and Large Power Systems
Divisions, Progress Rail Services and Solar Turbines. Umpleby joined
Solar Turbines Inc., a wholly-owned subsidiary of Caterpillar Inc. basedin San Diego, in 1980.

Edward J. Rapp
Group President

Steven H. WunningGroup President

Ed Rapp is a group president with responsibility for Construction Industries
at Caterpillar Inc., which includes the Earthmoving, Excavation, Building
Construction Products, China Operations, Europe/South America
Operations and Global Construction & Infrastructure Divisions. He
is currently located in Singapore. Rapp joined Caterpillar in 1979.

Steve Wunning is a group president with responsibility for Resource
Industries at Caterpillar Inc., which includes the Advanced Components &Systems, Diversiﬁed Products, Integrated Manufacturing Operations,
Mining Sales & Support, Mining Products and Product Development &Global Technology Divisions. Wunning joined Caterpillar in 1973.

Ofﬁcers
Chairman of the Board& Chief Executive Ofﬁcer
Douglas R. Oberhelman

Group Presidents
Bradley M. Halverson
Stuart L. Levenick
Edward J. Rapp
D. James Umpleby, III
Steven H. Wunning

Executive Vice President,
Law and Public Policy &Chief Legal Ofﬁcer
James B. Buda

Senior Vice President
David P. Bozeman

Vice Presidents
Kent M. Adams
William P. Ainsworth
Mary H. BellThomas J. BluthRobert B. Charter
Qihua Chen
Frank J. Crespo
Christopher C. Curfman

Michael L. DeWalt
Paolo Fellin
William E. Finerty
Steven L. Fisher*
Gregory S. Folley
Thomas G. Frake
Stephen A. Gosselin
Hans A. Haefeli
Kimberly S. Hauer
Gwenne A. Henricks
Denise C. Johnson
James W. Johnson
Kathryn D. Karol
Pablo M. Koziner
Randy M. Krotowski
Julie A. Lagacy
Stephen P. Larson*
Nigel A. Lewis
Steven W. Niehaus
Thomas A. PelletteWilliam J. Rohner*
Mark E. Sweeney
Tana L. Utley
Karl E. Weiss
Ramin Younessi

Treasurer
Edward J. Scott

Chief Audit Ofﬁcer
Amy A. Campbell

Chief Ethics andCompliance Ofﬁcer
Christopher C. Spears

Corporate Controller
Jill E. Daugherty

Chief Accounting Ofﬁcer
Jananne A. Copeland

Corporate Secretary
Christopher M. Reitz

Assistant Treasurer
Robin D. Beran

Assistant Secretary
Joni J. Funk
Nick G. Holcombe

Chief Financial Ofﬁcer
Bradley M. Halverson

CATERPIL L AR INC.

* Retired in 20132013 YEAR IN REVIEW

5

From Left to Right: Edward B. Rust, Jr.; Jesse J. Greene, Jr.; Charles D. Powell; Susan C. Schwab; Peter A. Magowan; Miles D. White; David R. Goode; Juan Gallardo;
David L. Calhoun; Douglas R. Oberhelman; Jon M. Huntsman, Jr.; William A. Osborn; Joshua I. Smith; Daniel M. Dickinson; Dennis A. Muilenburg

Board of Directors
DAVID L. CALHOUN, 56, is Senior Managing Director and HeadJUAN GALLARDO, 66 , is currently Chairman of the Board,of Private Equity Portfolio Operations of Blackstone Group LP (private
equity ﬁ rm) since January 2014. He also serves as Executive Chairman of the Board of The Nielsen Company B.V (marketing and media
information) since January 2014. Prior to his position at Blackstone,
Mr. Calhoun served as Chief Executive Ofﬁcer of Nielsen Holdings
N.V. (2010–2013) and Vice Chairman of General Electric Company andPresident and Chief Executive Ofﬁcer of GE Infrastructure (2005–2006).
Other current directorships: The Boeing Company. Other directorships
within the last ﬁ ve years: Medtronic, Inc. Mr. Calhoun has been a
director since 2011.

Organizacion CULTIBA (holding company of Grupo Gepp and Grupo
Azucarero Mexico) and Chairman of Grupo GEPP S.A.P.I. de C.V.
(Pepsicola bottling group and its brands in Mexico. Other current
directorships: Lafarge SA and Grupo Financiero Santander S.A.B.
de C.V. Mr. Gallardo has been a director since 1998.

JESSE J. GREENE, JR., 68, is currently an instructor at Columbia
Business School in New York City where he teaches corporate governance, risk management and other business topics at the graduate andexecutive education levels. He was formerly Vice President of Financial
Management and Chief Financial Risk Ofﬁcer of International Business
Machines Corporation (computer and ofﬁce equipment). Mr. Greene
has been a director since 2011.

DANIEL M. DICKINSON, 52 , is currently Managing Partnerof HCI Equity Partners (private equity investment). Other current
directorships: Mistras Group, Inc. and HCI Equity Partners. Other
directorships within the last ﬁ ve years: Progressive Waste Solutions
Ltd. Mr. Dickinson has been a director since 2006.

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2013 YEAR IN REVIEW

6

JON M. HUNTSMAN, JR., 53, is former United States Ambassador

SUSAN C. SCHWAB, 58, is currently a Professor at the University

to China (2009–2011) and former governor of Utah (2005–2009). Other
current directorships: Chevron Corporation, Ford Motor Company andHuntsman Corporation. Mr. Huntsman has been a director since 2012.

of Maryland School of Public Policy and a Strategic Advisor for Mayer
Brown LLP. Prior to her current positions, Ambassador Schwab held
various positions including United States Trade Representative (memberof the President’s cabinet) and Deputy United States Trade Representative. Other current directorships: FedEx Corporation and The
Boeing Company. Ambassador Schwab has been a director since 2009.

PETER A. MAGOWAN, 71, was formerly President and Managing
General Partner (1993–2008) of the San Francisco Giants (major league
baseball team) and Chairman (1980–1998) and Chief Executive Ofﬁcer(1980–1993) of Safeway Inc. (food retailer). Mr. Magowan has been a
director since 1993.

MILES D. WHITE, 58, is currently Chairman and Chief Executive
Ofﬁcer of Abbott Laboratories (pharmaceutical and medical products).
Other current directorships: McDonald’s Corporation. Mr. White has
been a director since 2011.

DENNIS A. MUILENBURG, 49, has been Vice Chairman, President
and Chief Operating Ofﬁcer of The Boeing Company (aerospace/defense products and services) since December 2013. Prior to hiscurrent position, Mr. Muilenburg was Executive Vice President of The
Boeing Company and President and Chief Executive Ofﬁcer of Boeing
Defense, Space & Security (2009–2013); President of Boeing Global
Services & Support (2008–2009); and Vice President and General
Manager of the Boeing Combat Systems division (2006-2008). Mr.
Muilenburg has been a director since 2011.

Additional directors in 2013,
retired as of December 31, 2013
DAVID R. GOODE, 72 , was formerly Chairman, President and CEO
of Norfolk Southern Corporation (holding company engaged principallyin surface transportation). Other current directorships: Delta Air Lines,
Inc. and Texas Instruments Incorporated. Mr. Goode had been a director
since 1993.

DOUGLAS R. OBERHELMAN, 60, is currently Chairman andChief Executive Ofﬁcer of Caterpillar Inc. Prior to his current position,
Mr. Oberhelman served as Vice Chairman and Chief Executive OfﬁcerElect and as a Group President of Caterpillar Inc. Other current
directorships: Eli Lilly and Company. Other directorships within thelast ﬁ ve years: Ameren Corporation. Mr. Oberhelman has been a
director since 2010.

CHARLES D. POWELL, 72 , is currently Chairman of Capital
Generation Partners (asset and investment management), LVMH
Services Limited (luxury goods) and Magna Holdings (real estate
investment). Prior to his current positions, Lord Powell was Chairmanof Sagitta Asset Management Limited (asset management). Other
current directorships: LVMH Moët-Hennessy Louis Vuitton andTextron Inc. Lord Powell had been a director since 2001.

WILLIAM A. OSBORN, 66, was formerly Chairman and CEO of
Northern Trust Corporation (multibank holding company) and The
Northern Trust Company (bank). Other current directorships: Abbott
Laboratories and General Dynamics Corporation. Other directorships
within the last ﬁ ve years: Tribune Company. Mr. Osborn has been a
director since 2000.

JOSHUA I. SMITH, 72, is currently Chairman and Managing Partnerof the Coaching Group, LLC (management consulting). Other current
directorships: Comprehensive Care Corporation, FedEx Corporation
and The Allstate Corporation. Other directorships within the lastﬁ ve years: CardioComm Solutions Inc. Mr. Smith had been a director
since 1993.

EDWARD B. RUST, JR., 63 , is currently Chairman, CEO andPresident of State Farm Mutual Automobile Insurance Company(insurance). He is also President and CEO of State Farm Fire andCasualty Company, State Farm Life Insurance Company and otherprincipal State Farm afﬁ liates as well as Trustee and President ofState Farm Mutual Fund Trust and State Farm Variable Product Trust.
Other current directorships: Helmerich & Payne, Inc. and McGraw-Hill
Financial, Inc. Mr. Rust has been a director since 2003.

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2013 YEAR IN REVIEW

7

CONSTRUCTION INDUSTRIES
Construction Industries is built to support customers using machinery in infrastructure and building construction
applications. Responsibilities include business strategy, product design, product management and development,
manufacturing, marketing and sales and product support. The product portfolio includes backhoe loaders; compact,
small and medium wheel loaders; small and medium track-type tractors; skid steer loaders; multi-terrain loaders;compact track loaders; mini, small, medium and large track excavators, wheel excavators; motor graders; selectwork tools and pipe layers.

Sales

Segment Proﬁt($ in millions)($ in millions)$19,334$18,445$1,789$1,363

2012

2013

2012

2013

2013 Sales by Geography($ in millions)North America $7,008
Asia-Paciﬁc $4,690
EAME $4,019
Latin America $2,728

CATERPIL L AR INC.

2013 YEAR IN REVIEW

8COMMON GROUND

Gaining
Market Sharethrough Quality
A Conversation with Ed Rapp, Group President

And it’s through that feedback from customers that we get a good
sense of our strengths – the things that we’re doing right and needto continue – and other areas of opportunity. I’d say the biggest riskin this job is isolation, and the way to break through that is to engage
directly with customers and get their feedback.

What were your successes and challenges during 2013?
I feel really good about how our group is positioned coming out of 2013.
We had many challenges relative to the industry – business conditions,managing inventory and other things. But as I look at the foundation
we’ve collectively built, the health of our product line, the progress
we’re making in critical markets and the gains we’re making relative
to market share, I have great conﬁ dence going into 2014. We are
well-positioned for additional successes in the years to come.

What sort of quality trends has Construction Industries experienced
in recent years?
Quality trends have been good over the last number of years. Whatmakes that even more remarkable is that we’ve seen improving trends
in our quality during one of the more challenging periods of new productintroduction, as we have launched Tier 4 product in developed parts of
the world. It was incredibly challenging to deliver emissions levels thathave never been achieved before, while also improving fuel efﬁciency
and doing so at better quality levels. Sometimes people underestimate
the signiﬁcance of Tier 4 – better quality, better emissions, better fuelefﬁciency – it really does show the power of systems integration,
the power of Caterpillar.

From a competitive perspective, how does quality factor into
Caterpillar winning business?
Our value proposition is based on the belief that our customers will
make more money with Cat ® equipment than they would with ourcompetitors’ equipment. Quality is a key component of that proposition
because customers can only make money when their equipment is
in operation. Our products tend to operate as part of a system – anexcavator loading a truck or a wheel loader loading a hopper. So if
one Cat ® machine goes down, the customer’s whole operation could
potentially go down. There is no Caterpillar value proposition without
quality products and quality service. No matter where our customers
are located around the world, the expectation of quality is always
the same. So for us, quality is the price of admission.

Beyond quality, what factors are driving success for Caterpillar?
The primary factor is the strength of the Cat product portfolio. The
depth and breadth of that line is a key part of our strength – from thesmallest machines to the largest mining equipment, from generators
to engines that power ocean-going vessels. It’s a testament to the factthat building machinery at Caterpillar is a team sport – a collaboration
between product, component and service groups, coupled with feedback and engagement from customers. All of these players work jointly
in terms of product development, and help us create solutions thatmeet customer requirements.

What are the most effective measures of quality?
As I think about quality, I always remember “only the paranoid prevail,”and so we’re on top of metrics on a regular basis; we have internal
metrics and metrics from our dealers that we review daily. But I alsomeasure quality in terms of the feedback we get as we travel and visit
with dealers and with customers. I often ask the question, “What are
the things we’re doing that you really like and what are the things
we’re doing that need to get better?”

CATERPIL L AR INC.

This collaborative environment at Caterpillar is better than it has ever
been, allowing us to deliver more quality products today than ever before.

2013 YEAR IN REVIEW

9CONSTRUCTION INDUSTRIESA Deeper Understandingof the Customer

In the second year of the program, Chad Jessen, senior equipment
manager for Kiewit, spent a year at Caterpillar rotating through four
different divisions, while Caterpillar’s Darren Knutson spent a year
rotating assignments at Kiewit. Both Jessen and Knutson’s experienceswere built on a common focus: technology-enabled solutions.

It’s not that often that a company gets to truly experience the “insand outs” of its customers on a daily basis. But we’re doing just that atCaterpillar and taking the meaning of “understanding the customer” toa whole new level. For the past two years, Caterpillar has collaborated
with Kiewit – one of our large North America-based customers – in arotational job exchange opportunity.

“If our customers are successful, we will be successful,” says Knutson.
“The value of our relationship with Kiewit is about much more thansales; it is about the relationship and both parties working toward
common goals geared toward technological advances in the markets
we serve.”

The idea of a job exchange stemmed from Caterpillar Vice President
Tom Bluth who was looking for an opportunity to develop Caterpillar
engineers with a more profound focus on the customer.
“The start of the program grew out of our desire to drive a deeper
understanding of our customers and also enhance the developmentof our key leaders,” says Bluth.

While working with Caterpillar, Jessen also had the opportunity toparticipate in Caterpillar’s Executive Leadership Program.
“My time with Caterpillar was such a unique experience. There wereso many takeaways,” says Jessen. “Being provided the opportunity to
see a world-class operation like Caterpillar and get behind the curtain
to not only help Caterpillar be more successful by passing on knowledge of what we believe, as the customer, but also to learn what they’reworking on that Kiewit can take advantage of was invaluable.”

Tim Graham, who is now Caterpillar’s chief engineer for mid-sized
wheel loaders, was the ﬁrst to experience this opportunity. He spent one
year with Kiewit rotating through various assignments and learning
different aspects of Kiewit’s business – from estimating and planning
projects to the core running of the business to ﬁeld-facing projects.
“Kiewit owns about 2,500 pieces of Cat ® equipment and touches nearly
every industry that Caterpillar serves – earthmoving, mining, energy
and power, etc. – so it was a pretty eye-opening experience for me,”explains Graham. “Not only did I gain a deeper understanding of thecustomer, what their needs are and how we can serve them better, butthere was a lot of character building and leadership growth that naturally happened through this experience.”“This is just the beginning; we’re just scratching the surface indeveloping a deeper understanding of our customers,” says Vice
President Karl Weiss who continues ownership of the program.
“We have the opportunity, as our understanding grows, to help
our customers be more proﬁ table through improved Cat ® products
and solutions.”

Graham’s year proved to be an extremely successful developmental
opportunity, so much so that the two companies expanded the idea
even further by sending one of Kiewit’s leaders to Caterpillar for asimilar rotational experience.

CATERPIL L AR INC.

2013 YEAR IN REVIEW

10CONSTRUCTION INDUSTRIESGlobal Strength
Through Local
Leadership

Leading such an effort requires strong ties and deep relationships
throughout the country. Chen also acts as the company’s country
manager, responsible for being the “face of Caterpillar” in broad-based
dealings with government ofﬁcials and the general media in China.

Caterpillar’s global presence, depth and breadth of our product line
and ﬁnancial strength are unmatched in the industry. A key factor tothis global strength is a distinct focus on local leadership development.
“As we look at building out our Business Model around the world, building
local leaders is at the top of our priority list,” explains Ed Rapp, Group
President with responsibility for Construction Industries. “Developmentof local leaders around the world is what we have to do if we truly want
to be a global company.

“Reﬂecting on my personal journey, I think it’s vitally important for us
to build our local talent pipeline,” says Chen. “Having leaders in place
who understand local cultural nuances, who know the organization andBusiness Model and who can bring people together to build on Caterpillar’svalues and culture is a key differentiator that we can leverage to help
us be even more successful.”“If you think about how strategy execution happens, it starts with a clear
articulation of where you want to go, followed by someone driving that
execution throughout the organization to turn vision into reality,” says
Rapp. “And if you think about how that’s going to happen around theworld, it is so much more effective when it’s driven by someone froma local culture in a local language.”

Currently, more than two-thirds of Caterpillar’s manufacturing facilities
in China are led by local leaders, with a target to increase the local
leader population to 90 percent.
“We have a clear strategy in place, built on three elements – attract,develop and perform – that is going to help us to get there,” explains
Chen. “We’re focused on attracting the right people, maximizing on
their strengths so they can grow and develop and providing the clarity
needed, so they can successfully perform. Our focus on local leader
development is a key part of our strategy that will pay beneﬁ ts for us
in the long term.”

Caterpillar Vice President with responsibility for China Operations Qihua
Chen is a prime example of where building local talent has proven to be
successful. Chen started his career as an engineer with the Chinesestate-owned company Xuzhou Construction Machinery Group (XCMG).
Years later, when Caterpillar formed a joint venture with XCMG, creating Caterpillar Xuzhou Ltd. (CXL), Chen was the ﬁrst employee to join
the company.
Throughout his career at Caterpillar, Chen spent time developing
skills in multiple parts of the business and multiple locations acrossthe world. Today, Chen is responsible for leading Caterpillar’s “Winin China” strategy by providing overall leadership to the company’s
growth in China, which includes 26 facilities, four research anddevelopment centers, three logistics and parts centers and more than
15,000 employees. He also has direct responsibility for leading operations at CXL and Caterpillar Suzhou Co., Ltd.

CATERPIL L AR INC.

2013 YEAR IN REVIEW

11

CONSTRUCTION INDUSTRIES

Brazil’s Growth
Acceleration
Program Beneﬁts
Caterpillar andCommunities“The government put such stipulations in place to protect the end
customer in the cities,” adds Renosto. “They needed to ensure themachines would be properly serviced and that operators could
be trained.”

The future is looking brighter for 3,441 municipalities in Brazil after
receiving new Cat ® equipment. Several thousand Cat motor graders
and backhoe loaders were purchased by the Brazilian government in2013 and provided to municipalities with a population of less than
50,000, as part of the country’s Growth Acceleration Program (PAC2).
The machines will help improve cities by building and maintaining
roads, which in turn will improve the ﬂow of agricultural products
between local farmers and bigger cities.

São Francisco de Assis, a municipality with a large population of family
farmers who produce a variety of foods such as milk and beans, isamong those that received Cat equipment. Mayor Horácio Benjamim
da Silva Brasil says that the receipt of the motor grader will help improvefamily incomes and living conditions in the region.

“Some of these cities still only have dirt roads,” explains Odair Renosto,
Earthmoving product manager. “Getting a new motor grader or backhoe
loader from the government – something they wouldn’t otherwise be able
to afford – is a really big deal for the city.”“These machines are extremely important to our region,” says the mayor,
whose municipality has more than 3,500 kilometers of dirt roads. “A roadin good condition contributes to the sustainability of the families wholive here because they can generate food for their own consumption,
as well as generate an income.”

Caterpillar was awarded three winning bids from the Brazilian government
after participating in a reverse auction that resulted in the sale of a signiﬁcant number of motor graders and backhoe loaders in 2013.

“As is typical of our culture, employees in all functions within Caterpillar
rallied to rapidly increase production and ensure delivery,” adds
Worldwide Product Manager Pat O’Connell. “There is a real sense of
pride in seeing how the machines are directly beneﬁ ting people’s daily
lives. These machines will have a lasting impact on the towns they
serve, similar to Caterpillar’s enduring presence in Brazil.”“This is the ﬁrst time we participated in an auction of this magnitude,”
explains Renosto, who says all bidders go into the process blind, notknowing who they’re competing against. “In order to even participate in
the bidding process, we had to meet some very stringent requirements.”
These bid requirements included the ability to deliver machines within
the speciﬁed delivery timeframes, providing freight to the destination
cities, a two-year warranty and 2,500 hours of service maintenance,
as well as operator and service training.

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12CONSTRUCTION INDUSTRIESCat Connect Optimizes
Customer Operations®

Cat Connect offers improvement in four areas: equipment management,
productivity, safety and sustainability.

Caterpillar has built a reputation for excellence by listening to its
customers, understanding their needs and challenges and delivering
products, services and solutions that help them succeed. Today,
Caterpillar is not only meeting those needs, but exceeding them withtechnology at the forefront.

• Equipment Management helps customers increase uptime andreduce operating costs by monitoring fuel burn, location andutilization of machines, as well as health and maintenance issues
like hours and ﬂuid contamination.
• Productivity monitors production and manages job site efﬁciency
by using technology to measure payloads and cycle times to optimize
production and reduce loading and hauling costs. It also utilizes
grade and compaction control technologies so operations get done
faster with more accuracy and less rework.
• Safety increases job site awareness to encourage safe practices
for people and equipment. This includes on-board camera systems
and object/proximity-detection systems that signiﬁcantly increase
the operator’s view point, contributing to a safer job site.
• Sustainability reduces environmental impact and simpliﬁes
compliance reporting. By monitoring fuel burn and carefully
managing resource consumption, customers can reduce
operating costs and improve job site efﬁciency while considering
environmental impact.

Caterpillar has been offering technology-enabled solutions to our mining
customers for some time via Cat ® MineStarTM. Recently, Caterpillar
introduced a new framework of technologies and services – called Cat ®
Connect – to help customers in other industries monitor, manage andenhance their operations, which will in turn improve their bottom line.
“Using connected data from technology-equipped machines, customers
now have the ability to get a true view of what’s going on at their job site,”
explains Caterpillar Technology & Solutions Manager John Carpenter.
“They can monitor everything from the productivity of their machines
to fuel consumption and maintenance to the overall availability of theirﬂeet, regardless of the size and complexity of their operation andregardless of whether it’s a piece of Cat ® equipment or from one of
our competitors.”

These solutions are tailored to meet customer requirements and areeither factory installed on machines or offered as aftermarket retroﬁ t
options offered through Cat ® dealers’ SITECH channel, the only
technology-focused distribution channel of its kind.

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13

Cat® Connect Optimizes Customer Operations (continued)“If we did not jump on machine control and guidance technology when
we did, we were going to be left behind,” adds Duso.

Caterpillar customer D/N Excavating is seeing the beneﬁ ts of Cat ®
Connect, after they utilized both Caterpillar installed and aftermarket
solutions. D/N Excavating, a commercial and residential contractor
located in New York, ﬁrst experienced what this technology can do for
its business when they purchased a Cat ® D5K tractor Track-Type Tractor
that was factory-equipped with Cat Grade Control, part of the Cat Connect
grade control technologies. They later installed the aftermarket solution to a Cat ® 324D excavator to help improve grading efﬁciency.

Carpenter says customers are seeing tremendous results with thesesolutions after experiencing them just once on their job sites.
“We want our customers to make more money and enhance operationalsafety using our products and services than they can with our competitors – and we’re doing just that with Cat Connect,” says Carpenter. “Oncecustomers experience what we have to offer, they want to immediately
leverage these technologies on their own job sites.”“Because we are able to tackle much larger projects [due to Cat Connect],our company has nearly doubled our gross sales in the last two years,”
says Don Nusbaum who owns D/N Excavating with Scott Duso. The two
say they’ve also seen a grading efﬁciency gain of 100 percent, reduction
in labor of 90 percent and signiﬁcant reduction in rework as a result of
this technology.

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2013 YEAR IN REVIEW

14CUSTOMER & DEALER SUPPORT
Customer & Dealer Support is built to strengthen Caterpillar’s product support excellence by bringing a strong focus
to Cat ® branded equipment and customer service and delivering outstanding dealer development. This groupsupports customers and dealers in a variety of ways, such as providing employee equipment training on job sites,
supplying aftermarket parts and service support and offering e-business and equipment management solutions.
Key strengths are the ability to manufacture parts and components, provide remanufacturing solutions and deliver
unmatched parts availability to dealers and customers anywhere in the world.

178
Global dealersMore thanMILLION3

Cat products at work aroundthe world

88+

Year history with dealers

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15

COMMON GROUND

Helping Customers
Discover What We’re
Built to Deliver
A Conversation with Stu Levenick,Group President

How does the Cat ® dealer network set us apart, and why is it
a competitive advantage?

Can you provide an example of how we help customers lower costs
and add value?

The most important thing about the Cat dealer network isn’t necessarily
that dealers are independent, although that’s certainly a factor; it’s the
dynamic relationship that we’ve built with dealers over the years. We
could build an independent dealer network, but if we didn’t value their
input – and they didn’t value ours – it wouldn’t be very successful. It’s
the mutual trust, performance and commitment to serving our customers that gives us a competitive advantage.

From a solution perspective, condition monitoring services have allowed
customers to dramatically improve their productivity and reduce theiroperating costs. Productivity is a key decision point for machinery –not only the control and guidance systems that allow them to perform
and produce at a much higher rate, but also the ability to monitor that
productivity from afar. Condition monitoring technology provides realtime data feeds from machines, providing critical information about what’s
happening with that equipment. This can range from simple information,
like the location of a piece of equipment, up to identifying service issues
in advance of an equipment failure. Condition monitoring offers a rangeof solutions for customers to better manage their equipment and lower
their owning and operating costs, making them more successful.

The BUILT FOR IT™ rebranding campaign was a major initiative
during 2013. What were the primary components of the campaign?
A lot of effort went into developing and deploying BUILT FOR IT, which
was initially launched in ﬁve major markets – China, Indonesia, Russia,
North America and Brazil – but will be rapidly expanded to the rest of
the world.

Reman is another area of responsibility for you. How does thatbusiness add value?

The initial campaign included print materials, billboards and a robust
online presence. Through that process, Caterpillar connected with
1.6 billion people around the world, and so far we’re very pleased withthe results. We will continue this effort in 2014. BUILT FOR IT was
the main theme for our presence at CONEXPO and our Worldwide
Dealer Meeting, and human resources is using it in their recruitment
efforts, for example. BUILT FOR IT is rapidly becoming how wecommunicate our brand message both internally and externally,
to virtually every constituency that we have.

Remanufacturing is an important aspect of our business and a solutionthat provides customers a tremendous opportunity to lower their owningand operating costs. It was ﬁrst deployed in North America, driven by
our former on-highway truck engine business. Over the years, we’ve
steadily expanded this concept to other product lines and components.
Remanufacturing has tremendous sustainability advantages, and theseare of particular importance in some of our key markets, like China.
On the one hand, we think remanufacturing makes a lot of sense forcustomers economically, but it also allows us to reuse components
over and over again rather than put them into a landﬁll. Because it’sa really good solution for both the customer and the environment, weare aggressively promoting remanufacturing as an attractive solution
in markets throughout the world.

When our customers hear BUILT FOR IT, what do you want theirtakeaway to be?
When a customer hears BUILT FOR IT, we don’t want them to think ofjust a product or solution, but an entire organization that’s dedicated totheir success. We developed BUILT FOR IT as a campaign to capture
what Caterpillar really is. We’re much more than just products. We’remuch more than just solutions. We’re a global organization, along with
our dealers, with products, services and solutions and people on the
ground who are dedicated to building customer value.

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2013 YEAR IN REVIEW16CUSTOMER & DEALER SUPPORT

88 Years“Across the Table”

For more than 88 years and through dramatic changes in our business,the simple yet powerful relationship between Caterpillar and our dealers
has endured. Combining the capabilities of a global technology andmanufacturing leader with a close personal relationship between dealers
and their customers in their own languages, cultures and locations
has made Caterpillar what we are today and will carry us well into
the future.
In 1926, three visionary Caterpillar managers – I.E. Jones, W.H. Gardnerand H.P. Mee – sat down in San Leandro, Calif., and helped write “Acrossthe Table,” a book in which they outlined the foundational principles forthe relationship between Caterpillar and Cat ® dealers. There is great
wisdom in a book that has truly stood the test of time and is as relevant
today as it was in 1926. The three men deﬁned the number-one qualiﬁcation for a Cat dealer: “Good character, and a sustained reputation
for square dealing.”

BUILT FOR IT™
In 2013, for the ﬁrst time in company history, a global brandpromotional campaign was launched in Brazil, Russia, Indonesia,
China and North America. This campaign highlights the BUILTFOR IT ™ message platform and tagline that was also launchedin 2013 to the enterprise and to the Cat ® dealer network. Thismessage is an external manifestation of our internal brandpromise, “A Champion for Your Enduring Success.”

In describing the relationship between Caterpillar and our dealers, thebook explains, “Our dealer organization is our chief pride ... the dealership relation with this company is so close that both manufacturer anddealer must have unbounded mutual conﬁdence in and respect for one
another ... It is only upon the basis of such mutual esteem that an enduring relationship can be built.” Those words still ring true and always will.

The essence of BUILT FOR IT reaches far beyond our products
and services. It showcases our ability to leverage the strengths
and expertise of our global manufacturing and distribution networkthat is positioned to deliver a wide range of solutions. By executing
a consistent, well-coordinated marketing message between
Caterpillar and Cat dealers, we will have the opportunity to increase
our brand value even more. When it comes to helping customers
get their jobs done, no matter how big or small the challenge, thisuniﬁed voice will highlight that we are built to help them succeed.
Simply put, we are BUILT FOR IT.

The foundational principles ﬁrst deﬁned in “Across the Table” have
served us well for over 88 years as our relationship has grown andthrived. But the world has changed since we published the book in
1926. Caterpillar and our dealers have changed, as have our customers’
needs. That’s why in 2013 we launched our Across the Table initiativewith our dealers.
Our distribution model, which has historically delivered unmatchedlocal support, is increasingly measured by global standards. The

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17

88 Years “Across the Table” (continued)

More than 80 dealers worldwide have been working side-by-side withhundreds of Caterpillar employees from every area of the company on
projects focused on such things as e-business, technology-enabled
solutions, service strategy, rental and used equipment strategy andparts logistics. A global team focused on one ideal – ensuring that our
distribution network is built for our next century of progress.

Cat ® dealer network is one of our biggest competitive advantages, andwe must make sure that it continues to uniquely position itself so that
our customers succeed into the future. In 2013, Caterpillar and Cat dealers
worked together to deﬁne and lay the foundation for a strategy that
addresses our mutual challenges and builds the foundation for our next
century of progress. This requires a thoughtful transformation within
our distribution model, without changing the principles that deﬁne
our relationship.
Together, we have mapped the path forward to achieving thetransformation we need around four objectives:

STRENGTHENThe Cat Dealer Model

ENHANCE

Customer Focus

ACHIEVE

Superior Economics for Caterpillar and the Dealer

SEIZE

Opportunities while Mitigating Risks

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2013 YEAR IN REVIEW18

CUSTOMER & DEALER SUPPORTCaterpillar Can
Win in China with
Remanufacturing
Services

RFG is also beneﬁcial from a service operations perspective.

This past October marked a signiﬁcant milestone for Caterpillar’sRemanufacturing business. We received ofﬁcial approval and support
from the Chinese government to import true Reman Finished Goods (RFG).

“In the past, because Reman offerings were limited, we had to pick andchoose what Reman products would be available for our repair strategy
for both workshop and ﬁeld repairs,” says LSH Engine Division Parts andService Operations General Manager Fan Baochun. “However, withCat RFG imports, we are able to now rely on the availability of the full rangeof Cat Reman parts such as fuel injectors, cylinder heads, cylinder
liner packs, crankshafts, turbochargers, etc., for use in our repairs.
We can now utilize our technicians for more value-added jobs and haveincreased our engine rebuild shop throughput and decreased workshop
and ﬁeld service job turnaround time, resulting in a solid increase of
our capacity and capability.““RFG imports allow us to be more competitive and win more businessin China. Most importantly, they allow us to serve more customers, andwhen our customers win, we all win,” says Reman General Manager
Frank Li.
This change enables Caterpillar to sell more machines by providing ourcustomers in China the complete Cat ® value package and a broader range
of options. Our dealers see value in RFG imports too, as they create
more business opportunities and choices to serve the customer. One
Cat dealer in China, Lei Shing Hong (LSH) Machinery, has seen positive
results in sales since the introduction of RFG importation.
“We have a lot of loyal customers in our territory that always request
Reman as their ﬁrst preferred choice because Reman is as good as new,
but priced at a fraction of new,” shares LSH Engine Division Marketing
General Manager Allan Wang. “Our customers have Cat ® legacy engines
still in operation, and they rely heavily on Reman product offerings forcost-effective repairs. These customers were just as excited as wewere to see that Caterpillar is now able to import RFG.”“We can offer more options for customers with Cat Reman importconstraints removed,” says LSH Machine Division Product Support
General Manager Stanley Sheung.

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2013 YEAR IN REVIEW19

CUSTOMER & DEALER SUPPORT

Customers Succeed with
Equipment Management
Solutions

Caterpillar is in business to help customers succeed, and nothing ismore critical to customer success than having machines ready to do
the job wherever and whenever they are needed. Cat ® dealer NMC
understands this and works with customers to ensure they succeed.

says Brad Beck, Fleet Operations manager for Werner Construction.
Werner Construction is a family-owned company that has been in business for 77 years and has more than 120 pieces of Cat equipment, as well
as several other pieces of equipment with Cat ® engines.

Based in Nebraska, NMC’s customers range from construction
companies to feed lots, but they all have one thing in common – theneed for reliable, dependable equipment. NMC’s Equipment Management Solutions department offers a variety of solutions to theircustomers, such as Product Link™ and VisionLink™ technology,
Fluid Analysis, Fault Code Monitoring, Machine Analysis Reporting
and Customer Support Agreements.

NMC also provides Fluid Analysis service to customers. The Fluid
Analysis Lab is able to test almost any ﬂuid on a piece of equipment:
engine oil, transmission ﬂuid, hydraulic ﬂuid, fuel, coolant, etc. This
allows NMC to accurately and scientiﬁcally identify mechanical problems,
which helps reduce customer downtime and minimize repairs costs.
The tests performed include identifying wear metals that are present,
particle counts of metallic and non-metallic debris and analyzing thesample for the presence of fuel, water and glycol. These tests andothers provide one detailed sample report with a recommendationin an understandable language.

Fault code technology enables a machine’s engine to generate a“fault code” whenever it operates outside of expected performance.
NMC’s Fault Code Monitoring service utilizes Cat ® Product Link totransmit machine fault code alerts to NMC’s knowledgeable staff via
satellite or cell phone as they occur. The team then analyzes the data,
researches potential causes and repairs and notiﬁes the customer witha recommendation. By catching potential problems early, customers
save time and money by avoiding major repairs.

In May 2013, NMC’s Fluid Analysis Lab also provided signiﬁcantsavings to Werner Construction by identifying an issue with amachine’s transmission and making a small repair before the issue
destroyed the entire transmission.
“We’ve incorporated NMC’s Fluid Analysis Services into our Fleet
Management Program in part because it allows us to better manage our
expenses by identifying any potential equipment failures before they
become more serious or catastrophic. We receive the analysis results
quickly and can always count on the staff at NMC to provide support,
and if necessary, service repairs,” commented Beck.

Recently, the NMC Equipment Management Solutions Team saved
customer Werner Construction thousands of dollars with Fault CodeMonitoring. The customer saw a cost savings of 90 percent by catchinga fuel injector problem early and replacing it, rather than having to
replace the entire engine of the machine.

In a world where time is money, NMC’s Equipment Management Solutions
department allows customers to reduce unexpected downtime, schedule
service around production demands and ultimately realize a systematic
approach for managing ﬂeet and repairs – providing critical information
whenever they need it, wherever they are.

“We count on NMC’s Equipment Management Solutions group to help
us monitor and manage our ﬂeet of Cat ® equipment. By monitoring fault
codes, they identiﬁed a fuel injector on one of our Cat ® 972K Wheel
Loaders that wasn’t responding correctly and quickly replaced the part
before it caused any damage to the engine. This type of customer service
allows us to maintain equipment uptime and manage our repair costs,”
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20

ENERGY & POWER SYSTEMS
Energy & Power Systems is built to support customers using reciprocating engines, turbines, locomotives andrelated systems and solutions in oil & gas, power generation, marine, rail and industrial applications, including
Caterpillar machines. Responsibilities include business strategy, product design, product management anddevelopment, manufacturing, marketing, sales and product support. The product and services portfolio includes
reciprocating engines, generator sets, marine propulsion systems, well-service pressure-pumping products,
turbines and turbine-related services, diesel-electric locomotives and other rail-related products and services.

Sales

Segment Proﬁt($ in millions)($ in millions)$21,122$20,155$3,434$3,400

2012

2013

2012

2013

2013 Sales by Geography($ in millions)North America $8,231
EAME $5,735
Asia-Paciﬁc $4,021
Latin America $2,168

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21

COMMON GROUNDThe Golden Ageof Natural Gas
A Conversation with Jim Umpleby,
Group President

How is technology helping us to realize the potential of natural gas?

What is driving demand for energy resources and, in particular,
natural gas?

Caterpillar is investing heavily in new technologies, including those thatbring natural gas to products and machines that have traditionally operated on diesel fuel. We’re working with a number of our customers – inrail, marine and mining – to provide dual fuel engines that will burn bothnatural gas and diesel. One can envision a future where locomotives,
mining trucks and some other machines use liqueﬁed natural gas, creating
economic and environmental advantages for our customers. Caterpillar
is committed to being the leader in these technologies.

Global economic growth is driving signiﬁcant demand for commodities,
energy and infrastructure. Studies indicate that global energy demand
will increase 100 percent between 2000 and 2040. Although renewableforms of energy, such as wind and solar, are growing rapidly in many
countries, fossil fuels such as oil, coal and natural gas are still expected
to meet 80 percent of the world’s energy needs in the year 2040. The
demand for natural gas is increasing rapidly due to abundant supply,
low cost and emissions.

What part of your work with natural gas technology do you takethe most pride in?

What type of transformation is the natural gas industry undergoing?

Caterpillar employees and our dealers are proud to provide the products
and services that improve living standards around the world. Many inthe developing world still do not have access to reliable power in homes,
schools and hospitals. We’re very proud that we’re playing a vital rolein improving living conditions around the world.

We’re really coming into the golden age of natural gas, and the UnitedStates is at the forefront of this transition. We expect natural gas toplay a larger role in the global energy mix during the coming decades.
Advances in technology, such as well stimulation and horizontal drilling,
have allowed oil and gas that were previously uneconomical to produce
to be brought to the market. These new technologies have allowed theUnited States to become the leading producer of oil and gas in 2013.
The rapid increase in natural gas production has reduced natural gas
prices, offering a competitive advantage for the U.S. and is also creating
many opportunities for Caterpillar, our dealers and our customers.
What are some of the ways that Caterpillar customers are participatingin this transformation?
Caterpillar participates across a large portion of the natural gas value
chain. Our reciprocating engines are used for drilling and gas gatheringand our well stimulation pumps manufactured by our Black Horse joint
venture with Ariel Corporation are used for well servicing. Natural gas
pipelines around the world utilize Solar ® gas turbines and centrifugal
gas compressors. Cat ® machines are used to prepare drilling sites andour pipelayers and other machines are used to construct pipelines. For
those residential consumers of natural gas in the U.S. and Western
Europe, there’s a very high probability that Cat ® products were used
to produce or transmit the natural gas used in your homes.

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ENERGY & POWER SYSTEMS

Expanding Solutions
for a Growing Resource

Caterpillar recently created a joint venture with Ariel Corporation called
Black Horse LLC to provide well-service pressure-pumping products.
These pumps are being sold and serviced through the Cat ® dealer network. Black Horse brings our energy production customers a completepressure-pumping solution, backed by the global parts and service
support of our Cat dealers.

Global energy consumption is rising rapidly, driven by worldwide population
growth, developing economies, improving living standards and the useof ever more energy-dependent technologies. More than 1 billion of theworld’s 7 billion residents are without access to electricity. Natural gas
is playing a rapidly expanding role to meet this need. Natural gas is alsomuch more abundant and recoverable than it was just a few years ago.
From exploration and production to transmission, from electric generation to advanced engine technologies, Caterpillar solutions are major
contributors to this growth story.

For gas production, compression and transmission, Caterpillar
manufactures Solar ® gas turbines and compressors, and Cat ® reciprocating engines. There are thousands of Cat reciprocating engine
generator sets and Solar gas turbine generator sets converting natural
gas into electricity around the world.

Enabling a New Energy Paradigm
The development of new extraction techniques such as well stimulationand horizontal drilling has meant that shale gas, which was previously uneconomical to produce, can be brought to market. In 2013,
surging energy output made headlines as the U.S. Energy Information
Administration announced the nation was on a path to be the world’s
largest producer of oil and gas within a year. This remarkable turn of
events unfolded in just a decade as the exploration of shale-rockformations grew in nearly every region of the U.S., from Texas andNorth Dakota to the Midwest and Northeast.

Combining Performance with Efﬁciency
Caterpillar has been a supplier of natural gas-ﬁred reciprocating engines
since 1947. Today, more customers are moving from diesel to gas, andmany of our customers require a gas option for their engines. In the oiland gas, rail, mining and marine markets, the performance of the gaspowered engine is paramount. It must match the reliability, torqueresponse and power density of the diesel engine, while delivering thefuel cost savings and reduced emissions of natural gas. The technology
to deliver these capabilities is dual fuel – engines that burn both diesel
and natural gas simultaneously.

This rapid increase in production, made possible by improved techniques,
has resulted in historically low natural gas prices in the U.S. Because ofplentiful, low-cost natural gas and the existing infrastructure of pipelines,
compressor stations and other equipment, it is expected that natural
gas will power the vast majority of new electric generation capacity to
be installed in the U.S. during the next 25 years.
Caterpillar’s natural gas solutions range across the entire value chain,and our product offering continues to grow. Caterpillar is the market
leader for supplying power for land drilling and for providing bothengines and transmissions for use on hydraulic well stimulation rigs.

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Expanding Solutions for a Growing Resource (continued)
As part of our 2010 strategic imperatives, Caterpillar committed toaggressively grow the Energy & Power Systems businesses, which
during the last three years have contributed more than one-third ofCaterpillar’s sales and proﬁ tability. Signiﬁcant investments have been
made in alignment with that strategy and in support of our customers.
Three of the most recent acquisitions have been in the rail, power andmarine groups (Electro-Motive Diesel, MWM, Berg Propulsion).

With deep expertise in both gas and diesel engines, Caterpillar iswell-positioned to deliver reliable dual-fuel engines to the market.
Our solutions allow customers to achieve signiﬁcant savings derived
from the price differential between natural gas and diesel. In 2013,
we released our ﬁrst marine dual-fuel engine, a product that allows
the operator to switch fuels to meet various emissions requirements.
The use of cleaner-burning natural gas contributes to lower-emission
engine operations.
Even as we innovate new solutions, we beneﬁt from the legacy of having
been a world leader in diesel and natural gas engines for more than
65 years. Our products range from a 7.5 horsepower engine to a 30,000
horsepower gas turbine. We are focused on meeting the world’s increased
energy needs through a variety of products, solutions and applications
across multiple industries. They include:• Reciprocating engine-powered generator sets
• Integrated systems used in the electric power generation industry• Reciprocating engines and integrated systems and solutions forthe marine and petroleum industries• Reciprocating engines supplied to the industrial industry as wellas in Cat ® machines• Turbines and turbine-related services• Diesel-electric locomotives and components and otherrail-related products and services

Cat® Power Generators Bring Hope to Africa
A region of Africa long burdened by poverty, disease andmalnutrition due to underdevelopment is now being powered
into a new era of prosperity, thanks to Cat ® generators. Home
to nearly 2 million people, Mtwara and Lindi are the southernmost regions of Tanzania and would experience frequent andprolonged periods without power.
A solution to meet the regions’ power needs came fromcollaboration between local Cat ® dealer Mantrac Africa andcustomer Wentworth Resources. Tapping into the abundant
nearby natural gas resource, they developed a project building
pipelines using six Cat ® G3520C Generator Sets to provide areliable source of electric power never seen before in the region.

CATERPILLAR FUEL TECHNOLOGY SOLUTION DELIVERS
When Southwestern Energy Company was searching for an innovative
dual fuel solution to improve drilling efﬁciency, they turned to the Cat ®
Dynamic Gas BlendingTM (DGBTM) kit to implement dual fuel technology
into their operations. Southwestern Energy installed two Cat 3512C
Generator Sets with EPA-approved Cat DGB kits on a rig operating in
the Fayetteville Shale. The Cat dual fuel solutions powered the drilling ofeight wells over the course of 45 days, saving Southwestern Energy
greater than an estimated $100,000 in fuel costs. Cat DGB continuously
adjusts to changes in fuel quality and pressure, allowing the engine torun on a wide variety of fuels while continuously maintaining diesel
power and performance.

CATERPIL L AR INC.

Today, the power plant in Mtwara has three more Cat generators
on line, with three more units pending, as the demand forelectricity in the region rises and businesses continue to invest.
The project has enjoyed widespread support from local politicalleaders and has been instrumental in the development of plans
for future phases of power generation across Africa.
To learn more:
http://www.youtube.com/watch?v=wRCSscZRIXU

2013 YEAR IN REVIEW24

CONSTRUCTION
ENERGY & POWER
INDUSTRIESSYSTEMS
Feature Headline (continued)

Feature Story
Headline
From Arkansas to Chile,
Electro-Motive Diesel
Delivers for Rail Industry

One of the EMDTM SD70ACe locomotives delivered to A&M made its debut at the MINExpo Show in Las Vegas, Nev., last September, painted in Cat yellow.
Prior to delivery, the locomotive underwent a paint design reﬂecting A&M’s corporate colors and renumbering (in the photo above).

“To take advantage of AC traction on our mountainous route, we
determined the rugged design of the EMD SD70ACe would allow
A&M to maintain high ﬂeet availability at low cost. The EMD SD70ACe
locomotive is ideal for our operations and will enable A&M to retire
several older locomotives, while drastically increasing our haulingcapability and efﬁciency,” said A&M Chairman Reilly McCarren.

Nearly 5,000 miles apart, with diverse languages, cultures and commercial
and industrial requirements, Arkansas and Chile are very different places
to do business. Yet in both markets, Electro-Motive Diesel is providing
the right solution for rail customers seeking greater efﬁciency andperformance. In the span of two months in 2013, Electro-Motive Diesel
delivered three of its EMD SD70ACe demonstrator locomotives to the
Arkansas & Missouri Railroad (A&M), representing the ﬁrst AC traction
locomotives for the independent, Class III railroad. Meanwhile, a hemisphere away, Chile’s Ferronor railway company put into service six
heavy-haul locomotives, representing more than 50 years of technology
advancements since the ﬁrst EMD locomotive model GR12 was deliveredin Chile.

Ferronor owns a railway network of about 2,300 kilometers and mostlytransports mining supplies and products. Ferronor’s new 4,500 brakehorsepower EMDTM GT46AC locomotives improve both emissions andfuel economy. Features include a 16-cylinder engine with electronic unit
injection, variable-speed cooling fans and traction motor blowers that
optimize cooling, and a split cooling radiator system. The self-steering
trucks provide improved curve negotiation and wheel wear. To monitor
the health of the locomotive, the IntellitrainTM system provides remote
access to locomotive operation and performance, and the EM2000
microprocessor control system provides complete self-diagnostics.

The EMD SD70ACe locomotives delivered to A&M are certiﬁed for
EPA Tier 3 emissions standards. The 4,300 traction horsepower
EMD SD70ACe locomotive integrates EMD’s highly reliable and fuelefﬁcient 16-cylinder 710 engine, EMD EM2000 TM microprocessor control
system and AC traction. The AC traction system provides signiﬁcantly
more tractive effort, allowing locomotive unit replacement and much
improved life cycle cost.

Progress Rail Services Corporation, a wholly-owned subsidiary ofCaterpillar Inc., is a leading supplier of remanufactured locomotive
and railcar products and services to the railroad industry. Through theacquisition of Electro-Motive Diesel, Inc., Progress Rail has expanded
its network of global locations, furthering a commitment to providing
industry-leading products and services to our customers.

A&M operates 139 miles of railway through mountainous terrain
from Fort Smith, Ark., to Monett, Mo. The A&M railroad selectedElectro-Motive Diesel to supply its new locomotives based on thedemonstrated performance of the EMD SD70ACe.

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ENERGY & POWER SYSTEMS

Expanding to Include Marine
Full-Propulsion Solutions
In 2013, Caterpillar acquired Johan Walter Berg AB and its subsidiaries,
including the core brand of Berg Propulsion. The company has beenrenamed Caterpillar Propulsion AB, and integration efforts continue
globally. Products manufactured by Caterpillar Propulsion will be Cat ®
branded moving forward, starting with the new azimuth thruster fortug customers. This acquisition expands the Cat product line from solely
offering marine engines and generators to now providing customers
complete marine propulsion package systems.
Headquartered in Sweden, Berg has designed and manufactured heavyduty marine thrusters and controllable pitch propellers since 1929. Its
proprietary systems are employed throughout the world in maritime
applications that require precise maneuvering and positioning. Starting
life as a shipyard, Berg proudly served the marine industry for 101 years,
always striving to provide the best solutions for their customers that provide
minimized downtime.

“Our team will now be able to provide worldwide
Caterpillar support to marine operators for
a complete, optimized propulsion package.”– Tom Frake, Caterpillar vice president“Our team will now be able to provide worldwide Caterpillar support tomarine operators for a complete, optimized propulsion package,” says
Tom Frake, Caterpillar vice president with responsibility for the Marine
and Petroleum Power Division.
The integration will provide for even more Cat ® products for ship owners
around the world, and the Caterpillar Marine team and our unmatcheddealer network will provide greater services with these complete
Caterpillar Propulsion solutions.

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CONSTRUCTION
ENERGY & POWER
INDUSTRIESSYSTEMS

Delivering Backup
FeaturePower
Story
to Kansas
Headline
Homes

Wind has long been a feature of the Kansas prairie. In fact, the state
has the second-highest wind potential in the U.S., second only to Texas.
Harnessing that renewable energy resource presents a big opportunity
for sustainable growth in the state. Wind energy, however, has one
signiﬁcant limitation – it is not available at the same level at all times.
For that reason, utility providers must complement their wind resources
with other generation sources that offer ﬂexibility and control to effectively manage sudden changes in supply and demand of power. Caterpillar
has the right solutions and capabilities to meet that need.

The new facility will include 20-cylinder, natural gas-fueled Cat
generator sets, each rated at 12,500 horsepower. Each engine will
drive a single generator, and the total electric output of Rubart Station
will be approximately 110 megawatts. The 12 units can be started andramped up quickly to meet rapidly changing market conditions, torespond to wind resource changes and to assure full reliability within
the Mid-Kansas system.
This conﬁguration was chosen over other options based on several
factors, including high efﬁciency, low emissions, exceptionally low
water consumption and fast load response.

Mid-Kansas Electric Company, LLC is a coalition of ﬁve rural electriccooperatives and one wholly-owned subsidiary that serve approximately
200,000 Kansans throughout 33 counties. Mid-Kansas selected Caterpillar
to equip Rubart Station, a backup generating station, to manage theﬂuctuations in available energy that are inherent with wind power.
The result is one of the largest natural gas-ﬁred power plants poweredby Cat ® generator sets globally.

“Mid-Kansas Electric is building this new station to help manage theﬂuctuations in available energy that are inherent with the growing presence of wind power in the area,” said Dean Powell, director of Global
Sales and Marketing, Caterpillar Power Generation Systems. “We are
excited that Mid-Kansas Electric will be the ﬁrst to install our new Cat ®
G20CM34 Generator Sets. These generator sets will not only enhance
Mid-Kansas’ current diverse generation portfolio comprised of naturalgas, coal and wind but will also serve as a reliable and cost-effectivemeans to meet its coalition members’ growing demand for energy.”

200,000RESIDENTS

The total electric output of Rubart Station
is 110 megawatts, which provides power
to 200,000 residents in Kansas.

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27

CATERPILLAR ENTERPRISE SYSTEM GROUP
Caterpillar Enterprise System Group brings together critical processes and is built to support Caterpillar to further
improve our manufacturing and supply chain capabilities worldwide. It builds upon the strong foundation of ourCaterpillar Production System and 6 Sigma by utilizing customer expectations and driving competitive advantage.
We align all critical elements of our customer order-to-delivery process with a holistic view that delivers world-class
results. Caterpillar Enterprise System Group combines existing divisions and organizations from several functional
areas within Caterpillar, including Global Purchasing, Integrated Logistics Services, Caterpillar Production
System, Lean and Process Transformation.

25+%of the Caterpillar enterpriselaunched Lean in 2013

5

Lean Principles in our
Lean methodology

98%internal defect reduction at
pre-delivery inspection gate
for medium wheel loaders
produced in Aurora, Ill.
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COMMON GROUND

Moving toward a
Connected Caterpillar

A Conversation with Dave Bozeman,
Senior Vice President

Over the years, Caterpillar has faced numerous business challenges.
How will CESG help the company respond to those challenges?

Why was the Caterpillar Enterprise System Group created?
The Caterpillar Enterprise System Group (CESG) was developed in 2013
to get our key order-to-delivery processes aligned under one overall
group. We think it’s important to take an end-to-end, more holistic view ofCaterpillar so we can identify and create business synergies. Overall,
CESG wants to improve the customer experience from the time they
engage Caterpillar for a product or service to the time that productor service is delivered. We expect our group, together with thebusinesses, will drive that greater experience.

The CESG team will drive Caterpillar in a connected fashion, knowingthat we’ll continue to face challenges from time to time. When thoseoccur, however, we want CESG’s work to put Caterpillar in a better
position to deal with those challenges head-on – increasing our agility
and ﬂexibility to address those situations.
How will CESG be successful in executing its strategy?
Strong employee engagement is what we’ll need to successfully connect
Caterpillar – all of our people embracing CESG goals and helping connect
processes and systems into a single chain. I’ve often said that we strive
for boring factories and boring businesses, because “boring” operations
mean everything is running smoothly. But that will require engaged
employees who can drive proﬁ tability. An engaged workforce will help
connect Caterpillar and help drive high proﬁtability and growth in those“boring” factories, putting us in a strong position to succeed today
and tomorrow.

In terms of Caterpillar’s 2020 strategy, why did it make sense to form
the group in 2013?
I think Caterpillar has been heading in this direction for a while. Over theyears we’ve used our 6 Sigma and Caterpillar Production System (CPS)
deployments to yield great beneﬁ ts when it comes to delivery, safety
and proﬁ tability. But if we’re moving to the next level as an organization, we really have to look at an end-to-end, order-to-delivery process.
That’s where the CESG comes in – by aligning our processes together,
we’re able to improve performance to a level even higher than we
could achieve by just using 6 Sigma or CPS.

How do you want the work of CESG to help evolve Caterpillar’s culture?
CESG will evolve Caterpillar’s culture by taking a more holistic view of
the company, as opposed to a more segmented view. It will help
promote and drive a more connected organization – which is why
it’s vitally important to have the order-to-delivery processes andsupport groups come together under one team. These are the things
that will help drive a culture of end-to-end value for Caterpillar.

How will CESG’s work inﬂuence the execution of the 2020 strategy?
CESG will deliver a more connected Caterpillar, and a more connected
Caterpillar will ultimately produce better inventory turns. We’ll havea better cash-to-cash cycle and should achieve greater efﬁciencies
with Caterpillar’s new product introductions. But more importantly,
our group wants to look at the effectiveness and efﬁciency of ourentire value chain – including our internal and external supply chain
and our dealers.
Overall, CESG’s work will be very important for all of Caterpillar, since
we will be optimizing the entire chain and not just individual links.

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CATERPILLAR ENTERPRISE SYSTEM GROUP

A Value Chain that Creates
Competitive Advantage
Results Driven

Caterpillar is a proven innovator, but breakthrough advances do not end
at product design. With the creation of the Caterpillar Enterprise System
Group (CESG) in 2013, Caterpillar is driving an innovative focus toward
order-to-delivery. To better serve customers from the moment theyplace an order to the day it is delivered in the ﬁeld, we are engineering
an innovative, end-to-end Lean value chain. The new structure andprocesses are designed to deliver a competitively advantaged company.

A more responsive company also creates value by optimizing the cash
conversion cycle. The faster our products reach the market, the sooner
both Caterpillar and our customers see a proﬁ t. And the beneﬁ ts do not
end there. Increased efﬁciencies are a fundamental result of increased
responsiveness to customers. In addition, when we meet more customer
demands, we have the opportunity to further increase our market shareand generate total shareholder return, no matter the cycle.

The Caterpillar Enterprise System Group encompasses functional areasof excellence, including Global Purchasing, Integrated Logistics Services,
Caterpillar Production System (CPS), Lean Ofﬁce and Process Transformation. Aligning these critical processes and support groups improves
our manufacturing and supply chain capabilities worldwide.

Focused on the Customer
Our customers know exactly what they want – availability and reliability –and this strategic initiative delivers both. A more responsive company
is created when we deploy an end-to-end supply chain engineered
based on customer expectations. Shortened product lead times mean
our business can deliver an unmatched level of agility and responsiveness across the markets and segments we serve. Meanwhile, a focus
on Lean in every aspect of our business eliminates inefﬁciencies andfuels an improvement beyond our current, historical best quality.

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CATERPILLAR ENTERPRISE SYSTEM GROUP CONSTRUCTION INDUSTRIES

Feature Story
Headline
Lean: A Journey that Delivers
Signiﬁcant Results
Lean Stair Step

A commitment to Lean is driving signiﬁcant process and quality
improvements at Caterpillar. Lean challenges all employees to getcloser to the customer so they can deliver products and services
based on the customer’s true expectations, rather than assumptions
about customer requirements. At the conclusion of 2013, more than
25 percent of the enterprise had launched Lean.

Caterpillar’s Lean methodology consists of ﬁve Lean Principles thatare implemented in standardized order.

Deploying the Lean Principle of Built in Quality is the ﬁrst of ﬁve steps inany Lean deployment. Simply put, every person, working every process,must guarantee 100 percent high quality at all stages of work. A defectcannot be passed on during any stage, no matter how small or seemingly
insigniﬁcant.
The immediate results achieved through Lean are signiﬁcant, anddeploying these principles creates process improvements and sustainable
efﬁciencies in the entire order-to-delivery space. Lean changes not only
the process, but also has a signiﬁcant impact on culture.
“The success of our Lean journey depends heavily on leader engagement.
Overall, I am impressed by how leaders at each of the deployments haveembraced Lean, as well as how their actions are opening up lines ofcommunication with employees and driving action,” says Dave Bozeman,senior vice president with responsibility for CESG, after conducting a
Lean deployment review.
Our Lean journey is not limited to manufacturing. All functional areas
within Caterpillar execute business processes on a daily basis. These
disciplines include engineering, marketing, purchasing, accounting
and human resources. Whatever the organizational role, it is always ourpriority to embed Lean to provide the highest-quality services, products
and outputs to our customers.

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Lean: A Journey that Delivers Signiﬁcant Results (continued)

PRE-DELIVERY
DEFECTSPER MACHINE

Lean at Work: Spotlight on Medium Wheel Loaders in Aurora, Ill.
Caterpillar is known for its quality, but no matter the product or service
there is always room for improvement. Nowhere is this more evident
than at Caterpillar’s Aurora, Ill. facility. By deploying Lean within themedium wheel loader value stream we are eliminating defects andimproving our medium wheel loader process – from customer orderto-delivery.

By leveraging the tools and processes of 6 Sigma and the Caterpillar
Production System (CPS), Lean empowered Aurora employees toeliminate internal defects throughout the entire value stream. Our
more disciplined approach has driven down our average internal
defects by 60 percent per medium wheel loader and 98 percent lessat our pre-delivery inspection gate.

Since the introduction of Lean at our Aurora facility in April 2013,
the results are signiﬁcant. At initial deployment, Aurora employees
were discovering defects on medium wheel loaders and this wasseen as normal. Once discovered, those internal defects were thenrepaired before shipment to the customer; however each repair
added extra time associated with rework to our internal processes
and additional inventory.

The elimination of defects and rework is a driving factor behind
medium wheel loader value stream velocity improvements. When
compared to just a year ago, medium wheel loaders in Aurora arenow being built in half the time. Improvements driven by Lean will
ensure better product availability for our medium wheel loader customers; and as we continue to deploy Lean across the enterprisecustomers around the world will see the beneﬁ ts.

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CATERPILLAR ENTERPRISE SYSTEM GROUP

The Power of an Engineered
and Intelligent Network
The relationship between Caterpillar and Finning focused on improving
transportation routes from North America to Chile, Argentina, Bolivia
and Uruguay.

When a Cat ® 793 Mining Truck rolls off the assembly line in Decatur, Ill.,for delivery in South America, a long and complex transportation journey
begins. And while the route will always be long – and involve a combination of trucks, trains and ocean containers to get the job done – Caterpillar
is now using an engineered and intelligent transportation network todrive efﬁciency, effectiveness and value for our customers.

“You have to think about the people and processes needed. Results
won’t change if you don’t change the way you think and execute yourend-to-end processes” says Chavez. “We did, and the results werereally great.”“By enabling real-time visibility of product being delivered with processes
that shorten transit time and increase transport utilization, everyone
through the outbound value chain wins – Caterpillar, dealers and customers,” says Ed O’Neil, director of Integrated Logistics Services. “Driving
future success is about designing and delivering an engineered andintelligent logistics network that delivers customer value.”

After working the project for seven months, the team delivered millionsof dollars in savings. Actions included:• Actively monitoring shipments through a common technology
platform, thus enabling staff to know when product would arriveat ports of entry, allowing them to prepare an accurate schedule• Increasing velocity by enhancing transportation scheduling toenable the best and quickest routes with faster arrival times• Improving transportation volumes and lowering costs by combining
freight into fewer shipments

This engineered network is a strategic advantage and is already driving
signiﬁcant value for Cat ® dealer Finning (South America). Before teamingwith Caterpillar’s outbound transportation team, it was a struggle toaccurately monitor and track shipments. This lack of visibility drove
several inefﬁciencies, including the inability to accurately schedule
staff and localize transportation routes at ports of entry.

Chavez has since taken a new role at Finning (Canada), but the journeycontinues. His new team is actively collaborating with Caterpillar to
replicate an optimized transportation network at Finning (Canada).

“In some cases we had employees waiting for hours – and in somecases days – to receive shipments due to lack of visibility. This was justone of our opportunities,” said Cristian Chavez, vice president operational
excellence, Finning (Canada). “The project we (Caterpillar and Finning)ran is a good example of the power and value of Caterpillar and its dealers.
Collaboration optimized our supply chain.”

CATERPIL L AR INC.

“A transportation network, that enables visibility and velocity, is justsimply good business,” says Chavez. “Finning is proof that no matter
where you do business, an engineered network delivers a competitive
advantage and customer value.”2013 YEAR IN REVIEW

33

FINANCIAL PRODUCTS & CORPORATE SERVICES
Financial Products is built to provide ﬁnancing to customers and dealers for the purchase and lease of Cat andother brands’ equipment, as well as ﬁnancing for Cat product sales to dealers. Financing plans include operating
and ﬁnance leases, installment sale contracts, working capital loans and wholesale ﬁnancing plans. The segment
also provides various forms of insurance to customers and dealers to help support the purchase and lease of ourequipment. Corporate Services is built to provide business and human resources, information technology, accounting
and ﬁnance services to Caterpillar, serving as the enterprise resource for business-related activities.

Revenues

Segment Proﬁt($ in millions)($ in millions)$3,090$3,224

$763

$990

2012

2013

2012

2013

2013 Revenues by Geography($ in millions)North America $1,688
Asia-Paciﬁc $603
EAME $503
Latin America $430

Charts represent ﬁnancial performance for Financial Products segment.

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COMMON GROUND

Solid Delivery
Drives Results
A Conversation with Brad Halverson,
Group President & Chief Financial Ofﬁcer

cyclical, don’t usually move to the same degree at the same time, andhaving that balance in our business helps. In addition, to reduce proﬁ t
volatility, we’re focused on improving inventory performance and cost
ﬂexibility through the business cycle.

How would you describe Caterpillar’s 2013 ﬁnancial performance?
Two words come to mind when I think about our 2013 ﬁnancial performance:
difﬁcult and execution. It was a difﬁcult year for sales. Caterpillar’ssales were down about $10 billion, with nearly $8 billion of that comingfrom Resource Industries, which is typically our most proﬁtable segment.
But our employees reacted quickly, and because they were so intently
focused on execution, we were still able to achieve a year to be proud of.

What can individual employees do in 2014 to help strengthen Caterpillar’sﬁnancial performance?
I’m really looking forward to 2014. We have the hardest-working andmost talented employees on the planet. Collectively, we should all
focus on the type of process efﬁciencies and product innovations that
increase customer value. Across the enterprise, this means developing
our people, continuing to manage our costs and supporting elementsof our Enterprise Strategy including the Caterpillar Enterprise Systemand our Across the Table Distribution Model Transformation.

What were the areas of execution that really stood out in 2013?
Cost ﬂexibility is a key part of our strategy and we took substantial
actions to help maintain proﬁ tability as sales declined. Despite the$10 billion decline in sales, we delivered on our proﬁt pull through target
and had a record year for Machinery & Power Systems (M&PS) operating cash ﬂow at $9 billion. This is a testament to the hard work andgreat execution of our people. We continued to drive our Business
Model by developing high quality products and partnering with ourdealers to provide our customers with the best service and support inour industry. In 2013, we improved our overall market share for machines
and ﬁnanced a greater percentage of dealer deliveries through Cat
Financial. Safety improved in our facilities and our product quality is
at all-time record levels. These areas of great execution were instrumental in delivering strong ﬁnancial results in what was a difﬁcult year,
particularly for mining.

Individually, I’d like our employees to focus on growing and developing
their skills and be willing to stretch themselves outside of their comfort
zone within the workplace. By doing so, not only will they add to theirown skill sets, but they’ll also increase their value to Caterpillar and ourcustomers. Finally, in 2014, I would ask that our employees do their best
to have fun at work. Smile, make a colleague feel good, but also understand that we have a lot of work to do. We can work hard, we can begreat at what we do, but we can also enjoy what we’re accomplishingin the process.

What are the most important drivers of shareholder value at Caterpillar?

What do you see when you think about Caterpillar’s future?

Our goal at Caterpillar is to be in the top quartile of the S&P 500 for total
shareholder return. We believe achieving that means a long-term growthin earnings per share of about 15 percent. We’re in cyclical industries
and we understand that there will be years that proﬁ t grows faster thanthat and years when it grows slower or declines. To achieve this long-term
proﬁ t goal, we allocate resources within Caterpillar to the areas withthe greatest growth opportunities, we manage costs and we provide
customers with innovative and high quality products. Stockholders
value consistency and that presents a challenge in cyclical businesses
like ours. Thankfully, we serve a broad range of industries that, while

I love Caterpillar and have a lot of conﬁdence in our long-term future.
We’re in the right industries – ones that support global growth, infrastructure development and growth of the middle class – and we’re
well-positioned to help meet those needs going forward. We’ve got
the right business model, the best products and a dealer network that’s
focused on lowering our customers’ operating costs. Although we’rea global organization, we’re able to make good decisions faster than
we’ve ever made them before. We have a lot to look forward to atCaterpillar – it’s going to be a fun journey that we take together.

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FINANCIAL PRODUCTS

Complete Solutions Convince
Customer to Convert to Cat Products®

What does it take to create a stronger competitive position in an
important and growing industry? In the Netherlands, a targeted focus
on specialized customer needs, reliable products and well-tailoredﬁnancial services is proving to be the answer.
Waste and recycling is a growing segment for Pon Equipment BV, a Cat ®
dealer with operations in the Netherlands. The sector is highly competitive, with three major manufacturers sharing the market with Caterpillar.
To build an increased level of customer afﬁnity, Pon Equipment added
Account Manager Jan Horsting, dedicated to the waste and recycling
industry. Jan was assigned to work with Caterpillar and Cat Financial
to target customers and provide tailored ﬁnancing solutions.

Cat Financial Territory Manager Maikel Klaver and Sales Support
Representative Florien de Haas, reviewed Cat Financial ﬁnancing offers
for which he qualiﬁed. This resulted in a Cat Financial line of credit
being offered to the customer, which enabled him to purchase a newCat ® M313D Wheel Loader. Mr. Borg concluded the transaction by
investing in a full-service and maintenance contract for the machines.

In early 2013, a Caterpillar customer in the Netherlands spoke witha neighboring businessman who was having reliability issues with acompetitor’s equipment. The machine, used in recycling operations,malfunctioned repeatedly, hampering productivity. The operator ﬁled
complaint after complaint. The Caterpillar customer, citing his positive
experience, convinced his neighbor to look into replacing his current
gear with Cat equipment.

Mr. Borg is pleased with the new investments, and even more pleased
are his operators who deal with the machines daily on the job site. Workis getting done more quickly and efﬁciently. At the end of 2013, Borg
owned six Cat machines with plans to add more Cat ® products to his ﬂeet.

Jan Horsting learned of the opportunity and paid a visit to the potential
customer, Gebr. Borg. Jan arranged an onsite demo of a Cat ® 972K
Wheel Loader, which he believed would be a good ﬁ t for owner Fred
Borg’s needs. During the demo, however, an even better solution
emerged. By combining a Cat 962K Wheel Loader with the Cat ® 336E
Excavator – both smaller, lighter and more affordable machines thanthe customer’s existing unit – work could be performed more productively. Mr. Borg decided to purchase both machines.

“For us, Caterpillar, Cat Financial and Pon Equipment BV are able tooffer us trust, service and security for the continuation of my business,”notes Mr. Borg. “The live demos, especially, convinced me that the Cat
machines were for me. After all, you simply can’t buy a machine fromjust seeing it in a brochure.”“This deal meant a lot to us at Cat Financial,” says Territory Manager
Maikel Klaver. “The collaboration with the dealer and the ﬁnancing
offers we were able to bring to the table resulted in additional machinesales, which is good for everyone. We gained a customer who previously ﬁnanced with his local bank and turned him into a member of theCaterpillar family.”

Once in operation, the two Cat ® machines rapidly proved their worth
and outperformed the existing ﬂeet. Mr. Borg was interested in adding
more Cat machines, but was not sure he could afford it, given tight credit
availability in the Dutch market. Pon Equipment, working closely with
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CORPORATE SERVICES

Caterpillar’s Diversity& Inclusion Journey
Employee Resource Groups (ERGs) are an important component of ourdiversity and inclusion strategy. ERGs are employee-driven and represent independent, voluntary, nonproﬁ t groups of employees who sharecommon interests and an approved business purpose. Today, there are
12 unique ERGs with a total of 85 chapters and more than 9,000 global
members. The ERGs bring value to the business by mentoring employees,
facilitating leadership and career development seminars, volunteeringin the community and hosting potential employees, dealers, customers
and suppliers.

At Caterpillar, diversity and inclusion are much more than a “nice to have”
expression of good intentions. Instead, they are a crucial enabler ofour strategy to build a competitive advantage.
“If Caterpillar is to win in the marketplace and in the war for talent, weneed to engage people who are different from us,” says Latasha Gillespie,
director of Global Diversity & Inclusion. “We’re not just talking about
race, gender or ethnicity. We’re talking about diversity of thought anddiversity of style. We’re talking about mid-career hires. It has been proventhat companies with diverse teams outperform their competitors. Our
global customers expect employees to understand their diverse culturesand business needs,” Gillespie adds.

“Our commitment to diversity and inclusion allows our company tothrive in the global marketplace,” says Kim Hauer, vice president andChief Human Resources Ofﬁcer. “The world is changing, the talent pool
is different, customers’ expectations have evolved and so must we inorder to maintain our global market leadership position. By becoming
even more diverse than we are today and building an inclusive environment, we will be able to attract and retain the very best people, uncover
new and innovative ideas and, ultimately, ensure the success of ourcustomers who make progress possible around the world.”

Attracting and developing the best talent is a critical component ofCaterpillar’s strategy. To achieve that goal, our human resources teams
are focused on building diverse and inclusive teams where the uniqueness of individuals is respected and their different points of vieware valued.
Since establishing a Global Diversity & Inclusion Ofﬁce nearly 10 years
ago, Caterpillar has taken signiﬁcant strides in diversity and inclusion,and this past year was no exception. In 2013, DiversityInc., an internationally recognized resource on diversity management, named Caterpillar
to the “25 Noteworthy Companies” list and the “Top 10 Companies for
Veterans” list.

Caterpillar ERGs
• Caterpillar African American Network• Caterpillar Armed Forces Support Network• Caterpillar Asian Indian Community• Caterpillar Chinese Resource Group• Caterpillar Experienced Professional Direct Hire Resource Group• Caterpillar Korean Resource Group• Caterpillar Lambda Network• Caterpillar Latino Connection• Caterpillar Middle Eastern Resource Group• Caterpillar Women’s Initiatives Network• Caterpillar Young Professionals Resource Group• Champions of Challenge Resource Group

Additionally, more than 70,000 employees across the globe participatedin the inaugural Inclusion Survey. The results from the survey are helping
Caterpillar leaders to understand and leverage our strengths as well as
to identify disparities that may exist as a result of differences experienced
by various employee demographic groups. In the ﬁrst year of completingthe survey, Caterpillar placed in the top ﬁve percent among benchmarked
companies conducting their inaugural survey.

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CORPORATE SERVICES

Shop Floor Mobility – Powering
Caterpillar’s Performance throughExcellence and Innovation
The Decatur deployment is just the beginning of shop ﬂoor mobility.
The concept has been replicated in Aurora and in Brazil. Cat ® dealers arealso exploring the beneﬁts of shop ﬂoor mobility for service technicians.
Bringing shop ﬂoor technology to match the modern factory is just one
way we are powering performance through technology.

One of the most important disciplines in Lean manufacturing, “standard
work” provides a clear description of the safest, highest-quality andmost efﬁcient way to perform a given task. Yet it can be challenging to
make this voluminous information immediately accessible to employees
when and where they need it. A new shop ﬂoor mobility initiative, implemented by Global Information Services, uses tablets to put standard
work resources literally at the ﬁngertips of assemblers at our Decatur,Ill., manufacturing facility.
Before shop ﬂoor mobility, assemblers at the facility either had to climb
off the work platform and walk back to a terminal to check standard work
or attempt to recall it from memory. With an average of 200 minutes ofstandard work to complete on a truck, the time required to retrieve
information added up quickly.
The shop ﬂoor mobility initiative makes standard work accessible on themachine that an assembler is building, through a tablet with a speciallydesigned magnetic case. It requires only a click to rotate a picture, zoom
into the picture for a more detailed view or access additional information.
Engineering changes are automatically updated and operation signoffs
happen the moment a task is complete – making real-time, controlled
data easily accessible throughout each work shift.
Each assembler, line by line on every assembly line in Decatur wastrained to use the tablets. Battery life extends for a full shift, and feedback from the assemblers indicates that the quality of the visual aids issuperior to legacy systems. Mobility is helping Caterpillar’s Decatur
facility reach our vision to be the world’s premier truck facility.

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2013 YEAR IN REVIEW38LAW AND PUBLIC POLICY
Law and Public Policy is built to sustain Caterpillar’s world-class reputation. The organization includes theLegal Services Division and the Global Government & Corporate Affairs Division. Responsibilities include legal
and compliance services, media relations, internal communications, government affairs advocacy, sustainability
consulting and global environmental, health and safety services. Support for the Caterpillar Foundation is also
provided by our group, making sustainable progress possible around the world. We are a global team, focusedon serving our customers, communities and countries.

+80% 14,000 87%

Caterpillar legal professionals
who participate in the Caterpillar
pro bono program

Number of pending and granted
patents worldwide managed by
our Intellectual Property Group

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2013 YEAR IN REVIEW39

The Enterprise Recordable
Injury Frequency (RIF) has
fallen 87% from 2003 to today

COMMON GROUND

Pro Bono Has
its Beneﬁts
A Conversation with Jim Buda,
Executive Vice President & Chief Legal Ofﬁcer

Caterpillar’s legal services team has a reputation for “pro bono” work.
What exactly does that mean?

How do members of your department balance their time between theirday jobs and their pro bono projects?

The words “pro bono” come from the Latin “pro bono publico,” whichmeans “for the public good.” It describes providing professional services
to those in need and is often associated with providing free legal services
to people who could not otherwise afford them. Caterpillar encourages
all types of volunteer work, and we’re proud to provide volunteer legal
assistance throughout the world.

Very carefully. Caterpillar is our main client, so we get the job done forCaterpillar ﬁrst – all other work comes second. But our people are great
at managing work, and the pro bono program is something that is
important to us. We don’t require anyone to participate in the pro bonoprogram, but more than 80 percent of our legal professionals do. In 2013,
we donated more than 1,500 hours of legal services throughout theworld, which amounts to well over a half million dollars of pro bono legal
work. Plus, Our Values in Action include integrity, excellence, teamwork,commitment and sustainability, and I think that’s part of what drives
our passion.

In an age of limited corporate resources, why does Caterpillar
continue to put such an emphasis on community service andpro bono work?
First and foremost, it’s important to give back to our communities.
If we can help an individual who is struggling, then we need to do so.
The pro bono work we do gives our lawyers and legal professionals
an opportunity to help people. It is also a recruiting tool; candidates
like the fact that Caterpillar offers a more balanced life than a careerat a law ﬁrm might, plus a clear opportunity to engage in pro bonowork. There’s a great sense of teamwork among our team, and partof that is due to our shared commitment to serve the communities
where our people live and work.

Beyond legal services, what other types of community service does
the Law and Public Policy group engage in?
Caterpillar employees are very generous with their time and demonstrate
the community spirit that is embedded in Our Values in Action. We
encourage all of our colleagues worldwide to donate their time. The
Caterpillar Foundation is supported by our group, and that drives homethe need to help others. From cleaning up a park to building homes, orvolunteering with Junior Achievement or the United Way, our team isalways ready to reach out and get the job done.

What type of pro bono work does Caterpillar’s legal services teamtypically perform?
We often provide individual services such as helping someone obtain aprotective order. Or we might hold a clinic to help small businesses
determine whether they have proper insurance coverage or whether
they need to be incorporated. For our non-U.S. lawyers, who live inplaces where pro bono legal work is not as customary, we give themthe opportunity to partner with outside counsel or other Caterpillar
lawyers on projects for humanitarian organizations.

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2013 YEAR IN REVIEW

40LAW AND PUBLIC POLICY

Protecting Valuable
Innovations andTreasured Brands
Cat ® products are both popular and valuable – our brand ranks among
the top 60 most valuable global brands – and to protect that value, theIntellectual Property Practice Group directs an active worldwide
enforcement program. The team works closely with Caterpillar’s global
security groups to identify and stop individuals and companies that
attempt to trade on Caterpillar innovations and brands or that attempt tosell counterfeit products. The practice group coordinates and manages
more than 9,000 enforcement matters annually, shutting down websites,
online auctions and other unauthorized uses of Caterpillar’s intellectual
property. Their efforts protect some of the world’s most prized commercial assets – work that beneﬁts our stockholders, our customers and all
our stakeholders.

Throughout our history, Caterpillar has been an industry leader intechnological innovation. A long list of notable inventions has originatedfrom the creative minds of our engineers and scientists, including earlymodels of track-type tractors, elevated sprocket undercarriages in the
1980s, computer-aided earthmoving systems in the 1990s and, mostrecently, Tier 4 emissions management technologies and hydraulichybrid technologies. Today, Caterpillar invests around four percent ofannual sales in research and development, producing breakthroughsthat expand our offering and improve existing products. It is only
through a world-class Intellectual Property Protection Program that
Caterpillar can protect this investment from being copied by competitors.
As Caterpillar has expanded its product and technology development
efforts and acquired other businesses, our patent portfolio has doubled
and our collection of brand names now numbers more than 20. These
intellectual property assets create a competitive advantage and represent a barrier to entry for competitors and potential competitors in
the global marketplace. Caterpillar is regularly listed among the top
100 corporations in the number of patents issued by the U.S. Patent
and Trademark Ofﬁce each year.
The Intellectual Property Practice Group of the Legal Services Division
works hand-in-hand with Caterpillar’s engineers, scientists and marketers
to identify, develop and protect Caterpillar’s innovations and trademarks.
The practice group manages about 14,000 pending and granted patents
worldwide. The group collaborates with the chief technology ofﬁcer andproduct managers to identify intellectual property strategies unique to eachof Caterpillar’s businesses – work that helps ensure that Caterpillar’s
intellectual property portfolio continues to generate shareholder value.
This practice group also protects Caterpillar’s brands by obtaining
and enforcing trademarks worldwide. The group manages about 12,000
trademark applications and registrations to support brand value,
coordinating closely with brand management and marketing groups.

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2013 YEAR IN REVIEW41

CONSTRUCTION
LAW AND PUBLIC
INDUSTRIESPOLICY

Feature Story
Headline
Supporting Girls
Today So They Can
Lead Tomorrow
Photo courtesy of INSIDER IMAGES/Stuart Ramson for the UN Foundation.

10
to
25

Caterpillar enables the growth of our world through infrastructure andenergy development. Our solutions support communities and protect
the planet, and the Caterpillar Foundation shares these values in thecommunities where we live and work. The Caterpillar Foundation
believes girls and women hold the key to addressing the world’s toughest challenges. By focusing on turning the spiral of poverty into a pathto prosperity by investing in those proven to yield the best results –women and girls – the Foundation makes sustainable progress possible.

(Left) Photo courtesy of INSIDER IMAGES/Stuart Ramson for the UN Foundation.
(Right) Photo courtesy of Nathan Mitchell.

The Caterpillar Foundation works with the United Nations Foundation
to impact people and communities in need. The UN Foundation’s “forgirls, by girls” Girl Up campaign motivates and trains thousands of girls
in the U.S. to become global leaders and to advocate for girls aroundthe world.

percent. When the number of girls attending school increases by
10 percent, a nation’s Gross Domestic Product (GDP) increases
by 3 percent. A typical girl who receives an education reinvests
90 percent of her income in her family and local community.

With this partnership, girls are given the opportunity to become educatedand are empowered to be healthy, safe, and leaders in their communities.
According to Girl Up, there are more than 600 million adolescent girls
living in developing countries today who struggle for the opportunity
to attend school, obtain medical care or be involved in community life.

For these reasons and others, we believe girls and women in every
geographic region will be essential contributors to a more equitableand prosperous tomorrow. The Caterpillar Foundation continues toinvest in innovative programs that offer girls the necessary opportunities
to lead the next generation. The progress of our company and world
depends on their future.

According to the UN Foundation, today more than 66 million school-age
girls do not attend school, 496 million over the age of 15 cannot read or
write and 33 million fewer girls than boys attend primary school worldwide. Removing the barriers that girls face in accessing education –hurdles that boys are less likely to encounter – is the primary focus of
the Foundation’s investment in the Girl Up campaign.

Caterpillar Inc. supports the philanthropic efforts of the Caterpillar
Foundation. Founded in 1952, the Caterpillar Foundation has contributed
more than $550 million, including $58 million in 2013, to help makesustainable progress possible around the world by providing programsupport in the areas of environmental sustainability, access to education and basic human needs.

The Caterpillar Foundation is investing in the programmatic work ofGirl Up to help bring awareness to the challenges of educating girls
through the work of the United Nations. According to the UN Foundation,
an educated girl can break the cycle of poverty within a single generation, and an extra year of school boosts girls’ eventual wages by

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Read more about the Caterpillar Foundation on page 60.

2013 YEAR IN REVIEW42

CONSTRUCTION
LAW AND PUBLIC
INDUSTRIESPOLICY

Feature Story
Headline
Sustaining a World-Class
Ethics and Compliance Culture
Today, Caterpillar operates in an unprecedented global regulatory
enforcement environment. The compliance expectations of government
regulators, investors and Caterpillar’s Board of Directors have neverbeen higher. We embrace those high expectations and are committed
to continuous improvement as we work to strengthen a world-classethics and compliance culture.
Our global footprint, key markets, growth strategy and business modelput the need for a robust and effective compliance program at the forefront of our operations. If a violation were to occur, the resulting cost,
reputational harm and destruction of shareholder value cannot be overstated. Many multinational corporations are dedicating tremendous
resources to compliance, but many have done so only after suffering
the devastating consequences of an avoidable compliance event.

and procedures are in place to review third parties with whom we dobusiness and to evaluate requests for travel, gifts and entertainment
for government ofﬁcials.

Caterpillar’s objective is to be proactive and aggressively get in front of
this expanding risk. Processes and procedures are designed to ensure wehave an organization that operates in accordance with internal controls,
within the law and on the ﬁrm foundation of Our Values in Action. It adds
up to a company we can all be proud of and one that our employees,
stockholders and customers can rely upon.

We recognize that acquisitions can potentially introduce new risks.
Caterpillar conducts risk-based due diligence on potential acquisitions,and we carefully integrate acquired companies into our processes. In
addition, independent investigation and compliance audit processes
have been designed and executed. Training for the general employee
population also has been enhanced, and thousands of employees
in high-risk job functions receive additional training each year. The
program is a virtuous circle of continuous improvement that mitigatescompliance risks for Caterpillar around the globe.

Caterpillar’s compliance transformation began several years ago. We
built and continue to invest in an Ethics & Compliance Program witha focus on compliance assurance. Enterprise risk owners for eachof 16 compliance risk areas have deﬁned policies, procedures, tools
and a compliance audit program designed to drive accountability forcompliance at all levels of the enterprise. As a part of Caterpillar’s
Anti-bribery Compliance Program, we have implemented a risk-based
approach and common processes to mitigate bribery risk. Policies

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2013 YEAR IN REVIEW43LAW AND PUBLIC POLICYCONSTRUCTION INDUSTRIES

Feature Story
Headline

Safety:Progress Toward
Achieving an
Ambitious Vision“While Global EHS sets the policies for the enterprise, our improvement
is due to our employees and leaders who put safety ﬁrst. An RIF numberof .78 illustrates that the safety of our people is a primary focus in everything we do,” says Andy Schneider, Global EHS Manager.

At Caterpillar, there is no number bigger than zero.
Zero is the aspirational target expressed through Vision Zero: zeroaccidents and injuries across the enterprise. Although the vision has
not yet been fully realized, our progress has been remarkable. In fact,
Caterpillar has never been a safer place to work.

In 2013, 28 out of 36 divisions met or exceeded their RIF targets, andCaterpillar exceeded the 2013 enterprise-wide RIF target by 23 percent.

During the past decade, the enterprise Recordable Injury Frequency(RIF) has fallen more than 87 percent – from 6.22 in 2003 to .78 today.
RIF deﬁnes the number of injuries severe enough to require medical
treatment per 200,000 hours worked. That data translates to more than
52,000 workplace injuries that have been avoided since 2003.

Achieving Vision Zero will require a continued commitment to safety
and a continuing commitment to develop our culture of safety.
“Our work on safety will never be done,” Oberhelman says. “Every day
we have to maintain our focus and recommit to making our workplace
safe for everyone.”“Zero injuries – that’s our goal,” says Chairman and CEO Doug Oberhelman.
“It will not be easy to achieve, but it’s certainly not impossible. We
simply will not be satisﬁed unless everyone gets safely home every
single day.”The enterprise-wide RIF of .78 represents an all-time low for recordable
injuries – a metric that can be attributed to strategic safety initiatives
and support from executive leadership, as well as a commitment tosafety from employees across the globe.
Global Environmental Affairs, Health and Safety (Global EHS) is theorganizational owner of the EHS Assurance Manual, which identiﬁes
the fundamental environmental and safety issues that all Caterpillar
facilities must address.

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2013 YEAR IN REVIEW44

RESOURCE INDUSTRIESResource Industries is built to support customers using machinery in mining and quarrying applications. Responsibilities
include business strategy, product design, product management and development, manufacturing, marketing andsales and product support. The product portfolio includes large track-type tractors, large mining trucks, undergroundmining equipment, electric rope shovels, draglines, hydraulic shovels, drills, highwall miners, tunnel boring equipment,
large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, select work tools,
forestry products, paving products, industrial and waste products, machinery components and electronics and control
systems. Resource Industries also manages areas that provide services to other parts of the company, including
integrated manufacturing and research and development.

Sales

Segment Proﬁt($ in millions)($ in millions)$21,158$13,270$4,318$1,575

2012

2013

2012

2013

2013 Sales by Geography($ in millions)North America $4,443
EAME $3,241
Asia-Paciﬁc $3,105
Latin America $2,481

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2013 YEAR IN REVIEW

45

COMMON GROUND

Mining Fundamentals
Remain Positive
A Conversation with Steve Wunning,Group President

the vehicles operate 24 hours a day, seven days a week. Not only does
autonomous mining offer increased productivity, but customers can also
lower their operating costs because fewer people will be required at themine sites. This is a key consideration since many of these mines arelocated in remote areas where people need to be transported to andfrom the location. There’s also a lot of interest in autonomous machines
because they can actually improve mine safety – putting fewer people
in and around mining operations.

How does Caterpillar manage the cyclical nature of themining business?
The mining industry has always been a cyclical one. Caterpillar looks
at the mining industry both from short-term and long-term perspectives. Mining industry production in 2013 was higher than it was in 2012,
and we expect both production and resource consumption to be evenhigher in 2014. Commodity prices for coal, copper and iron ore are stabilizing. So, from a short-term point of view, mining production is on the
upswing, which means Caterpillar should eventually see higher mining
equipment sales down the road.

Why does coal continue to be an attractive energy source?
Coal is easy to ﬁnd, safe to transport, and low in cost. And coal can becleaner with the right technology and the right investment. Today, coalprovides about 35 percent of the electricity in the world, and experts
say that the demand for electricity between 2010 and 2040 is going toincrease about 90 percent. These experts also say that coal will meet
about a third of that electricity demand, so, with the right strategy, coalcan have a positive future.

Beyond this current cycle, what’s the long-term outlook for mining?
The long-term fundamentals are very positive. The world’s population
is growing at a rate of about 6.5 million people every month, and that’s
going to continue month in, month out for the foreseeable future. The
standard of living for people in developing countries will almost double
between 2010 and 2018, and by 2035 it’s expected that 60 percent of
the world’s population will live in cities. All of this growth is going toincrease the demand for mining. And remember that the richest, easiest
ore bodies have already been mined. One driver of Cat ® mining products
is the amount of material that must be moved in order to get at theremaining minerals. Declining ore resources and harder-to-get-to orebodies are going to really drive the demand for our products, in addition
to increasing consumer demand.

Is it possible for coal to be a sustainable energy source going forward?
Coal and sustainability are not two words frequently used in the same
breath. One aspect of sustainability concerns the environment, ofcourse, but another concerns improving the living standards of people
around the world. Currently, more than 1 billion people do not haveaccess to electricity, including more than 50 percent of the populationof Africa. If we can provide energy access for these people, their living
standards will increase and economic development will increase –creating more jobs, improving education and helping provide a betterway of life. We have to balance our environmental concerns, which are
critically important, with improving living standards and making theworld a better place to live. Coal and other forms of energy need to bepart of that sustainable solution.

How will autonomous mining change the industry in the coming years?
I talk to mining executives around the world, and, in almost every case,they want to know about Cat® autonomous mining vehicles. These machines
can help increase their productivity and equipment utilization because

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RESOURCE INDUSTRIESCaterpillar ProductDevelopment Community
Brings Innovation to Bear

We’re making great progress so far. The strategy is coming to life invarious forms, one of which is technology demonstrations. These events
showcase key new technologies and system solutions to the enterprise.
The beneﬁ ts of these demonstrations are two-fold: product and component groups get to explore new technologies and maximize potential
applications, while their interest and response helps set the velocity
for further development of these technologies. Eight technology demonstrations were held in 2013.

The future holds many challenges for Caterpillar customers. Our global
product development community is working now to bring innovation tobear on those future challenges, and turn them into opportunities forlong-term success.
In recent years, Caterpillar’s product development has largely focusedon one of the most signiﬁcant opportunities in our history: compliancewith Tier 4 emissions standards in the United States and Stage IV emissions standards in the European Union (EU). Since the implementationof Tier 1 and Stage I emissions standards in 1996, these challenging
regulations have driven an extensive overhaul of our product lines toreduce emissions by about 90 percent over a 20-year period. With theﬁnal phases of both standards nearly upon us, the competitive landscapeis changing rapidly as we move into a market where customer needs,
rather than regulatory compliance, will drive product development.

While it is important to innovate and explore many new ideas, only thosetechnologies that can be integrated into new products and provide
customer value move forward in the development process. Progress ismeasured by tracking technology transfers. These occur when a newtechnology has developed and matured enough to meet a comprehensive
set of agreed-upon requirements, known as Technology Readiness
Levels, or TRLs. At TRL 4, the new technology is adopted by a component
or product group for commercial use. Last year, over 25 technologies
reached this level and transferred to groups for use in our products.

This means Caterpillar must innovate to differentiate our products andsolutions from the competition in order to meet customer needs better
than ever before. Technology is key to this effort and will ensure we are
well-positioned to meet these needs. In 2011, Caterpillar’s productdevelopment community began to develop an enterprise product andtechnology strategy by exploring how key trends, business demands,
sustainability and other forces will impact our customers. This community then worked backward to identify key themes and technologies.
The result was an integrated product and technology strategy to guide
us into the future.

“Our team is successful when we develop technologies that make their
way from research into commercialization and bring value to our customers,” explains Lou Balmer Millar, director of Research and Advanced
Engineering for the Product Development & Global Technology Division.
“We do this through enterprise alignment, technology leverage, collaboration and assurance of technology readiness upon transfer to productgroups. We’re thrilled to be part of the global Caterpillar team working
together to achieve common enterprise technology goals.”

The strategy encompasses three themes – Energy and Power Systems,
Machines and Machine Systems and Automation and Enterprise Solutions. Each theme includes customer-focused goals that serve as targets
against which progress can be measured. Research activities currently
underway within these areas include efforts to reduce customer owningand operating costs, improve productivity, enhance safety and reducegreenhouse gas emissions.
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RESOURCE INDUSTRIESTransforming
One Great Brand
into Anothertechnicians undergo training and take part in the truck’s assembly. The
truck clocked 605 hours and achieved an availability of 95.5 percent in its
ﬁrst month of operation. The downtime was negligible and the customer’s
feedback has been very positive, saying the integration of Cat and Unit
Rig components has proven to be a great success.

Unit Rig has been a pioneer in electric drive trucks for more than
50 years. After Caterpillar’s acquisition of Bucyrus in 2011, the Unit
RigTM truck product line became part of the Caterpillar family. Almost
immediately, both Caterpillar and Unit Rig engineering teams began
working to integrate Cat components into the trucks. The goal was toensure that our customers would have one dependable source for all
their parts and that both Caterpillar and Cat dealers could maximize
their return on investment from using proven components – all while
meeting the performance expectations of our customers.

Like the Cat MT4400D AC, the Cat MT5300D AC is also demonstrating
success. The ﬁrst pilot Cat MT5300D AC was built two months ahead ofschedule in order for a key mining customer to showcase the truck attheir annual meeting. Excellent collaboration with the dealership andthe Caterpillar engineering teams made that possible. Performance
results also have been strong. In its ﬁrst 31 days, the Cat MT5300D AC
clocked over 609 hours and operated with 95.5 percent availability.

In just three months, our engineering teams installed a Cat engine in theexisting Unit RigTM MT4400. The initial truck has now clocked more than
6,000 hours in the ﬁeld without any major issues, giving dealers conﬁdence
in the quality of the design and manufacturing of the project. Following
this success, we undertook the next step by adding proven Cat electric
drive system and Cat ® electronics to the Unit Rig MT4400 with the end
result of the new truck becoming the Cat ® MT4400D AC Mining Truck.
This new Cat ® truck was successfully developed and tested in justover six months.

By leveraging our proven Cat components, maximizing research andtechnology dollars and, most importantly, staying connected to ourcustomers, the entire extended Caterpillar family is beneﬁ ting from thesuccess of the transformed Unit Rig trucks.

The Unit Rig to Cat Truck Journey• Historically, some Unit Rig trucks have set records in annual
operating hours, clocking over 8,136 working hours during theﬁrst year of operation.
• Unit Rig trucks have a signiﬁcant presence in Australia, China,
India, Mongolia, Africa and Russia.
• Today’s Cat MT family of mining trucks leverage the engineeringand technological experience from thousands of Unit Rigs trucks
in service.
• The Cat MT family of large mining trucks currently has two models
in production – the Cat MT4400D AC, which is in the 240 ton(218 tonne) size class, and the Cat MT5300D AC, which is in the
320 ton (290 tonne) size class.

Next on the drawing board was a brand new 320 ton Cat truck. In lessthan nine months, engineering teams designed and built the prototype
for the Cat ® MT5300D AC Mining Truck. The 320 ton (290 tonne) truck isbased on designs from the Unit Rig MT5500 and MT6300 trucks, as wellas the drive system and engine from the Cat ® 795F AC Mining Truck. By
early 2013, the Unit Rig MT4400D AC and Unit Rig MT5300D AC wereofﬁcially branded as Cat trucks, and are now known as the Cat MT
family in the large mining truck product line.
Meanwhile, in the ﬁeld, a Cat dealer received the ﬁrst pilot Cat MT4400D
truck for a customer site. For this ﬁrst ﬁeld truck, we set aggressive
goals – clock 600 hours of truck operation at or above 85 percent availability with downtime at less than 3 percent during the ﬁrst month ofoperation. The Cat dealership supported this endeavor by having their
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2013 YEAR IN REVIEW48

RESOURCE INDUSTRIESCat® 988K Large
Wheel Loader –A Technological
Showpiece• Eco Mode (On-demand Throttle) – This new feature allows operators
to maintain normal operation with the left pedal (brake/neutralizer
pedal) and implements. Operators do not need to operate the engine
throttle pedal since the machine systems manages engine RPM.
Customers gain the efﬁciency of manual throttle and the ergonomics/
ease of use of throttle lock. This feature helps the new Cat 988K
reduce fuel consumption by up to 20 percent, compared to the earlier
generation Cat 988H.

The seventh-generation Cat ® 988 Wheel Loader, the Cat 988K, drove
off the line in 2013 – an incredible accomplishment that many of ourcompetitors may never be able to achieve. This award-winning model,
celebrating its 50-year anniversary, combines long life, reliability,
improved fuel efﬁciency and performance that are at the core of theCat brand. The Cat 988K is a great example of how these technologicaladvancements have beneﬁ ted Caterpillar.
Developing a world-class product like the high-tech Cat 988K Wheel
Loader takes a tremendous team effort. At the core of this development
were technologies that Caterpillar invested in to improve the way wework as a team. Utilizing new Voice of the Customer software, themarketing team worked hard to understand what customers want.
Customers were even brought in to our 3D lab to collaborate with theteam using scale-size 3D virtual models. Engineering teams extensively
used Virtual Product Development – detailed computer simulations ofeverything from bolted joints, to powertrain, to structures, to the
manufacturing process itself – allowing the team to test ideas and iterate virtually, shrinking development time and costs by over 30 percent.

• All New Operators Station – The Cat 988K is all about operator
comfort, and technology enables this. In-cab sound levels are
considerably reduced to 71 A-weighted decibels, or dB(A), downfrom 74 dB(A) in the Cat 988H, and the cab temperature control
is fully automatic and continuously variable. A new touch-screen
color graphical display in the machine provides machine information and features Cat ® Next Generation Vital Information
Management System (VIMS).
• Completely Integrated Systems – One of the most prominent
examples of technology on the Cat 988K is one that can only
be appreciated by operating the machine. Using 50 years ofexperience with this wheel loader, the Cat 988K is the benchmark
in system integration. All of our machine systems work seamlessly
together to ensure our customers move more and make morewith our Cat 988K.

Not only has technology improved team collaboration, but it is also at thecore of the Cat 988K features and beneﬁ ts:• Cat ® C18 ACERT™ – The Cat 988K is the ﬁrst machine to offer
Tier 4 Final/Stage IV emissions for machines under 560 kilowatts(750 horsepower). This high-tech engine delivers more power
while using less fuel and producing fewer emissions.

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RESOURCE INDUSTRIESCaterpillar Celebrates
Important Anniversaries
in Japanannounced that Caterpillar would take sole ownership of CJL. Throughout
2012 and 2013, former CJL employees were fully transitioned into theCaterpillar family. The one-year anniversary of CJL becoming wholly
owned by Caterpillar, further strengthening our presence in Japan, wascelebrated throughout the enterprise.

Employees in Japan marked two very important anniversaries in 2013 –the 50th anniversary of Caterpillar operations in Japan and the ﬁrst
anniversary of Caterpillar Japan Ltd. becoming fully integrated into theCaterpillar family.
The history of Caterpillar’s operations in Japan began in the Sagami
facility 50 years ago. Since its construction in 1964, Sagami has helped
bring a wide range of products to the marketplace – including the legendary Cat ® D4D Track-Type Tractor ﬁrst produced in 1965. The products
delivered from the Sagami facility have played signiﬁcant roles in theconstruction of highways and dams, and made invaluable contributions
to Japan’s economic growth. Along the way, Sagami has become aleader in building strong supplier relationships, aligning key suppliers
to meet our business needs.

“Over the past 50 years, while we have collectively made great progressin Japan, the real power of the relationship and history is based on theimpact it has had on Caterpillar around the world,” says Ed Rapp, grouppresident with responsibility for Construction Industries. “The Japanese
team’s outstanding capabilities in manufacturing excellence, supplierintegration, implementation of the Caterpillar Production System,
continuous improvement and design capabilities have become benchmarks for the enterprise.”

Caterpillar’s ﬁrst hydraulic excavator to be manufacturered in Japan,
the Cat Y35, was made in Akashi. Since then, Akashi has become
the primary plant and an enterprise leader in the development andproduction of hydraulic excavators, with the ability to produce
100 excavators per day. The Akashi facility has become an enterprisebenchmark for implementation of the Caterpillar Production Systemand highly efﬁcient supply chain.
The Hydraulic Excavator Design Center (HEDC) in Akashi is a key
Caterpillar product development center. HEDC has developed products
such as the E-series and award-winning Cat ® 336E Hybrid Excavator
that are distributed to satisﬁed customers in markets all over the world.
An employee puts the ﬁnishing touches on a Cat 320 Hydraulic Excavatorin 1990 (top photo). The audience admires the ﬁrst Cat D4D produced in
Sagami in 1965 (bottom photo).

Another important anniversary occurred in 2013. In 2008, Caterpillar
and Mitsubishi Heavy Industries Ltd. announced that Caterpillar would
become the majority owner of Caterpillar Japan Ltd. (CJL), a joint venture
between the two companies. CJL began integration efforts into
Caterpillar’s business and processes and then in 2012, the companies

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Financial Performance
We are proud of the way our employees came together in 2013 in a challenging industry environment. Despite a decline insales and revenues, Caterpillar set a record for Machine and Power Systems operating cash ﬂow, strengthened our balance
sheet and improved our overall market position for machines. In addition, we continued to improve the safety in our facilities
and the quality of our products. Cost ﬂexibility was critical to our strategy and was a signiﬁcant focus in 2013 as we took
substantial measures to help maintain proﬁtability as sales declined. This was not easy, especially for our employees who
endured a very tough year, but the actions we initiated helped us deliver strong operational performance in 2013.

CONSOLIDATED SALES AND REVENUES ($ IN MILLIONS)$32,396$42,588$60,138$65,875

CONSOLIDATED SALES AND REVENUES BY SEGMENT ($ IN MILLIONS)$55,656

 Energy & Power Systems $20,155
 Construction Industries $18,445
 Resource Industries $13,270
 Financial Products $3,224
 All Other $562

$55.7 Billion$55.7 Billion
Total Sales
and Revenues

Sales and revenues were down 16 percent,primarily driven by a sharp drop in sales of
new machines for mining.

2009

2010

2011

2012

Caterpillar is a diverse company that serves a wide range
of industries across the globe.

2013

2013 EXPORTS FROM U.S. BY REGION ($ IN MILLIONS)OPERATING PROFIT ($ IN MILLIONS)$577$3,963$7,153$8,573$5,628

EAME $5,809

29% Pull ThroughAsia-Paciﬁc $4,453
Latin America $4,135
Canada $2,193

Despite lower volume, an unfavorable mixof sales, the large negative cost absorption
impact and weak price realization, we
achieved a decremental operating proﬁt
pull through of 29 percent, which is in linewith our target range.

$16.6 Billion Total Exports
U.S. exports to Asia-Paciﬁc and EAME markets saw
the most signiﬁcant year-over-year decreases.
2009

CATERPIL L AR INC.

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2011

2013 YEAR IN REVIEW

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2012

2013

Financial Performance
CAPITAL EXPENDITURES (EXCLUDES EQUIPMENT LEASED) ($ IN MILLIONS)RESEARCH AND DEVELOPMENT ($ IN MILLIONS)$1,504$1,421$1,575$2,515$3,350$2,522$1,905$2,297$2,466$2,046$2.5 Billion$2.0
BillionInvested in 2013

We invested more than $2.5 billion incapital expenditures in 2013.

2009

2010

2011

2012

R&D expenses were lower primarily
due to decreased program spending.

2013

2009

PROFIT PER SHARE (DILUTED)
$1.43

2009

$4.15

2010

$7.40

2011

$8.48

2012

2010

2011

2012

2013

DIVIDENDS DECLARED PER SHARE
$5.75

$1.68

$1.74

$1.82

$2.02

$2.32

$5.75

15% Increase

Cost reduction actions helped mitigate thenegative proﬁt impact from lower sales.

Strong cash ﬂow enabled us to increase
our dividend in 2013, the 20th consecutive
year we have done so.

2013

2009

CATERPIL L AR INC.

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2011

2013 YEAR IN REVIEW

52

2012

2013

Market Performance
CAT VS. S&P MACHINERY INDEX

5-YEAR CLOSING STOCK PRICE$56.99$100.00$133.10$224.51$221.08$224.58$93.66$90.60$89.61$90.81$90.81$232.31

Despite a difﬁcult year, Caterpillar stock
price was largely stable.
 Caterpillar Inc.
 S&P 500 Index
 S&P 500 Machinery Index(S5MACH)As of December 31, 2013

2008

2009

2010

2011

2012

2013

2009

2010

2011

Cumulative stockholder return assuming an investment of $100 on December 31, 2008, andreinvestment of dividends issued thereafter.
Caterpillar common stock is traded on the New York Stock Exchange under the symbol CAT.

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2013 YEAR IN REVIEW

53

2012

2013

Business Performance
GLOBAL EMPLOYEES (AT YEAR END)

GLOBAL SALES AND REVENUES PER EMPLOYEE ($ IN THOUSANDS)$326

118,501

2013

2012

125,3412011

125,099
104,490

2010

$529

$516

$454

118,501$454,000

Employees

Per Employee

Our global workforce decreased
5.5 percent from 2012 primarily
due to restructuring programs
and lower production volumes.

Sales and revenues per employee decreased
due to lower sales volume.

93,813

2009

2009

GLOBAL CAT® DEALERS
178

$432

188

191

2010

2011

2012

2013

DEALER NET WORTH ($ IN BILLIONS)*
189

$15.7

178

$17.7

$18.9

$21.3

$21.8

178

$21.8 Billion

Global Dealers

Most Cat® dealers are independently
owned, locally operated businesses
and beneﬁt from strong, longstanding
customer relationships.

Our dealer network is a key part of ourBusiness Model and a competitive advantage.

2009

2010

2011

2012

2009

2013

2010

2011

DEALER EMPLOYEES (IN THOUSANDS)*

162.2

2013

2012

2011

2010

2009

152.5
141.3
126.7

162,200
Dealer EmployeesCat® dealer employees are a critical linkto servicing our global customer base.

135.7*Estimated
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2012

2013

2013 Global Performance by Region
NORTH AMERICA

2013 Sales and Revenues by Segment($ in millions)Total$21,762 Energy & Power Systems $8,231
 Construction Industries $7,008
 Resource Industries $4,443
 Financial Products $1,688
 All Other $392

OfﬁcesFacilities*

52,51953

Employees

Dealers*Facilities include principal locations where manufacturing, parts distribution, rail and remanufacturing
work takes place. In certain geographic areas, the facility symbol may represent multiple facilities.

EAME

2013 Sales and Revenues by Segment($ in millions)Total$13,613

 Energy & Power Systems $5,735
 Construction Industries $4,019
 Resource Industries $3,241
 Financial Products $503
 All Other $115

24,92749

Employees

Dealers

OfﬁcesFacilities**Facilities include principal locations where manufacturing, parts distribution, rail and remanufacturing
work takes place. In certain geographic areas, the facility symbol may represent multiple facilities.

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2013 Global Performance by Region
ASIA-PACIFIC

2013 Sales and Revenues by Segment$ in millions

Total$12,470

 Construction Industries $4,690
 Energy & Power Systems $4,021
 Resource Industries $3,105
 Financial Products $603
 All Other $51

OfﬁcesFacilities*

25,67043

Employees

Dealers*Facilities include principal locations where manufacturing, parts distribution, rail and remanufacturing
work takes place. In certain geographic areas, the facility symbol may represent multiple facilities.

LATIN AMERICA

2013 Sales and Revenues by Segment($ in millions)Total$7,811

 Construction Industries $2,728
 Resource Industries $2,481
 Energy & Power Systems $2,168
 Financial Products $430
 All Other $4

OfﬁcesFacilities*

15,38533

Employees

Dealers*Facilities include principal locations where manufacturing, parts distribution, rail and remanufacturing
work takes place. In certain geographic areas, the facility symbol may represent multiple facilities.

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Five-Year Financial Summary
Dollars in millions except per share data
Years ended December 31,
Sales and revenues

2013

2012

2011

2010

2009

$ 55,656$ 65,875$ 60,138$ 42,588$ 32,396

Percent inside the United States

33%

31%

30%

32%

31%

Percent outside the United States

67%

69%

70%

68%

69%

Sales

$ 52,694$ 63,068$ 57,392$ 39,867$ 29,540

Revenues$

2,962$ 2,807$ 2,746$ 2,721$ 2,856

Proﬁt

$

3,789

$ 5,681$ 4,928$ 2,700$

895

Proﬁt per common share1

$

5.87

$

8.71

$

7.64

$

4.28

$

1.45

Proﬁt per common share — diluted 2

$

5.75

$

8.48

$

7.40

$

4.15

$

1.43

$

2.320

$ 2.020

4

Dividends declared per share of common stock
Return on average common stockholders’ equity

19.7%

3

$ 1.820

37.2%

41.4%

$ 1.740$ 1.680

27.4%

11.9%

Capital expenditures:
Property, plant and equipment

$

2,522

$ 3,350$ 2,515$ 1,575$ 1,504

Equipment leased to others

$

1,924

$ 1,726$ 1,409$ 1,011$

Depreciation and amortization

$

3,087

$ 2,813$ 2,527$ 2,296$ 2,336

Research and development expenses

$

2,046

$ 2,466$ 2,297$ 1,905$ 1,421

As a percent of sales and revenues

3.7%

3.7%

3.8%

4.5%

968

4.4%

Wages, salaries and employee beneﬁts$ 10,962$ 11,756$ 10,994$ 9,187$ 7,416

Average number of employees

122,502

127,758

113,620

98,55499,359$ 84,896$ 88,970$ 81,218$ 63,728$ 59,842

Consolidated$ 26,719$ 27,752$ 24,944$ 20,437$ 21,847

Machinery and Power Systems

$

7,999

$ 8,666$ 8,415$ 4,505$ 5,652

Financial Products$ 18,720$ 19,086$ 16,529$ 15,932$ 16,195

Consolidated$ 37,750$ 40,143$ 34,592$ 28,418$ 31,631

Machinery and Power Systems

$

8,775

$ 10,415$ 9,066$ 5,204$ 6,387

Financial Products$ 28,975$ 29,728$ 25,526$ 23,214$ 25,244

December 31,
Total assets
Long-term debt due after one year:

Total debt:

1. Computed on weighted-average number of shares outstanding.
2. Computed on weighted-average number of shares outstanding diluted by assumed exercise of stock-based compensation awards, using the treasury stock method.
3. Represents proﬁt divided by average stockholders’ equity (beginning of year stockholders’ equity plus end of year stockholders’ equity divided by two).
4. Proﬁt attributable to common stockholders.

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BUSINESS

Overview

Caterpillar Business Overview
Caterpillar is built to make sustainable progress possible around the world. Cat ® equipment – a product line of more than 300 machines withmore than 3 million units around the world – is at work for our customers on highways, rail lines, oceans and rivers, in forests, quarries and oil
ﬁelds. Any job site you can imagine can put our products and services to work. We supply the machines, solutions and support so our customers
can excel under varying terrain and climate conditions. Our engines and gas turbines provide the horsepower for customers to move goods andcommodities across the globe, while generators deliver power wherever it is needed. Caterpillar’s manufacturing excellence is supplemented
by world-class service businesses, supported by logistics, ﬁnancial products and remanufacturing.
Caterpillar Inc. owns a portfolio of brands. These brands help support our growth strategy and achieve our enterprise goals. The Caterpillar
brand represents our corporation with the investment community, employees, public policymakers and other key stakeholders. Built on decadesof performance, our portfolio of brands – including our primary brand name, Cat – provides quality, reliability and an assurance of the ﬁnest
in design, engineering and customer service.
More information about Caterpillar can be found at caterpillar.com. For a complete overview of Cat products, services and solutions,please visit cat.com.

• Marine
Major
MajorService
ServiceAreas
Areasandand Industries
Served• Material HandlingIndustries Served

Major Product Groups• Articulated Truck• Compact Truck andMulti Terrain Loader• Dragline• Drill• Electric Rope Shovel• Engine• Generator Set• Highwall Miner• Hydraulic Excavator• Hydraulic Shovel• Locomotive• Marine Propulsion Systems• Motor Grader• Off-Highway Truck• On-Highway Truck• Pipelayer• Skid Steer Loader• Track Excavator• Track Loader• Track-Type Tractor• Tunnel Boring• Turbine• Wheel Dozer• Wheel Excavator• Wheel Loader• Wheel Tractor-Scraper• Work Tools and Attachments

CATERPIL L AR INC.

•• Agriculture
Agriculture•• Construction
Construction•• Customer
CustomerServices
Services•• Demolition
Demolitionand
and
Scrap
ScrapRecycling
Recycling•• ElectricElectricPower
Power
Generation
Generation•• Financing
Financing•• Forestry
Forestry•• Governmental
Governmental&&Defense
Defense•• Insurance
Insurance•• Landscaping
Landscaping•• Locomotive
Locomotive&&Railway
Railway•• Maintenance
Maintenanceand
andRepair
Repair•• Mining
Material Handling•• OEM
Solutions
Mining•• Oil&Gas
OEM Solutions•• Paving
Oil & Gas•• Pipeline
Paving•• Power
PipelinePlants•• Quarry,
Aggregates
Power Plants
andCement• Quarry, Aggregates• Remanufacturing
and Cement•• Rental
Remanufacturing•• Safety
Rental•• Training
Safety•• Technology& Solutions
Training•• WasteTechnology & Solutions• Marine• Waste2013 YEAR IN REVIEW

58

BUSINESS

Overview
Global Footprint

OfﬁcesFacilities

Facilities include principal locations where manufacturing, parts distribution, rail and remanufacturing
work takes place. In certain geographic areas, the facility symbol may represent multiple facilities.

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TRADEMARKInformation© 2014 Caterpillar All Rights Reserved. CAT, CATERPILLAR, their respective logos, ACERT, BUILT FOR IT, MineStar, Product Link, Solar, Unit Rig,
VisionLink, “Caterpillar Yellow,” the “Power Edge” trade dress as well as corporate and product identity used herein, are trademarks of Caterpillar
and may not be used without permission.
© 2014 CATERPILLAR PUBLIC RELEASE All Rights Reserved. Printed in the U.S.A.

Forward-Looking Statements
Certain statements in this 2013 Year in Review relate to future events andexpectations and are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as “believe,”“estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,”“intend,” “could,” “should” or other similar words or expressions often
identify forward-looking statements. All statements other than statementsof historical fact are forward-looking statements, including, without
limitation, statements regarding our outlook, projections, forecasts or trend
descriptions. These statements do not guarantee future performance,
and we do not undertake to update our forward-looking statements.

in delinquencies, repossessions or net losses of Cat Financials customers
could adversely affect its results; (x) new regulations or changes inﬁnancial services regulations; (xi) we may not realize all of the anticipatedbeneﬁts of our acquisitions, joint ventures or divestitures, or these beneﬁts
may take longer to realize than expected; (xii) international trade policies
may impact demand for our products and our competitive position; (xiii)
our ability to develop, produce and market quality products that meet
our customers’ needs; (xiv) the highly competitive environment in which
we operate could adversely affect our sales and pricing; (xv) we may
not realize all of the anticipated beneﬁ ts from a number of initiatives toincrease our productivity, efﬁciency and cash ﬂow and to reduce costs;(xvi) we could incur additional restructuring charges and may not realize
anticipated savings or beneﬁts from past or future cost-reduction actions;(xvii) inventory management decisions and sourcing practices of ourdealers and our OEM customers; (xviii) compliance with environmental
laws and regulation; (xix) alleged or actual violations of trade or anticorruption laws and regulations; (xx) additional tax expense or exposure;(xxi) currency ﬂuctuations; (xxii) our or Cat Financial’s compliance withﬁnancial covenants; (xxiii) increased pension plan funding obligations;(xxiv) union disputes or other employee relations issues; (xxv) signiﬁcantlegal proceedings, claims, lawsuits or investigations; (xxvi) compliancerequirements imposed if additional carbon emissions legislation and/or
regulations are adopted; (xxvii) changes in accounting standards; (xxviii)
failure or breach of IT security; (xxix) adverse effects of unexpected
events including natural disasters; and (xxx) other factors described in
more detail under “Item 1A. Risk Factors” in our Form 10-K ﬁled with the
SEC on February 18, 2014, for the year ended December 31, 2013.

Caterpillar’s actual results may differ materially from those described or
implied in our forward-looking statements based on a number of factors,
including, but not limited to: (i) global economic conditions and economic
conditions in the industries we serve; (ii) government monetary or ﬁscal
policies and infrastructure spending; (iii) commodity price changes,
component price increases, ﬂuctuations in demand for our products orsigniﬁcant shortages of component products; (iv) disruptions or volatility
in global ﬁnancial markets limiting our sources of liquidity or the liquidityof our customers, dealers and suppliers; (v) political and economic risks,commercial instability and events beyond our control in the countries inwhich we operate; (vi) failure to maintain our credit ratings could increase
our cost of borrowing and adversely affect our cost of funds, liquidity,
competitive position and access to capital markets; (vii) our Financial
Products segment’s risks associated with the ﬁnancial services industry;(viii) changes in interest rates or market liquidity conditions could adversely
affect Cat Financial’s and our earnings and/or cash ﬂow; (ix) an increase
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