Caterpillar 2013 Annual Report Download - page 37

CATERPILLAR INC. 2013 YEAR IN REVIEW
35
COMMON GROUND
Solid Delivery
Drives Results
A Conversation with Brad Halverson,
Group President & Chief Financial Offi cer
How would you describe Caterpillar’s 2013 fi nancial performance?
Two words come to mind when I think about our 2013 fi nancial performance:
diffi cult and execution. It was a diffi cult year for sales. Caterpillar’s
sales were down about $10 billion, with nearly $8 billion of that coming
from Resource Industries, which is typically our most profi table 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 were the areas of execution that really stood out in 2013?
Cost fl exibility 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 profi t pull through target
and had a record year for Machinery & Power Systems (M&PS) oper-
ating cash fl ow at $9 billion. This is a testament to the hard work and
great execution of our people. We continued to drive our Business
Model by developing high quality products and partnering with our
dealers to provide our customers with the best service and support in
our industry. In 2013, we improved our overall market share for machines
and fi nanced 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 instru-
mental in delivering strong fi nancial results in what was a diffi cult year,
particularly for mining.
What are the most important drivers of shareholder value at Caterpillar?
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 growth
in 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 than
that and years when it grows slower or declines. To achieve this long-term
profi t goal, we allocate resources within Caterpillar to the areas with
the 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
cyclical, don’t usually move to the same degree at the same time, and
having that balance in our business helps. In addition, to reduce profi t
volatility, we’re focused on improving inventory performance and cost
fl exibility through the business cycle.
What can individual employees do in 2014 to help strengthen Caterpillar’s
fi nancial performance?
I’m really looking forward to 2014. We have the hardest-working and
most talented employees on the planet. Collectively, we should all
focus on the type of process effi ciencies and product innovations that
increase customer value. Across the enterprise, this means developing
our people, continuing to manage our costs and supporting elements
of our Enterprise Strategy including the Caterpillar Enterprise System
and our Across the Table Distribution Model Transformation.
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 their
own skill sets, but they’ll also increase their value to Caterpillar and our
customers. 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 under-
stand that we have a lot of work to do. We can work hard, we can be
great at what we do, but we can also enjoy what we’re accomplishing
in the process.
What do you see when you think about Caterpillar’s future?
I love Caterpillar and have a lot of confi dence in our long-term future.
We’re in the right industries – ones that support global growth, infra-
structure 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’re
a 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 at
Caterpillar – it’s going to be a fun journey that we take together.