Caterpillar 2015 Annual Report Download

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2015 YEAR IN REVIEW
YEARS
90 WHAT WE’VE
BUILT.
WHERE WE’RE
HEADED.

Table of contents

  • Page 1
    2015 YEAR IN REVIEW 90 BUILT. WHAT WE'VE YEARS HEADED. WHERE WE'RE

  • Page 2
    ...ficers ...9 Board of Directors ...10 Data and Innovation ...12 Solar™ InSight System™ Turns Data Into Action ...13 Safety Services Keep Customers Alert to Fatigue ...15 Customer Input Shifts Cat® 994K Design Into High Gear ...16 Cat® Command Steers Mining in a New Direction ...17 Investing in...

  • Page 3
    ...). Our formative years were spent growing in a global economy marked by depression and world war. 1929 1931 Our strong legacy of innovation begins with the introduction of our first diesel tractor. Our manufacturing headquarters move from California to Illinois and we change the standard paint...

  • Page 4
    ...'s 40-year history in China. Business cycles have always been a part of our story. Global recession in the early '80s and increased competition caused a sharp downturn in product demand that pushed us to the brink of bankruptcy. 1975 1981 Caterpillar acquires Solar Turbines International from...

  • Page 5
    ...in 2008 with a first-of-its-kind electric drive system. Then in 2012, we unveiled the Cat® 336E H - the first machine to use a novel hydraulic hybrid technology developed by Caterpillar. In the same year, we introduced the Cat® 966K XE Wheel Loader - engineered to deliver superior efficiency by...

  • Page 6
    ... and equipment are up to date. These investments, coupled with Lean manufacturing improvements, also mean we're prepared to handle more volume and well positioned when recovery does come to our markets. We continue to invest in new products and technologies, maintaining research and development...

  • Page 7
    ... overall cost reductions, how Lean manufacturing is improving our quality , safety and efficiency , and that we're maintaining research and development spending. You can also read about our sustainability accomplishments and goals in the Caterpillar 2015 Sustainability Report, What We've Built...

  • Page 8
    ... and accountability. There are about a dozen specific projects underway, everything from expanded e-business to digital technology solutions connecting our machines and engines to our customers. And this leads me to our ongoing investments in digital technology. We talked a lot about that this year...

  • Page 9
    2015 YEAR IN REVIEW FROM LEFT TO RIGHT Thomas A. Pellette, Edward J. Rapp, Denise Johnson, David P . Bozeman, Douglas R. Oberhelman, Robert B. Charter, D. James Umpleby III, Bradley M. Halverson, James. B. Buda LEADERSHIP OFFICERS Chairman of the Board & Chief Executive Officer Douglas R. ...

  • Page 10
    ... equity investment). Other current directorships: HCI Equity Partners. Other directorships within the last five years: Mistras Group, Inc. and Progressive Waste Solutions Ltd. Mr. Dickinson has been a director of the Company since 2006. JUAN GALLARDO, 68, is currently Chairman of the Board and CEO...

  • Page 11
    2015 YEAR IN REVIEW LEADERSHIP BOARD OF DIRECTORS DOUGLAS R. OBERHELMAN, 62, is currently Chairman and Chief Executive Officer of Caterpillar Inc. Prior to his current position, Mr. Oberhelman served as Vice Chairman and Chief Executive Officer-Elect and as a Group President of Caterpillar Inc. ...

  • Page 12
    ... power of big data to offer our customers insights that decrease operating costs, increase uptime and maximize profitability. In the process, we're shaping a new era for Caterpillar in which we not only manufacture machines and engines, but also deliver value-added solutions that take our customer...

  • Page 13
    ...'s world-class product engineering and design capabilities with Uptake's software, application and data analytics expertise. As a result, Caterpillar will be able to transform the massive amount of incoming data we receive every day into even more useful information to feed back to our customers for...

  • Page 14
    ... people - from product support to design engineers to dedicated ï¬,eet managers - work in harmony. "We're providing the technology, but they're the ones who are interfacing with the customer and know the site, the control system and the equipment," Leon says. "Having the data and information now in...

  • Page 15
    ... for their employees. We find that the best results come from combining technology with people solutions. So, along with on-site manager workshops that increase customers' awareness of fatigue and distraction and help them build their overall safety culture, Caterpillar uses digital analytics to...

  • Page 16
    ... prototypes to be used in the design phase of development. The large wheel loader team leverages the use of simulation in each new product development program. In fact, the first full phase of the Cat 994K product design, which is the largest wheel loader in Caterpillar history, was done virtually...

  • Page 17
    ...improved safety and productivity. Trucks operating with Cat Command for Hauling use sophisticated onboard intelligence and advanced guidance technology, so a small number of people can run the whole project and centralize the control. For job sites such as underground mines, autonomous solutions are...

  • Page 18
    ... YEAR IN REVIEW DATA AND INNOVATION INVESTING IN R&D $2,165M 2015 R&D Spend 1,667 Total Patents Granted in 2015 190 Completed New Product Programs 15,953 Total Number of Pending and Granted Patents Worldwide 33 New technologies transferred from R&D to the New Product Introduction development...

  • Page 19
    ... YEAR IN REVIEW CUSTOMER SUPPORT Our business strategy is a simple one: make our customers more successful. We work with our dealer network every day around the world to ensure that success - at construction sites and mining quarries and power plants. Our goal is to speed the delivery of customer...

  • Page 20
    ... what's most important: their business, employees and families. When Davis hung up the phone, the Cat Financial team went to work. Davis, along with Customer Account Manager Bill Schowalter, Customer Solutions Support Manager Patrick Carnell and Territory Manager Reed Campbell, approved five...

  • Page 21
    ... better ways to get trains where they need to go, safely and on time. Today, advances in technology and innovation are transforming global rail transport. And Caterpillar's rail business is leading with innovative solutions that tackle some of the most challenging problems facing the industry. For...

  • Page 22
    ... a truly game changing Cat® Connect Technology that helps operators get more work done faster by automating blade adjustments, without requiring added investment in GPS systems. Cat® Slope Assist is a factory-integrated blade control system for Track-Type Tractors that helps operators reach target...

  • Page 23
    ... Cat dealer Carter Machinery providing the technical support, commissioning and testing. This followed a previous donation of a 350 kW Cat® C15 diesel generator set that provides standby power for Monticello's Robert H. Smith International Center for Jefferson Studies. The donations were part of...

  • Page 24
    2015 YEAR IN REVIEW 1969 CAT® ENGINES supply power for the APOLLO 11 MISSION to the moon. Homestead Dairy (continued) Homestead Green Energy has been in constant operation since October 2013, and the Cat® generator sets are essential to the waste-to-energy process. The manure is collected in ...

  • Page 25
    2015 YEAR IN REVIEW CUSTOMER SUPPORT INNOVATION MADE SIMPLE - AND PROFITABLE WITH JOB SITE SOLUTIONS Near the end of his shift, a mine truck operator glances up at the dashboard mounted in his cab. The simple display shows that he exceeded several production targets. However, according to the data...

  • Page 26
    ... YEAR IN REVIEW CUSTOMER SUPPORT PRODUCTIVITY SOLUTIONS THAT PROMISE TO WEAR WELL In the heavy equipment industry, time is money. If worn-out parts suddenly fail, costly shut downs could be needed until the part is repaired or replaced. Caterpillar employees and Cat® dealers work hard every day...

  • Page 27
    .... Caterpillar is going after that win by leveraging Lean, Engineered Value Chains and building strong Foundational Capabilities throughout our value chain to fulfill our Customer Service Promise, maximize Operating Profit After Capital Charge (OPACC) and create a competitive advantage. We...

  • Page 28
    ...success of our Engineered Value Chain programs demonstrates Caterpillar's ability to use different build strategies - in this case semi-finished machines - to reduce lead times and better meet customer needs. We are improving our end-to-end business by simplifying our product offerings and planning...

  • Page 29
    ... to our future because it works. Today, products ï¬,ow through our factories faster than ever, quality levels are at the highest in company history and products are delivered to the customer more quickly, generating cash ï¬,ow. Lean impacts every job - whether production or office environment - in...

  • Page 30
    ..., marketing, purchasing, accounting and human resources. LEAN BENEFITS Stabilizing the Business Enhancing Product Quality Improving Velocity Driving Value for Our Shareholders CONSTRUCTION INDUSTRIES MOTOR GRADER RESOURCE INDUSTRIES OFF-HIGHWAY TRUCK ENERGY & TRANSPORTATION MID-SIZE ENGINES...

  • Page 31
    ... Global Supply Network Director of Logistics Scott Shepherd, "so we could react faster and accurately re-route shipments. This allowed us to move material more quickly, while limiting added costs and overall supply disruption." 1909 MANUFACTURING began in the Peoria area - an advantageous location...

  • Page 32
    ... machines, Caterpillar can now manage this inventory with better data visibility, accuracy and completeness than ever before. In 2012, our Global Supply Network piloted its Automated Indirect Inventory Management (AIIM) initiative at the company's North Little Rock, Arkansas, facility - using onsite...

  • Page 33
    ...for global brand management, marketing, rental services and retail sales development. Sustainable Solutions Division at the heart of our sustainability drive from a product sense, brings together the sustainable businesses of Cat Reman and Caterpillar Safety Services with Caterpillar Work Tools, our...

  • Page 34
    ... mining and sales support joins the Material Handling & Underground Division. Finally, within Construction Industries, the Global Construction & Infrastructure Division will also assume sales responsibilities for work tools, industrial and waste, paving and forestry products, as well as heavy...

  • Page 35
    ... Workshop for Women Leaders Marking Milestones at Both Ends of a Caterpillar Career Sculpture Contest Welds Team Relationships 40 Years of Building a Beautiful China Work That Matters A Good Deed in the Badlands Teams Employ Lean and Agile to Deliver for Customers Caterpillar Foundation 35

  • Page 36
    ... Women workshops - the first leadership program created by a Caterpillar employee resource group - in this case the Women's Initiatives Network (WIN) - and the first gender-specific workshop designed for high-potential, high-performing women. Research shows that companies perform better when they...

  • Page 37
    .... Caterpillar in Lünen has been a part of this small group of companies for years, but Farooq, now successfully integrated in the company, was the first refugee hired. "We strongly believe it to be part of our social responsibility to give young people like Farooq the possibility to enjoy a good...

  • Page 38
    ..., factory manager and vice president before being named Chairman of the Board in 1975. In 1925 Caterpillar employed 2,537 people. Today, our 100,000+ employees continue to change the world. From bringing basic infrastructure like roads, airports and power to developing societies, powering space...

  • Page 39
    ... final creations were truly remarkable works of art." - Tim Williams, the East Peoria facility manager 1910 The first HOLT TRACK-TYPE TRACTOR is built at the newly purchased plant in East Peoria, Illinois. The sculptures went on display in the Caterpillar Visitors Center in January 2016, and the...

  • Page 40
    ...Partnership refers to Caterpillar's support for Chinese customers, dealers, suppliers and other partners. A big part of our commitment is integrating local resources and fostering our relationships with Chinese suppliers to increase the competitiveness of our global supply network. Additionally, our...

  • Page 41
    ... YEAR IN REVIEW Beautiful China (continued) management philosophies such as 6 Sigma has resulted in a number of our Chinese suppliers' emerging as leaders in local industries. Some have expanded their businesses beyond China, constructing facilities abroad and supplying Caterpillar globally, using...

  • Page 42
    ... who work here. We are global leaders because our services and products reï¬,ect the very essence of our employees - innovative, reliable and of the highest quality. At Caterpillar, no task is small, no job is minor. Here, big ideas come to life step-by-step, piece-by-piece, personby-person. Team...

  • Page 43
    ... and bad times. They taught us two rules in life: One, the most important thing in life is family. If you have things sorted out in your personal and family life, you will perform well at work. Two, be happy with what you have today while you work for what you want tomorrow. YOUXIANG ZHANG - CHINA...

  • Page 44
    ... Brad was connected with a fellow employee, Todd Lange, that everything came together. Through Todd and the contribution of Caterpillar's Building Construction Products Division, the group purchased a brand new backhoe loader. Then Cat® dealer Butler Equipment stepped in to donate delivery expenses...

  • Page 45
    ... a responsibility to address those ideas and report back to employees on what has been done. This Lean culture is making a difference. "There's no doubt that Lean has contributed to our improvements in quality, velocity and safety," states Steve Ferguson, ACSD global operations general manager. "In...

  • Page 46
    ...poverty and facilitates collaboration among the public, private and nonprofit sectors. Together.Stronger.™ THE ONE CAMPAIGN & U.N. FOUNDATION ENERGY POLICY This past year, the Caterpillar Foundation supported energy access policy work through investments with The ONE Campaign and United Nations...

  • Page 47
    ... project, Caterpillar employees at the Morton, Illinois, facility sponsored a Habitat for Humanity house for a deserving family in the local community. Approximately 500 employees across the facility volunteered their time and talents over a 10-week period to build the house. Together.Stronger...

  • Page 48
    2015 YEAR IN REVIEW PATH TO PROSPERITY Basic Needs The path to prosperity results in active community leaders who are able to help others. Lack of Education With Jobs No Jobs With Education The spiral of poverty repeats across generations. Basic Needs 48

  • Page 49
    2015 YEAR IN REVIEW HOW WE WILL GET THERE VIA OUR STRATEGIC INVESTMENTS AND PARTNERSHIPS When we invest and partner strategically and effectively, basic needs are met, education is attained, jobs are created and economies grow. BASIC HUMAN NEEDS Food Water Shelter Energy Disaster Relief EDUCATION...

  • Page 50
    2015 YEAR IN REVIEW OUR PARTNERS Our philanthropic partners are making profound changes throughout the world. Our investments enable them to scale their impact. TM Together.Stronger.â„¢ STAY CONNECTED TO OUR PROGRESS To learn more about the Caterpillar Foundation and our partners, please visit ...

  • Page 51
    .... Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2015 sales and revenues of $47.011 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and...

  • Page 52
    ... principal locations where manufacturing, parts distribution, rail and remanufacturing work take place. In certain geographic areas, the facility symbol may represent multiple facilities. Product Line Construction Mining Equipment Diesel & Natural Gas Engines Industrial Gas Turbines Diesel...

  • Page 53
    ... & Transportation / $17,938 • Construction Industries / $16,568 • Resource Industries / $7,551 • Financial Products / $3,078 • All Other / $1,876 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 CAPITAL EXPENDITURES (EXCLUDES EQUIPMENT LEASED TO OTHERS) RESEARCH AND DEVELOPMENT...

  • Page 54
    2015 YEAR IN REVIEW MARKET PERFORMANCE CAT vs. S&P MACHINERY INDEX $100 $98.47 $100.03 $103.48 $107.03 $82.46 $90.60 $89.61 $90.81 $91.53 $67.96 5-YEAR CLOSING STOCK PRICE (IN DOLLARS) 2010 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 - Caterpillar Inc. - S&P 500 Index - S&P 500 ...

  • Page 55
    ... NORTH AMERICA 53 Dealers 48,000 Caterpillar Employees 2015 Sales and Revenues by Segment ($ in millions) $8,084 Construction Industries $7,759 Energy & Transportation $2,820 Resource Industries OFFICES FACILITIES* *Facilities include principal locations where manufacturing, parts distribution...

  • Page 56
    2015 YEAR IN REVIEW 2015 GLOBAL PERFORMANCE BY REGION ASIA PACIFIC 43 Dealers 24,100 Caterpillar Employees 2015 Sales and Revenues by Segment ($ in millions) $3,275 $3,227 $1,774 Resource Industries OFFICES FACILITIES* Construction Energy & Transportation Industries $458 Financial Products...

  • Page 57
    ... mining. 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...

  • Page 58
    ... America / $1,449 2013 2014 2015 2013 2014 2015 END MARKETS INCLUDE: Building Construction Roads and Highway Construction Infrastructure Projects PRODUCTS Backhoe Loaders Compact, Small and Medium Wheel Loaders Small and Medium Track-type Tractors Skid Steer Loaders Multi-terrain Loaders...

  • Page 59
    ... in mining and quarrying applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large mining trucks, off-highway trucks, electric rope shovels, wheel tractor...

  • Page 60
    ... $1,216 2013 2014 $(88) 2015 2013 2014 2015 END MARKETS INCLUDE: Mining Quarrying PRODUCTS Large Mining Trucks Off-Highway Trucks Electric Rope Shovels Wheels Tractor Scrapers Hydraulic Shovels Large Track-Type Tractors Large Wheel Loaders Track and Rotary Drills Articulated Trucks Hard Rock...

  • Page 61
    ... engines, generator sets, marine propulsion systems, gas turbines and turbinerelated services, diesel-electric locomotives and other rail-related products and services. What is the strategic importance of the Energy & Transportation group to Caterpillar's long-term success? Energy & Transportation...

  • Page 62
    ... Asia-Pacific / $3,275 • Latin America / $1,634 2013 2014 2015 2013 2014 2015 END MARKETS INCLUDE: Oil & Gas Power Generation Marine Rail Industrial PRODUCTS Reciprocating Engines Generator Sets Marine Propulsion Systems Gas Turbines Turbine-Related Services Diesel-Electric Locomotives 62

  • Page 63
    ... employee equipment training on job sites, supplying aftermarket parts and service support and offering e-business and equipment management solutions. The segment also includes the product portfolio for forestry, paving, industrial and waste products, and global on-highway trucks. This group...

  • Page 64
    ... the Across the Table concept to our dealers at the beginning of 2014 and spent most of that year aligning and understanding the initiatives in order to discover how we deliver consistent service that's world class. We've made great progress. Our dealers are aligned and engaged as we work toward our...

  • Page 65
    ... sale contracts, working capital loans and wholesale financing plans. Financial Products provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment. Corporate Services provides business and human resources, information technology, accounting...

  • Page 66
    ...will see that change as we use true collaboration tools to solve business problems. How is the work of the Human Services Division supporting Caterpillar's growth? Our human resource group is embedded in our business units. This means that all the issues around people and development are handled as...

  • Page 67
    ... value chain strategy: 1) executing our lean methodology, which drives stability within Caterpillar and back through our suppliers; 2) deploying an engineered value chain approach that starts with the customer and really reimagines the way we design our overall supply chain; and 3) building...

  • Page 68
    ... Vice President, Caterpillar Enterprise System Group (continued) Why is it important to become more efficient as we manage through business cycles? Companies that connect end-to-end and manage at the peak and at the bottom of cycles are the companies that win, and Caterpillar has a strategy to do...

  • Page 69
    ..., 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, focused on serving our customers, communities and countries. What is Caterpillar doing well as it manages through...

  • Page 70
    ... projects turn into patents - Caterpillar owns over 15,000 patents right now. Some patents are more valuable than others, while others give us a better return on investment than others. The Law and Public Policy Organization is using big data and analytics to develop a value for each of our patents...

  • Page 71
    ... and equipment Equipment leased to others Depreciation and amortization Research and development expenses As a percent of sales and revenues Average number of employees December 31, Total assets Long-term debt due after one year: Consolidated Machinery, Energy & Transportation Financial Products...

  • Page 72
    ... the year ended December 31, 2015. TRADEMARK INFORMATION © CAT, CATERPILLAR, their respective logs, ACERT, BUILT FOR IT, Minestar, Product Link, Solar, Progress Rail, "Caterpillar Yellow" , the "Power Edge" trade dress, as well as any corporate and product identity used herein, are trademarks of...