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NYSE: CAT

Drew Osika Jack Hainline Dan Glotzbach Greg Bruno December 7, 2010. NYSE: CAT. Agenda. Company Overview Sources of Revenue Recent Financial Results SWOT Management Assessment Competitors Valuation. Company Overview.

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NYSE: CAT

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  1. Drew Osika Jack Hainline Dan Glotzbach Greg Bruno December 7, 2010 NYSE: CAT

  2. Agenda • Company Overview • Sources of Revenue • Recent Financial Results • SWOT • Management Assessment • Competitors • Valuation

  3. Company Overview • The company traces its origins back to the 1925, merger between C.L. Best and Holt Caterpillar which formed Caterpillar Tractor Co. The name was changed to Caterpillar Inc. in 1986. • Began trading on the NYSE exchange January 2, 1962, under the ticker symbol CAT. • Headquartered in Peoria, IL, and has 102,336 employees worldwide. • Chairman and CEO – Douglas Oberhelman • CAT manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide. • CAT is an industry leader and the company’s products are recognized worldwide.

  4. Sources of Revenue • Machinery • Manufactures and sells construction, mining, and forestry machines. Has over 300 different types of machines ranging from skid loaders and backhoe loaders to underground mining equipment and articulated trucks. • This sector represented 65% of 3Q 2010 revenue. Quarterly Results for 3Q 2010 Page 7 http://www.caterpillar.com/cda/files/2506920/7/3Q+2010+Cat+Inc+Release+Final+814pm.pdf

  5. Sources of Revenue • Engines • World’s largest manufacturer of medium speed engines and also the world’s largest manufacturer of high speed diesel engines. • Caterpillar engines provide power to trucks, ships and boats, and their own construction and mining equipment. • This sector represented 29% of 3Q 2010 revenue. Quarterly Results for 3Q 2010 Page 7 http://www.caterpillar.com/cda/files/2506920/7/3Q+2010+Cat+Inc+Release+Final+814pm.pdf

  6. Sources of Revenue • Financial Products • Provides financing alternatives and loans to customers and dealers for Caterpillar’s machinery, engines, and other equipment and marine vessels. • They also offer different types of insurance to customers and dealers to support the purchase of their equipment. • This sector represented 6% of 3Q 2010 revenue. Quarterly Results for 3Q 2010 Page 7 http://www.caterpillar.com/cda/files/2506920/7/3Q+2010+Cat+Inc+Release+Final+814pm.pdf

  7. Recent Financial Results • 3Q 2010 Earnings Reported October 21, 2010 • CAT realized a profit of $796 M for the quarter, 96% higher than the 3Q 2009 number of $404 M • Profit/Share was $1.22 an increase from $0.64 for 3Q 2009 and an increase from the 2Q 2010 number of $1.09 • Sales and Revenue were $11.134 B for the quarter, 53% higher than the 3Q 2009 number of $7.298 B • 2010 is shaping up to be one of the most significant YOY increases in sales and revenue in the company’s history • 2010 Profit/Share revised to $3.80 to $4.00 from the 2Q 2010 range of $3.15 to $3.85 • Preliminary 2011 sales and revenue expected to reach $50 B with continued growth in developing countries and weak, but continued, growth in the developed countries. Quarterly Results for 3Q 2010 Pages 1 and 5 http://www.caterpillar.com/cda/files/2506920/7/3Q+2010+Cat+Inc+Release+Final+814pm.pdf

  8. Recent Financial Results (Revenue in Billions of $) Quarterly Results for 4Q 2009 – 3Q 2010 Page 5 in all reports http://www.caterpillar.com/investors/financial-reporting/quarterly-results/cat-inc

  9. Revenue Breakdown Geographically for 3Q 2010 23% 23% Quarterly Results for 3Q 2010 Page 7 http://www.caterpillar.com/cda/files/2506920/7/3Q+2010+Cat+Inc+Release+Final+814pm.pdf

  10. SWOT Analysis • Strengths: • Global Market Leader / Brand Strength • Diversified Revenue Streams • Innovation • Weaknesses: • Highly Debt Leveraged (Slow Improvement) • Reliance on Credit Sales to Customers

  11. SWOT Analysis • Opportunities: • Investment in Emerging Markets • Expect large increase in excavator production capacity in China • Continued Expansion into Mining Industry (November Acquisition of Bucyrus International Inc.) • Threats: • Manufacturing Capacity to Meet Growing Sales Demand • Changing prices in raw material inputs (Hedge only for foreign exchange/interest rates)

  12. Management Assessment • “How We Win” • Strategic Initiatives • Focus: Rising demand in energy and the ability of CAT to provide an efficient product • Continued Global Leadership and Growth • M&A and Direct Investment • Dividends per share continue to rise

  13. Competitors • Deere & Company • Leading producer of agricultural and forestry equipment • Komatsu Ltd. • World’s 2nd largest manufacturer of construction and mining equipment • Larger presence than CAT in China and Japan • CNH Global • Created in 1999 after New Holland N.V. and Case Corporation merged • Fiat S.p.A. owns the majority of CNH’s common shares • Volvo AB • Diverse business that competes with CAT on construction equipment, heavy-duty trucks and engines.

  14. 5-Year Stock Performance http://finance.yahoo.com/q/bc?t=1y&s=CAT&l=on&z=l&q=l&c=&c=^GSPC&c=CNH&c=DE

  15. Comparable Analysis • Multiples are in line with industry • Heavy debt but large future earnings growth expected

  16. Comparable Analysis

  17. Recommendation • Do not recommend a buy at this time. Put on Watch List.

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