Integrated Company Analysis Wisconsin School of Business

December 14, 2010

Team A9

Ryan Beal - Jay Frohne - Tiana Jia - Megan Johnson - Stuart Solomon

On our honor, we have neither given nor received unauthorized aid in completing this academic work.

Table of Contents

Executive Summary .......................................................................................................................................1!

Overview of Recommendations ............................................................................................................... 1!Background ....................................................................................................................................................2!

Caterpillar Inc. Overview ......................................................................................................................... 2!Strategic Overview ................................................................................................................................... 2!

Competitive Environment......................................................................................................................... 3!Acquisitions .............................................................................................................................................. 3!

Marketing Strategy Analysis for Caterpillar and the CAT Brand .................................................................4!Background of the CAT Brand................................................................................................................. 4!

Reputation................................................................................................................................................. 5!Segmentation ............................................................................................................................................ 5!

Positioning ................................................................................................................................................ 5!

Marketing Mix.......................................................................................................................................... 6!Product ................................................................................................................................................. 6!

Price...................................................................................................................................................... 6!Distribution .......................................................................................................................................... 6!

Promotion ............................................................................................................................................. 6!The Challenge........................................................................................................................................... 7!

Recommendation ...................................................................................................................................... 8!Financial Analysis..........................................................................................................................................8!

Recommendation .................................................................................................................................... 10!Valuation Analysis.......................................................................................................................................10!

Recommendation .................................................................................................................................... 10!SWOT Analysis ...........................................................................................................................................10!

Recommendations .................................................................................................................................. 11!

Exhibits Exhibit 1 – Lines of Business ..................................................................................................................E1-1!

Exhibit 2 – Vision 2020, Strategic Goals ................................................................................................E2-1!Exhibit 3 – “Big 8” Imperatives for 2011 through 2015 .........................................................................E3-1!

Exhibit 4 – Competitor Overview............................................................................................................E4-1!CNH Global NV ..................................................................................................................................E4-1!

Cummins Inc........................................................................................................................................E4-2!

Deere and Company ............................................................................................................................E4-2!

Komatsu Limited .................................................................................................................................E4-3!Terex Corporation................................................................................................................................E4-3!

Volvo Group AB .................................................................................................................................E4-4!Exhibit 5 – Acquisitions ..........................................................................................................................E5-1!

Exhibit 6 – Caterpillar Family of Brands.................................................................................................E6-1!Exhibit 7 – Financial Metrics...................................................................................................................E7-1!

Revenue Metrics ..................................................................................................................................E7-1!Earnings Metrics..................................................................................................................................E7-4!

Asset Utilization ..................................................................................................................................E7-6!Performance Metrics............................................................................................................................E7-7!

Capital Expenditures............................................................................................................................E7-8!Exhibit 8 – Dividend Payout Policy ........................................................................................................E8-1!

Exhibit 9 - Valuation Analysis.................................................................................................................E9-1!

Weighted Average Cost of Capital ......................................................................................................E9-1!Projected Cash Flows ..........................................................................................................................E9-2!

Exhibit 10 – Share Repurchase ..............................................................................................................E10-1!Exhibit 11 – SWOT Analysis ................................................................................................................E11-1!

Strengths ............................................................................................................................................E11-1!Weaknesses........................................................................................................................................E11-2!

Opportunities .....................................................................................................................................E11-3!Threats ...............................................................................................................................................E11-4!

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1

Executive Summary For over 85 years Caterpillar Inc. (“Caterpillar” or the “Company”) has been linked to the development of

the world. Operating three primary lines of business, Caterpillar currently has a presence in over 200

countries.

This report will provide: 1) an overview of the Company and with whom it competes; 2) a review of how

the Company goes to market; 3) a look into the financial health of the Company; 4) our opinion of what

the Company is worth today; and 5) an operational overview of where the Company is today and the

challenges and opportunities that await.

Listed below are five general, categorical recommendations. Throughout the report we will expand on

these five categorical recommendations in further detail (e.g., multiple recommendations comprise the

general categorical recommendation of improving asset utilization).

Overview of Recommendations

1. Strengthen marketing relationships and improve co-branding strategy;

2. Improve asset utilization;

3. Continue with share repurchase program;

4. Continue with heavy investment in research and development; and

5. Develop and maintain contingency plans for labor relations and changing government policies.

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2

Background

Caterpillar Inc. Overview The Caterpillar Tractor Co. was created in 1925 as a result of the merger of the C.L. Best Gas Tractor

Company and the Holt Caterpillar Company.1 Reorganized as Caterpillar Inc. in 1986,2 the Company is

currently “one of the world’s largest manufacturers of construction and mining equipment, diesel and

natural gas engines and industrial gas turbines.”3 The Company currently has over 3 million machines in

use.4

The Company operates in three primary lines of business: Machinery, Engines, and Financial Products

(please see Exhibit 1 for a more information on the Company’s business lines). For the twelve months

ended September 30, 2010 the Company generated total revenues of $37.7 billion5 and earnings before

interest, taxes, depreciation, and amortization (EBITDA) of $4.7 billion.6 (Please see the Financial

Analysis section for more details regarding the revenues and earnings of the Company.)

Strategic Overview In order to continue to effectively grow the business and “win” against the competition, Caterpillar has

implemented Vision 2020; an enterprise strategy that focuses on the Company’s customers, employees,

and stockholders. Vision 2020 is built on Caterpillar’s strategic goals, operating principals, and core

values. The three primary strategic goals of Vision 20207 are to: 1) generate superior financial results; 2)

be a global industry leader; and 3) have the best team. (See Exhibit 2 for a more information on

Caterpillar’s Vision 2020 and strategic goals.) Included in Vision 2020 are Caterpillar’s “Big 8”

1 http://www.caterpillar.com/company/history 2 Caterpillar Inc. Form 10-K for the Fiscal Year Ended December 31, 2009. 3 http://www.cat.com/ar2009 4 Ibid. 5 Caterpillar Inc. Form 10-Q for the Quarterly Period Ended September 30, 2010 and Form 10-K for the Fiscal Year

Ended December 31, 2009 6 Ibid. 7 Caterpillar Inc. “2011 – 2015 Enterprise Strategy & Our Values in Action.” August 19, 2010 Analyst Meeting.

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3

imperatives for 2011 through 2015. The “Big 8” imperatives (which can be found in Exhibit 3) focus on

how Caterpillar will “win” and maintain and improve its leadership position.

Through Vision 2020, Caterpillar expects to “win by delivering valued, quality products, services and

solutions to [their] customers that provide the lowest total owning and operating lifecycle costs. This

value proposition, enabled by [Caterpillar’s] unmatched customer support, creates the largest global field

population, highest customer loyalty and attractive profitability through the business cycle.”8

Competitive Environment Broadly speaking, Caterpillar operates in the Farm and Construction Machinery Industry. However, as

outlined in Exhibit 1, Caterpillar’s primary businesses provide solutions in industries as diverse as

agriculture, construction, mining, forestry, rail, marine, petroleum, and power generation.

Due to the breadth, scope, and worldwide nature of its operations, Caterpillar competes against numerous

global competitors as well as many regional and specialized local competitors.9 Across all segments, the

Company competes “on the basis of product performance, customer service, quality and price.”10 For this

project, we have focused on the following six global competitors: Deere and Company (Deere), Komatsu

Limited (Komatsu), Terex Corporation (Terex), Volvo Group AB (Volvo), Cummins Inc. (Cummins),

and CNH Global NV (CNH). Further detail on each competitor can be found in Exhibit 4.

Acquisitions Caterpillar has made several key acquisitions in 2010, summarized below11. See Exhibit 5 for additional

information.

8 Ibid. 9 Caterpillar Inc. Form 10-K for the Fiscal Year Ended December 31, 2009. 10 Ibid. 11 Capital IQ: Transaction Details: Bucyrus International Inc., announced Nov-14-2010; MWMGmbH, announced Oct 22-2010; Underground Imaging Technologies, LLC, dated Jul-01-2010; CleanAirSystems, Inc. (nka:Clean Air Systems, Inc.), dated Jun-29-2010.

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4

• Bucyrus International Inc. (Bucyrus) – Caterpillar entered an agreement to purchase Bucyrus on

November 14, 2010 for $7.5 billion in cash. Bucyrus designs and manufactures mining

equipment primarily for coal, copper, oil sands, iron ore, and other mineral mining.

• MWM GmbH (MWM) – On October 22, 2010, Caterpillar signed an agreement to acquire MWM

for !580M. MWM develops and produces technologies, engines, and systems for decentralized

energy production. This includes development and optimization of combustion engines for

natural gas and diesel.

• Underground Imaging Technologies, LLC (UIT) – Caterpillar entered an agreement to purchase

UIT on July 1, 2010 for an undisclosed amount. UIT develops and integrates hardware and

software systems for mapping and investigating underground infrastructure.

• CleanAIR Systems Inc. (CleanAir) – Caterpillar entered an agreement to purchase CleanAir on

June 29, 2010. Financial terms of the deal were not disclosed. CleanAir designs, manufactures,

and distributes emissions control systems for on- and off-road vehicles, machinery, and stationary

generators.

Marketing Strategy Analysis for Caterpillar and the CAT Brand Background of the CAT Brand12 Until the 1950s, the CAT and Caterpillar names were synonymous. In the 1950s, CAT emerged as a

distinct brand under the Caterpillar Inc. umbrella. Today the CAT Brand represents the largest and most

respected family of products and services in earth-moving industries worldwide. (Note: throughout the

remainder of this section, CAT refers specifically to the CAT Brand whereas Caterpillar will continue to

refer the Caterpillar Inc. company and family of brands and products as a whole. Please refer to Exhibit 6

to see the entire Caterpillar family of brands.)

12 http://www.cat.com/about-the-company.

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5

Reputation Since the company’s formation, Caterpillar has developed a reputation for having a superior global

dealership network along with best-in-class quality and value in their products. During this time, the

CAT logo, which consists of C-A-T set in a bold-black font above a yellow triangle (see Exhibit 6,

second row from the top, left-most logo), has developed into an easily identifiable symbol for quality at

work-sites around the world.

Segmentation Caterpillar engages in Business-to-Business and Business to Government marketing with its primary

customers being:

• Government and Government Contractors;

• Independent Contractors; and

• Industrial Corporations.

Segmenting the market in this way enables Caterpillar to more easily identify its core customers and

develop effective marketing strategies aimed at increasing the Company’s brand equity and profitability.

Positioning CAT’s promise to its consumers is that it is there to help them succeed. CAT positions itself as the hard-

working person’s industrial brand. In its marketing strategies and communications, it emphasizes the

importance of the people that own and operate CAT machinery, and its messaging drives home the point

that the Company will always be there to help its customers get the job done. Consistent with this

promise, there is a strong emphasis on the relationship between customers and their local dealership.

Caterpillar’s goal is to go beyond the traditional transactional customer-dealer relationship and move into

more of a partnership type of relationship. This has served the Company and the CAT brand well, not

only on their bottom line, but also in terms of increasing their brand equity, as this emphasis on

relationships has added “trust” to their existing equity of “hard-working” and “quality”.

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6

Marketing Mix

Product

Caterpillar has a diverse set of products that extend beyond the industrial machines that they are known

for. The Company also sells or rents equipment such as work tool attachments, engines, turbines, and

electronics. In addition to their core set of products, they also license CAT merchandise through their

online store.

Price

The price of Caterpillar equipment varies depending on factors such as product category, with further

variation within those particular categories by size, make and model. For example, truck-type tractors can

vary in price from $90,000-$800,000. In an effort to reach out to customers that do not specialize in a

particular type of machinery, Caterpillar has a rental program that offers customers the flexibility to use

Caterpillar equipment as needed, without the financial commitment of purchasing. Additionally, through

a number of dealerships, Caterpillar provides customers with rent-to-own options.

Distribution

Staying true to the Company’s commitment of offering superior customer service, Caterpillar products

can only be purchased at official Caterpillar dealerships. There are currently 178 dealerships worldwide,

each of which is independently owned and operated, specializing in Caterpillar sales (in addition to

Caterpillar rental, maintenance, and repair services). As the CAT and Caterpillar brands continue to grow

and expand, it is important that the Company continues to closely monitor how each dealer operates to

ensure that the dealers maintain the excellence in pre- and post-sales support that Caterpillar is known for.

Promotion

On July 26, 2010, Caterpillar partnered with Mike Rowe, host of Discovery Channel’s Dirty Jobs and

owner of MikeRoweworks.com, to “highlight the important and essential work that Caterpillar customers

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7

perform everyday.”13 Rowe’s interaction with CAT customers and dealers will be featured online and at

CAT dealerships to “demonstrate the solutions that Cat Dealers provide their customers throughout the

lifecycle of their equipment, highlighting their superior parts and service support.”14

Strategically, this is an excellent move for CAT, as being endorsed by Mike Rowe reinforces their brand

equity as being hard working and dedicated to the people it serves. Using Mike Rowe to create this link

between the brand, its dealerships, and its customers’ community is a strategy that will resonate very well

with the company’s base, as his image is that of a hard working everyman who is easily relatable.

The Challenge While Mike Rowe exemplifies the ideal traits that CAT values in a partner/spokesperson, his popularity

has put him in high demand. He is currently the spokesperson for several other brands, the most notable

(and visible) of which is Ford Motor Company (Ford). This has the potential to become a customer

confusion issue, as it is likely that consumers will connect Mike Rowe to Ford instead of CAT or

Caterpillar, due to the fact that Ford spends more on high profile advertising mediums, such as television

and print, and has higher brand recognition among the general populace. The implication of this is that

Mike Rowe will be so strongly tied to Ford that, when used for CAT promotions, consumers will still

associate him with Ford and, as a result create an indirect node link between CAT and Ford. This can be

very problematic for CAT as it strives to differentiate its brand.

13 Caterpillar Inc. (July 26, 2010). “Mike Rowe is Ready to Hit the Dirt with Caterpillar Customers and Dealers”.

Press Release. http://www.cat.com/cda/files/2411931/7/072610%20Mike%20Rowe%20is%20ready%20to%20hit%20the%20dirt.pdf

14 Ibid.

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8

Recommendation In order to counteract this backfire potential, CAT must act decisively in order to cement its relationship

with its current endorser and in turn the strength of his association with their company in the mind of their

customers.

The solution is to embark on a truly co-branded initiative. Mike Rowe has a large presence on the CAT

website (www.cat.com), but at this time, Caterpillar has a very small presence on MikeRoweworks.com.

In order to capitalize on their relationship, Caterpillar must establish higher visibility on Mike Rowe’s

site. This will strengthen the link between CAT and Mike Rowe and minimize the risk of brand

confusion.

Next, Caterpillar should leverage the popularity of Dirty Jobs and find creative solutions for CAT brand

placement on the show that will leverage the recognizable CAT logo to strengthen its brand equity with

its target base.

Financial Analysis15 Caterpillar’s fiscal year end is on December 31. For this analysis we have analyzed Caterpillar’s results

as of each year-end 2005 through 2009 and for the twelve month period ended September 30, 2010.

Going forward, and in the exhibits, this period is referred to as the Historical Period and a year refers to

the latest twelve-month period ended in that year (e.g., 2009 refers to the twelve months ended December

31, 2009 whereas 2010 refers to the twelve months ended September 30, 2010).

15 All data and figures contained in this section are sourced from financial statements filed with the Securities and Exchange Commission and CapitalIQ. Calculations have been sourced from CapitalIQ and computed manually.

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9

In 2010, the Machinery and Engine businesses generated approximately $34.9 billion, or 93% of

Caterpillar’s total revenue. After a significant reduction in total revenues in 2009 (due to the economic

downturn), total revenues grew approximately 16% in 2010.

The Company generated earnings before interest, taxes, depreciation and amortization (EBITDA), a

proxy for true cash earnings, of approximately $4.7 billion in 2010, a 62% increase over 2009. Although

EBITDA increased significantly, 2010 levels are still approximately 21.5% below 2008.

Caterpillar’s capital structure is primarily comprised of debt financing. As of September 30, 2010 the

Company had total debt of $25.0 billion accounting for 72% of the Company’s capital structure and a

debt to equity ratio of 2.5x. This debt heavy capital structure is fairly consistent throughout the industry

(as defined by the six global competitors we have examined). The industry average is 1.8x.

Caterpillar’s accounts receivable turnover averaged 4.8x per year throughout the Historical Period.

Accounts receivable turnover has increased from 3.9x in 2009 to 5.3x in 2010. Throughout the entire

Historical Period Caterpillar’s accounts receivable turnover has been below the industry average,

however, Caterpillar has improved and grown closer to the industry average in the most recent period.

Caterpillar currently accounts for its inventory on a LIFO basis. Prior to 2009 the Company utilized a

FIFO basis. Caterpillar’s competitors’ utilize multiple inventory methods depending on the business

line/product category, geographical region, or stage of inventory (e.g., raw materials vs. finished goods).

On average, throughout the Historical Period, Caterpillar turns over its inventory 4.4x per year

Please refer to Exhibit 7 for a comprehensive analysis of Caterpillar’s financial metrics compared to its

industry competitors. Please refer to Exhibit 8 for a description of Caterpillar’s dividend payout policy.

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10

Recommendation Improve asset utilization effectiveness and cash flow through improved inventory turnover and accounts

receivable turnover.

Valuation Analysis Based on our discounted cash flow (DCF) analysis, the projected value of Caterpillar’s stock is $97.27.

In deriving this share price, we analyzed Base Case, Worst Case, and Best Case scenarios, weighting each

scenario 60%, 20%, and 20%, respectively. DCF calculations incorporated a weighted average cost of

capital of 8.8%. Please see Exhibit 9 for our analysis and a detailed explanation of assumptions used in

the DCF calculations.

Recommendation As of December 13, 2010 Caterpillar’s stock price closed at $91.63. Accordingly, we think it is an

opportune time for the Company to continue its share repurchase program (to the extent that attractive

growth initiatives are unavailable). Please see Exhibit 10 for further information on Caterpillar’s share

repurchase program.

SWOT Analysis The SWOT Analysis helps us understand where Caterpillar is in their business cycle and make

recommendations for their internal and external activities. We charted their internal

Strengths/Weaknesses and external Opportunities/Threats, looking closely at the actions Caterpillar can

control and those they can only mitigate their risk. Caterpillar is anticipating an economic upturn in

developed countries and continued growth in emerging nations. In order to be ahead of this anticipated

demand, they are expanding organically and through acquisitions. Referring to the SWOT chart

(following page), it is recommended they proceed with their Opportunities, being careful not to

overextend or overreach. Strengths should be leveraged to stay ahead of competition and anticipated

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11

regulation. Weaknesses should be addressed, but not to the extent of slowing Opportunities. Threats

have to be closely monitored.

Refer to Exhibit 11 for specific details on each component of the SWOT analysis and the

recommendations listed below.

Recommendations Specifically, we feel that Caterpillar should:

1. Maintain their research and development spending at current percentage of revenue levels.

2. Continue to increase supplier collaboration.

3. Maintain labor contingency plans while taking a long-term approach to the upcoming contract

negotiations and working to strengthen labor relations.

4. Continue expansion in emerging markets through organic growth, strategic partnerships, and

acquisitions.

5. Develop strong local presences in foreign markets with indigenous personnel to strengthen

government relations and reduce the risk of adverse government policies.

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Exhibits

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E1-1

Exhibit 1 – Lines of Business The Company operates three primary lines of business: Machinery, Engines, and Financial Products.

1. “Machinery – A principal line of business which includes the design, manufacture, marketing

and sales of construction, mining and forestry machinery… Also includes logistics services for

other companies and the design, manufacture, remanufacture, maintenance and services of rail-

related products.”16

2. “Engines – A principal line of business including the design, manufacture, marketing and sales

of engines for Caterpillar machinery, electric power generation systems, locomotives, marine,

petroleum, construction, industrial, agricultural and other applications and related parts. Also

includes remanufacturing of Caterpillar engines and a variety of Caterpillar machine and engine

components and remanufacturing services for other companies.”17

3. “Financial Products – A principal line of business consisting primarily of Caterpillar Financial

Services Corporation (Cat Financial) [and] Caterpillar Insurance Holdings, Inc. (Cat Insurance)...

Cat Financial provides a wide range of financing alternatives to customers and dealers for

Caterpillar machinery and engines, Solar gas turbines, as well as other equipment and marine

vessels… Cat Insurance provides various forms of insurance to customers and dealers to help

support the purchase and lease of [the Company’s] equipment.”18

16 Caterpillar Inc. Form 10-Q for the Quarterly Period Ended September 30, 2010. 17 Ibid. 18 Ibid.

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E2-1

Exhibit 2 – Vision 2020, Strategic Goals

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E3-1

Exhibit 3 – “Big 8” Imperatives for 2011 through 201519

1. Execute the Business Model – accelerate aftermarket parts and services growth

2. Excel at Product Development – quality, emissions, growth markets and next generation

products

3. Simplify and attack cost structure

4. Achieve profit and cash pull through

5. Win in China – grow to leadership in India, ASEAN and CIS

6. Achieve profitable global machine leadership – excavation, earthmoving and BCP

7. Expand leadership in Mining and Quarry & Aggregates – new products and solutions

8. Aggressively grow Power Systems – rail, power conversion, growth markets and alternative fuel.

19 Caterpillar Inc. “2011 – 2015 Enterprise Strategy & Our Values in Action.” August 19, 2010 Analyst Meeting.

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E4-1

Exhibit 4 – Competitor Overview Caterpillar’s six primary global competitors:

CNH Global NV “CNH is a global, full-line company in both the agricultural and construction equipment industries. It

operates in three business segments: agricultural equipment, construction equipment and financial

services. CNH markets its products globally through its two brand families: Case and New Holland. Case

IH (along with Steyr in Europe) and New Holland make up its agricultural brand family. Case and New

Holland Construction (along with Kobelco in North America) make up its construction equipment brand

family. As of December 31, 2009, it was manufacturing its products in 38 facilities throughout the world

and distributing its products in approximately 170 countries through a network of approximately 11,600

full-line dealers and distributors. During the year ended December 31, 2009, its sales of agricultural

equipment represented 76% of its revenues, sales of construction equipment represented 15% of its

revenues and Financial Services represented 9% of its revenues.”20

20 http://moneycentral.msn.com/companyreport?symbol=CNH

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E4-2

Cummins Inc. “Cummins is engaged in the designing, manufacturing, distributing and servicing diesel and natural gas

engines, electric power generation systems and engine-related component products, including filtration

and exhaust after treatment, fuel systems, controls and air handling systems. The company sells its

products to the original equipment manufacturers (OEMs), distributors and customers globally. The

company serves its customers through a network of more than 500 company-owned and independent

distributor locations and approximately 5,200 dealer locations in more than 190 countries and territories.

The company operates in four business segments: engine segment, power generation segment,

components segment and the distribution segment. In January 2010 the company purchased an additional

50% ownership interest in Cummins Western Canada.”21

Deere and Company “Deere, together with its subsidiaries (‘John Deere’) operates in three business segments: agriculture and

turf segment, construction and forestry segment, and credit segment. The agriculture and turf segment,

created by combining the former agricultural equipment and commercial and consumer equipment

segments, manufactures and distributes a range of farm and turf equipment, and related service parts. The

construction and forestry segment manufactures, distributes to dealers and sells at retail machines and

service parts used in construction, earthmoving, material handling and timber harvesting. The credit

segment finances sales and leases by John Deere dealers of new and used agriculture and turf equipment

and construction and forestry equipment. In addition, it provides wholesale financing to dealers of the

foregoing equipment, provides operating loans, finances retail revolving charge accounts, offers crop risk

mitigation products and invests in wind energy generation.”22

21 http://moneycentral.msn.com/companyreport?symbol=CMI 22 http://moneycentral.msn.com/companyreport?symbol=DE

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E4-3

Komatsu Limited “Komatsu is a global company engaged in the manufacturing, development, marketing and sale of a range

of industrial-use products and services. The manufacturing operations of Komatsu are conducted

primarily at plants located in Japan, the United States, Brazil, the United Kingdom, Germany, Sweden,

Italy, Indonesia, China, Thailand and India. Komatsu’s products are primarily sold under the Komatsu

brand name and almost all of its sales and service activities are conducted through its sales subsidiaries

and independent distributors who primarily sell products to retail dealers in their respective geographic

area. Komatsu operates and competes in the six principal markets, such as Japan, the United States,

Europe and Commonwealth of Independent States (‘CIS’), China, Asia (excluding Japan and China) and

Oceania and the Middle East and Africa. In May, 2009, Komatsu acquired the additional interest in

Komatsu Australia Corporate Finance Pty. Ltd.”23

Terex Corporation “Terex is a global equipment manufacturer of a range of products. It focuses on delivering a range of

commercial solutions for a range of commercial applications, including the construction, infrastructure,

quarrying, shipping, transportation, power and energy industries. The Company operates in four business

segments: Aerial Work Platforms, Construction, Cranes and Material Processing. In December 2009, the

Company completed the selling of its power buggy product line. In January 2010, Terex completed the

sale of its generator product line. On February 19, 2010, the Company completed the divestiture of its

mining business. On December 31, 2009, Terex completed the sale of its construction trailer business. On

July 23, 2009, the Company completed the acquisition of Port Equipment Business from Fantuzzi

Industries S.a.r.l.”24

23 http://moneycentral.msn.com/companyreport?symbol=KMTUF 24 http://moneycentral.msn.com/companyreport?symbol=TEX

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E4-4

Volvo Group AB “Volvo is a supplier of commercial transport solutions providing products, such as trucks, buses,

construction equipment, engines and drive systems for boats and industrial applications, as well as aircraft

engine components. The Company also offers its customers financial solutions. The Company operates in

six segments: Trucks, Buses, Construction Equipment, Volvo Penta, Volvo Aero and Financial Services.

The business units include Volvo 3P, Volvo Powertrain, Volvo Parts, Volvo Logistics, Volvo Business

Services, Volvo Information Technology (IT), Volvo Real Estate and Volvo Technology. During the year

ended December 31, 2009, AB Volvo acquired all shares in Volvo Logistics AB from Fortos Ventures

AB.”25

25 http://moneycentral.msn.com/companyreport?symbol=VOLVY

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Exhibit 5 – Acquisitions

(more)

November 15, 2010

Caterpillar contact: Jim Dugan Corporate Public Affairs 309-494-4100 dugan_jim@cat.com Caterpillar contact: Europe Eric Amstutz Office: +41 22 849 4466 Mobile: +41 78 833 44 66 amstutz_eric_m@cat.com Bucyrus contact: Shelley M. Hickman Director Global Communications 414-768-4599 shickman@bucyrus.com

FOR IMMEDIATE RELEASE

Caterpillar to Acquire Bucyrus Creating Mining Equipment Company With Unmatched Product Range, Unrivaled Customer Support; Highly

Complementary Combination Expected to Drive Strong Synergies

PEORIA, Ill. and SOUTH MILWAUKEE, Wis. – Caterpillar Inc. (NYSE: CAT)

and Bucyrus International, Inc. (Nasdaq: BUCY) announced today they have entered into

an agreement under which Caterpillar will acquire Bucyrus International in a transaction

valued at approximately $8.6 billion (including net debt). The acquisition is based on

Caterpillar’s key strategic imperative to expand its leadership in the mining equipment

industry, and positions Caterpillar to capitalize on the robust long-term outlook for

commodities driven by the trend of rapid growth in emerging markets which are

improving infrastructure, rapidly developing urban areas and industrializing their

economies.

News

-2-

(more)

Under the terms of the transaction, which has been approved by the boards of

directors of both companies, Bucyrus shareholders will receive $92 per share, $7.6 billion

in aggregate consisting of all cash. The transaction represents an implied premium of 32

percent to Bucyrus' share price as of November 12, 2010. Caterpillar will fund the

acquisition through a combination of cash from the balance sheet, debt and up to $2

billion in equity. The transaction is expected to close in mid-2011. Caterpillar intends to

locate its mining business headquarters in South Milwaukee, Wisconsin, where Bucyrus

headquarters is currently located, and maintain the Bucyrus brand for the principal

Bucyrus legacy products.

“For several years, mining customers have been asking us to expand our range of

products and services to better serve their increasingly complex requirements,” said

Caterpillar Chairman and CEO Doug Oberhelman. “This announcement says to those

customers, we heard you loud and clear. It is a strong statement about our belief in the

bright future of the mining industry. Our strategy calls for disciplined investment in

attractive industries that value our product and service delivery model," Oberhelman said.

"Our performance through the global economic turmoil of 2008-2009 allowed us to

emerge with a strong balance sheet and the ability to make strategic investments in

companies like Bucyrus. This, and other recent acquisitions, will position Caterpillar for

industry leadership and will be positive for our stockholders, customers and employees.”

Tim Sullivan, Bucyrus President and CEO, said, “This is an outstanding and

financially compelling transaction for our shareholders. More fundamentally, it is a

testament to the tremendous value our talented team of employees has created over the

past several years and to the strength of our brand in the global mining machinery

marketplace. I am confident that we have found an excellent partner in Caterpillar.

Caterpillar is a first-rate global company and it shares our commitment to providing

innovative products and exceptional service to customers, creating a collaborative and

safe work environment for employees and minimizing the impact on the environment.

We are very pleased that Caterpillar has committed to locate its mining business

headquarters in Milwaukee and we are confident that the combined global platform will

be extremely well positioned to capitalize on the substantial growth opportunities in this

market in the years ahead.”

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The closing of the transaction is subject to regulatory approvals, customary

closing conditions and approval by Bucyrus stockholders. At that time, Caterpillar Group

President Steve Wunning will have executive office accountability for Bucyrus, along

with his current responsibilities for the company’s mining business.

“Even today at mine sites around the world, our customers are using Bucyrus

shovels to load Caterpillar mining trucks,” Wunning said. “This combination, as well as

the significant expansion in products and facility capacity already announced, gives us

the opportunity to expand the range of surface and underground mining products and

solutions offered to customers by Caterpillar and its dealer network.”

A driving motivation for the transaction is Caterpillar’s estimate of more than

$400 million in annual synergies beginning in 2015 derived from the combined financial

strength and complementary product offerings of the combined mining equipment

businesses.

Synergies driven by the acquisition include:

Market leading sales and support capabilities of Caterpillar dealers and a

broad, one-stop shop for global mining customers

Caterpillar Remanufacturing products and services for Bucyrus equipment

Caterpillar engines and components to enhance performance and lower owning

and operating costs for Bucyrus equipment

Additional scale and cost efficiencies in areas such as purchasing and engineering

Deployment of manufacturing best practices through the Caterpillar Production

System

Advisors:

J.P. Morgan Securities LLC served as exclusive financial advisor for Caterpillar

and has provided committed financing for the transaction. Mayer Brown LLP, Sidley

Austin LLP and Howrey LLP served as legal advisors for Caterpillar.

Deutsche Bank Securities Inc. and UBS Investment Bank served as financial

advisors for Bucyrus. Sullivan & Cromwell LLP and Arnold & Porter LLP served as

legal advisors for Bucyrus.

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Teleconference and webcast access:

Caterpillar and Bucyrus will conduct a real-time teleconference to discuss this

acquisition. The call will begin at 11 a.m. Central Standard Time on Monday, November

15, 2010. The one-hour conference call can be accessed by telephone from both

domestic and international locations, with a listen-only entry code provided below:

Conference Call Number: 877-216-8554 (domestic) 973-528-0009 (international) Listen Only Entry Code: 5621

To access a telephone replay of this call, please dial 800-332-6854 (for domestic

callers) and 973-528-0005 (for international callers) and enter 56211 as the conference ID.

The call can also be accessed in real-time through http://www.CAT.com/IRwebcast.

Listeners should go to the website at least 15 minutes before the live event to

download and install any necessary audio software. The transcript from the conference

call and slides used in the call will be made available on http://www.CAT.com/IRwebcast.

About Caterpillar: For more than 85 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2009 sales and revenues of $32.396 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at: http://www.cat.com. About Bucyrus International, Inc. Bucyrus is a world leader in the design and manufacture of high productivity mining equipment for the surface and underground mining industries. Bucyrus' surface mining equipment is used for mining coal, copper, iron ore, oil sands and other minerals. Bucyrus' underground mining equipment is used primarily for mining coal and also used in mining minerals such as potash and trona. In addition to machine manufacturing, Bucyrus manufactures high quality OE parts and provides world-class support services for their machines. Bucyrus' corporate headquarters is located in South Milwaukee, Wisconsin, USA. Caterpillar Forward-Looking Statements Certain statements in this presentation relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to known and unknown factors that may cause actual results of Caterpillar Inc. to be different from those expressed or implied in the forward-looking statements. 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

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other than statements of 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 Caterpillar does not undertake to update its forward-looking statements. It is important to note that actual results of the company may differ materially from those described or implied in such forward-looking statements based on a number of factors, including, but not limited to: (i) the possibility that the proposed transaction with Bucyrus does not close for any reason, including, but not limited to, a failure to obtain required regulatory approvals, (ii) inability to successfully integrate or achieve expected benefits, including synergies of the Bucyrus transaction (iii) economic volatility in the global economy generally and in capital and credit markets; (iv) Caterpillar’s ability to generate cash from operations, secure external funding for operations and manage liquidity needs; (v) adverse changes in the economic conditions of the industries or markets Caterpillar serves; (vi) government regulations or policies, including those affecting interest rates, liquidity, access to capital and government spending on infrastructure development; (vii) commodity price increases and/or limited availability of raw materials and component products, including steel; (viii) compliance costs associated with environmental laws and regulations; (ix) Caterpillar’s and Cat Financial’s ability to maintain their respective credit ratings, material increases in either company’s cost of borrowing or an inability of either company to access capital markets; (x) financial condition and credit worthiness of Cat Financial’s customers; (xi) material adverse changes in our customers’ access to liquidity and capital; (xii) market acceptance of Caterpillar’s products and services; (xiii) effects of changes in the competitive environment, which may include decreased market share, lack of acceptance of price increases, and/or negative changes to our geographic and product mix of sales; (xiv) Caterpillar’s ability to successfully implement Caterpillar Production System or other productivity initiatives; (xv) international trade and investment policies, such as import quotas, capital controls or tariffs; (xvi) failure of Caterpillar or Cat Financial to comply with financial covenants in their respective credit facilities; (xvii) adverse changes in sourcing practices for our dealers or original equipment manufacturers; (xviii) additional tax expense or exposure; (xix) political and economic risks associated with our global operations, including changes in laws, regulations or government policies, currency restrictions, restrictions on repatriation of earnings, burdensome tariffs or quotas, national and international conflict, including terrorist acts and political and economic instability or civil unrest in the countries in which Caterpillar operates; (xx) currency fluctuations, particularly increases and decreases in the U.S. dollar against other currencies; (xxi) increased payment obligations under our pension plans; (xxii) inability to successfully integrate and realize expected benefits from acquisitions; (xxiii) significant legal proceedings, claims, lawsuits or investigations; (xxiv) imposition of significant costs or restrictions due to the enactment and implementation of health care reform legislation and financial regulation legislation; (xxv) changes in accounting standards or adoption of new accounting standards; (xxvi) adverse effects of natural disasters; and (xxvii) other factors described in more detail under “Item 1A. Risk Factors” in Part I of our Form 10-K filed with the SEC on February 19, 2010 for the year ended December 31, 2009 and in Part II of our Form 10-Q filed with the SEC on May 3, 2010 for the quarter ended March 31, 2010. These filings are available on our website at www.cat.com/sec_filings. Additional Information Relating to Bucyrus and Where to Find It This communication may be deemed to be solicitation material in respect of the proposed acquisition of Bucyrus by Caterpillar. In connection with the proposed merger, Bucyrus intends to file relevant materials with the Securities and Exchange Commission (the “SEC”), including a proxy statement on Schedule 14A, which will be mailed to stockholders of Bucyrus. Bucyrus stockholders are urged to read all relevant documents filed with the SEC, including the proxy statement, because they will contain important information about the proposed transaction. Investors and security holders will be able to obtain free copies of the proxy statement (when available), as well as other filed documents, without charge, at the SEC’s website (http://www.sec.gov). Free copies of Bucyrus’s filings may be obtained by directing a request to Bucyrus’s Investor Relations by telephone to (414)768-4000, in writing to Bucyrus, Attention: Investor Relations, 1100 Milwaukee Avenue, South Milwaukee, WI 53172, by email to amalingowski@bucyrus.com or at Bucyrus’s website (http://www.bucyrus.com). Bucyrus and its directors and executive officers may be deemed, under SEC rules, to be participants in the solicitation of proxies from the stockholders of Bucyrus with respect to the proposed transaction. More detailed information regarding the identity of the potential participants, and their direct or indirect interests,

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Caterpillar Public Release #

by securities holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with the proposed transaction. Information regarding Bucyrus’s directors and executive officers is also available in Bucyrus’s definitive proxy statement for its 2010 Annual Meeting of Stockholders filed with the SEC on March 12, 2010. These documents are available free of charge at the SEC’s web site at http://www.sec.gov and from Investor Relations at Bucyrus. Caution Concerning Forward-Looking Statements Relating to Bucyrus Statements in this communication that relate to Bucyrus’s future plans, objectives, expectations, performance, events and the like may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Future events, risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from those expressed or implied in these forward-looking statements. These forward-looking statements may be identified by the use of predictive, future tense or forward-looking terminology, such as “believes,” “anticipates,” “expects,” “estimates,” “intends,” “may,” “will” or similar terms. The material factors and assumptions that could cause actual results to differ materially from current expectations include, without limitation, the following: (1) the inability to close the merger in a timely manner; (2) the inability to complete the merger due to the failure to obtain stockholder approval and adoption of the merger agreement and approval of the merger or the failure to satisfy other conditions to completion of the merger, including required regulatory approvals; (3) the failure of the transaction to close for any other reason; (4) the effect of the announcement of the transaction on Bucyrus’s business relationships, operating results and business generally; (5) the possibility that the anticipated synergies and cost savings of the merger will not be realized, or will not be realized within the expected time period; (6) the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (7) diversion of management’s attention from ongoing business concerns; (8) general competitive, economic, political and market conditions and fluctuations; (9) actions taken or conditions imposed by the governmental or regulatory authorities; (10) adverse outcomes of pending or threatened litigation or government investigations; (11) the impact of competition in the industries and in the specific markets in which Bucyrus operates; and (12) other factors that may affect future results of the combined company described in the section entitled “Risk Factors” in the proxy statement to be mailed to Bucyrus’s stockholders Bucyrus’s filings with the SEC that are available on the SEC’s web site located at http://www.sec.gov, including the section entitled “Risk Factors” in Bucyrus’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Readers are strongly urged to read the full cautionary statements contained in those materials. All forward-looking statements attributable to Bucyrus are expressly qualified in their entirety by the foregoing cautionary statements. We assume no obligation to update any forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made.

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October 22, 2010

Caterpillar contact – Europe: 3i contact – Germany, Austria: Switzerland: Simon Steiner Eric Amstutz Office: + 49 69 921874 65 Public Affairs, Geneva Mobile: +49 172 30 68 688 Office: +41 22 849 4466 ssteiner@heringschuppener.com Mobile: +41 78 833 44 66 amstutz_eric_m@cat.com Caterpillar contact – North America: 3i contact – United Kingdom: Jim Dugan Isabel Unsworth Corporate Public Affairs Office: +44 207 975 3190 Office: 309-494-4100 isabel.unsworth@3i.com Mobile: 309-360-7311 dugan_jim@cat.com FOR IMMEDIATE RELEASE

Caterpillar to Buy 3i-Backed MWM Significantly Expanding Customer Options for Sustainable Power Generation Solutions

PEORIA, Ill. / LONDON, U.K. – Caterpillar Inc. (NYSE: CAT) has signed an

agreement to acquire MWM Holding GmbH (“MWM” or the “Company”) from 3i and

funds managed by 3i. Headquartered in Mannheim, Germany, MWM is a leading global

supplier of highly sustainable alternative engines.

With the acquisition of MWM, Caterpillar will significantly expand customer

options for sustainable power generation solutions. The total transaction value amounts to

!580 million (approximately $810 million) and will be paid in cash.

MWM, which stands for Motoren-Werke Mannheim, can draw on more than 135

years of experience in the development and optimization of combustion engines for

natural gas, special gases and diesel.

“MWM is recognized for its leading technology and product strength, particularly

for its highly efficient range of engines, combined heat and power and trigeneration

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solutions capable of operating on a wide range of gaseous fuels including natural gas,

biogas, mine gas and industrial waste gas,” said Caterpillar CEO Doug Oberhelman.

“This is a natural complement to Caterpillar’s existing diesel and gas power generation

business and demonstrates our commitment to continued investment in sustainable

products and industries,” Oberhelman added.

“We are very pleased about the development MWM experienced over the last

three years. In close collaboration with the MWM management and its employees, we

developed and implemented a broad number of strategic and operational improvement

initiatives. We also made significant investments in the Company’s production facilities,

research and development platform and distribution network. Today, MWM has a highly

skilled and motivated workforce, best-in-class products as well as a very efficient sales

organization and production facilities,” said Peter Wirtz, partner and managing director

of 3i Germany. “Beyond our accomplished mission of transforming MWM’s positioning,

we strongly believe in the long-term success of the Company under Caterpillar’s

ownership,” Wirtz continued.

Following the repositioning of MWM over the three years since 3i’s investment in

the company, 3i will recognize an internal rate of return in excess of 25 percent and

generate a 2.2x return on its investment.

“We highly appreciate 3i’s support and believe that Caterpillar provides the best

prospects for the next step of our development, given its worldwide network which will

open up new distribution and growth opportunities to us,” said Peter Grosch, chairman of

MWM.

MWM will become part of Caterpillar’s Electric Power Division (EPD), which

supplies natural gas and diesel generator sets and integrated power systems involved in

the generation, control and supply of electricity. EPD operates in more than 50 locations

around the world.

The integration of MWM will result in important synergies leveraging the two

companies’ existing product ranges, advanced engine technologies, research and

development resources, manufacturing, distribution and customer support capabilities.

“The gas engines industry is a great fit for Caterpillar’s energy and electric power

systems business. Together with the two companies’ premium products, technology and

global distribution network, our comprehensive offerings will deliver sustainable power

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system solutions for our global customers,” said Bill Rohner, Caterpillar vice president

with responsibility for Electric Power.

The acquisition is expected to close in the coming months, pending final

regulatory approvals.

About Caterpillar: For more than 85 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2009 sales and revenues of $32.396 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at: http://www.cat.com. About 3i: 3i is an international investor focused on Private Equity, Infrastructure and Debt Management, investing in Europe, Asia and North America. Our competitive advantage comes from our international network and the strength and breadth of our business relationships. These underpin the value that we deliver to our portfolio, shareholders and fund investors. More information is available at: http://www.3i.com.

About MWM: MWM GmbH is one of the world’s leading providers of highly efficient and sustainable energy generation plants. Based in Mannheim, Germany, the enterprise can look back on more than 135 years of experience in the development and optimization of combustion engines for natural gas, special gases and diesel fuel. Understanding of the value chain, engineering competence and innovative drive make MWM a reliable partner who develops and produces solutions tailored to the individual needs of its customers. With over 1,100 employees across 11 subsidiary companies worldwide, the company has focused on ecologically progressive solutions for producing "renewable energy". More information is available at: http://www.mwm.net. Forward-Looking Statements Certain statements in this press release relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to known and unknown factors that may cause actual results of Caterpillar Inc. to be different from those expressed or implied in the forward-looking statements. 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 statements of 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 Caterpillar does not undertake to update its forward-looking statements. It is important to note that actual results of the company may differ materially from those described or implied in such forward-looking statements based on a number of factors, including, but not limited to: (i) economic volatility in the global economy generally and in capital and credit markets; (ii) Caterpillar’s ability to generate cash from operations, secure external funding for operations and manage liquidity needs; (iii) adverse changes in the economic conditions of the industries or markets Caterpillar serves;

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Caterpillar Public Release #

(iv) government regulations or policies, including those affecting interest rates, liquidity, access to capital and government spending on infrastructure development; (v) commodity price increases and/or limited availability of raw materials and component products, including steel; (vi) compliance costs associated with environmental laws and regulations; (vii) Caterpillar’s and Cat Financial’s ability to maintain their respective credit ratings, material increases in either company’s cost of borrowing or an inability of either company to access capital markets; (viii) financial condition and credit worthiness of Cat Financial’s customers; (ix) material adverse changes in our customers’ access to liquidity and capital; (x) market acceptance of Caterpillar’s products and services; (xi) effects of changes in the competitive environment, which may include decreased market share, lack of acceptance of price increases, and/or negative changes to our geographic and product mix of sales; (xii) Caterpillar’s ability to successfully implement Caterpillar Production System or other productivity initiatives; (xiii) international trade and investment policies, such as import quotas, capital controls or tariffs; (xiv) failure of Caterpillar or Cat Financial to comply with financial covenants in their respective credit facilities; (xv) adverse changes in sourcing practices for our dealers or original equipment manufacturers; (xvi) additional tax expense or exposure; (xvii) political and economic risks associated with our global operations, including changes in laws, regulations or government policies, currency restrictions, restrictions on repatriation of earnings, burdensome tariffs or quotas, national and international conflict, including terrorist acts and political and economic instability or civil unrest in the countries in which Caterpillar operates; (xviii) currency fluctuations, particularly increases and decreases in the U.S. dollar against other currencies; (xix) increased payment obligations under our pension plans; (xx) inability to successfully integrate and realize expected benefits from acquisitions; (xxi) significant legal proceedings, claims, lawsuits or investigations; (xxii) imposition of significant costs or restrictions due to the enactment and implementation of health care reform legislation and proposed financial regulation legislation; (xxiii) changes in accounting standards or adoption of new accounting standards; (xxiv) adverse effects of natural disasters; and (xxv) other factors described in more detail under “Item 1A. Risk Factors” in Part I of our Form 10-K filed with the SEC on February 19, 2010 for the year ended December 31, 2009 and in Part II of our Form 10-Q filed with the SEC on May 3, 2010 for the quarter ended March 31, 2010. These filings are available on our website at www.cat.com/sec_filings.

For North American Release: July 2010 Release Number: 09PR10 Acquisition Positions Caterpillar to Deliver Subsurface Imaging and Mapping Services Caterpillar Inc. has acquired all assets of Underground Imaging Technologies, Inc. (UIT)

through its majority owned affiliate, Underground Imaging Technologies LLC. UIT is an

advanced geophysical services company and technology developer based in Latham, N.Y. The

acquisition will give Caterpillar the capability to provide geophysical services, specializing in

providing three-dimensional representations of underground utilities and other targets.

“UIT’s geophysical expertise and advanced technologies will add dynamic new subsurface

infrastructure capabilities to our Connected Worksite offerings,” said Hans Haefeli, vice

president with responsibility for the Caterpillar Advanced Systems Division. “But most

important, this service provides detailed information that enables design engineers and

contractors to proceed on underground projects with a clearer picture of the subsurface

environment, contributing to both project cost savings and increased safety on the worksite.”

“The use of advanced near-surface geophysical tools provides highly accurate three-

dimensional images and digital maps of subsurface utilities and unknown objects,” said Mark

R. Wallbom, CEO of UIT. “Our portfolio of proprietary software and geophysical means and

methods has high value for both design and construction projects. Identifying underground

impediments—before design and construction begin—speeds the work, saves money and

enhances safety. The technology also has potential applications in road building quality

control, site evaluation, environmental surveys, and mapping geologic layers for mining

applications.”

In business since 2002, UIT has been instrumental in developing many advancements in three-

dimensional mapping by integrating geophysical and geospatial hardware and custom

Press Release

2

software. UIT is the owner of a number of patents and proprietary geophysical technologies.

UIT also has demonstrated expertise in using those geophysical tools, such as their multi-

channel 14-antenna ground penetrating radar system called TerraVision II and their time

domain electromagnetic induction (TDEMI) system called MetaVision II.

The extensive data from multiple geophysical and geospatial inputs are processed using a suite

of UIT’s proprietary software that effectively integrates the acquisition, processing and

analysis of these dissimilar datasets. The process is best defined as geomatic engineering, a

modern engineering discipline that integrates acquisition, modeling, analysis and management

of spatially referenced data that when fused into common information systems, provides a

well-defined and accurate representation of the subsurface that is geo-referenced and tied to

control points.

All of UIT’s subsurface mapping activities are tied to an extremely accurate global positioning

system (GPS) or a robotic total station that provides the required spatial information and has

the capability to provide the actual elevation—not just the depth of cover—of all targets.

Extensive post processing and interpretation of the developed datasets, acquired from favorable

soils, result in a foot-by-foot map with accurate three-dimensional target locations formatted

for computer aided design (CAD) or other geographical information system (GIS)

compatibility.

Currently, Underground Imaging Technologies LLC is focusing on working with customers in

North America, but plans call for offering imaging services in many other parts of the world.

# # #

About Caterpillar: For more than 80 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at http://www.cat.com. About UIT: Underground Imaging Technologies (UIT) originally was formed as a joint venture of Vermeer Manufacturing Company and El Dorado Investment Company, a subsidiary of Pinnacle West Capital Corp. The objective of the joint venture was to

3

develop geophysical tools used to better locate underground utilities in a wide range of soils and to be able to map the utilities in three dimensions. UIT was founded on the principle that no single geophysical tool would be effective in every environment or for every application. Because of this, UIT has developed new tools to further the art and science of subsurface utility mapping using multi-sensor technologies. For more information about UIT, visit http://www.uit-systems.com.

Press Inquiries Sharon Holling Amber Santor Tel: 309-675-8995 Tel: 309-675-4693 Fax: 309-636-2738 Fax: 309-636-2738 Holling_Sharon_L@cat.com Santor_Amber_M@cat.com

Reader Requests

www.cat.com/requestCatinfo

For North American Release: June 2010 Release Number: 116PR10

Caterpillar Emissions Solutions Expands Capabilities Through Acquisition of CleanAIR Systems !

Caterpillar Emissions Solutions has signed a definitive agreement to purchase CleanAIR

Systems, Inc. Upon completion of the transaction, CleanAIR Systems will become a wholly

owned subsidiary of Caterpillar Inc. within the Customer Services Support Division.

CleanAIR Systems is a privately owned company in Santa Fe, New Mexico, and is a leader in

designing and manufacturing customized stationary aftertreatment solutions for internal

combustion engines. The broad product line includes California Air Resources Board (CARB)

verified particulate filters, oxidation catalysts and silencers as well as an innovative hybrid

selective-catalytic-reduction/particulate-filter/silencer system. These products and CleanAIR’s

engineering expertise have seen especially strong use in retrofitting engine-powered generators,

and they have application in diverse industries.

“Lowering the emissions output of our legacy equipment is one of the most significant steps we

can take to help our customers do their work in a more sustainable manner. The CleanAIR

products add significantly to our ability to accomplish emissions reductions for our electric

power, petroleum and marine customers,” said Terry Sears, Manager, Caterpillar Emissions

Solutions. "Our goal is to be the leader and the preferred provider of emissions reduction

technologies for the existing population of Cat products around the globe."

In 2008, Caterpillar Emissions Solutions signed an Allied Vendor Agreement with CleanAIR

Systems to strengthen the stationary aftertreatment business. The acquisition will build on the

success of the vendor agreement and the working relationships developed with Cat® dealers.

About 70 percent of CleanAIR products were going to Cat dealers under the agreement.

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2

“We are extremely pleased that CleanAIR Systems has joined the Caterpillar family. After

working together for several years as an allied vendor of Caterpillar, we feel this is a natural

progression,” said Michael Roach, President, CleanAIR Systems, Inc. “My staff and I are

looking forward to an exciting future helping the worldwide Cat Dealer Network and their

customers meet air quality regulations.”

Caterpillar Emissions Solutions will provide marketing and engineering support to CleanAIR

Systems, assist with CARB and EPA Verification, and jointly develop next-generation products

for Caterpillar customers.

The acquisition is expected to close by July 1, 2010, pending final regulatory approvals.

CleanAIR Systems will remain headquartered in Santa Fe and will be known as CleanAIR

Systems, Inc.- A Caterpillar Company.

# # #

CAT, CATERPILLAR, their respective logos, “Caterpillar Yellow” and 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.

Press Inquiries Americas: Sharon Holling Amber Santor Tel: 309-675-8995 Tel: 309-675-4693 Fax: 309-636-2738 Fax: 309-636-2738 Holling_Sharon_L@cat.com Santor_Amber_M@cat.com Europe, Africa, Middle East: Mia Karlsson Tel: +41-22-849-4662 Fax: +41-22-849-9993 Karlsson_Mia@cat.com

Reader Requests

www.cat.com/requestCatinfo

!

!

!

______________________________________________________________________________

E6-1

Exhibit 6 – Caterpillar Family of Brands

______________________________________________________________________________

E7-1

Exhibit 7 – Financial Metrics26 Caterpillar’s financial statements are audited by PricewaterhouseCoopers LLP (PWC). Throughout the

Historical Period, PWC found all “consolidated financial position(s) and the related consolidated

statements of results of operations, changes in stockholders' equity, and cash flow… to present fairly, in

all material respects, the financial position of [Caterpillar], and the results of their operations and their

cash flows... [Additionally, PWC found the Company to be] in conformity with accounting principles

generally accepted in the U.S. [Furthermore, PWC found] the Company maintained, in all material

respects, effective internal control over financial reporting...”27

(Note: industry averages, and how Caterpillar compares to the industry averages, have been analyzed for

a number of metrics contained in this Exhibit. The industry is defined as the six global competitors we

have examined.)

Revenue Metrics

26 All data sourced through individual company filings (quarterly and annually) with the Securities and Exchange Commission. 27 Caterpillar Inc. Form 10-K for the Fiscal Year Ended December 31, 2009 and Caterpillar Inc. Form 10-K for the Fiscal Year Ended December 31, 2007.

______________________________________________________________________________

E7-2

• Total revenue grew from $36.3 billion in 2005 to a high for the historical period of $51.3 billion

in 2008. Subsequently, total revenue declined to $32.4 billion in 2009 and has rebounded to

$37.4 billion in 2010. The decline and subsequent rebound is in part due to the worldwide

economic downturn and recovery as well as greater price realizations.

• Overall, throughout the Historical Period, Caterpillar’s annual revenue growth (or decline) has

been in-line with industry averages.

• On average, Machinery and Engines account for 93% of the Company’s annual revenues.

• Machinery is the Company’s largest line of business, comprising on average 62% of total revenue

throughout the Historical Period.

______________________________________________________________________________

E7-3

• North America has traditionally been Caterpillar’s largest geographic market. However, revenues

have declined steadily throughout the Historical Period from a high of 53% in 2005 and 2006 to a

low of 37% in 2010.

• Europe, Africa and the Middle East (EAME) has traditionally been Caterpillar’s second largest

geographic market. Revenues in this market have been slow to recover and currently remain

under 2005 levels.

• Asia/Pacific is Caterpillar’s fastest growing market. Accounting for a total of 13% of revenues in

2005, the market accounted for 25% of total revenues in 2010 (Caterpillar’s second largest

market). This market is one of Caterpillar’s focal points in the Vision 2020 strategy.

______________________________________________________________________________

E7-4

Earnings Metrics

• Overall, operating profits are beginning to recover from the lows experienced in 2009 with the

Machinery business experiencing a $2.2 billion turnaround.

• The Machinery business has become less efficient throughout the Historical Period. Accounting

for 63% of total revenues and 60% of operating profits in 2005, the business only accounted for

37% of operating profits in 2010 while still generating 63% of total revenues.

• The Engines business has become increasingly profitable for the Company. Accounting for 26%

of operating profits in 2005 and increasing to 51% of operating profits in 2010.

• The Financial Products business steadily contributes between 12% and 14% of total operating

profits (excluding 2009).

______________________________________________________________________________

E7-5

• EBITDA grew gradually from $5.3 billion in 2005 to $6.0 billion in 2007 before declining 5.3%

in 2008 to $5.7 billion. EBITDA declined significantly in 2009 to a Historical Period of low of

$2.9 billion. However, EBITDA has rebounded to $4.7 billion in 2010. The rebound is a

combination of increased sales, greater price realizations, and increased operating efficiencies.

• Caterpillar’s annual EBITDA growth (or decline in 2009) has followed the industry trend

throughout the Historical Period and as of 2010 was slightly above average.

• Caterpillar’s EBITDA margin steadily declined from a high of 14.5% in 2005 to a low of 9.0% in

2009. In 2010 EBITDA margin has increased to 12.7%. As previously mentioned, this increase

is attributable in part to greater price realizations and increased operating efficiencies.

______________________________________________________________________________

E7-6

• Overall, Caterpillar’s EBITDA margin is in-line with the industry average.

Asset Utilization

• Caterpillar currently accounts for its inventory on a LIFO basis. Prior to 2009 the Company

utilized a FIFO basis. Caterpillar’s competitors’ utilize multiple inventory methods depending on

the business line/product category, geographical region, or stage of inventory (e.g., raw materials

vs. finished goods).

• Caterpillar’s inventory turnover, while slightly below industry average, has followed the overall

industry trend.

• On average, throughout the Historical Period, Caterpillar turns over its inventory 4.4x per year.

______________________________________________________________________________

E7-7

• Caterpillar’s accounts receivable turnover has ranged between 3.9x and 5.4x per year

throughout the Historical Period, well below the industry average in all years.

• Accounts receivable turnover has followed the industry trend throughout the Historical

Period.

Performance Metrics

• Due to the capital intensive nature of the industry, the industry on average generates a low return

on its assets.

• Caterpillar’s return on assets has averaged 4.4% throughout the Historical Period and has

followed the trend of the industry.

______________________________________________________________________________

E7-8

• Caterpillar’s return on equity has outperformed the industry average throughout the Historical

Period. Return on equity is a focus of management and has traditionally been in the top 25% of

the S&P 500.28

• Caterpillar’s return on equity averaged 43.7% between 2005 and 2008. Return on equity has

increased from a low of 12.1% in 2009 to 22.1% in 2010.

Capital Expenditures

• The Company operates in a capital intensive and asset intensive business. Capital expenditures

grew in-step with the business between 2005 and 2008 to a Historical Period high of $4.0 billion

in 2008. In 2010, the Company spent $2.4 billion on capital projects.

• The Company’s capital expenditures have averaged 6.9% of revenue throughout the Historical

Period and have exceeded the industry average in every year.

28 Caterpillar Inc. “2011 – 2015 Enterprise Strategy & Our Values in Action.” August 19, 2010 Analyst Meeting.

______________________________________________________________________________

E8-1

Exhibit 8 – Dividend Payout Policy

Caterpillar has paid a cash dividend every year since the company formed in 192529. For the past sixteen

years, dividends per share have increased every year. In 2009, dividends of $0.42 per share were paid

each quarter, totaling $1.03B. The Board of Directors reviews the dividend quarterly to determine

whether to increase, maintain, or decrease the dividend. On December 8, 2010, the Board of Directors

announced a cash dividend of $0.44 per share of common stock, payable February 19, 2011 to

stockholders of record at the close of business on January 20, 2011.30 The chart below displays the

quarterly dividend rate from January 2001 through September 2010.

29 http://www.caterpillar.com/investors/stock-information 30 Caterpillar Inc. Press Release Dated December 8, 2010. “Caterpillar Inc. Maintains Dividend Rate”

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______________________________________________________________________________

E9-1

Exhibit 9 - Valuation Analysis

Weighted Average Cost of Capital Projected cash flows were discounted at a weighted average cost of capital (WACC) that incorporates the

inherent riskiness of Caterpillar’s operations. A WACC of 8.8% was applied to cash flows generated in

2011 and beyond. Caterpillar’s WACC was calculated as follows:

Cost of Debt = rf + credit spread

Cost of Equity = rf + !* (rm - rf)

WACC = (Debt weight * cost of debt) + (Equity weight * cost of equity)

• Cost of debt: The cost of debt was calculated using the following inputs:

o rf : The risk free rate used in our analysis was calculated using the 30-year treasury rate.

On December 3, 2010 the quoted rate was 4.32%31. We chose a 30-year treasury rate

because we felt that a long time horizon was most appropriate as a metric for the

economic life of Caterpillar.

o Credit spread: A credit spread of 2.2% was added to the risk free rate to account for

higher risk of Caterpillar as compared to U.S. Treasury bonds. The value of 2.2% is

based on Morningstar Equity Research32.

• Cost of equity: The cost of equity was calculated using the following inputs:

o !: The beta value used in our calculations is based on a regression of five years of

historical monthly stock returns for Caterpillar as compared to monthly returns for the

S&P 500 from December 4, 2005 through December 1, 2010. We performed the same

31 http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield on 12/5/2010 32 Morningstar Equity Research as of November 15, 2010.

______________________________________________________________________________

E9-2

analysis for John Deere, CHN, Terex, Volvo, and Cummins. We chose to use monthly

returns, as there is less volatility in monthly returns compared to daily or weekly returns.

We also examined betas from 10-year historical returns, and found that for both

Caterpillar and its competitors the betas were all lower. We believe the risks to

Caterpillar’s core business are more accurately reflected in data from the past 5 years.

o Market premium: A market premium of 7.0% was used. This value is based on the

average historical spread between the 10-year U.S. Treasury bond and the S&P 500.33

The generally acceptable range for market premium is 5-7% depending on the

methodology and time period selected. We chose to use 7% as a more conservative

estimate.

• WACC: the WACC was calculated with the following inputs:

o Debt and equity weights: Debt and equity weights of 50% were used. Caterpillar’s

consolidated balance sheet reflects a debt weight of approximately 70%; however most of

this debt is associated with the financial services operations; which experienced higher

levels of losses and past-due accounts in 2009. A lower debt weight was used in

anticipation of a reduction in losses and past-due accounts going forward.

Projected Cash Flows Cash flows were projected for five years under three different scenarios: base case, worst case, and best

case. In all cases, cash flows were driven by revenue growth projections as described below. In all cases

a terminal value was determined as a stable growing perpetuity based on the cash flow projections for

2015. A growth rate of 3% was used in all cases.

• Base Case: Under the base case projections, revenues are projected to grow by 15% in 2011,

10% in 2012, and 3% per year in 2013 and beyond. Per Caterpillar management, they continue to

33 Ibbotson Associates Yearbook

______________________________________________________________________________

E9-3

see signs of economic improvement, particularly in China and most developing countries. There

is also a marked increase in demand for mining equipment as a result of strong commodity prices

and growing confidence in economic recovery.

• Worst Case: Under the worst-case projections, revenues grow by 3% per year in 2011 and

beyond.

• Best Case: Under the best-case projections, revenues grow by 25% in 2011, 15% in 2012, 10% in

2013, and 3% per year in 2014 and beyond.

Common Projection Assumptions The following assumptions were constant in all three scenarios.

• Cost of goods sold (COGS): COGS held constant as a percent of revenue, based on historical

data. The average from 2005 – 2010 (last twelve months [LTM]) was cost of goods sold is equal

to 73% of revenue.

• Interest expense (finance division): Interest expense held constant as percent of revenue, based

on historical data. The average 2005 – 2010 (LTM) was interest expense (finance division) is

equal to 2.51% of revenue.

• Selling, General & Administrative Expense (SG&A): SG&A as a percent of revenue was higher

in 2009 and 2010 (LTM); 11.25% and 10.83%, respectively compared to an average of 8.7% over

years 2005 through 2008. This is due to fixed costs included in SG&A that Caterpillar was not

able to reduce when revenues declined in 2008 and 2009. To account for this, we projected

slightly higher than average SG&A as percentage of revenue for 2011 and 2012, returning to

historical average in 2013.

o For the base case and best case scenarios SG&A was projected to be 9.05% of revenues

in 2011 and 8.87% in 2012, returning to 8.7% of revenues in 2013.

o For the worst case scenario SG&A was projected to be 9.22% of revenues in 2011 and

8.96% in 2012, returning to 8.7% of revenues in 2013.

______________________________________________________________________________

E9-4

• Research and development (R&D): R&D expenses were projected as a constant percent of

revenue, based on 2009 and 2010 (LTM). The 2009 and 2010 rates were used as we expect R&D

expenses to be higher than 2008 and prior years due to R&D related to meeting U.S.

Environmental Protection Agency emission requirements. R&D expenses were therefore

projected to be 4.5% of revenues per year for 2011 and beyond.

• Other operating expenses: Other operating expenses were held constant as a percent of revenue,

based on historical data, at an average 2005-2010 (LTM) of 2.6% of revenues.

• Interest expense: Interest expenses as a percent of revenue were higher in 2009 and 2010, 1.2%

and 0.90%, respectively, versus 0.64% for 2005 through 2008. We projected slightly higher

interest expenses for 2011 and 2012, 0.8% and 0.74%, respectively, returning to historical

average of 0.64% of revenues in 2013.

• Interest and investment income: Held constant at average of 2009 and 2010 (LTM) value.

• Loss from affiliates: Held constant at 2009 value, as we believe 2009 values most accurately

represents conditions going forward. Historically income/loss from affiliates has consisted

primarily of a 50% interest in Shin Caterpillar Mitsubishi (SCM) in Japan. On August 1, 2008

SCM redeemed half of Mitsubishi Heavy Industries Ltd.’s (MHI’s) shares in SCM, and as a result

Caterpillar now owns 67% of the renamed entity, Caterpillar Japan Ltd. (Cat Japan) and includes

this income in its consolidated financial statements. So 2009 financial statements do not include

Cat Japan, and should be used for future projections.

• Currency exchange gains: Projected based on an average 2005 – 2010 (LTM) value of $87M.

• Other non-operating income: Projected based on an average of 2005-2010 (LTM) value of

$107.2M.

• Depreciation & amortization: Depreciation of plant and equipment is computed principally using

accelerated methods and amortization of purchased intangibles is computed using the straight-line

method, generally not to exceed a period of 20 years. Depreciation and amortization was

estimated at 3.5% of revenues based on historical data from 2005 – 2010 (LTM).

______________________________________________________________________________

E9-5

• Impairment of Goodwill: We have not projected any impairment of goodwill over the next five

years. The goodwill impairment recorded in 2009 is related to write down of $22 million

goodwill acquired with purchase of Forestry Division of Blount International. The balance of

goodwill as of December 31, 2009 is: Bldg Construction Products - $4 million, Cat Japan $256

million, Earthmoving $43 million, Electric power $203 million, Excavation $39 million, Large

power systems $569 million, Marine & Petroleum Power $60 million, Mining $30 million, All

other $1,065 million, resulting in a consolidated total of $2,269 million.

• Income tax expense: To project income tax expense we have estimated an effective tax rate of

26% in 2011 and 28% for years 2012 and beyond. This effective tax rate estimates the benefits of

deferred and refundable tax assets. “As of December 31, 2009, approximately $632 million of

U.S. state tax net operating losses (NOLs) and $160 million of U.S. state tax credit carryforwards

were available. Of the NOLs, over three-fourths expire after 2019. The state tax credit

carryforwards expire over the next ten years. We established a valuation allowance of $179

million for those NOLs and credit carryforwards likely to expire prior to utilization.”

• Capital expenditures: Capital expenditures were projected as a 6% of revenues based on

historical average from 2005 through 2010 (LTM).

DateS&P 500 Returns CAT Returns

DEERE Returns

CNH Returns

Terex Returns

Volvo Returns

Cummins Returns

Komatsu Returns

12/1/10 3.21% 5.12% 3.19% 5.93% 8.93% 10.73% 3.11% 7.57%11/1/10 -0.44% 7.13% -3.56% 4.25% 7.34% 6.24% 10.49% 13.05%10/1/10 3.48% 0.40% 11.06% 7.56% -2.39% -7.51% -3.58% 4.71%9/1/10 8.71% 17.35% 7.87% 26.30% 21.91% 22.63% 17.53% 12.37%8/2/10 -5.25% -7.89% -6.79% -11.34% -10.43% -9.61% -8.68% -4.40%7/1/10 6.84% 16.89% 19.11% 36.13% 5.62% 11.27% 22.72% 16.29%6/1/10 -5.20% 0.05% -2.69% -8.93% -12.39% 7.64% -2.91% -0.33%5/3/10 -8.34% -11.13% -4.52% -15.90% -18.84% -16.40% -6.45% -8.77%4/1/10 1.32% 7.58% -0.28% -3.19% 15.66% 22.76% 15.62% -4.10%3/1/10 5.80% 9.63% 3.50% 18.54% 15.63% 18.56% 8.30% 6.25%2/1/10 2.85% 8.01% 13.76% 7.37% -0.87% -2.31% 24.16% -74.69%1/4/10 -3.82% -9.38% -8.75% -6.07% -3.98% -5.19% -2.57% -4.60%

12/1/09 1.48% -3.80% -0.29% 5.13% 4.10% -14.20% 0.70% 2.68%11/2/09 5.74% 4.83% 16.83% 23.19% -7.51% 1.70% 3.70% -0.39%10/1/09 -1.77% 8.34% 6.82% 13.08% -2.37% 4.11% -3.13% 9.27%9/1/09 3.68% 14.32% -1.04% 0.12% 26.71% 8.42% -0.53% 2.42%8/3/09 3.07% 1.41% -1.89% -3.84% 6.74% 16.64% 2.72% 7.22%7/1/09 7.24% 31.60% 8.51% 24.79% 24.32% 13.28% 21.29% 5.72%6/1/09 -0.43% -9.16% -10.71% -23.82% -12.66% -6.96% 5.61% 1.77%5/1/09 5.32% -1.14% 5.33% 9.57% -2.75% -1.70% -4.34% 16.45%4/1/09 9.98% 29.38% 28.54% 56.47% 51.82% 24.76% 36.05% 11.08%3/2/09 9.36% 16.16% 22.88% 44.77% 7.06% 33.33% 26.24% 9.94%2/2/09 -10.69% -18.24% -18.81% -7.24% -22.37% 8.57% -11.64% -2.40%1/2/09 -8.54% -31.31% -10.33% -49.30% -31.64% -29.26% -10.59% -20.99%

12/1/08 1.65% 14.77% 13.37% -5.11% 25.87% 39.75% 8.88% 10.81%11/3/08 -7.48% 5.59% -9.58% -5.83% -16.07% -16.45% -5.22% 7.76%10/1/08 -16.79% -34.93% -22.09% -17.92% -45.06% -38.08% -40.57% -30.28%9/2/08 -9.43% -16.64% -29.97% -42.89% -39.61% -19.82% -34.54% -22.89%8/1/08 1.06% 1.52% -0.20% 2.52% 6.34% -3.63% -3.04% -10.23%7/1/08 -0.73% -4.74% -1.09% 10.36% -6.96% -0.50% 2.60% -9.33%6/2/08 -8.55% -10.46% -11.31% -24.26% -27.65% -21.19% -6.04% -11.70%5/1/08 1.04% 0.88% -3.29% 5.58% 2.02% 1.94% 12.40% 2.15%4/1/08 4.46% 3.79% 3.04% -18.22% 11.77% -0.97% 32.28% 5.32%3/3/08 -0.58% 8.59% -5.36% 1.38% -7.02% 0.00% -6.77% 13.52%2/1/08 -3.48% 1.66% -2.89% 1.62% 14.54% 5.67% 9.52% 4.28%1/2/08 -6.09% -2.16% -6.86% -24.17% -11.53% -16.62% -62.07% -10.45%

12/3/07 -0.76% 1.61% -45.81% 7.67% 1.27% -3.11% 9.80% -10.92%11/1/07 -4.18% -3.22% 12.66% -4.66% -11.49% -9.79% -1.87% -5.23%10/1/07 1.45% -5.45% 4.23% 5.96% -16.44% 13.06% -6.27% -3.42%9/4/07 3.58% 3.47% 8.56% 20.40% 11.25% 2.60% 7.75% 8.52%8/1/07 1.29% -3.61% 13.36% -0.02% -8.10% -5.41% 0.43% -2.88%7/2/07 -3.28% 0.25% -1.01% 1.79% 4.23% -9.08% 16.13% 3.64%6/1/07 -1.78% -0.70% 0.10% 5.34% -4.56% -8.55% 7.24%5/1/07 3.25% 8.24% 9.78% 12.49% 8.36% -78.45% 2.41%4/2/07 4.33% 8.32% 1.06% 15.35% 8.77% 14.10% -36.32%3/1/07 1.00% 4.90% 2.01% -0.56% 11.78% 12.09% 8.08%2/1/07 -2.16% -0.57% 7.82% 10.86% 15.58% 4.88% -0.02%1/3/07 1.43% 3.82% 4.80% 23.99% -9.41% 6.70% 12.86%

12/1/06 1.26% -1.78% -0.96% -5.21% 14.79% 4.28% -1.37%11/1/06 1.66% 2.17% 12.72% 7.46% 6.18% 3.13% -5.53%10/2/06 3.15% -7.24% 1.71% 13.77% 14.46% 5.44% 6.44%9/1/06 2.46% -1.30% 5.11% 5.50% 3.38% 4.55% 3.41%8/1/06 1.98% -5.38% 7.62% 4.96% -1.61% 8.45% -1.86%7/3/06 0.52% -5.41% -13.91% -13.14% -55.67% 7.41% -5.26%6/1/06 0.01% 2.43% -2.98% -3.74% 7.14% 0.57% 10.79%5/1/06 -3.09% -4.27% -3.58% -7.40% 4.51% -2.86% 4.46%4/3/06 0.59% 4.17% 10.42% 2.10% 3.71% 5.97% -0.76%3/1/06 1.11% -1.81% 2.58% 2.02% -0.08% 6.32% -2.88%2/1/06 0.05% 7.31% 9.25% 34.06% 12.27% -9.10% 10.43%1/3/06 2.55% 17.33% 5.51% 1.73% 17.77% 1.56% 7.69%

12/1/05 -0.10% -0.40% -2.57% 9.19% -3.99% 9.26% 0.15%Data Taken from Yahoo Finance

Historical Monthly Returns for CAT and Competitors

10-yr Weekly Returns 10-yr Monthly ReturnsCAT 1.250 CAT 1.439DEERE 1.224 DEERE 1.325Komatsu N/A Komatsu N/ACNH 1.916 CNH 2.119Terex 1.871 Terex 1.939Volvo 1.392 Volvo 1.541Cummins 1.464 Cummins 1.732

5-yr Weekly Returns 5-yr Monthly ReturnsCAT 1.405 CAT 1.733DEERE 1.321 DEERE 1.578Komatsu N/A Komatsu N/ACNH 2.108 CNH 2.601Terex 2.322 Terex 2.441Volvo 1.655 Volvo 1.763Cummins 1.539 Cummins 1.938

Summary of Observed Betas Calculated for CAT and Competitors

Discounted Cash Flow Model for Caterpillar - Worst CaseAll figures in millions, except per share data

Projected Annual Forecast2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15Total Revenues 36,339.0 41,517.0 44,958.0 51,324.0 32,396.0 37,679.0 38,809.4 39,973.7 41,172.9 42,408.0 44,990.7Cost of Goods Sold 26,558.0 29,549.0 32,626.0 38,415.0 23,886.0 26,870.0 28,330.8 29,180.8 30,056.2 30,957.9 32,843.2Interest Expense - Finance Division 768.0 1,023.0 1,132.0 1,153.0 1,045.0 932.0 974.1 1,003.3 1,033.4 1,064.4 1,129.3Gross Profit 9,013.0 10,945.0 11,200.0 11,756.0 7,465.0 9,877.0 9,504.4 9,789.5 10,083.2 10,385.7 11,018.2SG&A 3,190.0 3,706.0 3,821.0 4,399.0 3,645.0 4,081.0 3,579.0 3,582.0 3,582.0 3,689.5 3,914.2R&D Exp 1,084.0 1,347.0 1,404.0 1,728.0 1,421.0 1,717.0 1,746.4 1,798.8 1,852.8 1,908.4 2,024.6Other Operating Exp/(Income) 955.0 953.0 1,054.0 1,151.0 1,094.0 1,005.0 1,009.0 1,039.3 1,070.5 1,102.6 1,169.8Operating Income 3,784.0 4,939.0 4,921.0 4,478.0 1,305.0 3,074.0 3,169.9 3,369.4 3,577.9 3,685.3 3,909.7 Interest Exp (260.0) (274.0) (288.0) (274.0) (389.0) (356.0) (310.5) (294.2) (263.5) (271.4) (287.9) Interest and Investment Income 97.0 83.0 99.0 101.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 Income/(Loss) From Affiliates 73.0 81.0 73.0 37.0 (12.0) (26.0) (12.0) (12.0) (12.0) (12.0) (12.0) Currency Exchange Gains (Loss) 148.0 9.0 21.0 100.0 184.0 60.0 87.0 87.0 87.0 87.0 87.0 Other Non-Operating Inc. (Exp) 123.0 87.0 167.0 108.0 113.0 45.0 107.2 107.2 107.2 107.2 107.2 EBT Excl. Unusual Items 3,965.0 4,925.0 4,993.0 4,550.0 1,299.0 2,895.0 3,139.7 3,355.4 3,594.6 3,694.0 3,902.0 Restructuring Charges - - - (30.0) (706.0) (252.0) - - - - - Impairment of Goodwill - (18.0) - - (22.0) (22.0) - - - - - Gain (Loss) on Sale of Invest. 9.0 35.0 70.0 18.0 (14.0) (1.0) - - - - - Other Unusual Items - - - - - - - - - - - EBT Inc. Unusual Items 3,974.0 4,942.0 5,063.0 4,538.0 557.0 2,620.0 3,139.7 3,355.4 3,594.6 3,694.0 3,902.0 Income Tax Expense 1,120.0 1,405.0 1,485.0 953.0 (270.0) 644.0 816.3 939.5 1,006.5 1,034.3 1,092.5 Minority Int. in Earnings - - (37.0) (28.0) 68.0 (12.0) - - - - - Earnings from Cont. Ops. 2,854.0 3,537.0 3,541.0 3,557.0 895.0 1,964.0 2,323.4 2,415.9 2,588.1 2,659.7 2,809.4 Total Depreciation & Amortization 1,455.0 1,725.0 1,554.0 1,797.0 1,980.0 2,336.0 1,358.3 1,399.1 1,441.1 1,484.3 1,574.7

EBITDA 5,239.0 6,664.0 6,475.0 6,275.0 3,285.0 5,410.0 4,528.3 4,768.5 5,019.0 5,169.5 5,484.4EBIT 3,784.0 4,939.0 4,921.0 4,478.0 1,305.0 3,074.0 3,169.9 3,369.4 3,577.9 3,685.3 3,909.7Effective Tax Rate 28.2% 28.4% 29.3% 21.0% 0.0% 24.6% 26% 28% 28% 28% 28%EBITA 2,716.9 3,536.3 3,479.1 3,537.6 1,305.0 2,317.8 2,345.8 2,426.0 2,576.1 2,653.4 2,815.0Cash from Ops 2,973.9 5,724.3 7,451.1 4,211.6 6,328.0 4,530.8 5,988.3 6,228.5 5,715.0 5,865.5 6,180.4Capital expenditures (2,415.0) (2,675.0) (3,040.0) (4,011.0) (2,316.0) (2,368.0) (2,328.562) (2,398.419) (2,470.372) (2,544.483) (2,699.442)Unlevered free cash flows 558.9 3,049.3 4,411.1 200.6 4,012.0 2,162.8 3,659.7 3,830.0 3,244.6 3,321.1 3,480.9

Discount factor 0.919 0.844 0.776 0.713 0.655Present value of free cash flows 3,362.6 3,233.5 2,516.9 2,367.1 2,279.6

Sum of present values of FCFs 13,759.6

Growth in perpetuity methodLong term growth rate 3.0%Free cash flow (t+1) 3,585.4Terminal value 61,449.9Discounted to present value 40,242.64

Projected Diluted Shares 642Fair Value per Share 84.12$

Discounted Cash Flow Model for Caterpillar - Base CaseAll figures in millions, except per share data

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201512/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15

Total Revenues 36,339.0 41,517.0 44,958.0 51,324.0 32,396.0 37,679.0 43,330.9 47,663.9 49,093.9 50,566.7 53,646.2Cost of Goods Sold 26,558.0 29,549.0 32,626.0 38,415.0 23,886.0 26,870.0 31,631.5 34,794.7 35,838.5 36,913.7 39,161.7Interest Expense - Finance Division 768.0 1,023.0 1,132.0 1,153.0 1,045.0 932.0 1,087.6 1,196.4 1,232.3 1,269.2 1,346.5Gross Profit 9,013.0 10,945.0 11,200.0 11,756.0 7,465.0 9,877.0 10,611.7 11,672.9 12,023.1 12,383.8 13,137.9SG&A 3,190.0 3,706.0 3,821.0 4,399.0 3,645.0 4,081.0 3,920.6 4,229.7 4,271.2 4,399.3 4,667.2R&D Exp 1,084.0 1,347.0 1,404.0 1,728.0 1,421.0 1,717.0 1,949.9 2,144.9 2,209.2 2,275.5 2,414.1Other Operating Exp/(Income) 955.0 953.0 1,054.0 1,151.0 1,094.0 1,005.0 1,126.6 1,239.3 1,276.4 1,314.7 1,394.8Operating Income 3,784.0 4,939.0 4,921.0 4,478.0 1,305.0 3,074.0 3,614.7 4,059.1 4,266.3 4,394.2 4,661.9 Interest Expense (260.0) (274.0) (288.0) (274.0) (389.0) (356.0) (346.6) (350.8) (314.2) (323.6) (343.3) Interest and Investment Income 97.0 83.0 99.0 101.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 Income/(Loss) From Affiliates 73.0 81.0 73.0 37.0 (12.0) (26.0) (12.0) (12.0) (12.0) (12.0) (12.0) Currency Exchange Gains (Loss) 148.0 9.0 21.0 100.0 184.0 60.0 87.0 87.0 87.0 87.0 87.0 Other Non-Operating Inc. (Exp) 123.0 87.0 167.0 108.0 113.0 45.0 107.2 107.2 107.2 107.2 107.2 EBT Excl. Unusual Items 3,965.0 4,925.0 4,993.0 4,550.0 1,299.0 2,895.0 3,548.2 3,988.5 4,232.3 4,350.8 4,598.7 Restructuring Charges - - - (30.0) (706.0) (252.0) - - - - - Impairment of Goodwill - (18.0) - - (22.0) (22.0) - - - - - Gain (Loss) on Sale of Invest. 9.0 35.0 70.0 18.0 (14.0) (1.0) - - - - - Other Unusual Items - - - - - - - - - - - EBT Inc. Unusual Items 3,974.0 4,942.0 5,063.0 4,538.0 557.0 2,620.0 3,548.2 3,988.5 4,232.3 4,350.8 4,598.7 Income Tax Expense 1,120.0 1,405.0 1,485.0 953.0 (270.0) 644.0 922.5 1,116.8 1,185.0 1,218.2 1,287.6 Minority Int. in Earnings - - (37.0) (28.0) 68.0 (12.0) - - - - - Earnings from Cont. Ops. 2,854.0 3,537.0 3,541.0 3,557.0 895.0 1,964.0 2,625.7 2,871.7 3,047.2 3,132.6 3,311.1 Total Depreciation & Amortization 1,455.0 1,725.0 1,554.0 1,797.0 1,980.0 2,336.0 1,516.6 1,668.2 1,718.3 1,769.8 1,877.6

EBITDA 5,239.0 6,664.0 6,475.0 6,275.0 3,285.0 5,410.0 5,131.2 5,727.3 5,984.5 6,164.1 6,539.5EBIT 3,784.0 4,939.0 4,921.0 4,478.0 1,305.0 3,074.0 3,614.7 4,059.1 4,266.3 4,394.2 4,661.9Effective Tax Rate 28.2% 28.4% 29.3% 21.0% 0.0% 24.6% 26% 28% 28% 28% 28%EBITA 2,716.9 3,536.3 3,479.1 3,537.6 1,305.0 2,317.8 2,674.8 2,922.5 3,071.7 3,163.9 3,356.5Cash from Ops 2,973.9 5,724.3 7,451.1 4,211.6 6,328.0 4,530.8 6,591.2 7,187.3 6,680.5 6,860.1 7,235.5Capital expenditures (2,415.0) (2,675.0) (3,040.0) (4,011.0) (2,316.0) (2,368.0) (2,599.851) (2,859.836) (2,945.631) (3,034.000) (3,218.771)Unlevered free cash flows 558.9 3,049.3 4,411.1 200.6 4,012.0 2,162.8 3,991.4 4,327.5 3,734.9 3,826.1 4,016.7

Discount factor 0.919 0.844 0.776 0.713 0.655Present value of free cash flows 3,667.4 3,653.4 2,897.2 2,727.0 2,630.5

Sum of present values of FCFs 15,575.5

Growth in perpetuity methodLong term growth rate 3.0%Free cash flow (t+1) 4,137.2Terminal value 70,908.1Discounted to present value 46,436.68

Projected Diluted Shares 642Fair Value Per Share 96.59$

Projected Annual Forecast

Discounted Cash Flow Model for Caterpillar - Best CaseAll figures in millions, except per share data

Projected Annual Forecast2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15Total Revenues 36,339.0 41,517.0 44,958.0 51,324.0 32,396.0 37,679.0 47,098.8 54,163.6 59,579.9 61,367.3 65,104.6Cost of Goods Sold 26,558.0 29,549.0 32,626.0 38,415.0 23,886.0 26,870.0 34,382.1 39,539.4 43,493.3 44,798.1 47,526.3Interest Expense - Finance Division 768.0 1,023.0 1,132.0 1,153.0 1,045.0 932.0 1,182.2 1,359.5 1,495.5 1,540.3 1,634.1Gross Profit 9,013.0 10,945.0 11,200.0 11,756.0 7,465.0 9,877.0 11,534.5 13,264.7 14,591.1 15,028.9 15,944.1SG&A 3,190.0 3,706.0 3,821.0 4,399.0 3,645.0 4,081.0 4,261.5 4,806.5 5,183.5 5,339.0 5,664.1R&D Exp 1,084.0 1,347.0 1,404.0 1,728.0 1,421.0 1,717.0 2,119.4 2,437.4 2,681.1 2,761.5 2,929.7Other Operating Exp/(Income) 955.0 953.0 1,054.0 1,151.0 1,094.0 1,005.0 1,224.6 1,408.3 1,549.1 1,595.6 1,692.7Operating Income 3,784.0 4,939.0 4,921.0 4,478.0 1,305.0 3,074.0 3,929.0 4,612.6 5,177.5 5,332.8 5,657.6 Interest Exp (260.0) (274.0) (288.0) (274.0) (389.0) (356.0) (376.8) (398.6) (381.3) (392.8) (416.7) Interest and Investment Income 97.0 83.0 99.0 101.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 Income/(Loss) From Affiliates 73.0 81.0 73.0 37.0 (12.0) (26.0) (12.0) (12.0) (12.0) (12.0) (12.0) Currency Exchange Gains (Loss) 148.0 9.0 21.0 100.0 184.0 60.0 87.0 87.0 87.0 87.0 87.0 Other Non-Operating Inc. (Exp) 123.0 87.0 167.0 108.0 113.0 45.0 107.2 107.2 107.2 107.2 107.2 EBT Excl. Unusual Items 3,965.0 4,925.0 4,993.0 4,550.0 1,299.0 2,895.0 3,832.4 4,494.1 5,076.4 5,220.3 5,521.1 Restructuring Charges - - - (30.0) (706.0) (252.0) - - - - - Impairment of Goodwill - (18.0) - - (22.0) (22.0) - - - - - Gain (Loss) on Sale of Invest. 9.0 35.0 70.0 18.0 (14.0) (1.0) - - - - - Other Unusual Items - - - - - - - - - - - EBT Inc. Unusual Items 3,974.0 4,942.0 5,063.0 4,538.0 557.0 2,620.0 3,832.4 4,494.1 5,076.4 5,220.3 5,521.1 Income Tax Expense 1,120.0 1,405.0 1,485.0 953.0 (270.0) 644.0 996.4 1,258.4 1,421.4 1,461.7 1,545.9 Minority Int. in Earnings - - (37.0) (28.0) 68.0 (12.0) - - - - - Earnings from Cont. Ops. 2,854.0 3,537.0 3,541.0 3,557.0 895.0 1,964.0 2,836.0 3,235.8 3,655.0 3,758.6 3,975.2 Total Depreciation & Amortization 1,455.0 1,725.0 1,554.0 1,797.0 1,980.0 2,336.0 1,648.5 1,895.7 2,085.3 2,147.9 2,278.7

EBITDA 5,239.0 6,664.0 6,475.0 6,275.0 3,285.0 5,410.0 5,577.4 6,508.3 7,262.8 7,480.7 7,936.2EBIT 3,784.0 4,939.0 4,921.0 4,478.0 1,305.0 3,074.0 3,929.0 4,612.6 5,177.5 5,332.8 5,657.6Effective Tax Rate 28.2% 28.4% 29.3% 21.0% 0.0% 24.6% 26% 28% 28% 28% 28%EBITA 2,716.9 3,536.3 3,479.1 3,537.6 1,305.0 2,317.8 2,907.4 3,321.0 3,727.8 3,839.6 4,073.5Capital expenditures (2,415.0) (2,675.0) (3,040.0) (4,011.0) (2,316.0) (2,368.0) (2,825.925) (3,249.814) (3,574.795) (3,682.039) (3,906.275)Unlevered free cash flows 558.9 3,049.3 4,411.1 200.6 4,012.0 2,162.8 4,211.5 4,718.5 4,384.0 4,494.6 4,726.0

Discount factor 0.919 0.844 0.776 0.713 0.655Present value of free cash flows 3,869.6 3,983.5 3,400.7 3,203.5 3,095.0

Sum of present values of FCFs 17,552.4

Growth in perpetuity methodLong term growth rate 3.0%Free cash flow (t+1) 4,867.8Terminal value 83,429.2Discounted to present value 54,636.55

Projected Diluted Shares 642Fair Value Per Share 112.44$

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E10-1

Exhibit 10 – Share Repurchase

The Board of Directors of Caterpillar authorized a stock repurchase program in February 2007, set to

expire on December 31, 2011. The Board of Directors authorized $7.5 billion in share repurchases. As of

December 31, 2009, $3.8 billion had been spent.34

34 Caterpillar Inc. Form 10-K for the Fiscal Year Ended December 31, 2009

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E11-1

Exhibit 11 – SWOT Analysis

Strengths Dealership Network Caterpillar’s greatest asset is their commitment to their customers through its dealership network. The

worldwide Caterpillar network has over 500 facilities and markets its products in over 200 countries.

Preventing machine downtime is critical for Caterpillar’s customers, accordingly the Company’s service

network helps it maintain and expand its market share. “Given CAT's sizable market share and breadth of

geographic coverage, we don't think this dealer base is replicable over the near term.”35 The company's

wide dealer network creates a sizable competitive advantage.

Research and Development As competitor product quality has increased in the past decade, Caterpillar has spent heavily on research

and development (R&D) and maintained spending levels (5% of sales in 2009) throughout the recent

economic downturn. In 2010, R&D expense is forecasted to be $1.8 billion. The Company is unlikely to

concede this advantage, as its R&D budget dwarfs competitors’ spending.36 Comparatively, Komatsu’s

R&D budget for the year ended March 31, 2010 was $499 million.37

U.S. Manufacturing Caterpillar is the world leader in construction- and mining-equipment manufacturing because it produces

superior American made products sold both in the U.S. and abroad. Over 43,000 Caterpillar workers

manufacture products in 50 U.S. facilities (with three more facilities under construction). In 2010, over

60% of the machine and engine products produced in these factories were sold to markets outside of the

U.S.

35 Morningstar Equity Research. “Cat to Purchase Bucyrus in $8.6 Billion Acquisition”. 25 Oct 10. 36 Ibid. 37 Komatsu Ltd. Form 20-F for the Fiscal Year Ended March 31, 2010.

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E11-2

Inefficiencies are inherent in such a large-scale operation. As such, the Company has adopted ‘supplier

collaboration’; a shrinking of the supply base from 9,000 to 6,000 and working more closely with 200

suppliers identified as critical to future growth. Improvements to the supply chain are targeted to pull 25

cents of profit from each new dollar of sales as demand in emerging markets surges.38 Applying

engineering and quality-control expertise from suppliers inside Caterpillar factories, in conjunction with

supplier collaboration, will help build the Company's signature yellow- and-black machines more

efficiently.

Weaknesses Commodity Bet Caterpillar is expecting commodity prices of coal and metals to increase in the future. This is a weakness

as future regulation of greenhouse gasses and natural resource management is inevitable and will

negatively impact Caterpillar unless addressed in the near term. “The [Bucyrus] deal is effectively a bet

by Caterpillar's management regarding emerging markets and their positive impact on commodity

prices.”39 Mitigating this risk depends on Caterpillars ability to focus its massive R&D on the mining

business. Caterpillar is a world leader, in part because it invests heavily in R&D. Caterpillar can make

the commodity bet payoff by leading the mining industry in the direction it wants to go.

Cyclical Industries The Company is faced with the challenge of managing credit and inventory as a result of the cyclical

nature of the markets it operates in. These cyclical effects impact production and supply chain

efficiencies, as dealers are hesitant to increase inventories. Recognizing Caterpillar’s position in the

market, and where the market is in the cycle, will help management optimize business strategy to stay

ahead of the demand or lack of it. By continuing to expand into Emerging Markets and non-cyclical

industries Caterpillar will be able to smooth the highs and lows, making credit and inventory management

more consistent.

38 http://www.dailyherald.com/article/20101020/business/101029968/ 39 Morningstar Equity Research 25 Oct 10.

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E11-3

Labor Relations Approximately 17% of Caterpillar’s U.S. workforce is represented by the United Auto Workers (UAW),

an amount that would negatively impact operations if the upcoming labor negotiations go poorly. The

current labor contract expires March 1, 2011, as such; Caterpillar and the UAW will open contract

negotiations on December 15, 2010. "Contingency work force training, on the job training, continues and

that is something we have done prior to the 2004 negotiations and as well before that," said Caterpillar

Spokesman Rusty Dunn.40 Caterpillar trains a contingency force, mostly management, to do the jobs

required to neutralize a work slowdown or stoppage. This short-term fix works, but is inefficient as it

takes man-hours of training and practice, not to mention removes management from their primary roles.

In other words it has a cost. Caterpillar may be better off, thinking long-term, making greater concessions

(equal to or less than the cost of the training and lost management time) for a long-term or ongoing

contract, which could eliminate tiered pay scales and improve relations with the UAW.

Opportunities Emerging Markets Caterpillar has a strong presence across markets outside the U.S. Substantial growth in revenue

contributions from the developing markets has resulted in revenues from outside North America

accounting for over 60% of total revenue in 2010. Caterpillar expects GDP growth to remain strong in

2011 with 9.5% and 8.5% in China and India, respectively.41 Capitalizing on this growth, Caterpillar

currently operates 11 production facilities in China and is building another. The Company augments

growth of its existing businesses with complementary and strategic acquisitions.

Acquisitions When business is good, Caterpillar exploits its opportunities. Not known for acquisitions, Doug

Oberhelman, Caterpillar CEO, has been responsible for several recent major acquisitions. Oberhelman is

40 http://www.msnbc.msn.com/id/40441175/ns/local_news-peoria_il/ 41 Morningstar Equity Research 25 Oct 10.

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E11-4

striving to make Caterpillar a fast-acting company with a sense of urgency. Caterpillar has executed the

recent transactions in 60-90 days each.42

Threats Government Policies The unpredictability and political nature of governments worldwide threatens Caterpillar’s ability to

continue its business strategy. Monetary policy, new healthcare systems, high unemployment and

regulation can all affect Caterpillar’s weaknesses and subdue the growth Caterpillar needs to remain

profitable. Identifying and creating contingency plans for proposed legislation is a constant challenge,

especially in emerging markets where political instability is difficult to gauge. Creating and updating a

significant awareness in each market through local/indigenous personnel can mitigate and help predict,

therefore plan for, adverse government policies.

Competition Currently, Caterpillar’s R&D and acquisitions have kept them ahead of the competition. Competitors,

like Komatsu who has a superior dealer network in China, are working to catch up. “Like Caterpillar,

Japanese firm Komatsu offers mining trucks and hydraulic mining excavators but not a full suite of

related products. Both Cat and Bucyrus management teams… noted that customers seem to increasingly

prefer to deal with one supplier rather than multiple manufacturers, and we think Joy (comparable to

Bucyrus) could make an attractive acquisition target [for a competitor] as a result.”43

42 http://www.reuters.com/article/idUSN0615053020101106?feedType=RSS&feedName=marketsNews 43 Morningstar Equity Research 25 Oct 10.