10-KPeriod: FY2006

CATERPILLAR INC Annual Report, Year Ended Dec 31, 2006

Filed February 23, 2007For Securities:CAT

Summary

Caterpillar Inc. (CAT) reported strong financial performance for the fiscal year ended December 31, 2006, marking its fourth consecutive year of double-digit profit growth and third consecutive year of record sales and profits. With total sales and revenues reaching $41.517 billion and a profit of $3.537 billion ($5.17 per share), the company demonstrated robust execution of its Vision 2020 strategy focused on people, performance, and profitable growth. Key business segments include Machinery, Engines, and Financial Products. The company highlighted significant progress in its China operations, including the construction of a new manufacturing facility and strategic agreements to foster the remanufacturing industry. Acquisitions, notably Progress Rail, were integrated to enhance growth and profitability. Caterpillar continues to invest in research and development, with R&D spending at 3.2% of sales in 2006, focusing on product innovation and meeting stringent emissions regulations, such as through its ACERT Technology for engines.

Key Highlights

  • 1Record sales and profit for the fiscal year 2006, with revenues of $41.517 billion and profit of $3.537 billion ($5.17 per share).
  • 2Demonstrated consistent double-digit profit growth for the fourth consecutive year, indicating strong operational performance.
  • 3Strategic focus on Vision 2020 goals, aiming for $50+ billion in sales by 2010 and 15-20% profit per share growth.
  • 4Expansion in China is a key strategic initiative, including a new manufacturing facility and efforts to develop the remanufacturing industry.
  • 5Acquisition of Progress Rail for $1.0 billion diversified revenue streams and leveraged remanufacturing capabilities.
  • 6Significant investment in Research and Development ($1.347 billion in 2006) to drive product innovation and meet environmental standards like ACERT Technology for emissions compliance.
  • 7Strong global dealer network (182 dealers worldwide) supports extensive product distribution and customer service.

Frequently Asked Questions

Caterpillar operated in three principal lines of business: Machinery (including construction, mining, and forestry equipment), Engines (for various applications including power generation and on-highway vehicles), and Financial Products (through Cat Financial, Cat Insurance, and Cat Power Ventures).

Caterpillar invested significantly in ACERT Technology, which was certified by the EPA for 2007 engines. This technology aims to meet stringent emissions regulations while maintaining engine performance and customer satisfaction, as evidenced by multiple J.D. Power awards.

Key developments included the execution of the Vision 2020 strategy, significant expansion efforts in China (new manufacturing facility, remanufacturing initiatives), and the acquisition of Progress Rail. The company also continued to invest heavily in R&D to support product development and technological advancements.

For its Financial Products segment, Caterpillar utilizes a 'match funding' policy to manage interest rate risk by aligning debt and receivable portfolios. It also employs foreign currency forward and option contracts to manage foreign currency risk, aiming to minimize earnings volatility.