CATERPILLAR INC — Annual Report 2000

Mar 15, 2001

10-K 1 tenk.htm 2000 10-K SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CATERPILLAR FORM 10-K

(Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _ to _.

Commission File No. 1-768

CATERPILLAR INC. (Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)
1-768 (Commission File Number)	37-0602744 (IRS Employer I.D. No.)
100 NE Adams Street, Peoria, Illinois (Address of principal executive offices)	61629 (Zip Code)
Registrant's telephone number, including
area code: (309) 675-1000

2000

Securities registered pursuant to Section 12(b) of the Act:

	Name of each exchange
Title of each class	on which registered
Common stock ($1.00 par value)	Chicago Stock Exchange
	New York Stock Exchange
	Pacific Exchange, Inc.
Preferred Stock Purchase Rights	Chicago Stock Exchange
	New York Stock Exchange
	Pacific Exchange, Inc.
9 3/8% Notes due July 15, 2001	New York Stock Exchange
9% Debentures due April 15, 2006	New York Stock Exchange
6% Debentures due May 1, 2007	New York Stock Exchange
9 3/8% Debentures due August 15, 2011	New York Stock Exchange
9 3/4% Sinking Fund Debentures due June 1,
2019	New York Stock Exchange
9 3/8% Debentures due March 15, 2021	New York Stock Exchange
8% Debentures due February 15, 2023	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

As of December 31, 2000, there were 343,396,810 shares of common stock of the Registrant outstanding, and the aggregate market value of the voting stock held by non-affiliates of the Registrant (assuming only for purposes of this computation that directors and officers may be affiliates) was $16,042,645,570.

Documents Incorporated by Reference

Portions of the documents listed below have been incorporated by reference into the indicated parts of this Form 10-K, as specified in the responses to the item numbers involved.

• 2001 Annual Meeting Proxy Statement ("Proxy Statement") - Part III
• Annual Report to Security Holders filed as an appendix to the 2001 Annual Meeting Proxy Statement ("Appendix") - Parts I, II, and IV

2000

TABLE OF CONTENTS
Part I	Item
1. Business
	Item
1a. Executive Officers of the Registrant as of
December 31, 2000
	Item
2. Properties
Part II	Item
5. Market for Registrant's Common Equity
and Related Stockholder Matters
	Item
6. Selected Financial Data
	Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations
	Item
7a. Quantitative and Qualitative Disclosures
About Market Risk
	Item
8. Financial Statements and
Supplementary Data
Part III	Item
10. Directors and Executive Officers of the
Registrant
	Item
11. Executive Compensation
	Item
12. Security Ownership of Certain Beneficial
Owners and Management
Part IV	Item
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K

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PART I Item 1. Business. Principal Lines of Business Caterpillar operates in three principal lines of business:

1. Machinery - design, manufacture, and marketing of construction, mining, agricultural, and forestry machinery - track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, mining shovels, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, telescopic handlers, skid steer loaders, and related parts.
2. Engines - design, manufacture, and marketing of engines for Caterpillar Machinery, on-highway trucks and locomotives; marine, petroleum, construction, industrial, agricultural, and other applications; electric power generation systems; and related parts. Reciprocating engines meet power needs ranging from 5 to over 22,000 horsepower (4 to over 16 200 kilowatts). Turbines range from 1,340 to 18,000 horsepower (1000 to 13 500 kilowatts).
3. Financial Products - financing to customers and dealers for the purchase and lease of Caterpillar and noncompetitive related equipment, as well as some financing for Caterpillar sales to dealers. Also provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment. This line of business consists primarily of Caterpillar Financial Services Corporation and its subsidiaries and Caterpillar Insurance Services Corporation.

Due to financial information required by Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, we have also divided our business into eight operating segments for financial reporting purposes. Information about our operating segments, including geographic information, is incorporated by reference from Note 20 of the Notes to Consolidated Financial Statements on pages A-17 through A-19 of the Appendix.

Nature of Operations

We conduct operations in our Machinery and Engines' lines of business under highly competitive conditions, including intense price competition. We place great emphasis upon the high quality and performance of our products and our dealers' service support. Although no one competitor is believed to produce all of the same types of machines and engines, there are numerous companies, large and small, which compete with us in the sale of each of our products.

Our Financial Products' line of business also conducts business under highly competitive conditions. Financing for users of Caterpillar products is available through a variety of competitive sources, principally commercial banks and finance and leasing companies. We emphasize prompt and responsive service to meet customer requirements and offer various financing plans designed to increase the opportunity for sales of our products and generate financing income for our company. Financial Products' activity is primarily conducted in the United States, with additional offices in Asia, Australia, Canada, Europe, and Latin America.

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Information about our operations in 2000 and outlook for 2001, including risks associated with foreign operations, are incorporated by reference from "Management's Discussion and Analysis" on pages A-22 through A-30 of the Appendix.

Acquisitions During the fourth quarter of 2000 we reached an agreement with DaimlerChrysler to create a global engine alliance to develop, manufacture, market and distribute medium-duty engines and fuel systems for sale to third-party customers and for captive use. The alliance will create a medium-duty engine joint venture, a fuel systems joint venture, research and engineering cooperation, and combined purchasing volume focused on procurement synergies. The alliance is expected to be finalized in the second quarter of 2001.

During the second quarter of 1999 we acquired the remaining 51% interest in FG Wilson. FG Wilson is a leading packager of diesel-powered generator sets. During the first quarter of 1998, we acquired the net assets of Perkins Ltd. and the stock of several related subsidiaries for $1.328 billion. Perkins is a leading manufacturer of small- to medium-sized engines. Both acquisitions were accounted for using the purchase method of accounting.

Dealers Machines are distributed principally through a worldwide organization of dealers, 63 located in the United States and 157 located outside the United States. Worldwide, these dealers have over 2,700 places of business (including about 650 rental stores) and serve 171 countries. Reciprocating engines are sold principally through the worldwide dealer organization and to other manufacturers for use in products manufactured by them. Some of the reciprocating engines manufactured by Perkins are also sold through their worldwide distributor network. Our dealers do not deal exclusively with our products; however, in most cases sales and servicing of our products are our dealers' principal business. Turbines and large marine reciprocating engines are sold through sales forces employed by Solar and MaK, respectively. Occasionally, these employees are assisted by independent sales representatives.

Patents and Trademarks Our products are sold primarily under the marks "Caterpillar," "Cat," design versions of "Cat" and "Caterpillar," "Solar," "MaK," "Perkins," "FG Wilson," and "Olympian." We own a number of patents and trademarks relating to the products we manufacture, which have been obtained over a period of years. These patents and trademarks have been of value in the growth of our business and may continue to be of value in the future. We do not regard any of our business as being dependent upon any single patent or group of patents.

Research and Development We have always placed strong emphasis on product-oriented research and engineering relating to the development of new or improved machines, engines and major components. In 2000, 1999, and 1998, we spent $854 million, $814 million, and $838 million, respectively, on our research and engineering programs. Of these amounts, $649 million in 2000, $626 million in 1999, and $643 million in 1998 were attributable to new prime products, major component development and major improvements to existing products. The remainders were attributable to engineering

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costs incurred during the early production phase as well as ongoing efforts to improve existing products. Employment At December 31, 2000, we employed 68,440 persons of whom 30,780 were located outside the United States.

Sales Sales outside the United States were 50% of consolidated sales for 2000, 50% for 1999, and 49% for 1998.

Environmental Matters The company is regulated by federal, state, and international environmental laws governing our use of substances and control of emissions. Compliance with these existing laws has not had a material impact on our capital expenditures, earnings, or competitive position.

We are cleaning up hazardous waste at a number of locations, often with other companies, pursuant to federal and state laws. When it is likely we will pay clean-up costs at a site and those costs can be estimated, the costs are charged against our earnings. In doing that estimate, we do not consider amounts expected to be recovered from insurance companies and others.

The amount set aside for environmental clean-up is not material and is included in "Accrued expenses" in Statement 3 of the Appendix. If a range of liability estimates is available on a particular site, we accrue the lower end of that range.

We cannot estimate costs on sites in the very early stages of clean-up. Currently, we have five of these sites, and there is no more than a remote chance that a material amount for clean-up will be required.

Item 1a. Executive Officers of the Registrant as of December 31, 2000

Name and Age	Present Caterpillar Inc. position and date of initial election	Principal positions held during the past five years other than Caterpillar Inc. position currently held
Glen A. Barton (61)	Chairman and Chief Executive Officer (1999)	Group President (1990 - 1998) Vice Chairman (1998 - 1999)
Vito H. Baumgartner (60)	Group President (2000)	Chairman, Caterpillar Overseas
S.A. (1990-present) Vice President (1990-2000)
Gerald S. Flaherty (62)	Group President (1990)
James W. Owens (54)	Group President (1995)
Gerald L. Shaheen (56)	Group President (1998)	Vice President (1995-1998)
Richard L. Thompson (61)	Group President (1995)
R. Rennie Atterbury III (63)	Vice President, General Counsel and Secretary (1991)
Sidney C. Banwart (55)	Vice President (1998)	General Manager, Lafayette Plant (1995-1998)
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Name and Age	Present Caterpillar Inc. position and date of initial election	Principal positions held during the past five years other than Caterpillar Inc. position currently held
Michael J. Baunton (49)	Vice President (1998)	Group Chief Executive, Perkins Group Ltd.
(1995-1996) Divisional Managing Director, Varity Perkins
(1996-1998) President, Perkins Engine Company Limited
(1998 - present)
James
S. Beard (59)	Vice President (1990)	President, Caterpillar Financial Services Corporation
(1987-1990)
Richard A. Benson (57)	Vice President (1989)	President, Caterpillar Industrial Inc. (1989-1992)
James E. Despain (63)	Vice President (1990)
Michael A. Flexsenhar (61)	Vice President (1995)
Thomas A. Gales (52)	Vice President (2000)	President, Caterpillar Mexico S.A. de C.V. (1993-1997) Sloan Fellow,
M.I.T. (1997-1998) Managing Director, Caterpillar France, S.A., Grenoble
(1998-2000)
Donald M. Ings (52)	Vice President (1993)	President, Solar Turbines Incorporated (1993-1998)
Stuart L. Levenick (47)	Vice President (2000)	Regional Manager, Caterpillar Asia Pte. Ltd.
(1995-1998) General Manager, Commonwealth of Independent States,
Caterpillar Overseas S.A. (1998-2000) Chairman, Shin Caterpillar Mitsubishi Ltd. (2000 -
present)
Duane H. Livingston (59)	Vice President (1995)
Robert R. Macier (52)	Vice President (1998)	Business Unit Manager, Joliet Plant (1994-1998)
David A. McKie (56)	Vice President (1998)	Managing Director, Caterpillar Belgium
S.A. (1995-1998)
F. Lynn McPheeters (58)	Vice President and Chief Financial Officer (1998)	Executive Vice President, Caterpillar Financial Services
Corporation (1990-1996) Treasurer (1996 - 1998)
Daniel M. Murphy (53)	Vice President (1996)	Product Manager, Excavators, Aurora Plant
(1990-1996) General Manager, Mossville Plant (1996)
Douglas R. Oberhelman (47)	Vice President (1995)	Chief Financial Officer (1995-1998)
Gerald Palmer (55)	Vice President (1992)
Robert C. Petterson (62)	Vice President (1991)
John E. Pfeffer (58)	Vice President (1995)	Chairman, Shin Caterpillar Mitsubishi Ltd.
(1995-1999)
Siegfried R. Ramseyer (63)	Vice President (1992)
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Name and Age	Present Caterpillar Inc. position and date of initial election	Principal positions held during the past five years other than Caterpillar Inc. position currently held
Edward J. Rapp (43)	Vice President (2000)	Department Manager, Building Construction Products,
Caterpillar Overseas S.A. (1995-1998) Regional Manager, Caterpillar Overseas
S.A. (1998-2000)
Alan J. Rassi (60)	Vice President (1992)
Gary A. Stroup (51)	Vice President (1992)	President, Solar Turbines Incorporated (1998-present)
Gerald R. Vittecoq (52)	Vice President (2000)	Managing Director, Caterpillar France
S.A. (1995-1996) Treasurer, Caterpillar Overseas
S.A. (1996-1998) Managing Director, Caterpillar Belgium
S.A. (1998-2000)
Sherril K. West (53)	Vice President (1995)
Donald G. Western (52)	Vice President (1995)
Steven H. Wunning (49)	Vice President (1998)	President, Caterpillar Logistics, Logistics &
Product Services Division (1994-1998)
Robert R. Gallagher (60)	Controller (1990)
Kenneth J. Zika (53)	Treasurer (1998)	Business Resource Manager, Track-Type Tractors Division,
East Peoria Plant (1994-1997) Cost Management & Business Services Manager,
Corporate Services Division (1997-1998)

Item 2. Properties. General Information Caterpillar's operations are highly integrated. Although the majority of our plants are involved primarily in the production of either machines or engines, several plants are involved in the manufacture of both. In addition, several plants are involved in the manufacture of components which are used in the assembly of both machines and engines. Caterpillar's parts distribution centers are involved in the storage and distribution of parts for machines and engines. Also, the research and development activities carried on at the Technical Center involve both machines and engines.

Properties we own are believed to be generally well maintained and adequate for present use. Through planned capital expenditures, we expect these properties to remain adequate for future needs. Properties we lease are covered by leases expiring over terms of generally 1 to 10 years. We anticipate no difficulty in retaining occupancy of any leased facilities, either by renewing leases prior to expiration or by replacing them with equivalent leased facilities.

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Plant Closings Information regarding plant closing costs is incorporated by reference from Note 19 of the Notes to Consolidated Financial Statements on page A-17 of the Appendix.

Headquarters Our corporate headquarters are in Peoria, Illinois. Additional marketing headquarters are located both inside and outside the United States. The Financial Products Division is headquartered in leased offices located in Nashville, Tennessee.

Distribution Distribution of our products is conducted from parts distribution centers inside and outside the United States. Caterpillar Logistics Services, Inc. distributes other companies' products utilizing certain of our distribution facilities as well as other non-Caterpillar facilities located both inside and outside the United States. We also own or lease other storage facilities which support distribution activities.

Changes in Fixed Assets During the five years ended December 31, 2000, changes in our investment in property, plant and equipment were as follows (stated in millions of dollars):

	Expenditures		Acquisitions		Provisions for Depreciation	Disposals and Other Adjustments	Net Increase (Decrease) During Period
Year	U.S.	Outside U.S.	U.S.	Outside U.S.
1996	$513	$258	$0	$136	$(690)	$(94)	$123
1997	$726	$380	$0	$ 2	$(710)	$(107)	$291
1998	$880	$389	$21	$347	$(790)	$ (39)	$ 808
1999	$830	$450	$ 3	$103	$(857)	$(194)	$ 335
2000	$866	$522	$0	$ 9	$(917)	$(93)	$387

At December 31, 2000, the net book value of properties located outside the United States represented about 28% of the net book value of all properties reflected in our consolidated financial position. Additional information about our investment in property, plant, and equipment is incorporated by reference from Note 1F on page A-8 and Note 9 on page A-11 of the Notes to Consolidated Financial Statements of the Appendix.

Technical Center, Training Centers, Demonstration Areas, and Proving Grounds We own a Technical Center located in Mossville, Illinois and various other training centers, demonstration areas, and proving grounds located both inside and outside the United States.

Manufacturing, Remanufacturing, and Overhaul Manufacturing, remanufacturing, and overhaul of our products are conducted at the following locations. These facilities are believed to be suitable for their intended purposes with adequate capacities for current and projected needs for existing products.

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Manufacturing — Inside the U.S.	Kentucky	Texas	France	Japan
	* Danville	* Houston	* Arras	* Akashi 1
California	Michigan	* Waco	* Grenoble	* Sagamihara 1
* Gardena	* Menominee	Outside the U.S.	* Rantigny	Mexico
* San Diego	* Mt. Clemens		Germany	* Monterrey
Florida	Minnesota	Australia	* Kiel	* Reynosa
* Jacksonville	* Grand Rapids 1	* Burnie	* Rostock	* Saltillo 1
Georgia	* Minneapolis	* Melbourne	* Zweibrucken	* Tijuana
* Griffin	* New Ulm	Belgium	Hungary	* Torreon
* Jefferson	Mississippi	* Gosselies	* Godollo 2	The Netherlands
* LaGrange	* Oxford	Brazil	India	* s'-Hertogenbosch
* Toccoa	Missouri	* Piracicaba	*Bangalore 1	Northern Ireland
* Thomasville	* Boonville	Canada	* Mumbai 1	* Larne
Illinois	* West Plains	* Laval	* Pondicherry	* Monkstown
* Aurora	Nebraska	* Montreal	* Thiruvallur	* Springvale
* Champaign 1	* Omaha 1	England	Indonesia	People's Republic
* Decatur	North Carolina	* Barwell	* Jakarta 2	of China
* DeKalb	* Clayton	* Dorset	Italy	* Erliban 1
* Dixon	* Franklin	* Leicester	* Anagni 1	* Shunde 1
* East Peoria	* Leland	* Nottingham	* Bazzano	* Tianjin 2
* Joliet	* Morganton	* Peterborough	* Fano	* Xuzhou 2
* Mapleton	* Sanford	* Peterlee	* Frosinone 1	Poland
* Mossville	Ohio	* Saxham	* Jesi	* Janow Lubelski
* Peoria	* Marion	* Shrewsbury	* Marignano	Russia
* Pontiac	South Carolina	* Skinningrove	* Milan 1	* St. Petersburg
* Sterling	* Greenville	* Slough 2	* Minerbio	South Africa
Indiana	* Sumter	* Stafford		* Johannesburg
* Lafayette	Tennessee	* Stockton		Sweden
Kansas	* Dyersburg	* Suffolk		* Soderhamn
* Emporia	* Rockwood	* Wolverhampton
* Wamego
1 Facility
of affiliated company (50% or less owned) 2 Facility of partially owned subsidiary (more than 50%, less
than 100%)

| Remanufacturing
and Overhaul — Inside the U.S. | Outside the U.S. | Indonesia | Mexico |
| --- | --- | --- | --- |
| | | * Bandung | * Nuevo Laredo |
| Mississippi | Australia | Ireland | * Tijuana |
| * Corinth | * Melbourne | * Dublin | * Veracruz |
| * Prentiss County | Belgium | Malaysia | Nigeria |
| Texas | * Gosselies | Kuala Lumpur | * Port Harcourt |
| * De Soto | Canada | | |
| * Mabank | * Edmonton | | |

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Information required by Item 5 is incorporated by reference from "Price Ranges" and "Number of Stockholders" on page A-31 and from "Dividends declared per share of common stock" on page A-21 of the Appendix.

Non-U.S. Employee Stock Purchase Plans We have twenty-three employee stock purchase plans administered outside the United States for our foreign employees. As of December 31, 2000, those plans had approximately 7,324 participants in the aggregate. During the fourth quarter of 2000, a total of 24,788 shares of Caterpillar common stock or foreign denominated equivalents were distributed under the plans.

Put Options In conjunction with its stock repurchase program, Caterpillar sells put options to independent third parties on a private basis. These put options entitle the holders to sell shares of Caterpillar common stock to the Company on certain dates at specified prices. On December 31, 2000, 240,000 put options were outstanding with exercise prices ranging from $34.25 to $38.50 per share. The put options expired between February 6, 2001 and March 8, 2001, and were exercisable by the holders on their expiration dates. During the fourth quarter of 2000, Caterpillar received $.4 million in proceeds from the sale of put options.

Item 6. Selected Financial Data.

Information required by Item 6 is incorporated by reference from the "Five-year Financial Summary" on page A-21 of the Appendix.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Information required by Item 7 is incorporated by reference from "Management's Discussion and Analysis" on pages A-22 through A-30 of the Appendix.

SAFE HARBOR STATEMENT UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements contained in our Management's Discussion and Analysis are forward looking and involve uncertainties that could significantly impact results. The words "believes," "expects," "estimates," "anticipates," "will be" and similar words or expressions identify forward-looking statements made on behalf of Caterpillar. Uncertainties include factors that affect international businesses, as well as matters specific to the Company and the markets it serves.

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World Economic Factors Our current outlook calls for a significant slowdown in growth in the U.S. economy in early 2001, but growth is expected to pick up momentum in the second half of the year through 2002. Should recent interest rate reductions fail to stimulate the U.S. economy as expected, leading to a more protracted slowdown or recession in 2001, then sales of machines and engines would decline sharply this year and could be negatively impacted in 2002 as well. The outlook also projects that economic growth is expected to continue in Asia Pacific, Europe, Africa & Middle East and Latin America. If, for any reason, these projected growth rates falter, sales would likely be lower than anticipated in the affected region. In general, renewed currency speculation, significant declines in the stock markets, further oil or energy price increases, political disruptions or much higher interest rates could result in weaker than anticipated economic growth and worldwide sales of both machines and engines could be lower than expected as a result.

Economic recovery could also be delayed or weakened by growing budget or current account deficits or inappropriate government policies. In particular, our outlook assumes that the Japanese government remains committed to stimulating their economy with appropriate monetary and fiscal policies and that the Brazilian government follows through with promised fiscal and structural reforms. A reversal by either government could result in economic uncertainty and a weaker economy. Our outlook also assumes that currency and stock markets remain relatively stable and that world oil prices move down, on average, from the relatively elevated levels in the fourth quarter of 2000. If currency markets were to experience a significant increase in volatility, and/or stock markets were to decline significantly, interest rates could move higher, which would probably result in slower economic growth and lower sales. In addition, an eruption of political violence in the Middle East could lead to oil supply disruptions and resumed upward pressure on oil prices. In this case, inflation pressures would move up again and interest rates would be higher than currently projected, leading to slower world economic growth and potentially to lower Company sales.

The Russian economy has improved, but political and economic uncertainty remains high and an unexpected deterioration could impact worldwide stock or currency markets, which in turn could weaken Company sales.

Commodity Prices The outlook for our sales also depends on commodity prices. Consistent with our outlook for moderate worldwide economic growth in 2001, although copper and aluminum prices are expected to be higher, industrial metals prices as a whole are expected to be about flat on average in 2001. Oil prices are expected to decline from an average of about $30 to $32 a barrel in 2000 to an average of $25 to $30 a barrel in 2001. Agricultural prices are likely to be flat. Based on this forecast, equipment sales into sectors that are sensitive to crude oil prices are expected to be up in 2001. Industry sales to the industrial metals and agriculture equipment markets are expected to be about flat in 2001.

Weaker than anticipated world economic growth could lead to sharp declines in commodity prices and lower than expected sales into industrial metals, oil and agriculture.

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Monetary and Fiscal Policies For most companies operating in a global economy, monetary and fiscal policies implemented in the U.S. and abroad could have a significant impact on economic growth, and, accordingly, demand for a product. In the United States, the Federal Reserve is expected to reduce the federal funds rate from current levels of 6% to a range of 5% to 5.5% in the second half of 2001. If the Federal Reserve does not lower rates accordingly, and add sufficient liquidity to the banking system to generate the projected acceleration in growth in the second half of 2001, then machine and engine industry demand could be lower than expected, potentially resulting in lower Company sales. Similarly, if the European Central Bank raises rates in 2001, then machine and engine demand in Europe could be lower than expected.

In general, high interest rates, reductions in government spending, higher taxes, significant currency devaluations, and uncertainty over key policies are some factors likely to lead to slower economic growth and lower industry demand. The current outlook is for slower U.S. growth in 2001, but not a recession. If, for whatever reason, the U.S. were to enter a recession, then demand for Company products could fall in the U.S. and Canada and would also be lower throughout the rest of the world.

Political Factors Political factors in the U.S. and abroad have a major impact on global companies. The Company is one of the largest U.S. exporters as a percentage of sales. International trade and fiscal policies implemented in the U.S. this year could impact the Company's ability to expand its business abroad. U.S. foreign relations with certain countries and any related restrictions imposed could also have a significant impact on foreign sales. There are a number of significant expected political developments in Latin America, Asia, and Europe, Africa and the Middle East which are expected to take place in 2001 that could affect U.S. trade policies and/or de-stabilize local market conditions leading to lower Company sales.

Currency Fluctuations Currency fluctuations are also an unknown for global companies. The Company has facilities in major sales areas throughout the world and significant costs and revenues in most major currencies. This diversification greatly reduces the overall impact of currency movements on results. However, if the U.S. dollar strengthens against foreign currencies, the conversion of net non-U.S. dollar proceeds to U.S. dollars would somewhat adversely impact the Company's results. Further, since the Company's largest manufacturing presence is in the U.S., a sustained overvalued dollar could have an unfavorable impact on our global competitiveness.

Dealer Practices A majority of the Company's sales are made through its independent dealer distribution network. Dealer practices, such as changes in inventory levels for both new and rental equipment, are not within the Company's control (primarily because these practices depend upon the dealer's assessment of anticipated sales and the appropriate level of inventory) and may have a significant positive or negative impact on our results. In particular, the outlook assumes that inventory to sales ratios will be somewhat lower at the end of 2001 than at the end of 2000. If dealers reduce inventory levels more than anticipated, Company sales will be adversely impacted.

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Other Factors The rate of infrastructure spending, housing starts, commercial construction and mining play a significant role in the Company's results. Our products are an integral component of these activities and as these activities increase or decrease in the U.S. or abroad, demand for our products may be significantly impacted. In 1999, the six-year Federal highway bill did not boost U.S. sales as much as anticipated due to delays in getting major capital projects for highways underway. In 2000, there was a material increase in the volume of highway construction contracts, which had a positive impact on sales of certain types of equipment. If funding for highway construction in 2001 is delayed, or is concentrated on bridge repair, sales could be negatively impacted.

Projected cost savings or synergies from alliances with new partners could also be negatively impacted by a variety of factors. These factors could include, among other things, higher than expected wages, energy and/or materials costs, and/or higher than expected financing costs due to unforeseen changes in central bank interest rate policies. Cost savings could also be negatively impacted by unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any of the jurisdictions where the alliances conduct their operations.

Results may be impacted positively or negatively by changes in the sales mix. Our outlook assumes a certain geographic mix of sales as well as a product mix of sales. The Company operates in a highly competitive environment and our outlook depends on a forecast of the Company's share of industry sales. A reduction in that share could result from pricing or product strategies pursued by competitors, unanticipated product or manufacturing difficulties, a failure to price the product competitively, or an unexpected buildup in competitors' new machine or dealer owned rental fleets.

The environment also remains very competitive from a pricing standpoint. Additional price discounting would result in lower than anticipated price realization.

This discussion of uncertainties is by no means exhaustive but is designed to highlight important factors that may impact our outlook. Obvious factors such as general economic conditions throughout the world do not warrant further discussion but are noted to further emphasize the myriad of contingencies that may cause the Company's actual results to differ from those currently anticipated.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk.

Information required by Item 7a is incorporated by reference from the following Notes to Consolidated Financial Statements - Notes 1I and 2 on pages A-8 through A-9 of the Appendix and Notes 16 and 17 on pages A-16 through A-17 of the Appendix and from "Derivative Financial Instruments" on pages A-27 through A-29 of the Appendix.

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Item 8. Financial Statements and Supplementary Data.

Information required by Item 8 is incorporated by reference from the Report of Independent Accountants on page A-3, and the Financial Statements and Notes to Consolidated Financial Statements on pages A-4 through A-20 of the Appendix.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Information required by Item 10 relating to identification of directors is incorporated by reference from "Directors Up For Election This Year for Terms Expiring in 2004," "Directors Remaining in Office Until 2002," and "Directors Remaining in Office Until 2003" on pages 2 through 4 of the Proxy Statement. Identification of executive officers appears in Item 1a of this Form 10-K. There are no family relationships between the officers and directors of the Company. All officers serve at the pleasure of the Board of Directors and are regularly elected at a meeting of the Board of Directors in April of each year. Information required by Item 10 relating to compliance with section 16(a) of the Securities Exchange Act is incorporated by reference from "Section 16(a) Beneficial Ownership Reporting Compliance" on page 27 of the Proxy Statement.

Item 11. Executive Compensation.

Information required by Item 11 is incorporated by reference from "Director Compensation" on pages 5 and 6, "Performance Graph" on page 9, "Compensation Committee Report on Executive Officer and Chief Executive Officer Compensation" on pages 10 through 15, and "Executive Compensation Tables" on pages 16 through 18 of the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Information required by Item 12 is incorporated by reference from "Caterpillar Stock Owned by Officers and Directors (as of December 31, 2000)" on page 8 of the Proxy Statement and from "Persons Owning More than Five Percent of Caterpillar Stock (as of December 31, 2000)" on page 9 of the Proxy Statement.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) The following documents are filed as part of this report: 1. Financial Statements (Incorporated by reference from the Appendix):

1. Financial Statement Schedule:

(b) There were three reports (one dated October 17 and two dated November 22) filed on Form 8-K pursuant to Item 5 during the last quarter of 2000 and three additional reports filed on Form 8-K on January 18, January 25 and January 26, 2001. No financial statements were filed as part of those reports.

(c) Exhibits:

| | Restated Certificate of Incorporation
(incorporated by reference from Exhibit 3(i) to the Form 10-Q
filed for the first quarter of 1998). |
| --- | --- |
| 3.2 | Certificate of Designation, Preferences and
Rights of the Terms of the Series A Junior Participating
Preferred Stock (incorporated by reference from Exhibit 2 to Form
8-A filed December 11, 1996). |
| 3.3 | Bylaws, amended and restated (incorporated by
reference from Exhibit 3.3 to the 1998 Form 10-K). |
| 4 | Rights Agreement dated as of December 11,
1996, between Caterpillar Inc. and First Chicago Trust Company of
New York (incorporated by reference from Exhibit 1 to Form 8-A
filed December 11, 1996). |
| 10.1 | Caterpillar Inc. 1996 Stock Option and
Long-Term Incentive Plan, amended and restated as of December 31,
2000. |
| 10.2 | Caterpillar Inc. 1987 Stock Option Plan, as
amended and restated and Long Term Incentive Supplement, amended
and restated as of December 31, 2000. |
| 10.3 | Supplemental Pension Benefit Plan, as amended
and restated (incorporated by reference from Exhibit 10.3 to the
1999 Form 10-K). |
| 10.4 | Supplemental Employees' Investment Plan, as
amended and restated through December 31, 2000. |
| 10.5 | Caterpillar Inc. Corporate Incentive
Compensation Plan Management and Salaried Employees (incorporated
by reference from Exhibit 10.5 to the 1999 Form 10-K). |
| 10.6 | Directors' Deferred Compensation Plan, as
amended and restated through April 12, 1999 (incorporated by
reference from Exhibit 10.6 to the 1999 Form 10-K).. |
| 10.7 | Directors' Charitable Award Program
(incorporated by reference from Exhibit 10(h) to the 1993 Form
10-K). |
| 13 | |
| 10.8 | Deferred Employees' Investment Plan, as amended and restated
through December 31, 2000.** |
| 11 | Statement re: Computation of per Share
Earnings (incorporated by reference from Note 15 of the Notes to
Consolidated Financial Statements appearing on page A-16 of the
Appendix). |
| 12 | Statement Setting Forth Computation of Ratios
of Profit to Fixed Charges. |
| 13 | Annual Report to Security Holders attached as
an Appendix to the Company's 2001 Annual Meeting Proxy
Statement. |
| 21 | Subsidiaries and Affiliates of the Registrant. |
| 23 | Consent of Independent Accountants. |
| 99.1 | Form 11-K for Caterpillar Foreign Service Employees' Stock
Purchase Plan. |

** Compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this Form 10-K.

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| SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized. | | |
| --- | --- | --- |
| | CATERPILLAR
INC. (Registrant) | |
| Date: March 14, 2001 | By: /s/ R.
Rennie Atterbury III | Secretary |
| Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated. | | |
| March 14, 2001 | /s/ Glen A. Barton | Chairman of the Board, Director and Chief
Executive Officer |
| March 14, 2001 | /s/ Vito H. Baumgartner | Group President |
| March 14, 2001 | /s/ Gerald S. Flaherty | Group President |
| March 14, 2001 | /s/ James W. Owens | Group President |
| March 14, 2001 | /s/ Gerald L. Shaheen | Group President |
| March 14, 2001 | /s/ Richard L. Thompson | Group President |
| March 14, 2001 | /s/F. Lynn McPheeters | Vice President and Chief Financial Officer |
| March 14, 2001 | /s/ Robert R. Gallagher | Controller and Chief Accounting Officer |

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March 14, 2001	/s/ Lilyan H. Affinito	Director
March 14, 2001	/s/ W. Frank Blount	Director
March 14, 2001	/s/ John R. Brazil	Director
March 14, 2001	/s/ John T. Dillon	Director
March 14, 2001	/s/ Juan Gallardo	Director
March 14, 2001	/s/ David R. Goode	Director
March 14, 2001	/s/ James P. Gorter	Director
March 14, 2001	/s/ Peter A. Magowan	Director
March 14, 2001	/s/ William A. Osborn	Director
March 14, 2001	/s/ Gordon R. Parker	Director
March 14, 2001	/s/ Joshua I. Smith	Director
March 14, 2001	/s/ Clayton K. Yeutter	Director

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