Caterpillar Inc. (

CAT

)

Q4 2011 Earnings Call

January 26, 2012 11:00 a.m. ET

Executives

Doug Oberhelman - Chairman & CEO

Edward J. Rapp - Group President & CFO

Mike DeWalt - Director of IR

Analysts

Anne Diamond – JP Morgan

Joel Tiss - Buckingham Research Group

Andrew Casey - Wells Fargo Securities

Robert Wertheimer – Vertical Research Partners, LLC.

David Raso – ISI Group

Henry Kirn – UBS Investment Bank

Jerry Revich – Goldman Sachs Group Inc.

Eli Lustgarten – Longbow Securities

Seth Weber – RBC Capital Markets, LLC

Stephen Volkmann – Jefferies & Company, Inc.

Presentation

Operator

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Good morning, ladies and gentlemen and welcome to the Caterpillar Full Year and Fourth Quarter 2011 Earnings Results. At this time, all participants have been placed on a listen-only mode and we will open up the floor for your questions and comments folloing the presentation.

It is now my pleasure to turn the floor over to your host, Mr. Mike DeWalt. Sir, the floor is yours.

Mike DeWalt

Thank you. Good morning everyone and welcome to Caterpillar’s year-end 2011 earnings call. I am Mike DeWalt, the Director of Investor Relations. I am pleased to have our Chairman and CEO, Doug Oberhelman; and our Group President and CFO, Ed Rapp, with us on the call today.

This call is copyright by Caterpillar Inc., and any use, recording or transmission of any portion of this call without the expressed written consent of Caterpillar is strictly prohibited. If you would like a copy of today’s call transcript, we will be posting it in the Investor section of our caterpillar.com website and it will be in the section labeled Results Webcast.

This morning, we will be discussing forward-looking information that involves risks and uncertainties and assumptions that could cause our actual results to differ materially from the forward-looking information. A discussion of some of the factors that either individually or in the aggregate, we believe could make actual results differ materially from our projections, can be found in our cautionary statements under Item 1A, Risk Factors, of our Form 10-K filed with the SEC on February 22 of 2011 and also in our forward-looking statements language contained in today’s release.

Okay. Earlier this morning, we were very pleased to report fourth quarter results that capped off a record breaking year in 2011. To start this morning, I’ll cover the headlines.

For the fourth quarter, sales and revenues were $17.2 billion, the highest quarter in our history and profit was $2.32 a share also an all-time record for any quarter in company history. And, it was a record for sales and profit whether or not you include Bucyrus.

For the full year, sales were about $60 billion and profit was $7.40 a share. The year was also a record topping the previous record of 2008, which was $51 billion at the top line and profit for share of $5.66.

The other big headline this morning was the outlook for 2012, and we have raised our guidance for sales and revenues to a range of $68 billion to $72 billion with a midpoint of $70 billion. That midpoint is up about $3 billion from the midpoint of the preliminary outlook for 2012 that we provided with our third quarter financial release last October. Now those were the three big headlines of the day, the quarter, the full year and the outlook.

Now, I would like to just take a few minutes and go through some of our noteworthy accomplishments in 2011, then we’ll cover the high points of our 2012 outlook and will finish the call by taking your questions.

2011 was a great for Cat, probably the most positive in the 30 plus years of my career here. While the financial results in and of themselves were outstanding, we had a great year in a number of areas that along with the better industry growth that we saw was a foundation of our financial success this year.

The first area of highlighted acquisitions and in terms of executing our strategy, it was a pretty high profile item. Over the past year and a half we made three large ones, Bucyrus, EMD and MWM. Integrating them into Cat has been a high priority for us and a big focus in 2011 and while there is still much to do, we’re very pleased with the progress so far.

In terms of Cat operations, our success this year had much to do with the discipline of a Cat production system, its becoming a way of life at Caterpillar and its been the foundation that drove improvements in safety, quality, velocity and efficiency in 2011.

The safety of our workforce, contractors and visitors is fundamental to our values and we’re pleased that our enterprise safety improved again in 2011 and are now 83% better than 2003.

Quality, it’s a big reason why customers buy Cat equipment. It’s critical to the Cat business model and it’s another benefit that we’ve seen from the Cat production system. It has been a big focus for us and I’m pleased to report that in 2011, we continued another year of better product reliability for our customers.

Given the sizeable increase in demand we experienced in 2011, we stretch our factories and our suppliers to produce more. The results were outstanding and we were able to significantly increase production and do it while we improve the quality. In fact, we would like to take this opportunity right now to say thank you to our suppliers. With their help in 2011, this was the highest year-over-year increase in sales in our history and on a percentage basis; it was the most significant year-over-year increase since 1947.

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