OR

Commission File No. 1-768

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

Delaware
(State or other jurisdiction of incorporation)

Registrant’s telephone number, including area code: (309) 675-1000

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

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, 1999, there were 353,777,881 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 $16,432,866,117.

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.

TABLE OF CONTENTS

PART I

Item 1. Business.

Principal Lines of Business

Caterpillar operates in three principal lines of business:

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-16 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. In 1999, price competition, among other factors such as lower sales volume and an unfavorable change in product sales mix, had a significant negative impact on our profitability for the year.

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.

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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.

Information about our operations in 1999 and outlook for 2000, including risks associated with foreign operations, are incorporated by reference from “Management’s Discussion and Analysis” on pages A-21 through A-29 of the Appendix.

Acquisitions

During the second quarter of 1999 we acquired the remaining 51% interest in F.G. Wilson. F.G. 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 144 located outside the United States. Worldwide, these dealers have more than 1,800 places of business and serve 172 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,” “Barber-Greene,” “MaK,” “Perkins,” “F.G. 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.

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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 1999, 1998, and 1997, we spent $814 million, $838 million, and $700 million, respectively, on our research and engineering programs. Of these amounts, $626 million in 1999, $643 million in 1998, and $528 million in 1997 were attributable to new prime products, major component development and major improvements to existing products. The remainders were attributable to engineering costs incurred during the early production phase as well as ongoing efforts to improve existing products.

Employment

At December 31, 1999, we employed 66,896 persons of whom 28,517 were located outside the United States.

Sales

Sales outside the United States were 50% of consolidated sales for 1999, 49% for 1998, and 51% for 1997.

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, 1999 (except as noted*)

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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.

Plant Closings

Information regarding plant closing costs is incorporated by reference from Note 19 of the Notes to Consolidated Financial Statements on page A-16 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, 1999, changes in our investment in property, plant and equipment were as follows (stated in millions of dollars):

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At December 31, 1999, the net book value of properties located outside the United States represented 28.5% 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 1E on page A-7 and Note 9 on page A-12 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.

Manufacturing

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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-30 and from “Dividends declared per share of common stock” on page A-20 of the Appendix.

Non-U.S. Employee Stock Purchase Plans

We have twenty employee stock purchase plans administered outside the United States for our foreign employees. As of December 31, 1999, those plans had approximately 5,279 participants in the aggregate. During the fourth quarter of 1999, a total of 26,061 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, 1999, 237,500 put options were outstanding with exercise prices ranging from $42.48 to $52.10 per share. The put options expired between February 4, 2000 and March 10, 2000, and were exercised by the holders on their expiration dates. During the fourth quarter of 1999, 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-20 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-21 through A-29 of the Appendix.

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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 expected 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 all international businesses, as well as matters specific to the Company and the markets it serves.

Current Outlook

Our current outlook calls for recovery to continue throughout Asia and Latin America. Africa and Middle East also should register improved growth in 2000. If, for any reason, these recoveries falter, sales would likely be lower than anticipated in the affected region. Renewed currency speculation, a significant decline in the stock market (in the region or in the U.S.), political disruption or much higher interest rates (in the region or in the U.S.) could result in weaker than anticipated economic growth and sales. 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 the economy and that the Brazilian government follows through with promised reforms. A reversal by either government could result in renewed recession. Our outlook also assumes that currency and stock markets remain relatively stable. If currency or stock markets were to decline significantly, uncertainty would increase and interest rates could move higher, both of which would probably result in slower economic growth and lower sales.

The outlook for our sales also depends on commodity prices, most of which are expected to trend slightly higher through 2000 but remain considerably below 1999 levels. Oil prices have moved up considerably since the start of last year and are expected to decline some from recent highs. Gold prices moved higher last year on announcements of government plans to refrain from selling gold, and we assume gold prices average about $300 per ounce in 2000. Agricultural prices are likely to remain weak while most metals prices should be up slightly. Based on this forecast of only modest improvement in most commodity prices, equipment sales into sectors that are sensitive to commodity prices are likely to remain relatively weak for 2000.

Stronger than anticipated world growth could lead to noticeable improvement in commodity prices which could result in greater than expected sales this year. Conversely, weaker than anticipated world economic growth could lead to a drop in commodity prices and lower than expected sales. Europe plays a key role in this forecast and our current outlook is for improvement leading to annual average GDP growth of about 3%. If Europe falters, then commodity prices could be weaker.

Russia remains very weak. Political and economic instability are very high and a further deterioration could impact worldwide stock or currency markets, which in turn could weaken Company sales.

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. For example, if the Federal Reserve raises rates significantly, the U.S. economy could slow abruptly leading to an unanticipated decline in sales. The United States, in particular, is vulnerable to higher interest rates as it enters the tenth year of expansion - which is the largest in U.S. history. Our outlook assumes the Federal Reserve will raise interest rates 25 to 50 basis points in the first half of the year which will contribute to lower industry demand. If the Federal Reserve raises rates more that 50 basis points then industry demand will likely be even lower resulting in lower company sales.

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 slightly slower U.S. growth in 2000 and not recession. If, for whatever reason, the U.S. were to enter a recession then demand for Company products would fall in the U.S. and Canada and would also be lower throughout the rest of the world.

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Political Factors

Political factors in the U.S. and abroad also 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 also a number of presidential elections scheduled to take place in 2000 which could affect economic policy, particularly in Latin America.

Currency Fluctuations

Currency fluctuations are also a significant unknown for global companies. If the U.S. dollar strengthens against foreign currencies, the Company's ability to realize price increases on sales could be negatively impacted. Most of the Company's key competitors have their principal manufacturing operations based in Japan or European countries. The majority of our manufacturing assets are in the United States. Consequently, an overvalued dollar makes our costs relatively higher compared with these competitors. As a major net exporter from the United States, an overvalued dollar, over time, could have an unfavorable impact on our global competitive position.

Dealer Practices

In addition to these factors, there are uncertainties related to the Company's industry and specific operations. A major factor contributing to the Company's success is its 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 sales ratios will be somewhat lower at the end of 2000 than at the end of 1999. If dealers reduce inventory levels more than anticipated, company sales will be adversely impacted.

Other Factors

The rate of infrastructure spending, housing starts, commercial construction and mining also 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 underway. If, unexpectedly, these delays continued in the Year 2000, sales could be negatively impacted.

Another factor which can impact company sales and profit is mix. Our outlook assumes a certain geographic mix of sales (higher priced areas vs. lower priced areas) as well as a product mix of sales (machines vs. engines, small vs. large, high margin vs. low margin). Results may be impacted positively or negatively by changes in the mix.

The Company operates in a highly competitive environment and our outlook depends on a forecast of the Company's percentage of industry sales. A reduction in that percentage 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 outlook also depends on our ability to realize price increases. The environment remains very competitive and a repeat of the price discounting that occurred in 1998 and 1999 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 1G and 2 on pages A-8 through A-9 of the Appendix and Notes 16 and 17 on pages A-15 through A-16 of the Appendix and from “Derivative Financial Instruments” on pages A-27 through A-28 of the Appendix.

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-19 of the Appendix.

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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 2003,” “Directors Remaining in Office Until 2001,” and “Directors Remaining in Office Until 2002” 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 31 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 12, “Compensation Committee Report on Executive Officer and Chief Executive Officer Compensation” on pages 13 through 18, and “Executive Compensation Tables” on pages 19 through 21 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, 1999)” on page 11 of the Proxy Statement and from “Persons Owning More than Five Percent of Caterpillar Stock (as of December 31, 1999)” on page 12 of the Proxy Statement.

PART IV

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

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.

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