CATERPILLAR INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide information that will assist the reader in understanding the company’s Consolidated Financial Statements, the changes in certain key items in those financial statements between select periods and the primary factors that accounted for those changes. In addition, we discuss how certain accounting principles, policies and critical estimates affect our Consolidated Financial Statements. Our discussion also contains certain forward-looking statements related to future events and expectations as well as a discussion of the many factors that we believe may have an impact on our business on an ongoing basis. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the company’s business under Part I, Item 1A. Risk Factors of the 2023 Form 10-K . Highlights for the first quarter of 2024 include: • Total sales and revenues for the first quarter of 2024 were $15.799 billion, a decrease of $63 million, or about flat, compared with $15.862 billion in the first quarter of 2023. In the three primary segments, sales were higher in Energy & Transportation and lower in Construction Industries and Resource Industries . • Operating profit margin was 22.3 percent for the first quarter of 2024, compared with 17.2 percent for the first quarter of 2023. Adjusted operating profit margin was 22.2 percent for the first quarter of 2024, compared with 21.1 percent for the first quarter of 2023. • First-quarter 2024 profit per share was $5.75, and excluding the items in the table below, adjusted profit per share was $5.60. First-quarter 2023 profit per share was $3.74, and excluding the items in the table below, adjusted profit per share was $4.91. • Caterpillar ended the first quarter of 2024 with $5.0 billion of enterprise cash. • Enterprise operating cash flow was $2.1 billion in the first quarter of 2024. • In order for our results to be more meaningful to our readers, we have separately quantified the impact of several significant items. A detailed reconciliation of GAAP to non-GAAP financial measures is included on pages 53-54. Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 (Dollars in millions except per share data) Profit Before Taxes Profit Per Share Profit Before Taxes Profit Per Share Profit $ 3,532 $ 5.75 $ 2,634 $ 3.74 Restructuring (income) - non-US mining entity divestiture (64) (0.24) — — Other restructuring (income) costs 58 0.09 25 0.04 Restructuring costs - Longwall divestiture — — 586 1.13 Adjusted profit $ 3,526 $ 5.60 $ 3,245 $ 4.91 Overview Total sales and revenues for the first quarter of 2024 were $15.799 billion, a decrease of $63 million, or about flat, compared with $15.862 billion in the first quarter of 2023. Lower sales volume and unfavorable currency impacts, primarily related to the Australian dollar, were mostly offset by favorable price realization and higher Financial Products' revenues. The decrease in sales volume was primarily driven by lower sales of equipment to end users; there was not a significant impact from changes in dealer inventories . First-quarter 2024 profit per share was $5.75, compared with $3.74 profit per share in the first quarter of 2023. In the first quarter of 2024 and 2023, profit per share included restructuring income/costs. Profit for the first quarter of 2024 was $2.856 billion, an increase of $913 million, or 47 percent, compared with $1.943 billion for the first quarter of 2023. The increase was primarily due to the absence of the impact of the divestiture of the company's Longwall business in 2023 and favorable price realization, partially offse t by the profit impact of lower sales volume. Trends and Economic Conditions Outlook for Key End Markets Overall, we expect a continuation of healthy demand across most of our end markets for our products and services . In Construction Industries, we continue to expect North America to remain healthy in 2024 for both non-residential and residential construction after a strong 2023. We anticipate non-residential construction in North America to remain at similar to slightly higher demand levels to 2023 due to government-related infrastructure and construction projects. Residential construction demand is expected to be flat to slightly down compared to 2023, which remains strong relative to historical levels. In Asia Pacific, outside of China, we expect some softening in economic conditions. We anticipate China will remain at a 39 Table of Contents relatively low level in the excavator industry above 10-tons. In EAME , we anticipate that economic weakness in Europe will continue, partially offset by strong construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we anticipate the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. In Resource Industries, in 2024, for both mining and heavy construction and quarry and aggregates, we anticipate lower sales volume compared to strong 2023 performance, primarily in off-highway and articulated trucks. We anticipate a small decrease in dealer inventory in 2024, as compared to a slight increase in 2023. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. Customer product utilization remains high, the number of parked trucks remains low, the age of the fleet remains elevated, and our autonomous solutions continue to have strong customer acceptance. We expect higher services revenues, including robust rebuild activity in 2024. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. In Energy & Transportation, we expect reciprocating engines and services for Oil & Gas to be about flat in 2024 after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. Well servicing for reciprocating engines in North America is expected to soften. Power Generation reciprocating engine demand is expected to remain strong, largely due to continued data center growth relating to cloud computing and generative artificial intelligence (AI). For Solar Turbines, backlog and quoting activity remains strong for Oil & Gas and Power Generation. Industrial demand is expected to soften relative to a strong 2023. In Transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Full-Year 2024 Company Trends and Expectations For the full-year 2024, we continue to anticipate sales and revenues will be broadly similar to 2023. We do not anticipate a significant change in machine dealer inventories during 2024, compared to a $0.7 billion increase in machine dealer inventories during 2023. We expect slightly favorable price realization in 2024 as compared to 2023. Services revenues grew in the first quarter of 2024, and we expect continued growth in 2024 across each of our three primary segments. In Construction Industries, we expect sales of equipment to end users to be slightly lower compared to 2023 due to softer economic conditions in Europe. We expect demand in North America to remain at healthy levels in Construction Industries. Resource Industries' sales in 2024 are expected to be lower, driven by lower sales volume primarily in off-highway and articulated trucks. We also expect an unfavorable impact from changes in dealer inventories in Construction Industries and Resource Industries. Within Energy & Transportation, we expect slightly higher sales compared to 2023, including a seasonal increase throughout the year. In 2024, we expect a benefit from price realization during the first half of the year. We expect manufacturing costs to be about flat compared to 2023. We anticipate favorable freight to be partially offset by unfavorable cost absorption. We also anticipate shipping a more normal mix of products, which we expect to drive a slight unfavorable impact to operating profit. Selling, general and administrative (SG&A) and research and development (R&D) expenses are expected to increase throughout the year as we continue to invest in strategic initiatives aimed at future long-term profitable growth, such as services growth and technology, including autonomy, alternative fuels, connectivity and digital and electrification. We also expect a benefit of lower short-term incentive compensation expense in 2024 as compared to 2023. In 2024, we expect restructuring costs to be between $300 million and $450 million and expect capital expenditures to be in the range of $2.0 to $2.5 billion. We expect the annual effective tax rate, excluding discrete items, to be 22.5 percent. Second-Quarter 2024 Company Trends and Expectations In the second quarter of 2024, we expect lower sales and revenues as compared to the second quarter of 2023. We anticipate an unfavorable impact from changes in machine dealer inventories, as machine dealer inventory is expected to decline during the second quarter of 2024 compared to a $0.2 billion increase during the second quarter of 2023. In the second quarter of 2024, price realization is expected to remain favorable as compared to the second quarter of 2023. We expect lower Construction Industries' sales as compared to the second quarter of 2023 due to the impact from changes in dealer inventories, partially offset by favorable price realization. Resource Industries' sales are expected to be lower driven by lower sales volume, partially offset by favorable price realization. In Energy & Transportation, we expect sales to be about flat as compared to the second quarter of 2023. In the second quarter of 2024, we expect a benefit from price realization primarily from price actions taken in the second half of 2023. We expect manufacturing costs to be about flat compared to the second quarter of 2023, as we anticipate favorable freight to be partially offset by unfavorable cost absorption. We expect an increase in SG&A/R&D expenses in the second quarter of 2024 as compared to the second quarter of 2023 due to investments in strategic initiatives, which is expected to be offset by lower short-term incentive compensation expense. 40 Table of Contents Within Construction Industries and Resource Industries in the second quarter of 2024 as compared to the second quarter of 2023, we expect favorable price realization to be offset by the profit impact of lower sales volume. In Energy & Transportation, we anticipate favorable price realization and a favorable mix of products to be partially offset by higher manufacturing costs and SG&A/R&D expenses due to investments in strategic initiatives. Within corporate items and eliminations , we anticipate increased expenses due to timing differences in the second quarter of 2024 as compared to the second quarter of 2023. Global Business Conditions We continue to monitor a variety of external factors around the world, such as supply chain disruptions, inflationary cost and labor pressures. Areas of particular focus include transportation, certain components and raw materials. We continue to work to minimize supply chain challenges that may impact our ability to meet customer demand. We continue to assess the environment to determine if additional actions need to be taken. Risk Factors Risk factors are disclosed within Item 1A. Risk Factors of the 2023 Form 10-K. Notes: • Glossary of terms is included on pages 47-49; first occurrence of terms shown in bold italics. • Information on non-GAAP financial measures is included on pages 53-54. • Certain amounts may not add due to rounding. 41 Table of Contents Consolidated Results of Operations THREE MONTHS ENDED MARCH 31, 2024 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2023 CONSOLIDATED SALES AND REVENUES The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the first quarter of 2023 (at left) and the first quarter of 2024 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees. Total sales and revenues for the first quarter of 2024 were $15.799 billion, a decrease of $63 million, or about flat, compared with $15.862 billion in the first quarter of 2023. Lower sales volume of $684 million and unfavorable currency impacts of $30 million, primarily related to the Australian dollar, were mostly offset by favorable price realization of $575 million and higher Financial Products' revenues of $76 million. The decrease in sales volume was primarily driven by lower sales of equipment to end users; there was not a significant impact from changes in dealer inventories. In the three primary segments, sales were higher in Energy & Transportation and lower in Construction Industries and Resource Industries. North America sales increased 7 percent primarily due to favorable price realization and higher sales volume. The increase in sales volume was primarily driven by the impact from changes in dealer inventories. Dealer inventory increased more during the first quarter of 2024 than during the first quarter of 2023. Sales increased 2 percent in Latin America mainly due to higher sales volume. The increase in sales volume was primarily driven by higher services sales volume. EAME sales decreased 17 percent primarily due to lower sales volume. The decrease in sales volume was primarily driven by lower sales of equipment to end users. Asia/Pacific sales decreased 5 percent mainly due to lower sales volume. The decrease in sales volume was primarily driven by the impact from changes in dealer inventories. Dealer inventory increased more during the first quarter of 2023 than during the first quarter of 2024. Total dealer inventory increased by $1.4 billion during the first quarter of 2024, compared with an increase of $1.4 billion during the first quarter of 2023. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers’ demand expectations take into account seasonal changes, macroeconomic conditions, machine rentals and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers. 42 Table of Contents Sales and Revenues by Segment (Millions of dollars) First Quarter 2023 Sales Volume Price Realization Currency Inter-Segment / Other First Quarter 2024 $ Change % Change Construction Industries $ 6,746 $ (464) $ 199 $ (22) $ (35) $ 6,424 $ (322) (5 %) Resource Industries 3,427 (425) 173 (11) 29 3,193 (234) (7 %) Energy & Transportation 6,254 231 202 (1) (5) 6,681 427 7 % All Other Segment 111 (1) — — (1) 109 (2) (2 %) Corporate Items and Eliminations (1,439) (25) 1 4 12 (1,447) (8) Machinery, Energy & Transportation Sales 15,099 (684) 575 (30) — 14,960 (139) (1 %) Financial Products Segment 902 — — — 89 991 89 10 % Corporate Items and Eliminations (139) — — — (13) (152) (13) Financial Products Revenues 763 — — — 76 839 76 10 % Consolidated Sales and Revenues $ 15,862 $ (684) $ 575 $ (30) $ 76 $ 15,799 $ (63) — % Sales and Revenues by Geographic Region North America Latin America EAME Asia/Pacific External Sales and Revenues Inter-Segment Total Sales and Revenues (Millions of dollars) $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg First Quarter 2024 Construction Industries $ 3,833 6 % $ 595 (1 %) $ 996 (25 %) $ 993 (14 %) $ 6,417 (4 %) $ 7 (83 %) $ 6,424 (5 %) Resource Industries 1,264 (3 %) 476 — % 465 (22 %) 891 (9 %) 3,096 (8 %) 97 43 % 3,193 (7 %) Energy & Transportation 2,951 15 % 408 7 % 1,294 (7 %) 834 16 % 5,487 9 % 1,194 — % 6,681 7 % All Other Segment 18 — % (1) — % 4 — % 13 — % 34 (3 %) 75 (1 %) 109 (2 %) Corporate Items and Eliminations (58) (2) (11) (3) (74) (1,373) (1,447) Machinery, Energy & Transportation Sales 8,008 7 % 1,476 2 % 2,748 (17 %) 2,728 (5 %) 14,960 (1 %) — — % 14,960 (1 %) Financial Products Segment 659 15 % 101 (3 %) 123 8 % 108 (1 %) 991 1 10 % — — % 991 10 % Corporate Items and Eliminations (94) (18) (19) (21) (152) — (152) Financial Products Revenues 565 15 % 83 (3 %) 104 8 % 87 (2 %) 839 10 % — — % 839 10 % Consolidated Sales and Revenues $ 8,573 8 % $ 1,559 1 % $ 2,852 (17 %) $ 2,815 (5 %) $ 15,799 — % $ — — % $ 15,799 — % First Quarter 2023 Construction Industries $ 3,608 $ 599 $ 1,336 $ 1,161 $ 6,704 $ 42 $ 6,746 Resource Industries 1,308 474 599 978 3,359 68 3,427 Energy & Transportation 2,572 380 1,384 719 5,055 1,199 6,254 All Other Segment 18 — 4 13 35 76 111 Corporate Items and Eliminations (48) — (1) (5) (54) (1,385) (1,439) Machinery, Energy & Transportation Sales 7,458 1,453 3,322 2,866 15,099 — 15,099 Financial Products Segment 575 104 114 109 902 1 — 902 Corporate Items and Eliminations (83) (18) (18) (20) (139) — (139) Financial Products Revenues 492 86 96 89 763 — 763 Consolidated Sales and Revenues $ 7,950 $ 1,539 $ 3,418 $ 2,955 $ 15,862 $ — $ 15,862 1 Includes revenues from Machinery, Energy & Transportation of $177 million and $162 million in the first quarter of 2024 and 2023, respectively. 43 Table of Contents CONSOLIDATED OPERATING PROFIT The chart above graphically illustrates reasons for the change in consolidated operating profit between the first quarter of 2023 (at left) and the first quarter of 2024 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other operating (income) expenses . Operating profit for the first quarter of 2024 was $3.519 billion, an increase of $788 million, or 29 percent, compared with $2.731 billion in the first quarter of 2023. The increase was primarily due to the absence of the impact of the divestiture of the company's Longwall business in 2023 of $586 million and favorable price realization of $575 million, partially offset by the profit impact of lower sales volume of $268 million. Operating profit margin was 22.3 percent for the first quarter of 2024, compared with 17.2 percen t for the first quarter of 2023. Profit (Loss) by Segment (Millions of dollars) First Quarter 2024 First Quarter 2023 $ Change % Change Construction Industries $ 1,764 $ 1,790 $ (26) (1 %) Resource Industries 730 764 (34) (4 %) Energy & Transportation 1,301 1,057 244 23 % All Other Segment 24 11 13 118 % Corporate Items and Eliminations (415) (1,008) 593 Machinery, Energy & Transportation 3,404 2,614 790 30 % Financial Products Segment 293 232 61 26 % Corporate Items and Eliminations (25) 25 (50) Financial Products 268 257 11 4 % Consolidating Adjustments (153) (140) (13) Consolidated Operating Profit $ 3,519 $ 2,731 $ 788 29 % 44 Table of Contents Other Profit/Loss and Tax Items ▪ Interest expense excluding Financial Products in the first quarter of 2024 was $143 million, compared with $129 million in the first quarter of 2023. The increase was due to higher average borrowing rates. ▪ Other income (expense) in the first quarter of 2024 was income of $156 million, compared with income of $32 million in the first quarter of 2023. The change was primarily driven by favorable impacts from foreign currency exchange. ▪ The effective tax rate for the first quarter of 2024 was 19.5 percent compared to 26.9 percent for the first quarter of 2023. Excluding the discrete items discussed below, the first quarter 2024 estimated annual tax rate was 22.5 percent compared with 23.0 percent for the first quarter of 2023. The 2024 estimated annual tax rate excludes the impact of nontaxable gains of $64 million for the divestiture of a non-U.S. mining entity along with a related tax benefit of $54 million. The estimated annual tax rate in the first quarter of 2023 excluded the impact of the nondeductible loss of $586 million related to the divestiture of the company’s Longwall business. In addition, a discrete tax benefit of $38 million was recorded in the first quarter of 2024, compared with a $32 million benefit in the first quarter of 2023, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. Please see a reconciliation of GAAP to non-GAAP financial measures on pages 53-54. Construction Industries Construction Industries’ total sales were $6.424 billion in the first quarter of 2024, a decrease of $322 million, or 5 percent, compared with $6.746 billion in the first quarter of 2023. The decrease was primarily due to lower sales volume of $464 million, partially offset by favorable price realization of $199 million. The decrease in sales volume was mainly driven by lower sales of equipment to end users. ▪ In North America, sales increased primarily due to favorable price realization. ▪ Sales in Latin America were about flat. ▪ In EAME, sales decreased mainly due to lower sales volume. Lower sales volume was primarily driven by lower sales of equipment to end users. ▪ Sales decreased in Asia/Pacific primarily due to lower sales volume. Lower sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory increased more during the first quarter of 2023 than during the first quarter of 2024. Construction Industries’ segment profit was $1.764 billion in the first quarter of 2024, a decrease of $26 million, or 1 percent, compared with $1.790 billion in the first quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume of $278 million, higher SG&A/R&D expenses of $26 million and unfavorable other segment items of $7 million, partially offset by favorable price realization of $199 million and favorable manufacturing costs of $86 million. Favorable manufacturing costs largely reflected lower freight. Construction Industries’ segment profit as a percent of total sales was 27.5 percent in the first quarter of 2024, compared with 26.5 percent in the first quarter of 2023. Resource Industries Resource Industries’ total sales were $3.193 billion in the first quarter of 2024, a decrease of $234 million, or 7 percent, compared with $3.427 billion in the first quarter of 2023. The decrease was primarily due to lower sales volume of $425 million, partially offset by favorable price realization of $173 million. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Resource Industries’ segment profit was $730 million in the first quarter of 2024, a decrease of $34 million, or 4 percent, compared with $764 million in the first quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume of $217 million and unfavorable other segment items of $24 million, partially offset by favorable price realization of $173 million and favorable manufacturing costs of $38 million. Unfavorable other segment items primarily consisted of unfavorable currency impacts. Favorable manufacturing costs largely reflected lower freight. Resource Industries’ segment profit as a percent of total sales was 22.9 percent in the first quarter of 2024, compared with 22.3 percent in the first quarter of 2023. 45 Table of Contents Energy & Transportation Sales by Application (Millions of dollars) First Quarter 2024 First Quarter 2023 $ Change % Change Oil and Gas $ 1,568 $ 1,314 $ 254 19 % Power Generation 1,618 1,284 334 26 % Industrial 989 1,255 (266) (21 %) Transportation 1,312 1,202 110 9 % External Sales 5,487 5,055 432 9 % Inter-segment 1,194 1,199 (5) — % Total Sales $ 6,681 $ 6,254 $ 427 7 % Energy & Transportation’s total sales were $6.681 billion in the first quarter of 2024, an increase of $427 million, or 7 percent, compared with $6.254 billion in the first quarter of 2023. Sales increased across all applications except Industrial. The increase in sales was primarily due to higher sales volume of $231 million and favorable price realization of $202 million. ▪ Oil and Gas – Sales increased for turbines and turbine-related services. Sales also increased in reciprocating engines used in gas compression applications. ▪ Power Generation – Sales increased in large reciprocating engines, primarily data center applications. ▪ Industrial – Sales decreased primarily in EAME and North America. ▪ Transportation – Sales increased in rail services. International locomotive deliveries were also higher. Energy & Transportation’s segment profit was $1.301 billion in the first quarter of 2024, an increase of $244 million, or 23 percent, compared with $1.057 billion in the first quarter of 2023. The increase was mainly due to favorable price realization of $202 million. Energy & Transportation’s segment profit as a percent of total sales was 19.5 percent in the first quarter of 2024, compared with 16.9 percent in the first quarter of 2023. Financial Products Segment Financial Products’ segment revenues were $991 million in the first quarter of 2024, an increase of $89 million, or 10 percent, compared with $902 million in the first quarter of 2023. The increase was primarily due to a $69 million favorable impact from higher average financing rates across all regions and a $32 million favorable impact from higher average earning assets driven by North America. Financial Products’ segment profit was $293 million in the first quarter of 2024, an increase of $61 million, or 26 percent, compared with $232 million in the first quarter of 2023. The increase was mainly due to a $33 million insurance settlement and a $27 million favorable impact from equity securities. At the end of the first quarter of 2024, past dues at Cat Financial were 1.78 percent, compared with 2.00 percent at the end of the first quarter of 2023. Write-offs, net of recoveries, were $55 million for the first quarter of 2024, compared with $10 million for the first quarter of 2023. As of March 31, 2024, Cat Financial's allowance for credit losses totaled $281 million, or 1.01 percent of finance receivables, compared with $331 million, or 1.18 percent of finance receivables at December 31, 2023. Corporate Items and Eliminations Expense for corporate items and eliminations was $440 million in the first quarter of 2024, a decrease of $543 million from the first quarter of 2023, primarily driven by the absence of the impact of the divestiture of the company's Longwall business in 2023. 46 Table of Contents RESTRUCTURING COSTS In 2024, we expect to incur about $300 million to $450 million of restructuring costs. We expect that prior restructuring actions will result in an incremental benefit to operating costs, primarily Cost of goods sold and SG&A expenses, of about $25 million in 2024 compared with 2023. Additional information related to restructuring costs is included in Note 20 – "Restructuring costs" of Part I, Item 1 "Financial Statements." GLOSSARY OF TERMS 1. Adjusted Operating Profit Margin – Operating profit excluding restructuring income/costs as a percent of sales and revenues. 2. Adjusted Profit Per Share – Profit per share excluding restructuring income/costs. 3. All Other Segment – Primarily includes activities such as: business strategy; product management and development; manufacturing and sourcing of wear and maintenance components primarily for Cat® products; parts distribution; integrated logistics solutions; distribution services responsible for dealer development and administration, including a wholly owned dealer in Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience. 4. Consolidating Adjustments – Elimination of transactions between Machinery, Energy & Transportation and Financial Products. 5. Construction Industries – A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes asphalt pavers; backhoe loaders; cold planers; compactors; compact track loaders; forestry machines; material handlers; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; track-type loaders; track-type tractors (small, medium); track excavators (mini, small, medium, large); wheel excavators; wheel loaders (compact, small, medium); and related parts and work tools. 6. Corporate Items and Eliminations – Includes corporate-level expenses, timing differences (as some expenses are reported in segment profit on a cash basis), methodology differences between segment and consolidated external reporting, certain restructuring costs and inter-segment eliminations. 7. Currency – With respect to sales and revenues, currency represents the translation impact on sales resulting from changes in foreign currency exchange rates versus the U.S. dollar. With respect to operating profit, currency represents the net translation impact on sales and operating costs resulting from changes in foreign currency exchange rates versus the U.S. dollar. Currency only includes the impact on sales and operating profit for the Machinery, Energy & Transportation line of business; currency impacts on Financial Products revenues and operating profit are included in the Financial Products portions of the respective analyses. With respect to other income/expense, currency represents the effects of forward and option contracts entered into by the company to reduce the risk of fluctuations in exchange rates (hedging) and the net effect of changes in foreign currency exchange rates on our foreign currency assets and liabilities for consolidated results (translation). 8. Dealer Inventories – Represents dealer machine and engine inventories, excluding aftermarket parts. 9. EAME – A geographic region including Europe, Africa, the Middle East and Eurasia. 10. Earning Assets – Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases net of accumulated depreciation at Cat Financial. 47 Table of Contents 11. Energy & Transportation – A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses as well as product support of on-highway engines. Responsibilities include business strategy, product design, product management, development and testing, manufacturing, marketing and sales and product support. The product and services portfolio includes turbines, centrifugal gas compressors, and turbine-related services; reciprocating engine-powered generator sets; integrated systems and solutions used in the electric power generation industry; reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries; reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machines; electrified powertrain and zero-emission power sources and service solutions development; and diesel-electric locomotives and components and other rail-related products and services, including remanufacturing and leasing. Responsibilities also include the remanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies. 12. Financial Products – The company defines Financial Products as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. 13. Financial Products Segment – Provides financing alternatives to customers and dealers around the world for Caterpillar products and services, as well as financing for power generation facilities that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, revolving charge accounts, installment sale contracts, repair/rebuild financing, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage and maintenance plans for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of Caterpillar equipment. The segment also earns revenues from Machinery, Energy & Transportation, but the related costs are not allocated to operating segments. Financial Products’ segment profit is determined on a pretax basis and includes other income/expense items. 14. Latin America – A geographic region including Central and South American countries and Mexico. 15. Machinery, Energy & Transportation (ME&T) – The company defines ME&T as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of its products. 16. Machinery, Energy & Transportation Other Operating (Income) Expenses – Comprised primarily of gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements and accruals. 17. Manufacturing Costs – Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs. Variable manufacturing costs are defined as having a direct relationship with the volume of production. This includes material costs, direct labor and other costs that vary directly with production volume, such as freight, power to operate machines and supplies that are consumed in the manufacturing process. Period manufacturing costs support production but are defined as generally not having a direct relationship to short-term changes in volume. Examples include machinery and equipment repair, depreciation on manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and operations management. 18. Mark-to-market gains/losses – Represents the net gain or loss of actual results differing from the company’s assumptions and the effects of changing assumptions for our defined benefit pension and OPEB plans. These gains and losses are immediately recognized through earnings upon the annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement. 19. Pension and Other Postemployment Benefits (OPEB) – The company’s defined-benefit pension and postretirement benefit plans. 20. Price Realization – The impact of net price changes excluding currency and new product introductions. Price realization includes geographic mix of sales, which is the impact of changes in the relative weighting of sales prices between geographic regions. 48 Table of Contents 21. Resource Industries – A segment primarily responsible for supporting customers using machinery in mining, heavy construction and quarry and aggregates. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors; large mining trucks; hard rock vehicles; electric rope shovels; draglines; hydraulic shovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers; wheel dozers; landfill compactors; soil compactors; wide-body trucks; select work tools; machinery components; electronics and control systems and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics, autonomous machine capabilities, safety services and mining performance solutions. Resource Industries also manages areas that provide services to other parts of the company, including strategic procurement, lean center of excellence, integrated manufacturing, research and development for hydraulic systems, automation, electronics and software for Caterpillar machines and engines. 22. Restructuring Costs – May include costs for employee separation, long-lived asset impairments, contract terminations and (gains)/losses on divestitures. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold. 23. Sales Volume – With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation as well as the incremental sales impact of new product introductions, including emissions-related product updates. With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Energy & Transportation sales with respect to total sales. The impact of sales volume on segment profit includes inter-segment sales. 24. Services – Enterprise services include, but are not limited to, aftermarket parts, Financial Products revenues and other service-related revenues. Machinery, Energy & Transportation segments exclude most Financial Products revenues. LIQUIDITY AND CAPITAL RESOURCES Sources of funds We generate significant capital resources from operating activities, which are the primary source of funding for our ME&T operations. Funding for these businesses is also available from commercial paper and long-term debt issuances. Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. On a consolidated basis, we had positive operating cash flow in the first three months of 2024 and ended the first quarter with $4.96 billion of cash, a decrease of $2.02 billion from year-end 2023. In addition, ME&T has invested in available-for-sale debt securities and bank time deposits that are considered highly liquid and are available for current operations. These ME&T securities were $2.19 billion as of March 31, 2024 and are included in Prepaid expenses and other current assets and Other assets in the Consolidated Statement of Financial Position. We intend to maintain a strong cash and liquidity position. Consolidated operating cash flow for the first three months of 2024 was $2.05 billion, up $479 million compared to the same period a year ago. The increase was primarily due to higher profit before taxes including reconciling adjustments and lower working capital requirements, excluding changes in accrued wages, salaries and benefits, which were a partial offset due to higher payments for short-term incentive compensation. Within working capital, changes in inventory favorably impacted cash flow as inventory increased less in the first quarter of 2024 compared to the prior year period, partially offset by unfavorable changes in accounts payable. Total debt as of March 31, 2024 was $37.85 billion, a decrease of $25 million from year-end 2023. Debt related to ME&T decreased $31 million in the first three months of 2024 while debt related to Financial Products increased $14 million. As of March 31, 2024, we had three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes. Based on management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of March 31, 2024 was $2.75 billion. Information on our Credit Facility is as follows: • The 364-day facility of $3.15 billion (of which $825 million is available to ME&T) expires in August 2024. 49 Table of Contents • The three-year facility, as amended in August 2023, of $2.73 billion (of which $715 million is available to ME&T) expires in August 2026. • The five-year facility, as amended in August 2023, of $4.62 billion (of which $1.21 billion is available to ME&T) expires in August 2028. At March 31, 2024, Caterpillar’s consolidated net worth was $17.70 billion, which was above the $9.00 billion required under the Credit Facility. The consolidated net worth is defined in the Credit Facility as Caterpillar's consolidated shareholders’ equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss). At March 31, 2024, Cat Financial’s covenant interest coverage ratio was 1.70 to 1. This was above the 1.15 to 1 minimum ratio calculated as (1) profit excluding income taxes, interest expense and net gain (loss) from interest rate derivatives to (2) interest expense calculated at the end of each fiscal quarter for the prior four consecutive fiscal quarter period, required by the Credit Facility. In addition, at March 31, 2024, Cat Financial’s six-month covenant leverage ratio was 6.90 to 1. This was below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31, required by the Credit Facility. In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of banks may terminate the commitments allocated to the party that does not meet its covenants. Additionally, in such event, certain of Cat Financial’s other lenders under other loan agreements where similar financial covenants or cross default provisions are applicable may, at their election, choose to pursue remedies under those loan agreements, including accelerating the repayment of outstanding borrowings. At March 31, 2024, there were no borrowings under the Credit Facility. The aforementioned financial covenants are being reported as calculated under the Credit Facility and not pursuant to U.S. GAAP. Please refer to the credit agreements governing the Credit Facility filed as an exhibit to our periodic reports for further information related to the calculation thereof. For risks related to our indebtedness and compliance with these covenants, please refer to the risk factor "Restrictive covenants in our debt agreements could limit our financial and operating flexibility" set forth in Part I, Item 1A of our most recent annual report on Form 10-K. Our total credit commitments and available credit as of March 31, 2024 were: March 31, 2024 (Millions of dollars) Consolidated Machinery, Energy & Transportation Financial Products Credit lines available: Global credit facilities $ 10,500 $ 2,750 $ 7,750 Other external 4,142 626 3,516 Total credit lines available 14,642 3,376 11,266 Less: Commercial paper outstanding (3,016) — (3,016) Less: Utilized credit (763) — (763) Available credit $ 10,863 $ 3,376 $ 7,487 The other external consolidated credit lines with banks as of March 31, 2024 totaled $4.14 billion. These committed and uncommitted credit lines, which may be eligible for renewal at various future dates or have no specified expiration date, are used primarily by our subsidiaries for local funding requirements. Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines. 50 Table of Contents We receive debt ratings from the major credit rating agencies. Fitch maintains a "high-A" debt rating, while Moody’s and S&P maintain a “mid-A” debt rating. A downgrade of our credit ratings by any of the major credit rating agencies could result in increased borrowing costs and could make access to certain credit markets more difficult. In the event economic conditions deteriorate such that access to debt markets becomes unavailable, ME&T’s operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our committed credit facilities. Our Financial Products’ operations would rely on cash flow from its existing portfolio, existing cash balances, access to our committed credit facilities and other credit line facilities of Cat Financial, and potential borrowings from Caterpillar. In addition, we maintain a support agreement with Cat Financial, which requires Caterpillar to remain the sole owner of Cat Financial and may, under certain circumstances, require Caterpillar to make payments to Cat Financial should Cat Financial fail to maintain certain financial ratios. We facilitate voluntary supplier finance programs (the “Programs”) through participating financial institutions. We account for the payments made under the Programs, the same as other accounts payable, as a reduction to our cash flows from operations. We do not believe that changes in the availability of the programs will have a significant impact on our liquidity. Additional information related to the programs is included in Note 21 – "Supplier finance programs" of Part I, Item 1 "Financial Statements." Machinery, Energy & Transportation Net cash provided by operating activities was $1.77 billion in the first three months of 2024, compared with net cash provided of $1.78 billion for the same period in 2023. The decrease was primarily due to changes in accrued wages, salaries, and employee benefits mostly due to higher payments for short term incentive compensation in 2024, partially offset by lower working capital requirements, excluding the impact of changes in accrued wages, salaries, and employee benefits. Within working capital, changes in inventories favorably impacted cash flow but were partially offset by changes in accounts payable, accounts receivable and customer advances. Net cash provided by investing activities in the first three months of 2024 was $1.23 billion, compared with net cash used of $670 million in the first three months of 2023. The change was due to higher proceeds from maturities and sale of securities, primarily due to time deposit maturities in 2024, and lower investments in securities. Net cash used for financing activities during the first three months of 2024 was $5.12 billion, compared with net cash used of $1.14 billion in the same period of 2023. The change was primarily due to higher share repurchases in the first three months of 2024. While our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our long-term cash deployment strategy is focused on the following priorities. Our top priority is to maintain a strong financial position in support of a mid-A rating. Next, we intend to fund operational requirements and commitments. Then, we intend to fund priorities that profitably grow the company and return capital to shareholders through dividend growth and share repurchases. Additional information on cash deployment is as follows: Strong financial position – Our top priority is to maintain a strong financial position in support of a mid-A rating. We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins which align with our cash deployment actions and the various methodologies used by the major credit rating agencies. Operational excellence and commitments – Capital expenditures were $502 million during the first three months of 2024, compared to $414 million for the same period in 2023. We expect ME&T’s capital expenditures in 2024 to be about $2.0 billion to $2.5 billion. We made $113 million of contributions to our pension and other postretirement benefit plans during the first three months of 2024. We currently anticipate full-year 2024 contributions of approximately $273 million. In comparison, we made $208 million of contributions to our pension and other postretirement benefit plans during the first three months of 2023. Fund strategic growth initiatives and return capital to shareholders – We intend to utilize our liquidity and debt capacity to fund targeted investments that drive long-term profitable growth focused in the areas of expanded offerings, services and sustainability, including acquisitions. 51 Table of Contents As part of our capital allocation strategy, ME&T free cash flow is a liquidity measure we use to determine the cash generated and available for financing activities including debt repayments, dividends and share repurchases. We define ME&T free cash flow as cash from ME&T operations less capital expenditures, excluding discretionary pension and other postretirement benefit plan contributions. A goal of our capital allocation strategy is to return substantially all ME&T free cash flow to shareholders over time in the form of dividends and share repurchases, while maintaining our mid-A rating. Our share repurchase plans are subject to the company’s cash deployment priorities and are evaluated on an ongoing basis considering the financial condition of the company, corporate cash flow, the company’s liquidity needs, the economic outlook, and the health and stability of global credit markets. The timing and amount of future repurchases may vary depending on market conditions and investing priorities. In May 2022, the Board approved a share repurchase authorization (the 2022 Authorization) of up to $15.0 billion of Caterpillar common stock effective August 1, 2022, with no expiration. In the first three months of 2024, we repurchased $4.46 billion of Caterpillar common stock, with $3.37 billion remaining under the 2022 Authorization as of March 31, 2024. Our basic shares outstanding as of March 31, 2024 were approximately 489 million. Each quarter, our Board of Directors reviews the company’s dividend for the applicable quarter. The Board evaluates the financial condition of the company and considers corporate cash flow, the company’s liquidity needs, the economic outlook, and the health and stability of global credit markets to determine whether to maintain or change the quarterly dividend. In April 2024, the Board of Directors approved maintaining our quarterly dividend representing $1.30 per share, and we continue to expect our strong financial position to support the dividend. Dividends paid totaled $648 million in the first three months of 2024. Financial Products Net cash provided by operating activities was $308 million in the first three months of 2024, compared with $302 million for the same period in 2023. Net cash used for investing activities was $291 million in the first three months of 2024, compared with net cash used of $444 million for the same period in 2023. The change was primarily due to portfolio related activity. Net cash provided by financing activities was $117 million in the first three months of 2024, compared with net cash used of $43 million for the same period in 2023. The change was due to a higher net inflow from external borrowings and the absence of dividends paid to Caterpillar. RECENT ACCOUNTING PRONOUNCEMENTS For a discussion of recent accounting pronouncements, see Note 2 – “New accounting guidance” of Part I, Item 1 "Financial Statements." CRITICAL ACCOUNTING ESTIMATES For a discussion of the company’s critical accounting estimates, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K. There have been no significant changes to our critical accounting estimates since our 2023 Annual Report on Form 10-K. OTHER MATTERS Information related to legal proceedings appears in Note 14 – "Environmental and legal matters" of Part I, Item 1 “Financial Statements.” Order Backlog At the end of the first quarter of 2024, the dollar amount of backlog believed to be firm was approximately $27.9 billion, about $0.4 billion higher than the fourth quarter of 2023. The order backlog increased primarily within the Energy and Transportation segment. Of the total backlog at March 31, 2024, approximately $6.0 billion was not expected to be filled in the following twelve months. 52 Table of Contents NON-GAAP FINANCIAL MEASURES We provide the following definitions for the non-GAAP financial measures used in this report. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. We believe it is important to separately quantify the profit impact of three significant items in order for our results to be meaningful to our readers. These items consist of (i) restructuring income related to the divestiture of a non-US mining entity, (ii) other restructuring income/costs and (iii) restructuring costs related to the divestiture of the company's Longwall business in 2023. We do not consider these items indicative of earnings from ongoing business activities and believe the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing our period-over-period results. Reconciliations of adjusted results to the most directly comparable GAAP measures are as follows: (Dollars in millions except per share data) Operating Profit Operating Profit Margin Profit Before Taxes Provision (Benefit) for Income Taxes Profit Profit per Share Three Months Ended March 31, 2024 - U.S. GAAP $ 3,519 22.3 % $ 3,532 $ 688 $ 2,856 $ 5.75 Restructuring (income) - non-US mining entity divestiture (64) (0.5) % (64) 54 (118) (0.24) Other restructuring (income) costs 58 0.4 % 58 14 44 0.09 Three Months Ended March 31, 2024 - Adjusted $ 3,513 22.2 % $ 3,526 $ 756 $ 2,782 $ 5.60 Three Months Ended March 31, 2023 - U.S. GAAP $ 2,731 17.2 % $ 2,634 $ 708 $ 1,943 $ 3.74 Restructuring costs - Longwall divestiture 586 3.7 % 586 — 586 1.13 Other restructuring (income) costs 25 0.2 % 25 5 20 0.04 Three Months Ended March 31, 2023 - Adjusted $ 3,342 21.1 % $ 3,245 $ 713 $ 2,549 $ 4.91 We believe it is important to separately disclose our annual effective tax rate, excluding discrete items for our results to be meaningful to our readers. The annual effective tax rate, excluding discrete items for the three months ended March 31, 2024, and 2023 is discussed using non-GAAP financial measures that exclude the effects of amounts associated with discrete items recorded fully in the quarter they occur. These items consist of (i) restructuring income related to the divestiture of a non-US mining entity, (ii) restructuring costs related to the divestiture of the company's Longwall business in 2023 and (iii) settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. We believe the non-GAAP measures will provide investors with useful perspective on underlying business results and trends and aids with assessing the company's period-over-period results. 53 Table of Contents A reconciliation of our effective tax rate to annual effective tax rate, excluding discrete items is below: (Dollars in millions) Profit Before Taxes Provision (Benefit) for Income Taxes Effective Tax Rate Three Months Ended March 31, 2024 - U.S. GAAP $ 3,532 $ 688 19.5 % Restructuring (income) - non-US mining entity divestiture (64) 54 Excess stock-based compensation — 38 Annual effective tax rate, excluding discrete items $ 3,468 $ 780 22.5 % Excess stock-based compensation — (38) Other restructuring (income) costs 58 14 Three Months Ended March 31, 2024 - Adjusted $ 3,526 $ 756 Three Months Ended March 31, 2023 - U.S. GAAP $ 2,634 $ 708 26.9 % Restructuring costs - Longwall divestiture 586 — Excess stock-based compensation — 32 Annual effective tax rate, excluding discrete items $ 3,220 $ 740 23.0 % Excess stock-based compensation — (32) Other restructuring (income) costs 25 5 Three Months Ended March 31, 2023 - Adjusted $ 3,245 $ 713 In addition, we provide a calculation of ME&T free cash flow as we believe it is an important measure for investors to determine the cash generation available for financing activities including debt repayments, dividends and share repurchases. Reconciliations of ME&T free cash flow to the most directly comparable GAAP measure, net cash provided by operating activities are as follows: (Millions of dollars) Three Months Ended March 31, 2024 2023 ME&T net cash provided by operating activities 1 $ 1,771 $ 1,779 ME&T capital expenditures (502) (414) ME&T free cash flow $ 1,269 $ 1,365 1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 60 - 61. 54 Table of Contents Supplemental Consolidating Data We are providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows: Consolidated – Caterpillar Inc. and its subsidiaries. Machinery, Energy & Transportation – We define ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of our products. Financial Products – We define Financial Products as it is presented in the supplemental data as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. Consolidating Adjustments – Eliminations of transactions between ME&T and Financial Products. The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We believe this presentation will assist readers in understanding our business. Pages 56 to 61 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information. Certain amounts for prior periods have been reclassified to conform to the current period presentation. 55 Table of Contents Caterpillar Inc. Supplemental Data for Results of Operations For the Three Months Ended March 31, 2024 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Sales and revenues: Sales of Machinery, Energy & Transportation $ 14,960 $ 14,960 $ — $ — Revenues of Financial Products 839 — 1,029 (190) 1 Total sales and revenues 15,799 14,960 1,029 (190) Operating costs: Cost of goods sold 9,662 9,664 — (2) 2 Selling, general and administrative expenses 1,577 1,413 178 (14) 2 Research and development expenses 520 520 — — Interest expense of Financial Products 298 — 298 — Other operating (income) expenses 223 (41) 285 (21) 2 Total operating costs 12,280 11,556 761 (37) Operating profit 3,519 3,404 268 (153) Interest expense excluding Financial Products 143 143 — — Other income (expense) 156 (20) 23 153 3 Consolidated profit before taxes 3,532 3,241 291 — Provision (benefit) for income taxes 688 615 73 — Profit of consolidated companies 2,844 2,626 218 — Equity in profit (loss) of unconsolidated affiliated companies 10 10 — — Profit of consolidated and affiliated companies 2,854 2,636 218 — Less: Profit (loss) attributable to noncontrolling interests (2) (3) 1 — Profit 4 $ 2,856 $ 2,639 $ 217 $ — 1 Elimination of Financial Products’ revenues earned from ME&T. 2 Elimination of net expenses recorded between ME&T and Financial Products. 3 Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T. 4 Profit attributable to common shareholders. 56 Table of Contents Caterpillar Inc. Supplemental Data for Results of Operations For the Three Months Ended March 31, 2023 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Sales and revenues: Sales of Machinery, Energy & Transportation $ 15,099 $ 15,099 $ — $ — Revenues of Financial Products 763 — 935 (172) 1 Total sales and revenues 15,862 15,099 935 (172) Operating costs: Cost of goods sold 10,103 10,104 — (1) 2 Selling, general and administrative expenses 1,463 1,320 158 (15) 2 Research and development expenses 472 472 — — Interest expense of Financial Products 217 — 217 — Other operating (income) expenses 876 589 303 (16) 2 Total operating costs 13,131 12,485 678 (32) Operating profit 2,731 2,614 257 (140) Interest expense excluding Financial Products 129 129 — — Other income (expense) 32 (14) (19) 65 3 Consolidated profit before taxes 2,634 2,471 238 (75) Provision (benefit) for income taxes 708 648 60 — Profit of consolidated companies 1,926 1,823 178 (75) Equity in profit (loss) of unconsolidated affiliated companies 16 19 — (3) 4 Profit of consolidated and affiliated companies 1,942 1,842 178 (78) Less: Profit (loss) attributable to noncontrolling interests (1) — 2 (3) 5 Profit 6 $ 1,943 $ 1,842 $ 176 $ (75) 1 Elimination of Financial Products’ revenues earned from ME&T. 2 Elimination of net expenses recorded by ME&T paid to Financial Products. 3 Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T. 4 Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries. 5 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 6 Profit attributable to common shareholders. 57 Table of Contents Caterpillar Inc. Supplemental Data for Financial Position At March 31, 2024 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Assets Current assets: Cash and cash equivalents $ 4,959 $ 3,963 $ 996 $ — Receivables – trade and other 9,296 3,814 658 4,824 1,2 Receivables – finance 9,446 — 14,509 (5,063) 2 Prepaid expenses and other current assets 3,010 2,665 379 (34) 3 Inventories 16,953 16,953 — — Total current assets 43,664 27,395 16,542 (273) Property, plant and equipment – net 12,538 8,647 3,891 — Long-term receivables – trade and other 1,200 538 57 605 1,2 Long-term receivables – finance 12,531 — 13,191 (660) 2 Noncurrent deferred and refundable income taxes 2,860 3,382 138 (660) 4 Intangible assets 516 516 — — Goodwill 5,277 5,277 — — Other assets 5,155 4,081 2,117 (1,043) 5 Total assets $ 83,741 $ 49,836 $ 35,936 $ (2,031) Liabilities Current liabilities: Short-term borrowings $ 3,568 $ — $ 3,568 $ — Accounts payable 7,778 7,699 337 (258) 6,7 Accrued expenses 4,821 4,287 534 — Accrued wages, salaries and employee benefits 1,291 1,262 29 — Customer advances 2,194 2,173 2 19 7 Other current liabilities 3,265 2,601 725 (61) 4,8 Long-term debt due within one year 9,454 1,045 8,409 — Total current liabilities 32,371 19,067 13,604 (300) Long-term debt due after one year 24,831 8,594 16,292 (55) 9 Liability for postemployment benefits 4,068 4,068 — — Other liabilities 4,826 3,979 1,553 (706) 4 Total liabilities 66,096 35,708 31,449 (1,061) Commitments and contingencies Shareholders’ equity Common stock 5,663 5,663 905 (905) 10 Treasury stock (40,039) (40,039) — — Profit employed in the business 54,108 49,422 4,674 12 10 Accumulated other comprehensive income (loss) (2,093) (926) (1,167) — Noncontrolling interests 6 8 75 (77) 10 Total shareholders’ equity 17,645 14,128 4,487 (970) Total liabilities and shareholders’ equity $ 83,741 $ 49,836 $ 35,936 $ (2,031) 1 Elimination of receivables between ME&T and Financial Products. 2 Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables. 3 Elimination of ME&T’s insurance premiums that are prepaid to Financial Products. 4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction. 5 Elimination of other intercompany assets between ME&T and Financial Products. 6 Elimination of payables between ME&T and Financial Products. 7 Reclassification of Financial Products' payables to accrued expenses or customer advances. 8 Elimination of prepaid insurance in Financial Products’ other liabilities. 9 Elimination of debt between ME&T and Financial Products. 10 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries. 58 Table of Contents Caterpillar Inc. Supplemental Data for Financial Position At December 31, 2023 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Assets Current assets: Cash and cash equivalents $ 6,978 $ 6,106 $ 872 $ — Receivables – trade and other 9,310 3,971 570 4,769 1,2 Receivables – finance 9,510 — 14,499 (4,989) 2 Prepaid expenses and other current assets 4,586 4,327 341 (82) 3 Inventories 16,565 16,565 — — Total current assets 46,949 30,969 16,282 (302) Property, plant and equipment – net 12,680 8,694 3,986 — Long-term receivables – trade and other 1,238 565 85 588 1,2 Long-term receivables – finance 12,664 — 13,299 (635) 2 Noncurrent deferred and refundable income taxes 2,816 3,360 148 (692) 4 Intangible assets 564 564 — — Goodwill 5,308 5,308 — — Other assets 5,257 4,218 2,082 (1,043) 5 Total assets $ 87,476 $ 53,678 $ 35,882 $ (2,084) Liabilities Current liabilities: Short-term borrowings $ 4,643 $ — $ 4,643 $ — Accounts payable 7,906 7,827 314 (235) 6,7 Accrued expenses 4,958 4,361 597 — Accrued wages, salaries and employee benefits 2,757 2,696 61 — Customer advances 1,929 1,912 2 15 7 Dividends payable 649 649 — — Other current liabilities 3,123 2,583 647 (107) 4,8 Long-term debt due within one year 8,763 1,044 7,719 — Total current liabilities 34,728 21,072 13,983 (327) Long-term debt due after one year 24,472 8,626 15,893 (47) 9 Liability for postemployment benefits 4,098 4,098 — — Other liabilities 4,675 3,806 1,607 (738) 4 Total liabilities 67,973 37,602 31,483 (1,112) Commitments and contingencies Shareholders’ equity Common stock 6,403 6,403 905 (905) 10 Treasury stock (36,339) (36,339) — — Profit employed in the business 51,250 46,783 4,457 10 10 Accumulated other comprehensive income (loss) (1,820) (783) (1,037) — Noncontrolling interests 9 12 74 (77) 10 Total shareholders’ equity 19,503 16,076 4,399 (972) Total liabilities and shareholders’ equity $ 87,476 $ 53,678 $ 35,882 $ (2,084) 1 Elimination of receivables between ME&T and Financial Products. 2 Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables. 3 Elimination of ME&T’s insurance premiums that are prepaid to Financial Products. 4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction. 5 Elimination of other intercompany assets between ME&T and Financial Products. 6 Elimination of payables between ME&T and Financial Products. 7 Reclassification of Financial Products' payables to accrued expenses or customer advances. 8 Elimination of prepaid insurance in Financial Products' other liabilities. 9 Elimination of debt between ME&T and Financial Products. 10 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries. 59 Table of Contents Caterpillar Inc. Supplemental Data for Cash Flow For the Three Months Ended March 31, 2024 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Cash flow from operating activities: Profit of consolidated and affiliated companies $ 2,854 $ 2,636 $ 218 $ — Adjustments to reconcile profit to net cash provided by operating activities: Depreciation and amortization 524 328 196 — Provision (benefit) for deferred income taxes (54) (23) (31) — (Gain) loss on divestiture (64) (64) — — Other (5) (16) (120) 131 1 Changes in assets and liabilities, net of acquisitions and divestitures: Receivables – trade and other (81) 111 (40) (152) 1,2 Inventories (439) (434) — (5) 1 Accounts payable 203 179 30 (6) 1 Accrued expenses (38) (47) 9 — Accrued wages, salaries and employee benefits (1,454) (1,422) (32) — Customer advances 279 279 — — Other assets – net 60 102 3 (45) 1 Other liabilities – net 267 142 75 50 1 Net cash provided by (used for) operating activities 2,052 1,771 308 (27) Cash flow from investing activities: Capital expenditures – excluding equipment leased to others (500) (493) (8) 1 1 Expenditures for equipment leased to others (236) (9) (233) 6 1 Proceeds from disposals of leased assets and property, plant and equipment 155 5 152 (2) 1 Additions to finance receivables (3,256) — (3,573) 317 2 Collections of finance receivables 3,140 — 3,572 (432) 2 Net intercompany purchased receivables — — (137) 137 2 Proceeds from sale of finance receivables 13 — 13 — Net intercompany borrowings — — 3 (3) 3 Proceeds from sale of businesses and investments (net of cash sold) 42 42 — — Proceeds from maturities and sale of securities 1,867 1,797 70 — Investments in securities (275) (148) (127) — Other – net 8 31 (23) — Net cash provided by (used for) investing activities 958 1,225 (291) 24 Cash flow from financing activities: Dividends paid (648) (648) — — Common stock issued, including treasury shares reissued (8) (8) — — Common shares repurchased (4,455) (4,455) — — Net intercompany borrowings — (3) — 3 3 Proceeds from debt issued (original maturities greater than three months) 2,731 — 2,731 — Payments on debt (original maturities greater than three months) (1,570) (6) (1,564) — Short-term borrowings – net (original maturities three months or less) (1,050) — (1,050) — Net cash provided by (used for) financing activities (5,000) (5,120) 117 3 Effect of exchange rate changes on cash (30) (20) (10) — Increase (decrease) in cash, cash equivalents and restricted cash (2,020) (2,144) 124 — Cash, cash equivalents and restricted cash at beginning of period 6,985 6,111 874 — Cash, cash equivalents and restricted cash at end of period $ 4,965 $ 3,967 $ 998 $ — 1 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting. 2 Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory. 3 Elimination of net proceeds and payments to/from ME&T and Financial Products. 60 Table of Contents Caterpillar Inc. Supplemental Data for Cash Flow For the Three Months Ended March 31, 2023 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Cash flow from operating activities: Profit of consolidated and affiliated companies $ 1,942 $ 1,842 $ 178 $ (78) 1,5 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation and amortization 532 342 190 — Provision (benefit) for deferred income taxes (191) (169) (22) — (Gain) loss on divestiture 572 572 — — Other 117 124 (143) 136 2 Changes in assets and liabilities, net of acquisitions and divestitures: Receivables – trade and other (329) 205 14 (548) 2,3 Inventories (1,403) (1,402) — (1) 2 Accounts payable 477 465 34 (22) 2 Accrued expenses 38 6 32 — Accrued wages, salaries and employee benefits (950) (928) (22) — Customer advances 365 365 — — Other assets – net 107 223 4 (120) 2 Other liabilities – net 296 134 37 125 2 Net cash provided by (used for) operating activities 1,573 1,779 302 (508) Cash flow from investing activities: Capital expenditures – excluding equipment leased to others (422) (414) (9) 1 2 Expenditures for equipment leased to others (328) — (330) 2 2 Proceeds from disposals of leased assets and property, plant and equipment 184 7 179 (2) 2 Additions to finance receivables (3,020) — (3,462) 442 3 Collections of finance receivables 3,169 — 3,437 (268) 3 Net intercompany purchased receivables — — (258) 258 3 Proceeds from sale of finance receivables 24 — 24 — Net intercompany borrowings — — 2 (2) 4 Investments and acquisitions (net of cash acquired) (5) (5) — — Proceeds from sale of businesses and investments (net of cash sold) (14) (14) — — Proceeds from sale of securities 239 162 77 — Investments in securities (536) (433) (103) — Other – net 26 27 (1) — Net cash provided by (used for) investing activities (683) (670) (444) 431 Cash flow from financing activities: Dividends paid (620) (620) (75) 75 5 Common stock issued, including treasury shares reissued (25) (25) — — Common shares repurchased (400) (400) — — Net intercompany borrowings — (2) — 2 4 Proceeds from debt issued (original maturities greater than three months) 1,517 — 1,517 — Payments on debt (original maturities greater than three months) (1,475) (90) (1,385) — Short-term borrowings – net (original maturities three months or less) (103) (3) (100) — Net cash provided by (used for) financing activities (1,106) (1,140) (43) 77 Effect of exchange rate changes on cash (1) 4 (5) — Increase (decrease) in cash, cash equivalents and restricted cash (217) (27) (190) — Cash, cash equivalents and restricted cash at beginning of period 7,013 6,049 964 — Cash, cash equivalents and restricted cash at end of period $ 6,796 $ 6,022 $ 774 $ — 1 Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries. 2 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting. 3 Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory. 4 Elimination of net proceeds and payments to/from ME&T and Financial Products. 5 Elimination of dividend activity between Financial Products and ME&T. 61 Table of Contents Forward-looking Statements Certain statements in this Form 10-Q relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “forecast,” “target,” “guide,” “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 speak only as of the date they are made, and we do not undertake to update our forward-looking statements. Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers’ needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment’s risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xviii) currency fluctuations; (xix) our or Cat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) catastrophic events, including global pandemics such as the COVID-19 pandemic; and (xxvii) other factors described in more detail under the section entitled "Part I - Item 1A. Risk Factors" of Caterpillar's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as such factors may be updated from time to time in Caterpillar's periodic filings with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures About Market Risk The information required by this Item is incorporated by reference from Note 5 – “Derivative financial instruments and risk management” included in Part I, Item 1 and Management’s Discussion and Analysis included in Part I, Item 2 of this Form 10-Q.