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 second quarter of 2024 include: • Total sales and revenues for the second quarter of 2024 were $16.689 billion, a decrease of $629 million, or 4 percent, compared with $17.318 billion in the second quarter of 2023. In the three primary segments, sales were lower in Construction Industries and Resource Industries and higher in Energy & Transportation . • Operating profit margin was 20.9 percent for the second quarter of 2024, compared with 21.1 percent for the second quarter of 2023. Adjusted operating profit margin was 22.4 percent for the second quarter of 2024, compared with 21.3 percent for the second quarter of 2023. • Second-quarter 2024 profit per share was $5.48, and excluding the items in the table below, adjusted profit per share was $5.99. Second-quarter 2023 profit per share was $5.67, and excluding the items in the table below, adjusted profit per share was $5.55. • Caterpillar ended the second quarter of 2024 with $4.3 billion of enterprise cash. Highlights for the six months ended June 30, 2024 include: • Total sales and revenues were $32.488 billion for the six months ended June 30, 2024, a decrease of $692 million, or 2 percent, compared with $33.180 billion for the six months ended June 30, 2023. • Operating profit margin was 21.5 percent for the six months ended June 30, 2024, compared with 19.2 percent for the six months ended June 30, 2023. Adjusted operating profit margin was 22.3 percent for the six months ended June 30, 2024, compared with 21.2 percent for the six months ended June 30, 2023. • Profit per share for the six months ended June 30, 2024, was $11.23, and excluding the items in the table below, adjusted profit per share was $11.59. Profit per share for the six months ended June 30, 2023, was $9.41, and excluding the items in the table below, adjusted profit per share was $10.46. • Enterprise operating cash flow was $5.1 billion for the six months ended June 30, 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 66-67. Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 (Dollars in millions except per share data) Profit Before Taxes Profit Per Share Profit Before Taxes Profit Per Share Profit Before Taxes Profit Per Share Profit Before Taxes Profit Per Share Profit $ 3,500 $ 5.48 $ 3,652 $ 5.67 $ 7,032 $ 11.23 $ 6,286 $ 9.41 Restructuring (income) costs - divestitures of certain non-U.S. entities 228 0.47 — — 164 0.22 — — Other restructuring (income) costs 30 0.04 31 0.05 88 0.14 56 0.09 Restructuring costs - Longwall divestiture — — — — — — 586 1.13 Deferred tax valuation allowance adjustments — — — (0.17) — — — (0.17) Adjusted profit $ 3,758 $ 5.99 $ 3,683 $ 5.55 $ 7,284 $ 11.59 $ 6,928 $ 10.46 Overview Total sales and revenues for the second quarter of 2024 were $16.689 billion, a decrease of $629 million, or 4 percent, compared with $17.318 billion in the second quarter of 2023. The decrease was primarily due to lower sales volume , partially offset by favorable price realization . The decrease in sales volume was mainly driven by the impact from changes in dealer inventories . Dealer inventory decreased during the second quarter of 2024, compared with an increase during the second quarter of 2023. Second-quarter 2024 profit per share was $5.48, compared with $5.67 profit per share in the second quarter of 2023. In the second quarter of 2024 and 2023, profit per share included restructuring costs. Second-quarter 2023 profit per share also included a discrete tax benefit to adjust deferred tax balances. Profit for the second quarter of 2024 was $2.681 billion, a decrease of $241 million, or 8 percent, compared with $2.922 billion for the second quarter of 2023. Favorable price realization 46 Table of Contents was more than offset by the profit impact of lower sales volume, higher restructuring costs and higher selling, general and administrative (SG&A) and research and development (R&D) expenses. Trends and Economic Conditions Outlook for Key End Markets In Construction Industries, sales of equipment to end users in the second half of 2024 are expected to decline slightly as compared to the second half of 2023. In North America, for 2024, we anticipate lower rental fleet loading. Government-related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we continue to expect soft economic conditions. We anticipate demand in China will remain at a relatively low level in the excavator industry above 10-tons. In EAME , we anticipate that weak economic conditions in Europe will continue, partially offset by continued healthy 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, for both mining and heavy construction and quarry and aggregates, we continue to anticipate lower sales volume in 2024 compared to strong 2023 performance, primarily in off-highway and articulated trucks. We anticipate a decrease in dealer inventory in 2024, as compared to a slight increase in 2023. We expect higher services revenues, including robust rebuild activity in 2024. 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. Customers continue to display capital discipline, however, 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. For Energy & Transportation, in Oil & Gas in total, we expect a stronger year overall in 2024 as compared to 2023. We expect reciprocating engines for Oil & Gas to be about flat to slightly down in 2024 after strong 2023 performance, primarily due to ongoing softness in well servicing. We expect gas compression to be up in 2024 as compared to 2023, but expect it to soften in the second half of 2024 as compared to the second half of 2023. For Solar Turbines, we continue to expect sales volume to increase in the second half of 2024 as compared to the second half of 2023, as backlog remains strong for Oil & Gas. For Power Generation, reciprocating engine and Solar Turbines demand is expected to remain strong, largely due to continued data center growth relating to cloud computing and generative artificial intelligence (AI). Industrial demand is expected to remain at a relatively low level in the second half of 2024 compared to the second half of 2023. In Transportation, we anticipate growth as the year progresses in both high-speed marine and rail services. Full-Year 2024 Company Trends and Expectations For the full-year 2024, we anticipate slightly lower sales and revenues as compared to 2023. We anticipate a slight decrease in machine dealer inventories during 2024, mostly driven by Resource Industries, compared to an increase in 2023. In 2024, we expect restructuring costs to be around $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-Half 2024 Company Trends and Expectations We expect sales and revenues in the second half of 2024 to be slightly higher than the first half of 2024, following a normal seasonal trend. We expect sales and revenues in the second half of 2024 to be slightly lower than the second half of 2023, due to lower sales volume driven by lower sales of equipment to end users for machines. Changes in machine dealer inventories are expected to have a nominal impact on second-half 2024 sales and revenues as compared to the second half of 2023. We expect the decrease in machine dealer inventory in the second half of 2024 to be similar to the decrease in the second half of 2023 which was about $1.0 billion. We anticipate the decline in second-half 2024 sales and revenues compared to second-half 2023 will be roughly similar to the decline in the first half of 2024 compared to the first half of 2023. Services revenues grew in the second quarter of 2024, and we expect growth in the second half of 2024 compared to the second half of 2023. As compared to the second half of 2023, we expect favorable manufacturing costs in the second half of 2024. We also expect an unfavorable profit impact from lower sales volume and unfavorable price realization in the second half of 2024 compared to the second half of 2023. We anticipate the benefit from price realization in the second half of 2024 will be significantly lower as we lap favorable price trends from 2023 along with a normalizing price environment. Third-Quarter 2024 Company Trends and Expectations In the third quarter of 2024, we expect slightly lower sales and revenues as compared to the third quarter of 2023. We anticipate lower sales volume driven by an unfavorable impact from changes in machine dealer inventories and lower sales of equipment to end users of machines. Machine dealer inventory is expected to be about flat or slightly down during the third quarter of 2024 compared to a $0.4 billion increase during the third quarter of 2023. We expect price realization in the third quarter of 47 Table of Contents 2024 to be about flat compared to the third quarter of 2023. We also anticipate services revenues growth in the third quarter of 2024 compared to the third quarter of 2023. As compared to the third quarter of 2023, we expect lower Construction Industries' sales in the third quarter of 2024 due to the impact from changes in dealer inventories. Resource Industries' sales are expected to be lower driven by lower sales of equipment to end users. In Energy & Transportation, we expect sales to be higher driven by strength in Power Generation, Oil & Gas and Transportation, partially offset by lower sales in Industrial. We expect an unfavorable profit impact from lower sales volume to be offset by favorable manufacturing costs in the third quarter of 2024 as compared to the third quarter of 2023. Within Construction Industries, we expect an unfavorable profit impact from lower sales volume and slightly unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate an unfavorable profit impact from lower sales volume and higher SG&A/R&D expenses. In Energy & Transportation, we expect a favorable profit impact from higher sales volume and favorable price realization. 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 60-62; first occurrence of terms shown in bold italics. • Information on non-GAAP financial measures is included on pages 66-67. • Certain amounts may not add due to rounding. 48 Table of Contents Consolidated Results of Operations THREE MONTHS ENDED JUNE 30, 2024 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2023 CONSOLIDATED SALES AND REVENUES The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the second quarter of 2023 (at left) and the second 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 second quarter of 2024 were $16.689 billion, a decrease of $629 million, or 4 percent, compared with $17.318 billion in the second quarter of 2023. The decrease was primarily due to lower sales volume of $1.206 billion, partially offset by favorable price realization of $578 million. The decrease in sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased during the second quarter of 2024, compared with an increase during the second quarter of 2023. In the three primary segments, sales were lower in Construction Industries and Resource Industries and higher in Energy & Transportation. North America sales increased 1 percent primarily due to favorable price realization, partially offset by lower sales volume. The decrease in sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory increased less during the second quarter of 2024 than during the second quarter of 2023. Sales increased 5 percent in Latin America mainly due to higher sales volume and favorable price realization. The increase in sales volume was primarily driven by higher services sales volume. EAME sales decreased 16 percent primarily due to lower sales volume. The decrease in sales volume was primarily driven by the impact from changes in dealer inventories. Dealer inventory decreased during the second quarter of 2024, compared with an increase during the second quarter of 2023. Asia/Pacific sales decreased 9 percent mainly due to lower sales volume. The decrease in sales volume was primarily driven by lower sales of equipment to end users. Total dealer inventory decreased $200 million during the second quarter of 2024, compared with an increase of $600 million during the second 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. 49 Table of Contents Sales and Revenues by Segment (Millions of dollars) Second Quarter 2023 Sales Volume Price Realization Currency Inter-Segment / Other Second Quarter 2024 $ Change % Change Construction Industries $ 7,154 $ (588) $ 178 $ (55) $ (6) $ 6,683 $ (471) (7 %) Resource Industries 3,563 (475) 133 (9) (6) 3,206 (357) (10 %) Energy & Transportation 7,219 (129) 264 (12) (5) 7,337 118 2 % All Other Segment 116 (7) 3 (1) (3) 108 (8) (7 %) Corporate Items and Eliminations (1,507) (7) — — 20 (1,494) 13 Machinery, Energy & Transportation Sales 16,545 (1,206) 578 (77) — 15,840 (705) (4 %) Financial Products Segment 923 — — — 81 1,004 81 9 % Corporate Items and Eliminations (150) — — — (5) (155) (5) Financial Products Revenues 773 — — — 76 849 76 10 % Consolidated Sales and Revenues $ 17,318 $ (1,206) $ 578 $ (77) $ 76 $ 16,689 $ (629) (4 %) 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 Second Quarter 2024 Construction Industries $ 3,957 — % $ 677 20 % $ 1,047 (27 %) $ 975 (15 %) $ 6,656 (7 %) $ 27 (18 %) $ 6,683 (7 %) Resource Industries 1,206 (10 %) 524 (3 %) 442 (15 %) 950 (12 %) 3,122 (10 %) 84 (7 %) 3,206 (10 %) Energy & Transportation 3,308 6 % 439 (4 %) 1,421 (4 %) 912 1 % 6,080 2 % 1,257 — % 7,337 2 % All Other Segment 13 (19 %) — — % 4 — % 12 (14 %) 29 (15 %) 79 (4 %) 108 (7 %) Corporate Items and Eliminations (20) (1) (21) (5) (47) (1,447) (1,494) Machinery, Energy & Transportation Sales 8,464 1 % 1,639 5 % 2,893 (16 %) 2,844 (9 %) 15,840 (4 %) — — % 15,840 (4 %) Financial Products Segment 668 13 % 101 (1 %) 124 5 % 111 1 % 1,004 1 9 % — — % 1,004 9 % Corporate Items and Eliminations (89) (21) (20) (25) (155) — (155) Financial Products Revenues 579 14 % 80 (1 %) 104 7 % 86 (1 %) 849 10 % — — % 849 10 % Consolidated Sales and Revenues $ 9,043 1 % $ 1,719 5 % $ 2,997 (15 %) $ 2,930 (9 %) $ 16,689 (4 %) $ — — % $ 16,689 (4 %) Second Quarter 2023 Construction Industries $ 3,968 $ 566 $ 1,438 $ 1,149 $ 7,121 $ 33 $ 7,154 Resource Industries 1,342 538 517 1,076 3,473 90 3,563 Energy & Transportation 3,120 459 1,479 899 5,957 1,262 7,219 All Other Segment 16 — 4 14 34 82 116 Corporate Items and Eliminations (32) (2) (2) (4) (40) (1,467) (1,507) Machinery, Energy & Transportation Sales 8,414 1,561 3,436 3,134 16,545 — 16,545 Financial Products Segment 593 102 118 110 923 1 — 923 Corporate Items and Eliminations (85) (21) (21) (23) (150) — (150) Financial Products Revenues 508 81 97 87 773 — 773 Consolidated Sales and Revenues $ 8,922 $ 1,642 $ 3,533 $ 3,221 $ 17,318 $ — $ 17,318 1 Includes revenues from Machinery, Energy & Transportation o f $180 m illion and $172 million in the second quarter of 2024 and 2023, respectively. 50 Table of Contents CONSOLIDATED OPERATING PROFIT The chart above graphically illustrates reasons for the change in consolidated operating profit between the second quarter of 2023 (at left) and the second 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 second quarter of 2024 was $3.482 billion, a decrease of $170 million, or 5 percent, compared with $3.652 billion in the second quarter of 2023. Favorable price realization of $578 million was more than offset by the profit impact of lower sales volume of $431 million, higher restructuring costs of $227 million and higher SG&A/R&D expenses of $79 million. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives. In the second quarter of 2024, restructuring costs increased primarily due to the divestiture of two non-U.S. entities. Operating profit margin was 20.9 percent for the second quarter of 2024, compared with 21.1 percent for the second quarter of 2023. Profit (Loss) by Segment (Millions of dollars) Second Quarter 2024 Second Quarter 2023 $ Change % Change Construction Industries $ 1,741 $ 1,803 $ (62) (3 %) Resource Industries 718 740 (22) (3 %) Energy & Transportation 1,525 1,269 256 20 % All Other Segment 21 10 11 110 % Corporate Items and Eliminations (344) (272) (72) Machinery, Energy & Transportation 3,661 3,550 111 3 % Financial Products Segment 227 240 (13) (5 %) Corporate Items and Eliminations (243) 17 (260) Financial Products (16) 257 (273) (106 %) Consolidating Adjustments (163) (155) (8) Consolidated Operating Profit $ 3,482 $ 3,652 $ (170) (5 %) 51 Table of Contents Other Profit/Loss and Tax Items ▪ Interest expense excluding Financial Products in the second quarter of 2024 was $137 million, compared with $127 million in the second quarter of 2023. The increase was due to higher average borrowing rates. ▪ Other income (expense) in the second quarter of 2024 was income of $155 million, compared with income of $127 million in the second quarter of 2023. The change was primarily driven by favorable impacts from commodity hedges. ▪ The effective tax rate for the second quarter of 2024 was 23.9 percent compared to 20.6 percent for the second quarter of 2023. Excluding the discrete items discussed below, the second quarter 2024 estimated annual tax rate was 22.5 percent compared with 23.0 percent for the second quarter of 2023. The 2024 estimated annual tax rate excludes the impact of second-quarter losses of $228 million for the divestiture of two non-U.S. entities with no related tax benefit. In addition, a discrete tax benefit of $4 million was recorded in the second quarter of 2024 for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. In the second quarter of 2023, the company recorded a discrete tax benefit of $88 million due to a change in the valuation allowance for certain deferred tax assets. Please see a reconciliation of GAAP to non-GAAP financial measures on pages 66-67. Construction Industries Construction Industries’ total sales were $6.683 billion in the second quarter of 2024, a decrease of $471 million, or 7 percent, compared with $7.154 billion in the second quarter of 2023. The decrease was primarily due to lower sales volume of $588 million, partially offset by favorable price realization of $178 million. The decrease in sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory remained about flat during the second quarter of 2024, compared to an increase during the second quarter of 2023. ▪ Sales in North America were about flat. Lower sales volume was offset by favorable price realization. Lower sales volume was mainly driven by lower sales of equipment to end users. ▪ Sales increased in Latin America mainly due to higher sales volume. Higher sales volume was primarily driven by the impact from changes in dealer inventories. Dealer inventory increased during the second quarter of 2024, compared with a decrease during the second quarter of 2023. ▪ In EAME, sales decreased primarily due to lower sales volume. Lower sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased during the second quarter of 2024, compared with an increase during the second quarter of 2023. ▪ Sales decreased in Asia/Pacific mainly due to lower sales volume and unfavorable currency impacts primarily related to the Japanese yen. Lower sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased during the second quarter of 2024, compared with an increase during the second quarter of 2023. Construction Industries’ segment profit was $1.741 billion in the second quarter of 2024, a decrease of $62 million, or 3 percent, compared with $1.803 billion in the second quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume of $288 million and higher SG&A/R&D expenses of $30 million, partially offset by favorable price realization of $178 million, favorable manufacturing costs of $62 million and favorable other segment items of $16 million. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives. Favorable manufacturing costs largely reflected lower material costs. Favorable other segment items primarily consisted of favorable currency impacts. Construction Industries’ segment profit as a percent of total sales was 26.1 percent in the second quarter of 2024, compared with 25.2 percent in the second quarter of 2023. 52 Table of Contents Resource Industries Resource Industries’ total sales were $3.206 billion in the second quarter of 2024, a decrease of $357 million, or 10 percent, compared with $3.563 billion in the second quarter of 2023. The decrease was primarily due to lower sales volume of $475 million, partially offset by favorable price realization of $133 million. The decrease in sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more during the second quarter of 2024 than during the second quarter of 2023. Resource Industries’ segment profit was $718 million in the second quarter of 2024, a decrease of $22 million, or 3 percent, compared with $740 million in the second quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume of $169 million, unfavorable other segment items of $16 million and higher SG&A/R&D expenses of $14 million, partially offset by favorable price realization of $133 million and favorable manufacturing costs of $44 million. Unfavorable other segment items primarily consisted of unfavorable currency impacts. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives. Favorable manufacturing costs largely reflected lower freight. Resource Industries’ segment profit as a percent of total sales was 22.4 percent in the second quarter of 2024, compared with 20.8 percent in the second quarter of 2023. Energy & Transportation Sales by Application (Millions of dollars) Second Quarter 2024 Second Quarter 2023 $ Change % Change Oil and Gas $ 1,829 $ 1,760 $ 69 4 % Power Generation 1,885 1,645 240 15 % Industrial 1,045 1,318 (273) (21 %) Transportation 1,321 1,234 87 7 % External Sales 6,080 5,957 123 2 % Inter-segment 1,257 1,262 (5) — % Total Sales $ 7,337 $ 7,219 $ 118 2 % Energy & Transportation’s total sales were $7.337 billion in the second quarter of 2024, an increase of $118 million, or 2 percent, compared with $7.219 billion in the second quarter of 2023. Sales increased across all applications except Industrial. The increase in sales was primarily due to favorable price realization of $264 million, partially offset by lower sales volume of $129 million. ▪ Oil and Gas – Sales increased for turbines and turbine-related services. ▪ Power Generation – Sales increased in large reciprocating engines, primarily data center applications. Turbines and turbine-related services increased as well. ▪ Industrial – Sales decreased in EAME and North America. ▪ Transportation – Sales increased in rail services and marine. Energy & Transportation’s segment profit was $1.525 billion in the second quarter of 2024, an increase of $256 million, or 20 percent, compared with $1.269 billion in the second quarter of 2023. The increase was mainly due to favorable price realization of $264 million. Energy & Transportation’s segment profit as a percent of total sales was 20.8 percent in the second quarter of 2024, compared with 17.6 percent in the second quarter of 2023. 53 Table of Contents Financial Products Segment Financial Products’ segment revenues were $1.004 billion in the second quarter of 2024, an increase of $81 million, or 9 percent, compared with $923 million in the second quarter of 2023. The increase was primarily due to a favorable impact from higher average financing rates across all regions of $50 million and a favorable impact from higher average earning assets driven by North America of $32 million. Financial Products’ segment profit was $227 million in the second quarter of 2024, a decrease of $13 million, or 5 percent, compared with $240 million in the second quarter of 2023. The decrease was mainly due to higher provision for credit losses at Cat Financial of $27 million and an increase in SG&A expenses of $15 million, partially offset by the absence of prior year unfavorable currency impacts of $14 million and a favorable impact from higher average earning assets of $12 million. At the end of the second quarter of 2024, past dues at Cat Financial were 1.74 percent, compared with 2.15 percent at the end of the second quarter of 2023. Write-offs, net of recoveries, were $18 million for the second quarter of 2024, compared with $8 million for the second quarter of 2023. As of June 30, 2024, Cat Financial's allowance for credit losses totaled $254 million, or 0.89 percent of finance receivables, compared with $281 million, or 1.01 percent of finance receivables at March 31, 2024. The allowance for credit losses at year-end 2023 was $331 million, or 1.18 percent of finance receivables. Corporate Items and Eliminations Expense for corporate items and eliminations was $587 million in the second quarter of 2024, an increase of $332 million from the second quarter of 2023, primarily driven by higher restructuring costs and higher corporate costs. In the second quarter of 2024, restructuring costs increased primarily due to the divestiture of two non-U.S. entities. 54 Table of Contents SIX MONTHS ENDED JUNE 30, 2024 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2023 CONSOLIDATED SALES AND REVENUES The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the six months ended June 30, 2023 (at left) and the six months ended June 30, 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 were $32.488 billion for the six months ended June 30, 2024, a decrease of $692 million, or 2 percent, compared with $33.180 billion for the six months ended June 30, 2023. The decrease was primarily due to lower sales volume of $1.890 billion, partially offset by favorable price realization of $1.153 billion. The decrease in sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory increased less during the six months ended June 30, 2024, than during the six months ended June 30, 2023. In the three primary segments, sales were lower in Construction Industries and Resource Industries and higher in Energy & Transportation. North America sales increased 4 percent primarily due to favorable price realization. Sales increased 3 percent in Latin America mainly due to higher sales volume and favorable currency impacts primarily related to the Brazilian real. 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 mainly due to lower sales of equipment to end users. Asia/Pacific sales decreased 7 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 decreased during the six months ended June 30, 2024, compared with an increase during the six months ended June 30, 2023. Dealer inventory increased about $1.2 billion during the six months ended June 30, 2024, compared with an increase of about $2.2 billion during the six months ended June 30, 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. 55 Table of Contents Sales and Revenues by Segment (Millions of dollars) Six Months Ended June 30, 2023 Sales Volume Price Realization Currency Inter-Segment / Other Six Months Ended June 30, 2024 $ Change % Change Construction Industries $ 13,900 $ (1,052) $ 377 $ (77) $ (41) $ 13,107 $ (793) (6 %) Resource Industries 6,990 (900) 306 (20) 23 6,399 (591) (8 %) Energy & Transportation 13,473 102 466 (13) (10) 14,018 545 4 % All Other Segment 227 (8) 3 (1) (4) 217 (10) (4 %) Corporate Items and Eliminations (2,946) (32) 1 4 32 (2,941) 5 Machinery, Energy & Transportation Sales 31,644 (1,890) 1,153 (107) — 30,800 (844) (3 %) Financial Products Segment 1,825 — — — 170 1,995 170 9 % Corporate Items and Eliminations (289) — — — (18) (307) (18) Financial Products Revenues 1,536 — — — 152 1,688 152 10 % Consolidated Sales and Revenues $ 33,180 $ (1,890) $ 1,153 $ (107) $ 152 $ 32,488 $ (692) (2 %) 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 Six Months Ended June 30, 2024 Construction Industries $ 7,790 3 % $ 1,272 9 % $ 2,043 (26 %) $ 1,968 (15 %) $ 13,073 (5 %) $ 34 (55 %) $ 13,107 (6 %) Resource Industries 2,470 (7 %) 1,000 (1 %) 907 (19 %) 1,841 (10 %) 6,218 (9 %) 181 15 % 6,399 (8 %) Energy & Transportation 6,259 10 % 847 1 % 2,715 (5 %) 1,746 8 % 11,567 5 % 2,451 — % 14,018 4 % All Other Segment 31 (9 %) (1) — % 8 — % 25 (7 %) 63 (9 %) 154 (3 %) 217 (4 %) Corporate Items and Eliminations (78) (3) (32) (8) (121) (2,820) (2,941) Machinery, Energy & Transportation Sales 16,472 4 % 3,115 3 % 5,641 (17 %) 5,572 (7 %) 30,800 (3 %) — — % 30,800 (3 %) Financial Products Segment 1,327 14 % 202 (2 %) 247 6 % 219 — % 1,995 1 9 % — — % 1,995 9 % Corporate Items and Eliminations (183) (39) (39) (46) (307) — (307) Financial Products Revenues 1,144 14 % 163 (2 %) 208 8 % 173 (2 %) 1,688 10 % — — % 1,688 10 % Consolidated Sales and Revenues $ 17,616 4 % $ 3,278 3 % $ 5,849 (16 %) $ 5,745 (7 %) $ 32,488 (2 %) $ — — % $ 32,488 (2 %) Six Months Ended June 30, 2023 Construction Industries $ 7,576 $ 1,165 $ 2,774 $ 2,310 $ 13,825 $ 75 $ 13,900 Resource Industries 2,650 1,012 1,116 2,054 6,832 158 6,990 Energy & Transportation 5,692 839 2,863 1,618 11,012 2,461 13,473 All Other Segment 34 — 8 27 69 158 227 Corporate Items and Eliminations (80) (2) (3) (9) (94) (2,852) (2,946) Machinery, Energy & Transportation Sales 15,872 3,014 6,758 6,000 31,644 — 31,644 Financial Products Segment 1,168 206 232 219 1,825 1 — 1,825 Corporate Items and Eliminations (168) (39) (39) (43) (289) — (289) Financial Products Revenues 1,000 167 193 176 1,536 — 1,536 Consolidated Sales and Revenues $ 16,872 $ 3,181 $ 6,951 $ 6,176 $ 33,180 $ — $ 33,180 1 Includes revenues from Machinery, Energy & Transportation of $357 million and $334 million in the six months ended June 30, 2024 and 2023, respectively. 56 Table of Contents CONSOLIDATED OPERATING PROFIT The chart above graphically illustrates reasons for the change in consolidated operating profit between the six months ended June 30, 2023 (at left) and the six months ended June 30, 2024 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees. The bar titled Longwall Divestiture is included in total restructuring costs. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation’s other operating (income) expenses. Operating profit for the six months ended June 30, 2024, was $7.001 billion, an increase of $618 million, or 10 percent, compared with $6.383 billion for the six months ended June 30, 2023. The increase was primarily due to favorable price realization of $1.153 billion and the absence of the impact of the divestiture of the company's Longwall business in 2023 of $586 million, partially offset by the profit impact of lower sales volume of $699 million, higher SG&A/R&D expenses of $220 million and higher restructuring costs of $196 million. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives. For the six months ended June 30, 2024, restructuring costs increased primarily due to the divestitures of certain non-U.S. entities. Operating profit margin was 21.5 percent for the six months ended June 30, 2024, compared with 19.2 percent for the six months ended June 30, 2023. Profit (Loss) by Segment (Millions of dollars) Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 $ Change % Change Construction Industries $ 3,505 $ 3,593 $ (88) (2 %) Resource Industries 1,448 1,504 (56) (4 %) Energy & Transportation 2,826 2,326 500 21 % All Other Segment 45 21 24 114 % Corporate Items and Eliminations (759) (1,280) 521 Machinery, Energy & Transportation 7,065 6,164 901 15 % Financial Products Segment 520 472 48 10 % Corporate Items and Eliminations (268) 42 (310) Financial Products 252 514 (262) (51 %) Consolidating Adjustments (316) (295) (21) Consolidated Operating Profit $ 7,001 $ 6,383 $ 618 10 % 57 Table of Contents Other Profit/Loss and Tax Items ▪ Interest expense excluding Financial Products for the six months ended June 30, 2024, was $280 million, compared with $256 million for the six months ended June 30, 2023. The increase was due to higher average borrowing rates. ▪ Other income (expense) for the six months ended June 30, 2024, was income of $311 million, compared with income of $159 million for the six months ended June 30, 2023. The change was primarily driven by favorable impacts from foreign currency exchange. ▪ The effective tax rate for the six months ended June 30, 2024 was 21.7 percent compared to 23.2 percent for the six months ended June 30, 2023. Excluding the discrete items discussed below, the estimated annual tax rate for the six months ended June 30, 2024 was 22.5 percent compared with 23.0 percent for the six months ended June 30, 2023. The 2024 estimated annual tax rate excludes the impact of year-to-date losses of $164 million for the divestitures of certain non-U.S. entities with a related tax benefit of $54 million. The 2023 estimated annual tax rate excludes 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 $42 million was recorded in the six months ended June 30, 2024, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense, compared with $32 million for the six months ended June 30, 2023. In the six months ended June 30, 2023, the company recorded a discrete tax benefit of $88 million due to a change in the valuation allowance for certain deferred tax assets. Please see a reconciliation of GAAP to non-GAAP financial measures on pages 66-67. Construction Industries Construction Industries’ total sales were $13.107 billion for the six months ended June 30, 2024, a decrease of $793 million, or 6 percent, compared with $13.900 billion for the six months ended June 30, 2023. The decrease was primarily due to lower sales volume of $1.052 billion, partially offset by favorable price realization of $377 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, partially offset by lower sales volume. Lower sales volume was mainly driven by lower sales of equipment to end users. • Sales increased in Latin America mainly due to higher sales volume, partially offset by unfavorable price realization. Higher sales volume was driven primarily by the impact from changes in dealer inventories. Dealer inventory increased during the six months ended June 30, 2024, compared with a decrease during the six months ended June 30, 2023. • In EAME, sales decreased primarily due to lower sales volume. Lower sales volume was mainly due to lower sales of equipment to end users. • Sales decreased in Asia/Pacific mainly due to lower sales volume and unfavorable currency impacts primarily related to the Japanese yen. Lower sales volume was driven by the impact from changes in dealer inventories. Dealer inventory decreased during the six months ended June 30, 2024, compared with an increase during the six months ended June 30, 2023. Construction Industries’ profit was $3.505 billion for the six months ended June 30, 2024, a decrease of $88 million, or 2 percent, compared with $3.593 billion for the six months ended June 30, 2023. The decrease was mainly due to the profit impact of lower sales volume of $566 million and higher SG&A/R&D expenses of $56 million, partially offset by favorable price realization of $377 million and favorable manufacturing costs of $148 million. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives. Favorable manufacturing costs were primarily driven by lower material costs. Construction Industries’ profit as a percent of total sales was 26.7 percent for the six months ended June 30, 2024, compared with 25.8 percent for the six months ended June 30, 2023. 58 Table of Contents Resource Industries Resource Industries’ total sales were $6.399 billion for the six months ended June 30, 2024, a decrease of $591 million, or 8 percent, compared with $6.990 billion for the six months ended June 30, 2023. The decrease was primarily due to lower sales volume of $900 million, partially offset by favorable price realization of $306 million. The decrease in sales volume was mainly due to lower sales of equipment to end users. Resource Industries’ profit was $1.448 billion for the six months ended June 30, 2024, a decrease of $56 million, or 4 percent, compared with $1.504 billion for the six months ended June 30, 2023. The decrease was mainly due to the profit impact of lower sales volume of $386 million, unfavorable other segment items of $40 million and higher SG&A/R&D expenses of $18 million, partially offset by favorable price realization of $306 million and favorable manufacturing costs of $82 million. Unfavorable other segment items primarily consisted of unfavorable currency impacts. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives. Favorable manufacturing costs largely reflected lower freight. Resource Industries’ profit as a percent of total sales was 22.6 percent for the six months ended June 30, 2024, compared with 21.5 percent for the six months ended June 30, 2023. Energy & Transportation Sales by Application (Millions of dollars) Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 $ Change % Change Oil and Gas $ 3,397 $ 3,074 $ 323 11 % Power Generation 3,503 2,929 574 20 % Industrial 2,034 2,573 (539) (21 %) Transportation 2,633 2,436 197 8 % External Sales 11,567 11,012 555 5 % Inter-Segment 2,451 2,461 (10) — % Total Sales $ 14,018 $ 13,473 $ 545 4 % Energy & Transportation’s total sales were $14.018 billion for the six months ended June 30, 2024, an increase of $545 million, or 4 percent, compared with $13.473 billion for the six months ended June 30, 2023. Sales increased across all applications except Industrial. The increase in sales was primarily due to favorable price realization of $466 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 in EAME and North America. • Transportation – Sales increased in rail services and marine. Energy & Transportation’s profit was $2.826 billion for the six months ended June 30, 2024, an increase of $500 million, or 21 percent, compared with $2.326 billion for the six months ended June 30, 2023. The increase was mainly due to favorable price realization of $466 million. Energy & Transportation’s profit as a percent of total sales was 20.2 percent for the six months ended June 30, 2024, compared with 17.3 percent for the six months ended June 30, 2023. Financial Products Segment Financial Products’ segment revenues were $1.995 billion for the six months ended June 30, 2024, an increase of $170 million, or 9 percent, compared with $1.825 billion for the six months ended June 30, 2023. The increase was primarily due to a favorable impact from higher average financing rates across all regions of $119 million and a favorable impact from higher average earning assets driven by North America of $64 million. Financial Products’ segment profit was $520 million for the six months ended June 30, 2024, an increase of $48 million, or 10 percent, compared with $472 million for the six months ended June 30, 2023. The increase was mainly due to an insurance 59 Table of Contents settlement of $33 million, a favorable impact from higher average earning assets of $28 million and the absence of prior year unfavorable currency impacts of $27 million, partially offset by an increase in SG&A expenses of $34 million. Corporate Items and Eliminations Expense for corporate items and eliminations was $1.027 billion for the six months ended June 30, 2024, a decrease of $211 million from the six months ended June 30, 2023, primarily driven by the absence of the impact of the divestiture of the company's Longwall business in 2023 and decreased expenses due to timing differences, partially offset by unfavorable impacts of segment reporting methodology differences and higher restructuring costs. For the six months ended June 30, 2024, restructuring costs increased primarily due to the divestitures of certain non-U.S. entities. RESTRUCTURING COSTS In 2024, we expect to incur about $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 $35 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 and a discrete tax benefit to adjust deferred tax balances. 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. 60 Table of Contents 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. 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. 61 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 income/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 six months of 2024 and ended the second quarter with $4.34 billion of cash, a decrease of $2.64 billion from year-end 2023. In addition, ME&T invests 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 $1.75 billion as of June 30, 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 six months of 2024 was $5.07 billion, up $251 million compared to the same period a year ago. The increase was primarily due to higher profit before taxes including reconciling adjustments, lower working capital requirements, excluding changes in accrued wages, salaries and benefits, partially offset by changes in accrued wages, salaries and benefits, and higher cash taxes paid. Within working capital, changes in inventory and receivables favorably impacted cash flow as they both increased less in the first six months of 2024 compared to the prior year period, partially offset by unfavorable changes in accrued expenses. Total debt as of June 30, 2024 was $37.31 billion, a decrease of $567 million from year-end 2023. Debt related to ME&T decreased $1.02 billion in the first six months of 2024 while debt related to Financial Products increased $474 million. As of June 30, 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 June 30, 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. 62 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 June 30, 2024, Caterpillar’s consolidated net worth was $17.19 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 June 30, 2024, Cat Financial’s covenant interest coverage ratio was 1.47 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 June 30, 2024, Cat Financial’s six-month covenant leverage ratio was 6.75 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 June 30, 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 June 30, 2024 were: June 30, 2024 (Millions of dollars) Consolidated Machinery, Energy & Transportation Financial Products Credit lines available: Global credit facilities $ 10,500 $ 2,750 $ 7,750 Other external 4,137 520 3,617 Total credit lines available 14,637 3,270 11,367 Less: Commercial paper outstanding (4,730) — (4,730) Less: Utilized credit (813) — (813) Available credit $ 9,094 $ 3,270 $ 5,824 The other external consolidated credit lines with banks as of June 30, 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. 63 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 $4.57 billion in the first six months of 2024, compared with net cash provided of $4.67 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, and higher cash taxes paid; partially offset by lower working capital requirements, excluding the impact of changes in accrued wages, salaries, and employee benefits. Within working capital, changes in inventory favorably impacted cash flow as inventory increased less in the first six months of 2024 compared to the prior year period, partially offset by changes in accrued expenses. Net cash provided by investing activities in the first six months of 2024 was $1.38 billion, compared with net cash used of $1.19 billion in the first six 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 new investments in securities compared to the same period in 2023. Net cash used for financing activities during the first six months of 2024 was $8.57 billion, compared with net cash used of $3.19 billion in the same period of 2023. The change was primarily due to higher payments to purchase shares and debt payments in the first six months of 2024 compared to the same period in 2023. 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 $841 million during the first six months of 2024, compared to $685 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 $172 million of contributions to our pension and other postretirement benefit plans during the first six months of 2024. We currently anticipate full-year 2024 contributions of approximately $273 million. In comparison, we made $264 million of contributions to our pension and other postretirement benefit plans during the first six 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. 64 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 June 2024, the Board approved a share repurchase authorization (the 2024 Authorization) of up to $20.0 billion of Caterpillar common stock, effective June 12, 2024, with no expiration. In the first six months of 2024, we repurchased $6.28 billion of Caterpillar common stock, with $21.6 billion remaining under the 2022 and 2024 Authorizations as of June 30, 2024. Our basic shares outstanding as of June 30, 2024 were approximately 485 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 June 2024, the Board of Directors approved an 8 percent increase in the quarterly dividend to $1.41 per share, and we continue to expect our strong financial position to support the dividend. Dividends paid totaled $1.28 billion in the first six months of 2024. Financial Products Net cash provided by operating activities was $715 million in the first six months of 2024, compared with $542 million for the same period in 2023. Net cash used for investing activities was $1.35 billion in the first six months of 2024, compared with $1.01 billion for the same period in 2023. The change was primarily due to portfolio related activity and the divestiture of a non-U.S. entity. Net cash provided by financing activities was $635 million in the first six months of 2024, compared with $613 million for the same period in 2023. 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 second quarter of 2024, the dollar amount of backlog believed to be firm was approximately $28.6 billion, about $0.7 billion higher than the first quarter of 2024 due to increases in the Energy and Transportation segment. Of the total backlog at June 30, 2024, approximately $6.5 billion was not expected to be filled in the following twelve months. 65 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 four significant items in order for our results to be meaningful to our readers. These items consist of (i) restructuring income/costs related to the divestitures of certain non-U.S. entities in 2024, (ii) other restructuring income/costs, (iii) restructuring costs related to the divestiture of the company's Longwall business in 2023 and (iv) certain deferred tax valuation allowance adjustments 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 June 30, 2024 - U.S. GAAP $ 3,482 20.9 % $ 3,500 $ 836 $ 2,681 $ 5.48 Restructuring costs - divestiture of two non-U.S. entities 228 1.3 % 228 — 228 0.47 Other restructuring (income) costs 30 0.2 % 30 6 24 0.04 Three Months Ended June 30, 2024 - Adjusted $ 3,740 22.4 % $ 3,758 $ 842 $ 2,933 $ 5.99 Three Months Ended June 30, 2023 - U.S. GAAP $ 3,652 21.1 % $ 3,652 $ 752 $ 2,922 $ 5.67 Other restructuring (income) costs 31 0.2 % 31 6 25 0.05 Deferred tax valuation allowance adjustments — — % — 88 (88) (0.17) Three Months Ended June 30, 2023 - Adjusted $ 3,683 21.3 % $ 3,683 $ 846 $ 2,859 $ 5.55 Six Months Ended June 30, 2024- U.S. GAAP $ 7,001 21.5 % $ 7,032 $ 1,524 $ 5,537 $ 11.23 Restructuring (income) costs - divestitures of certain non-U.S. entities 164 0.5 % 164 54 110 0.22 Other restructuring (income) costs 88 0.3 % 88 20 68 0.14 Six Months Ended June 30, 2024 - Adjusted $ 7,253 22.3 % $ 7,284 $ 1,598 $ 5,715 $ 11.59 Six Months Ended June 30, 2023 - U.S. GAAP $ 6,383 19.2 % $ 6,286 $ 1,460 $ 4,865 $ 9.41 Restructuring costs - Longwall divestiture 586 1.8 % 586 — 586 1.13 Other restructuring (income) costs 56 0.2 % 56 11 45 0.09 Deferred tax valuation allowance adjustments — — % — 88 (88) (0.17) Six Months Ended June 30, 2023 - Adjusted $ 7,025 21.2 % $ 6,928 $ 1,559 $ 5,408 $ 10.46 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 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/costs related to the divestitures of certain non-U.S. entities in 2024, (ii) restructuring costs related to the divestiture of the company's Longwall business in 2023, (iii) certain deferred tax valuation allowance adjustments in 2023 and (iv) 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. A reconciliation of our effective tax rate to annual effective tax rate, excluding discrete items is below: 66 Table of Contents (Millions of dollars) Profit Before Taxes Provision (Benefit) for Income Taxes Effective Tax Rate Three Months Ended June 30, 2024 - U.S. GAAP $ 3,500 $ 836 23.9 % Restructuring costs - divestiture of two non-U.S. entities 228 — Excess stock-based compensation — 4 Annual effective tax rate, excluding discrete items $ 3,728 $ 840 22.5 % Excess stock-based compensation — (4) Other restructuring (income) costs 30 6 Three Months Ended June 30, 2024 - Adjusted $ 3,758 $ 842 Three Months Ended June 30, 2023 - U.S. GAAP $ 3,652 $ 752 20.6 % Deferred tax valuation allowance adjustments — 88 Annual effective tax rate, excluding discrete items $ 3,652 $ 840 23.0 % Other restructuring (income) costs 31 6 Three Months Ended June 30, 2023 - Adjusted $ 3,683 $ 846 Six Months Ended June 30, 2024 - U.S. GAAP $ 7,032 $ 1,524 21.7 % Restructuring (income) costs - divestitures of certain non-U.S. entities 164 54 Excess stock-based compensation — 42 Annual effective tax rate, excluding discrete items $ 7,196 $ 1,620 22.5 % Excess stock-based compensation — (42) Other restructuring (income) costs 88 20 Six Months Ended June 30, 2024 - Adjusted $ 7,284 $ 1,598 Six Months Ended June 30, 2023 - U.S. GAAP $ 6,286 $ 1,460 23.2 % Restructuring costs - Longwall divestiture 586 — Deferred tax valuation allowance adjustments — 88 Excess stock-based compensation — 32 Annual effective tax rate, excluding discrete items $ 6,872 $ 1,580 23.0 % Excess stock-based compensation — (32) Other restructuring (income) costs 56 11 Six Months Ended June 30, 2023 - Adjusted $ 6,928 $ 1,559 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) Six Months Ended June 30, 2024 2023 ME&T net cash provided by operating activities 1 $ 4,573 $ 4,667 ME&T capital expenditures (841) (685) ME&T free cash flow $ 3,732 $ 3,982 1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 75 - 76. 67 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 69 to 76 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. 68 Table of Contents Caterpillar Inc. Supplemental Data for Results of Operations For the Three Months Ended June 30, 2024 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Sales and revenues: Sales of Machinery, Energy & Transportation $ 15,840 $ 15,840 $ — $ — Revenues of Financial Products 849 — 1,043 (194) 1 Total sales and revenues 16,689 15,840 1,043 (194) Operating costs: Cost of goods sold 10,150 10,152 — (2) 2 Selling, general and administrative expenses 1,652 1,449 185 18 2 Research and development expenses 535 535 — — Interest expense of Financial Products 314 — 314 — Other operating (income) expenses 556 43 560 (47) 2 Total operating costs 13,207 12,179 1,059 (31) Operating profit 3,482 3,661 (16) (163) Interest expense excluding Financial Products 137 137 — — Other income (expense) 155 (21) 13 163 3 Consolidated profit before taxes 3,500 3,503 (3) — Provision (benefit) for income taxes 836 786 50 — Profit of consolidated companies 2,664 2,717 (53) — Equity in profit (loss) of unconsolidated affiliated companies 17 17 — — Profit of consolidated and affiliated companies 2,681 2,734 (53) — Less: Profit (loss) attributable to noncontrolling interests — — — — Profit 4 $ 2,681 $ 2,734 $ (53) $ — 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. 69 Table of Contents Caterpillar Inc. Supplemental Data for Results of Operations For the Six Months Ended June 30, 2024 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Sales and revenues: Sales of Machinery, Energy & Transportation $ 30,800 $ 30,800 $ — $ — Revenues of Financial Products 1,688 — 2,072 (384) 1 Total sales and revenues 32,488 30,800 2,072 (384) Operating costs: Cost of goods sold 19,812 19,816 — (4) 2 Selling, general and administrative expenses 3,229 2,862 363 4 2 Research and development expenses 1,055 1,055 — — Interest expense of Financial Products 612 — 612 — Other operating (income) expenses 779 2 845 (68) 2 Total operating costs 25,487 23,735 1,820 (68) Operating profit 7,001 7,065 252 (316) Interest expense excluding Financial Products 280 280 — — Other income (expense) 311 (41) 36 316 3 Consolidated profit before taxes 7,032 6,744 288 — Provision (benefit) for income taxes 1,524 1,401 123 — Profit of consolidated companies 5,508 5,343 165 — Equity in profit (loss) of unconsolidated affiliated companies 27 27 — — Profit of consolidated and affiliated companies 5,535 5,370 165 — Less: Profit (loss) attributable to noncontrolling interests (2) (3) 1 — Profit 4 $ 5,537 $ 5,373 $ 164 $ — 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. 70 Table of Contents Caterpillar Inc. Supplemental Data for Results of Operations For the Three Months Ended June 30, 2023 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Sales and revenues: Sales of Machinery, Energy & Transportation $ 16,545 $ 16,545 $ — $ — Revenues of Financial Products 773 — 955 (182) 1 Total sales and revenues 17,318 16,545 955 (182) Operating costs: Cost of goods sold 11,065 11,068 — (3) 2 Selling, general and administrative expenses 1,528 1,389 143 (4) 2 Research and development expenses 528 528 — — Interest expense of Financial Products 245 — 245 — Other operating (income) expenses 300 10 310 (20) 2 Total operating costs 13,666 12,995 698 (27) Operating profit 3,652 3,550 257 (155) Interest expense excluding Financial Products 127 127 — — Other income (expense) 127 (10) (18) 155 3 Consolidated profit before taxes 3,652 3,413 239 — Provision (benefit) for income taxes 752 691 61 — Profit of consolidated companies 2,900 2,722 178 — Equity in profit (loss) of unconsolidated affiliated companies 24 24 — — Profit of consolidated and affiliated companies 2,924 2,746 178 — Less: Profit (loss) attributable to noncontrolling interests 2 (1) 3 — Profit 4 $ 2,922 $ 2,747 $ 175 $ — 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 Profit attributable to common shareholders. 71 Table of Contents Caterpillar Inc. Supplemental Data for Results of Operations For the Six Months Ended June 30, 2023 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Sales and revenues: Sales of Machinery, Energy & Transportation $ 31,644 $ 31,644 $ — $ — Revenues of Financial Products 1,536 — 1,890 (354) 1 Total sales and revenues 33,180 31,644 1,890 (354) Operating costs: Cost of goods sold 21,168 21,172 — (4) 2 Selling, general and administrative expenses 2,991 2,709 301 (19) 2 Research and development expenses 1,000 1,000 — — Interest expense of Financial Products 462 — 462 — Other operating (income) expenses 1,176 599 613 (36) 2 Total operating costs 26,797 25,480 1,376 (59) Operating profit 6,383 6,164 514 (295) Interest expense excluding Financial Products 256 256 — — Other income (expense) 159 (24) (37) 220 3 Consolidated profit before taxes 6,286 5,884 477 (75) Provision (benefit) for income taxes 1,460 1,339 121 — Profit of consolidated companies 4,826 4,545 356 (75) Equity in profit (loss) of unconsolidated affiliated companies 40 43 — (3) 4 Profit of consolidated and affiliated companies 4,866 4,588 356 (78) Less: Profit (loss) attributable to noncontrolling interests 1 (1) 5 (3) 5 Profit 6 $ 4,865 $ 4,589 $ 351 $ (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. 72 Table of Contents Caterpillar Inc. Supplemental Data for Financial Position At June 30, 2024 (Unaudited) (Millions of dollars) Supplemental Consolidating Data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments Assets Current assets: Cash and cash equivalents $ 4,341 $ 3,481 $ 860 $ — Receivables – trade and other 9,421 3,672 643 5,106 1,2 Receivables – finance 9,516 — 14,826 (5,310) 2 Prepaid expenses and other current assets 2,736 2,549 390 (203) 3 Inventories 17,082 17,082 — — Total current assets 43,096 26,784 16,719 (407) Property, plant and equipment – net 12,582 8,653 3,929 — Long-term receivables – trade and other 1,181 501 55 625 1,2 Long-term receivables – finance 12,797 — 13,490 (693) 2 Noncurrent deferred and refundable income taxes 2,920 3,433 120 (633) 4 Intangible assets 488 488 — — Goodwill 5,264 5,264 — — Other assets 5,008 3,934 2,112 (1,038) 5 Total assets $ 83,336 $ 49,057 $ 36,425 $ (2,146) Liabilities Current liabilities: Short-term borrowings $ 5,298 $ — $ 5,298 $ — Accounts payable 7,575 7,523 274 (222) 6,7 Accrued expenses 4,947 4,315 632 — Accrued wages, salaries and employee benefits 1,677 1,637 40 — Customer advances 2,324 2,303 3 18 7 Dividends payable 684 684 — — Other current liabilities 2,882 2,365 744 (227) 4,8 Long-term debt due within one year 8,177 45 8,132 — Total current liabilities 33,564 18,872 15,123 (431) Long-term debt due after one year 23,836 8,605 15,299 (68) 9 Liability for postemployment benefits 3,993 3,993 — — Other liabilities 4,807 3,931 1,550 (674) 4 Total liabilities 66,200 35,401 31,972 (1,173) Commitments and contingencies Shareholders’ equity Common stock 5,517 5,517 905 (905) 10 Treasury stock (41,612) (41,612) — — Profit employed in the business 55,455 50,824 4,621 10 10 Accumulated other comprehensive income (loss) (2,230) (1,082) (1,148) — Noncontrolling interests 6 9 75 (78) 10 Total shareholders’ equity 17,136 13,656 4,453 (973) Total liabilities and shareholders’ equity $ 83,336 $ 49,057 $ 36,425 $ (2,146) 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 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. 73 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 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. 74 Table of Contents Caterpillar Inc. Supplemental Data for Cash Flow For the Six Months Ended June 30, 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 $ 5,535 $ 5,370 $ 165 $ — Adjustments to reconcile profit to net cash provided by operating activities: Depreciation and amortization 1,055 662 393 — Provision (benefit) for deferred income taxes (133) (81) (52) — (Gain) loss on divestiture 164 (46) 210 — Other 105 104 (280) 281 1 Changes in assets and liabilities, net of acquisitions and divestitures: Receivables – trade and other (245) 195 96 (536) 1,2 Inventories (643) (638) — (5) 1 Accounts payable (21) 6 (58) 31 1 Accrued expenses 69 (41) 110 — Accrued wages, salaries and employee benefits (1,056) (1,035) (21) — Customer advances 341 341 — — Other assets – net 20 (108) 5 123 1 Other liabilities – net (118) (156) 147 (109) 1 Net cash provided by (used for) operating activities 5,073 4,573 715 (215) Cash flow from investing activities: Capital expenditures – excluding equipment leased to others (841) (831) (13) 3 1 Expenditures for equipment leased to others (614) (10) (612) 8 1 Proceeds from disposals of leased assets and property, plant and equipment 342 13 335 (6) 1 Additions to finance receivables (7,446) — (7,951) 505 2 Collections of finance receivables 6,743 — 7,176 (433) 2 Net intercompany purchased receivables — — (138) 138 2 Proceeds from sale of finance receivables 37 — 37 — Net intercompany borrowings — — 9 (9) 3 Investments and acquisitions (net of cash acquired) (32) (32) — — Proceeds from sale of businesses and investments (net of cash sold) (61) 92 (153) — Proceeds from maturities and sale of securities 2,574 2,402 172 — Investments in securities (523) (300) (223) — Other – net 57 47 10 — Net cash provided by (used for) investing activities 236 1,381 (1,351) 206 Cash flow from financing activities: Dividends paid (1,283) (1,283) — — Common stock issued, including treasury shares reissued 8 8 — — Payments to purchase common stock (6,275) (6,275) — — Net intercompany borrowings — (9) — 9 3 Proceeds from debt issued (original maturities greater than three months) 4,151 — 4,151 — Payments on debt (original maturities greater than three months) (5,217) (1,014) (4,203) — Short-term borrowings – net (original maturities three months or less) 687 — 687 — Net cash provided by (used for) financing activities (7,929) (8,573) 635 9 Effect of exchange rate changes on cash (17) (7) (10) — Increase (decrease) in cash, cash equivalents and restricted cash (2,637) (2,626) (11) — 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 $ 4,348 $ 3,485 $ 863 $ — 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. 75 Table of Contents Caterpillar Inc. Supplemental Data for Cash Flow For the Six Months Ended June 30, 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 $ 4,866 $ 4,588 $ 356 $ (78) 1,5 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation and amortization 1,074 690 384 — Provision (benefit) for deferred income taxes (355) (338) (17) — (Gain) loss on divestiture 572 572 — — Other 106 198 (368) 276 2 Changes in assets and liabilities, net of acquisitions and divestitures: Receivables – trade and other (465) 132 57 (654) 2,3 Inventories (1,560) (1,558) — (2) 2 Accounts payable 34 (28) 2 60 2 Accrued expenses 381 318 63 — Accrued wages, salaries and employee benefits (562) (550) (12) — Customer advances 284 283 1 — Other assets – net 81 149 5 (73) 2 Other liabilities – net 366 211 71 84 2 Net cash provided by (used for) operating activities 4,822 4,667 542 (387) Cash flow from investing activities: Capital expenditures – excluding equipment leased to others (683) (678) (11) 6 2 Expenditures for equipment leased to others (774) (7) (772) 5 2 Proceeds from disposals of leased assets and property, plant and equipment 368 27 350 (9) 2 Additions to finance receivables (6,973) — (7,957) 984 3 Collections of finance receivables 6,759 — 7,516 (757) 3 Net intercompany purchased receivables — — (83) 83 3 Proceeds from sale of finance receivables 29 — 29 — Net intercompany borrowings — — 4 (4) 4 Investments and acquisitions (net of cash acquired) (20) (20) — — Proceeds from sale of businesses and investments (net of cash sold) (14) (14) — — Proceeds from sale of securities 463 332 131 — Investments in securities (1,078) (866) (212) — Other – net 41 41 — — Net cash provided by (used for) investing activities (1,882) (1,185) (1,005) 308 Cash flow from financing activities: Dividends paid (1,238) (1,238) (75) 75 5 Common stock issued, including treasury shares reissued (22) (22) — — Payments to purchase common stock (1,829) (1,829) — — Net intercompany borrowings — (4) — 4 4 Proceeds from debt issued (original maturities greater than three months) 3,299 — 3,299 — Payments on debt (original maturities greater than three months) (2,303) (95) (2,208) — Short-term borrowings – net (original maturities three months or less) (406) (3) (403) — Net cash provided by (used for) financing activities (2,499) (3,191) 613 79 Effect of exchange rate changes on cash (60) (12) (48) — Increase (decrease) in cash, cash equivalents and restricted cash 381 279 102 — 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 $ 7,394 $ 6,328 $ 1,066 $ — 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. 76 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.