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What changed in Caterpillar Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Caterpillar Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+308 added−312 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-15)

Top changes in Caterpillar Inc.'s 2023 10-K

308 paragraphs added · 312 removed · 238 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs part of this focus on health and safety, Caterpillar has established a peer-to-peer safety mentorship and education program for manufacturing new hires to accelerate acclimation to our safety culture in many global locations. In 2022, the Company achieved a recordable injury frequency rate of 0.44, compared to the 2021 recordable injury frequency rate of 0.41.
Biggest changeIn 2023, the Company achieved a recordable injury frequency rate of 0.40, compared to the 2022 recordable injury frequency rate of 0.44. In addition, Caterpillar has refreshed our safety strategy to enhance our focus on preventing serious injuries and to encourage learning from those closest to the work.
The product and services portfolio includes reciprocating engines, generator sets, integrated systems and solutions, turbines and turbine-related services, electrified powertrain and zero-emission power sources and service solutions development, the remanufacturing of Caterpillar engines and components and remanufacturing services for other companies, diesel-electric locomotives and other rail-related products and services and product support of on-highway vocational trucks for North America.
The product and services portfolio includes reciprocating engines, generator sets, integrated systems and solutions, turbines and turbine-related services, electrified powertrain and zero-emission power sources and service solutions development, the remanufacturing of Caterpillar engines and components, remanufacturing services for other companies, diesel-electric locomotives and other rail-related products and services and product support of on-highway vocational trucks for North America.
In rail-related businesses, our global competitors include Alstom SA, CRRC Corp., LTD., The Greenbrier Companies, Siemens Mobility, Voestalpine AG, Vossloh AG and Wabtec Freight. We also compete with other companies on a more limited range of products, services and/or geographic regions.
In rail-related businesses, our global competitors include Wabtec Freight, The Greenbrier Companies, Voestalpine AG, and Vossloh AG, Alstom SA, Siemens Mobility, and CRRC Corp., LTD. We also compete with other companies on a more limited range of products, services and/or geographic regions.
Caterpillar’s insurance group provides protection and service for claims under the following programs: • Contractual Liability Insurance to insure certain service contract obligations of Caterpillar and its affiliates, Caterpillar dealers and original equipment manufacturers (OEMs). • Cargo reinsurance for the worldwide cargo risks of Caterpillar products. 5 Table of Contents • Contractors’ Equipment Physical Damage Insurance for equipment manufactured by Caterpillar or OEMs, which is leased, rented or sold by third party dealers to customers. • General liability, employer’s liability, auto liability and property insurance for Caterpillar. • Life, disability, medical and accident reinsurance for Caterpillar's international employee benefits program (non-U.S.). • Reinsurance to cover VEBA Trust for medical claims of certain Caterpillar retirees and dependents. • Brokerage and insurance services for property and casualty and life and health business.
Caterpillar’s insurance group provides protection and service for claims under the following programs: • Contractual Liability Insurance to insure certain service contract obligations of Caterpillar and its affiliates, Caterpillar dealers and original equipment manufacturers (OEMs). • Cargo reinsurance for the worldwide cargo risks of Caterpillar products. • Contractors’ Equipment Physical Damage Insurance for equipment manufactured by Caterpillar or OEMs, which is leased, rented or sold by third party dealers to customers. • General liability, employer’s liability, auto liability and property insurance for Caterpillar. • Life, disability, medical and accident reinsurance for Caterpillar's international employee benefits program (non-U.S.). 5 Table of Contents • Reinsurance to cover VEBA Trust for medical claims of certain Caterpillar retirees and dependents. • Brokerage and insurance services for property and casualty and life and health business.
The Energy & Transportation portfolio includes the following products and related parts: • Reciprocating engine powered generator sets • Reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machinery • Integrated systems and solutions used in the electric power generation industry • Turbines, centrifugal gas compressors and related services • Reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries • Remanufactured reciprocating engines and components • Diesel-electric locomotives and components and other rail-related products and services Financial Products Segment The business of our Financial Products Segment is primarily conducted by Cat Financial, Insurance Services and their respective subsidiaries and affiliates.
The Energy & Transportation portfolio includes the following products and related parts: • Reciprocating engine powered generator sets • Reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machinery • Integrated systems and solutions used in the electric power generation industry • Turbines, centrifugal gas compressors and related services • Reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries • Diesel-electric locomotives and components and other rail-related products and services Financial Products Segment The business of our Financial Products Segment is primarily conducted by Cat Financial, Insurance Services and their respective subsidiaries and affiliates.
In 2022, we updated our strategy to also include sustainability as a strategic focus area. For nearly 100 years, our longstanding commitment to sustainability has inspired us to set and achieve meaningful environmental, social and governance goals. It’s also allowed us to develop innovative products, technologies and services to support our customers on their sustainability journey.
In 2022, we updated our strategy to also include Sustainability as a strategic area. For nearly 100 years, our longstanding commitment to sustainability has inspired us to set and achieve meaningful environmental, social and governance goals. It’s also allowed us to develop innovative products, technologies and services to support our customers on their sustainability journey.
Costs are accrued based on consideration of currently available data and information with respect to each individual site, including available technologies, current applicable laws and regulations, and prior remediation experience. Where no amount within a range of estimates is more likely, we accrue the minimum.
Costs are accrued 8 based on consideration of currently available data and information with respect to each individual site, including available technologies, current applicable laws and regulations, and prior remediation experience. Where no amount within a range of estimates is more likely, we accrue the minimum.
Credit decisions are based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, loan-to-value ratios and other internal metrics. Cat Financial typically maintains a security interest in retail-financed equipment and requires physical damage insurance coverage on financed equipment.
Credit decisions are based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, loan-to-value ratios and other internal metrics. Cat Financial typically maintains a security interest in retail-financed equipment and generally requires physical damage insurance coverage on financed equipment.
Cat Financial is a wholly owned finance subsidiary of Caterpillar Inc. and it provides retail and wholesale financing to customers and dealers around the world for Caterpillar products and services, as well as financing for vehicles and power generation facilities that, in most cases, incorporate Caterpillar products.
Cat Financial is a wholly owned finance subsidiary of Caterpillar Inc. and it provides retail and wholesale financing alternatives to customers and dealers around the world for Caterpillar products and services, as well as financing for vehicles and power generation facilities that, in most cases, incorporate Caterpillar products.
The Resource Industries product portfolio includes the following machines and related parts and services: · electric rope shovels · longwall miners · landfill compactors · draglines · large wheel loaders · soil compactors · hydraulic shovels · off-highway trucks · machinery components · rotary drills · articulated trucks · autonomous ready vehicles and solutions · hard rock vehicles · wheel tractor scrapers · select work tools · large track-type tractors · wheel dozers · safety services and mining performance · large mining trucks · fleet management solutions 2 Table of Contents Energy & Transportation Our Energy & Transportation segment supports customers in oil and gas, power generation, marine, rail and industrial applications, including Caterpillar machines.
The Resource Industries product portfolio includes the following machines and related parts and services: · electric rope shovels · large wheel loaders · soil compactors · draglines · off-highway trucks · machinery components · hydraulic shovels · articulated trucks · autonomous ready vehicles and solutions · rotary drills · wheel tractor scrapers · select work tools · hard rock vehicles · wheel dozers · safety services and mining performance · large track-type tractors · fleet management solutions · large mining trucks · landfill compactors 2 Table of Contents Energy & Transportation Our Energy & Transportation segment supports customers in oil and gas, power generation, marine, rail and industrial applications, including Caterpillar machines.
The majority of machine sales in this segment are made in the heavy and general construction, rental, quarry and aggregates markets and mining. The nature of customer demand for construction machinery varies around the world.
The majority of machine sales in this segment are made in the heavy and general construction, rental, quarry and aggregates and mining. The nature of customer demand for construction machinery varies around the world.
The addition of sustainability as a focus area, together with operational excellence, expanded offerings and services, highlights our work to help customers build a better, more sustainable world. Currently, we have five operating segments, of which four are reportable segments and are described below. Categories of Business Organization 1.
The addition of sustainability as a strategic area, together with operational excellence, expanded offerings and services, highlights our work to help customers build a better, more sustainable world. Currently, we have five operating segments, of which four are reportable segments and are described below. Categories of Business Organization 1.
The Construction Industries product portfolio includes the following product families as well as related parts and tools: · asphalt pavers · compactors · road reclaimers · backhoe loaders · forestry machines · skid steer loaders · cold planers · material handlers · small and medium · compact, small and · mini, small, medium track-type tractors medium wheel loaders and large track excavators · telehandlers · compact track and · motor graders · track-type loaders multi-terrain loaders · pipelayers · wheel excavators Resource Industries The Resource Industries segment is primarily responsible for supporting customers using machinery in mining and heavy construction and quarry and aggregates.
The Construction Industries portfolio includes the following product families as well as related parts and work tools: · asphalt pavers · motor graders · track-type tractors (small, medium) · backhoe loaders · pipelayers · track excavators (mini, small · cold planers · road reclaimers medium, large) · compactors · skid steer loaders · wheel excavators · compact track loaders · telehandlers · wheel loaders (compact, small, · forestry machines · track-type loaders medium) · material handlers Resource Industries The Resource Industries segment is primarily responsible for supporting customers using machinery in mining and heavy construction and quarry and aggregates.
Dealers and Distributors We distribute our machines principally through a worldwide organization of dealers (dealer network), 43 located in the United States and 113 located outside the United States, serving 192 countries. We sell reciprocating engines principally through the dealer network and to other manufacturers for use in products.
Dealers and Distributors We distribute our machines principally through a worldwide organization of dealers (dealer network), 43 located in the United States and 113 located outside the United States, serving 191 countries. We sell reciprocating engines principally through the dealer network and to other manufacturers for use in products.
The majority of Construction Industries' research and development spending in 2022 focused on the next generation of construction machines. 1 Table of Contents The competitive environment for construction machinery is characterized by some global competitors and many regional and specialized local competitors.
The majority of Construction Industries' research and development spending in 2023 focused on the next generation of construction machines. 1 Table of Contents The competitive environment for construction machinery is characterized by some global competitors and many regional and specialized local competitors.
To meet customer expectations in developing economies, Caterpillar developed differentiated product offerings that target customers in those markets, including our SEM brand machines. We believe that these customer-driven product innovations enable us to compete more effectively in developing economies.
To meet customer expectations in developing economies, Caterpillar developed differentiated product offerings that target customers in those regions, including our SEM brand machines. We believe that these customer-driven product innovations enable us to compete more effectively in developing economies.
Copies of our board committee charters, our board’s Guidelines on Corporate Governance Issues, Worldwide Code of Conduct and other corporate governance information are available on our website (www.Caterpillar.com/governance). The information contained on the company’s website is not included in, or incorporated by reference into, this annual report on Form 10-K.
Copies of our board committee charters, our board’s Guidelines on Corporate Governance Issues, Worldwide Code of Conduct and other corporate governance information are available on our website (www.Caterpillar.com/governance) and are also available free of charge. The information contained on the company’s website is not included in, or incorporated by reference into, this annual report on Form 10-K.
Compensation, Benefits and Employee Insights Providing competitive benefits and compensation underpins our commitment to our engaged and productive employees. Our pay-for-performance philosophy aligns employee’s individual contributions, behaviors and business results with individual rewards. Our comprehensive Total Health programs focus on purpose, as well as physical, emotional, financial, and social health.
Compensation, Benefits and Employee Insights Providing competitive benefits and compensation underpins our commitment to our engaged and productive employees. Our pay-for-performance philosophy aligns employee’s individual contributions, behaviors and business results with individual rewards. Our comprehensive Total Health programs focus on purpose, as well as physical and mental health, emotional and social support, and financial wellness.
Other information about our operations in 2022, including certain risks associated with our operations, is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Construction Industries Our Construction Industries segment is primarily responsible for supporting customers using machinery in infrastructure, forestry and building construction.
Other information about our operations in 2023, including certain risks associated with our operations, is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Construction Industries Our Construction Industries segment is primarily responsible for supporting customers using machinery in infrastructure and building construction.
An additional set of competitors, including Aggreko plc, Baker Hughes Co., Generac Holdings, Kohler Power Systems, and others, are primarily packagers who source engines and/or other components from domestic and international suppliers and market products regionally and internationally through a variety of distribution channels.
An additional set of competitors, including Aggreko plc, Generac Holdings, Kohler Energy, Baker Hughes Co., and others, are primarily packagers who source engines and/or other components from domestic and international suppliers and market products regionally and internationally through a variety of distribution channels.
There are also three independent dealers in the Southern Region of Japan. For Caterpillar branded products, the company’s relationship with each of its independent dealers is memorialized in standard sales and service agreements.
There are also three independent dealers in the Southern Region of Japan. 6 Table of Contents For Caterpillar-branded products, the company’s relationship with each of its independent dealers is memorialized in standard sales and service agreements.
Additional company information may be obtained as follows: Current information - • view additional financial information on-line at www.Caterpillar.com/en/investors/financial-information.html • request, view or download materials on-line or register for email alerts at www.Caterpillar.com/materialsrequest Historical information - • view/download on-line at www.Caterpillar.com/historical 9 Table of Contents
Additional company information may be obtained as follows: Current information - • view additional financial information on-line at www.Caterpillar.com/en/investors/financial-information.html • request, view or download materials on-line or register for email alerts at www.Caterpillar.com/materialsrequest Historical information - • view/download on-line at www.Caterpillar.com/historical
These patents and trademarks are generally considered beneficial to our business. We do not regard our business as being dependent upon any single patent or group of patents. Order Backlog The dollar amount of backlog believed to be firm was approximately $30.4 billion at December 31, 2022 and $23.1 billion at December 31, 2021.
These patents and trademarks are generally considered beneficial to our business. We do not regard our business as being dependent upon any single patent or group of patents. Order Backlog The dollar amount of backlog believed to be firm was approximately $27.5 billion at December 31, 2023 and $30.4 billion at December 31, 2022.
Our values unite us, and reflect our diverse cultures, languages, geographies, and businesses, as one Caterpillar team. Health and Safety The health and safety of our employees is an important focus at Caterpillar, and we strive to continually reduce our recordable injuries.
Our values unite us, and reflect our diverse cultures, languages, geographies, and businesses, as one Caterpillar team. Health and Safety The health and safety of our employees is an important focus at Caterpillar, and we strive to continually reduce our recordable injuries utilizing programs that amplify our safety culture, globally.
Our global internships, engineering co-ops, and career programs for engineering, marketing, and manufacturing provide development opportunities for early career employees. We also have a continual focus on strengthening technical, professional and leadership capabilities at every level. Strategic talent reviews and succession planning occur at a minimum, annually, across our businesses.
Our global internships, engineering co-ops, and career programs for engineering, marketing, and manufacturing provide development opportunities for early career employees. We also have a continual focus on strengthening technical, professional and leadership capabilities at every level using contemporary learning strategies to foster high performance. Strategic talent reviews and succession planning occur at a minimum, annually, across our businesses.
Overview With 2022 sales and revenues of $59.427 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
Overview With 2023 sales and revenues of $67.060 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
Full-Time Employees at Year-End 2022 2021 Inside U.S. 48,200 44,300 Outside U.S. 60,900 63,400 Total 109,100 107,700 By Region: North America 48,700 44,700 EAME 16,900 17,600 Latin America 19,100 19,500 Asia/Pacific 24,400 25,900 Total 109,100 107,700 As of December 31, 2022, there were approximately 7,980 hourly production employees in the United States who were covered by collective bargaining agreements with various labor unions, including The United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), The International Association of Machinists and The United Steelworkers.
Full-Time Employees at Year-End 2023 2022 Inside U.S. 50,800 48,200 Outside U.S. 62,400 60,900 Total 113,200 109,100 By Region: North America 51,200 48,700 EAME 16,600 16,900 Latin America 20,300 19,100 Asia/Pacific 25,100 24,400 Total 113,200 109,100 As of December 31, 2023, there were 7,973 hourly production employees in the United States who were covered by collective bargaining agreements with various labor unions, including The United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), The International Association of Machinists and The United Steelworkers.
Our ERGs provide many contributions, such as mentoring programs that connect diverse employees with senior leaders who can support their career goals, partnerships with recruiters and diverse early career and professional organizations that can assist in strengthening the diverse talent pipeline and programs that educate and inform on the richness of the global cultures that we share.
They also engage our employees, helping contribute to development and retention. 7 Table of Contents Our ERGs provide many contributions, such as mentoring programs that connect diverse employees with senior leaders who can support their career goals, partnerships with recruiters and diverse early career and professional organizations that can assist in strengthening the diverse talent pipeline and programs that educate and inform on the richness of the global cultures that we share.
Our 14 Employee Resource Groups (ERGs), which are sponsored and supported by leadership, help ensure different voices and perspectives contribute to our strategy for long-term profitable growth. They also engage our employees, helping contribute to development and retention.
Our 14 Employee Resource Groups (ERGs), which are sponsored and supported by leadership, help ensure different voices and perspectives contribute to our strategy for long-term profitable growth.
Our leadership development programs and focus on encouraging a variety of experiences to help employees broaden understanding and increase perspective. Our leadership curriculums include managing for inclusion as a core development principle and a professional skill. 7 Table of Contents Additionally, skill-based programs to upskill our manufacturing employees are developed locally and tailored to the specific needs of the business.
Our leadership development programs focus on encouraging a variety of experiences to help employees broaden understanding and increase perspective. Our leadership curriculums include managing for inclusion and building resilient and high performing teams as core development principles. Additionally, skill-based programs to upskill our manufacturing employees are developed locally and tailored to the specific needs of the business.
Other competitors, such as Fiat Industrial SpA (Iveco Group), GE Power, Kawasaki Heavy Industries Energy Solutions & Marine Engineering, MAN Energy Solutions (VW), Mitsubishi Heavy Industries Ltd., Siemens Energy Global GmbH,Volvo Penta AB, Weichai Power Co., Ltd., and other emerging market competitors compete in certain markets in which Caterpillar competes.
Principal global competitors include Cummins Inc., Deutz AG, Rolls-Royce Power Systems and Siemens Energy Global GmbH. Other competitors, such as Volvo Penta AB, FPT Industrial (Iveco Group), INNIO, GE Vernova, Kawasaki Heavy Industries Energy Solution & Marine Engineering, MAN Energy Solutions (VW), Weichai Power Co., Ltd., and other emerging market competitors compete in certain markets in which Caterpillar competes.
We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws. When it is probable we will pay remedial costs at a site, and those costs can be reasonably estimated, the investigation, remediation, and operating and maintenance costs of the remedial action are accrued against our earnings.
When it is probable we will pay remedial costs at a site, and those costs can be reasonably estimated, the investigation, remediation, and operating and maintenance costs of the remedial action are accrued against our earnings.
Outside the United States, the company enters into employment contracts and agreements in those countries in which such relationships are mandatory or customary.
Outside the United States, the company enters into employment contracts and agreements in those countries in which such relationships are mandatory or customary. The provisions of these agreements generally correspond in each case with the required or customary terms in the subject jurisdiction.
We sell some products, primarily turbines and locomotives, directly to end customers through sales forces employed by the company. At times, these employees are assisted by independent sales representatives.
Our dealers do not deal exclusively with our products; however, in most cases sales and servicing of our products are the dealers’ principal business. We sell some products, primarily turbines and locomotives, directly to end customers through sales forces employed by the company. At times, these employees are assisted by independent sales representatives.
The Bermuda Monetary Authority is responsible for monitoring compliance with solvency requirements and requires an Annual Financial Filing for this purpose. Caterpillar Product Services Corporation (CPSC), a wholly owned subsidiary of Caterpillar, is a warranty company domiciled in Missouri.
The Bermuda Monetary Authority is responsible for monitoring compliance with solvency requirements and requires an Annual Financial Filing for this purpose. Caterpillar Insurance Services Corporation, a wholly owned subsidiary of Caterpillar Insurance Holdings Inc., is a Tennessee insurance agency licensed in all 50 states, the District of Columbia and Guam.
The annual Employee Insights Survey provides all employees the opportunity to confidentially share their perspectives and engages leaders to listen, learn and respond to employee feedback. Employment Management aligns employment levels with the needs of the business. We believe we have the appropriate human capital resources to successfully operate and deliver our enterprise strategy.
The annual Employee Insights Survey provides all employees the opportunity to confidentially share their perspectives and engages leaders to listen, learn and respond to employee feedback to help foster a positive work environment. Employment Management aligns employment levels with the needs of the business.
The coalition is committed to upskill, hire and advance Black Americans over the next 10 years into family-sustaining careers. Diversity and Inclusion We are committed to fostering a diverse workforce and an inclusive environment. Our strategic approach weaves diversity and inclusion seamlessly into the business, ensuring that the principles guide us in our daily operating rhythm.
Diversity and Inclusion We are committed to fostering a diverse workforce and an inclusive environment that is representative of the many customers and communities we serve around the globe. Our strategic approach weaves diversity and inclusion seamlessly into the business, ensuring that the principles guide us in our daily operating rhythm.
Compared with year-end 2021, the order backlog increased for both the Energy & Transportation and Construction Industries segments, with the largest increase in Energy & Transportation. Of the total backlog at December 31, 2022, approximately $5.5 billion was not expected to be filled in 2023.
Compared with year-end 2022, the order backlog decreased across the three primary segments. Of the total backlog at December 31, 2023, approximately $5.8 billion was not expected to be filled in 2024.
In addition to governing our manufacturing and other operations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines. We have made, and will continue to make, significant research and development and capital expenditures to comply with these emissions standards.
Environmental Matters The company is regulated by federal, state and international environmental laws governing our use, transport and disposal of substances and control of emissions. In addition to governing our manufacturing and other operations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines.
At select business units, we have hired certain highly specialized employees under employment contracts that specify a term of employment, pay and other benefits.
In the United States, we employed approximately 50,800 full-time persons, most of whom are at-will employees and, therefore, not subject to any type of employment contract or agreement. At select business units, we have hired certain highly specialized employees under employment contracts that specify a term of employment, pay and other benefits.
Caterpillar Insurance Services Corporation, a wholly owned subsidiary of Caterpillar Insurance Holdings Inc., is a Tennessee insurance agency licensed in all 50 states, the District of Columbia and Guam. It provides brokerage and insurance services for all property and casualty and life and health lines of business.
It provides brokerage and insurance services for all property and casualty and life and health lines of business.
As of December 31, 2022, we employed about 109,100 full-time persons of whom approximately 60,900 were located outside the United States. In the United States, we employed approximately 48,200 full-time persons, most of whom are at-will employees and, therefore, not subject to any type of employment contract or agreement.
We believe we have the appropriate human capital resources to successfully operate and deliver our enterprise strategy. As of December 31, 2023, we employed about 113,200 full-time persons of whom approximately 62,400 were located outside the United States.
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Principal global competitors include Cummins Inc., Deutz AG, INNIO Jenbacher GmbH, Rolls-Royce Power Systems and Wärtsilä Corp.
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We have made, and will continue to make, significant research and development and capital expenditures to comply with these emissions standards. We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws.
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CPSC previously conducted a machine extended service contract program in Germany and France by providing machine extended warranty reimbursement protection to dealers in Germany and France. The program was discontinued effective January 1, 2013, though CPSC continues to provide extended warranty reimbursement protection under existing contracts.
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We also sell some of the large, medium speed reciprocating engines under the MaK brand through a worldwide network of 20 distributors covering 130 countries. 6 Table of Contents Our dealers do not deal exclusively with our products; however, in most cases sales and servicing of our products are the dealers’ principal business.
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In China, we continue to invest in programs that encourage women to pursue engineering management and leadership roles. In India, we tailored recruiting campaigns and on-site benefits to attract female employees. Caterpillar, along with other companies across industries, participates in the OneTen coalition.
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The provisions of these agreements generally correspond in each case with the required or customary terms in the subject jurisdiction. 8 Table of Contents Environmental Matters The company is regulated by federal, state and international environmental laws governing our use, transport and disposal of substances and control of emissions.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCommodity price changes, material price increases, fluctuations in demand for our products and services, significant disruptions to our supply chains or significant shortages of labor and material may adversely impact our financial results or our ability to meet commitments to customers. We are a significant user of steel and many other commodities required for the manufacture of our products.
Biggest changeThe adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event. 10 Table of Contents Commodity price changes, material price increases, fluctuations in demand for our products and services, significant disruptions to our supply chains or significant shortages of labor and material may adversely impact our financial results or our ability to meet commitments to customers.
Current material and component shortages, logistics constraints and labor inefficiencies have limited and could continue to limit our ability to meet customer demand, which could have a material adverse effect on our business, results of operations and/or financial condition.
Current material and component shortages, logistics constraints and labor inefficiencies limited and or could continue to limit our ability to meet customer demand, which could have a material adverse effect on our business, results of operations and/or financial condition.
Continuing to meet our cash requirements over the long-term requires substantial liquidity and access to varied sources of funds, including capital and credit markets. Global economic conditions may cause volatility and disruptions in the capital and credit markets.
Continuing to meet our cash requirements over the long-term requires substantial liquidity and access to varied sources of funds, including capital and credit markets. Global economic conditions may cause volatility and disruptions in capital and credit markets.
These ratings are based, in significant part, on each of Caterpillar’s and Cat Financial’s performance as measured by financial metrics such as net worth, interest coverage and leverage ratios, as well as transparency with rating agencies and timeliness of financial reporting. There can be no assurance that Caterpillar and Cat Financial will be able to maintain their credit ratings.
These ratings are based, in significant part, on each of Caterpillar’s and Cat Financial’s performance as measured by financial metrics such as net worth, profitability, interest coverage and leverage ratios, as well as transparency with rating agencies and timeliness of financial reporting. There can be no assurance that Caterpillar and Cat Financial will be able to maintain their credit ratings.
Risks associated with our past or future acquisitions also include the following: • the failure to achieve the acquisition's revenue or profit forecast; • the business culture of the acquired business may not match well with our culture; • technological and product synergies, economies of scale and cost reductions may not occur as expected; • unforeseen expenses, delays or conditions may be imposed upon the acquisition, including due to required regulatory approvals or consents; • we may acquire or assume unexpected liabilities or be subject to unexpected penalties or other enforcement actions; • faulty assumptions may be made regarding the macroeconomic environment or the integration process; • unforeseen difficulties may arise in integrating operations, processes and systems; • higher than expected investments may be required to implement necessary compliance processes and related systems, including information technology systems, accounting systems and internal controls over financial reporting; • we may fail to retain, motivate and integrate key management and other employees of the acquired business; • higher than expected costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any jurisdiction in which the acquired business conducts its operations; and • we may experience problems in retaining customers and integrating customer bases.
Risks associated with our past or future acquisitions also include the following: • the failure to achieve the acquisition's revenue or profit forecast; • the business culture of the acquired business may not match well with our culture; • technological and product synergies, economies of scale and cost reductions may not occur as expected; • unforeseen expenses, delays or conditions may be imposed upon the acquisition, including due to required regulatory approvals or consents; • we may acquire or assume unexpected liabilities or be subject to unexpected penalties or other enforcement actions; • faulty assumptions may be made regarding the macroeconomic environment or the integration process; • unforeseen difficulties may arise in integrating operations, processes and systems; • higher than expected investments may be required to implement necessary compliance processes and related systems, including information technology systems, accounting systems and internal controls over financial reporting; • we may fail to retain, motivate and integrate key management and other employees of the acquired business; • higher than expected costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any jurisdiction in which the acquired business conducts its operations; and 13 Table of Contents • we may experience problems in retaining customers and integrating customer bases.
With respect to Insurance Services' investment activities, changes in the equity and bond markets could result in a decline in value of its investment portfolio, resulting in an unfavorable impact to earnings. An increase in delinquencies, repossessions or net losses of Cat Financial customers could adversely affect its results.
With respect to Insurance Services' investment activities, changes in equity and bond markets could result in a decline in value of its investment portfolio, resulting in an unfavorable impact to earnings. An increase in delinquencies, repossessions or net losses of Cat Financial customers could adversely affect its results.
Financial market disruption and volatility may impact the accuracy of these judgments. • Cat Financial’s ability to engage in routine funding transactions or to borrow from other financial institutions on acceptable terms or at all could be adversely affected by disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations. • As Cat Financial’s borrowing agreements are primarily with financial institutions, their ability to perform in accordance with any of our underlying agreements could be adversely affected by market volatility and/or disruptions in financial markets. 16 Table of Contents Changes in interest rates or market liquidity conditions could adversely affect Cat Financial's and our earnings and/or cash flow.
Financial market disruption and volatility may impact the accuracy of these judgments. • Cat Financial’s ability to engage in routine funding transactions or to borrow from other financial institutions on acceptable terms or at all could be adversely affected by disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations. • As Cat Financial’s borrowing agreements are primarily with financial institutions, their ability to perform in accordance with any of our underlying agreements could be adversely affected by market volatility and/or disruptions in financial markets. 15 Table of Contents Changes in interest rates or market liquidity conditions could adversely affect Cat Financial's and our earnings and/or cash flow.
Operating in different regions and countries exposes us to numerous risks, including: • multiple and potentially conflicting laws, regulations and policies that are subject to change; • imposition of currency restrictions, restrictions on repatriation of earnings or other restraints; • imposition of new or additional tariffs or quotas; • withdrawal from or modification of trade agreements or the negotiation of new trade agreements; • imposition of new or additional trade and economic sanctions laws imposed by the U.S. or foreign governments; • war or acts of terrorism; and • political and economic instability or civil unrest that may severely disrupt economic activity in affected countries.
Operating in different regions and countries exposes us to numerous risks, including: • multiple and potentially conflicting laws, regulations and policies that are subject to change; • imposition of currency restrictions, restrictions on repatriation of earnings or other restraints; • imposition of new or additional tariffs or quotas; 11 Table of Contents • withdrawal from or modification of trade agreements or the negotiation of new trade agreements; • imposition of new or additional trade and economic sanctions laws imposed by the U.S. or foreign governments; • war or acts of terrorism; and • political and economic instability or civil unrest that may severely disrupt economic activity in affected countries.
Changes in regulations or additional regulations in the United States or internationally impacting the financial services industry could also add significant cost or operational constraints that might have an adverse effect on Cat Financial ’ s and our results of operations and financial condition. We are subject to stringent environmental laws and regulations that impose significant compliance costs.
Changes in regulations or additional regulations in the United States or internationally impacting the financial services industry could also add significant cost or operational constraints that might have an adverse effect on Cat Financial ’ s and our results of operations and financial condition. 18 Table of Contents We are subject to stringent environmental laws and regulations that impose significant compliance costs.
For example, a government’s adoption of “buy national” policies or retaliation by another government against such policies could have a negative impact on our results of operations. We may incur additional tax expense or become subject to additional tax exposure. We are subject to income taxes in the United States and numerous other jurisdictions.
For example, a government’s adoption of “buy national” policies or retaliation by another government against such policies could have a negative impact on our results of operations. 17 Table of Contents We may incur additional tax expense or become subject to additional tax exposure. We are subject to income taxes in the United States and numerous other jurisdictions.
These covenants include maintaining a minimum consolidated net worth (defined as the consolidated shareholder’s equity including preferred stock but excluding the pension and other post-retirement benefits balance within accumulated other comprehensive income (loss)), limitations on the incurrence of liens and certain restrictions on consolidation and merger.
These covenants include maintaining a minimum consolidated net worth (defined as the consolidated shareholder’s equity including 16 Table of Contents preferred stock but excluding the pension and other post-retirement benefits balance within accumulated other comprehensive income (loss)), limitations on the incurrence of liens and certain restrictions on consolidation and merger.
You should, however, consult any subsequent disclosures we make in our filings with the SEC on Form 10-Q or Form 8-K. The following is a cautionary discussion of risks, uncertainties and assumptions that we believe are material to our business.
You should, however, consult any subsequent disclosures we make in our filings with the SEC on Form 10-Q or Form 8-K. 9 Table of Contents The following is a cautionary discussion of risks, uncertainties and assumptions that we believe are material to our business.
If capital and credit market volatility occurs, customers’ liquidity may decline which, in turn, would reduce their ability to purchase our products. 15 Table of Contents Failure to maintain our credit ratings could increase our cost of borrowing and could adversely affect our cost of funds, liquidity, competitive position and access to capital markets.
If capital and credit market volatility occurs, customers’ liquidity may decline which, in turn, would reduce their ability to purchase our products. Failure to maintain our credit ratings could increase our cost of borrowing and could adversely affect our cost of funds, liquidity, competitive position and access to capital markets.
Natural disasters, pandemic illness, such as COVID-19, equipment failures, power outages or other unexpected events could result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or distribution centers, temporary or long-term disruption in the supply of component products from some local and international suppliers, and disruption and delay in the transport of our products to dealers, end-users and distribution centers.
Natural disasters, pandemic illness, equipment failures, power outages or other unexpected events could result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or distribution centers, temporary or long-term disruption in the supply of component products from some local and international suppliers, and disruption and delay in the transport of our products to dealers, end-users and distribution centers.
The occurrence of a major earthquake, fire, flood, tsunami or other weather event, power loss, telecommunications failure, software or hardware malfunctions, pandemics (including the COVID-19 pandemic), cyber-attack, war, terrorist attack or other catastrophic event that our disaster recovery plans do not adequately address, could adversely affect our employees, our systems, our ability to produce and distribute our products, and our reputation.
The occurrence of a major earthquake, fire, flood, tsunami or other weather event, power loss, telecommunications failure, software or hardware malfunctions, pandemics, cyber-attack, war, terrorist attack or other catastrophic event that our disaster recovery plans do not adequately address, could adversely affect our employees, our systems, our ability to produce and distribute our products, and our reputation.
We conduct operations in many countries involving transactions denominated in a variety of currencies. We are subject to currency-exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenues.
Currency exchange rate fluctuations affect our results of operations. We conduct operations in many countries involving transactions denominated in a variety of currencies. We are subject to currency-exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenues.
Cat Financial has also agreed under certain of these agreements not to exceed a certain leverage ratio (consolidated debt to consolidated net worth, 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), to maintain a minimum interest coverage ratio (profit excluding income taxes, interest expense and net gain/(loss) from interest rate derivatives to interest expense, calculated at the end of each calendar quarter for the rolling four quarter period then most recently ended) and not to terminate, amend or modify its support agreement with us.
Cat Financial has also agreed under certain of these agreements not to exceed a certain leverage ratio (consolidated debt to consolidated net worth, 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), to maintain a minimum interest coverage 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 and not to terminate, amend or modify its support agreement with us.
We operate in a highly competitive environment. We compete on the basis of a variety of factors, including product performance, customer service, quality and price. There can be no assurance that our products will be able to compete successfully with other companies’ products.
We operate in a highly competitive environment, which could adversely affect our sales and pricing. We operate in a highly competitive environment. We compete on the basis of a variety of factors, including product performance, customer service, quality and price. There can be no assurance that our products will be able to compete successfully with other companies’ products.
Lower performance by those divested businesses could affect our future financial results. Union disputes or other labor matters could adversely affect our operations and financial results. Some of our employees are represented by labor unions in a number of countries under various collective bargaining agreements with varying durations and expiration dates.
Union disputes or other labor matters could adversely affect our operations and financial results. Some of our employees are represented by labor unions in a number of countries under various collective bargaining agreements with varying durations and expiration dates.
If we issue equity securities or equity-linked securities, the issued securities may have a dilutive effect on the interests of the holders of our common shares. 14 Table of Contents Failure to implement our acquisition strategy, including successfully integrating acquired businesses, could have an adverse effect on our business, financial condition and results of operations.
If we issue equity securities or equity-linked securities, the issued securities may have a dilutive effect on the interests of the holders of our common shares. Failure to implement our acquisition strategy, including successfully integrating acquired businesses, could have an adverse effect on our business, financial condition and results of operations. Furthermore, we make strategic divestitures from time to time.
However, adverse economic conditions or other factors that might cause deterioration of the financial health of its customers could change the timing and level of payments received and necessitate an increase in Cat Financial's estimated losses, which could also have a material adverse effect on Cat Financial's and our earnings and cash flows. 17 Table of Contents Currency exchange rate fluctuations affect our results of operations.
However, adverse economic conditions or other factors that might cause deterioration of the financial health of its customers could change the timing and level of payments received and necessitate an increase in Cat Financial's estimated losses, which could also have a material adverse effect on Cat Financial's and our earnings and cash flows.
In these industries customers are likely to base their purchase decisions upon expected future commodity dynamics, including price. Commodity prices, especially in the post-COVID period, have experienced frequent volatility. Volatility in these markets may be abrupt and unpredictable in response to global economic conditions, government actions, regulatory changes, supply/demand dynamics, innovation, and commodity substitutions among others.
In these industries customers are likely to base their purchase decisions upon expected future commodity dynamics, including price. Commodity price volatility may be abrupt and unpredictable in response to global economic conditions, government actions, regulatory changes, supply/demand dynamics, innovation, and commodity substitutions among others.
Interest rate changes may also affect our customers’ ability to finance machine purchases, can change the optimal time to keep machines in a fleet and can impact the ability of our suppliers to finance the production of parts and components necessary to manufacture and support our products.
Interest rate changes may also affect our customers’ ability to finance machine purchases, can change the optimal time to keep machines in a fleet and can impact the ability of our suppliers to finance the production of parts and components necessary to manufacture and support our products. Increases in interest rates could negatively impact sales and create supply chain inefficiencies.
Failure to continue to deliver high quality, innovative, competitive products to the marketplace, to adequately protect our intellectual property rights; to supply products that meet applicable regulatory requirements, including engine exhaust emission requirements or to predict market demands for, or gain market acceptance of, our products, could have a negative impact on our business, results of operations and financial condition. 12 Table of Contents We operate in a highly competitive environment, which could adversely affect our sales and pricing.
Failure to continue to deliver high quality, innovative, competitive products to the marketplace, to adequately protect our intellectual property rights; to supply products that meet applicable regulatory requirements, including engine exhaust emission requirements or to predict market demands for, or gain market acceptance of, our products, could have a negative impact on our business, results of operations and financial condition.
Cat Financial created a cross-functional team that assesses risk across multiple categories as it relates to the use of LIBOR in securities, loans, derivatives, and other financial obligations or extensions of credit held by or due to us.
Together with Cat Financial we created a cross-functional team that assesses risk across multiple categories as it relates to the use of floating reference rates or indices, such as SOFR, in securities, loans, derivatives, and other financial obligations or extensions of credit held by or due to us.
Other changes in market interest rates may influence Cat Financial’s borrowing costs and could reduce its and our earnings and cash flows, returns on financial investments and the valuation of derivative contracts.
Changes in interest rates and market liquidity conditions could have an adverse impact on Cat Financial's and our earnings and cash flows. Changes in market interest rates may influence its and our borrowing costs, returns on financial investments and the valuation of derivative contracts.
Increases in the prices of such commodities would increase our costs, negatively impacting our business, results of operations and financial condition if we are unable to fully offset the effect of these increased costs through price increases, productivity improvements or cost reduction programs. We rely on suppliers to produce or secure material required for the manufacture of our products.
Increases in the prices of such commodities would increase our costs, negatively impacting our business, results of operations and financial condition if we are unable to fully offset the effect of these increased costs through price increases, productivity improvements, cost reduction programs or hedging programs.
Production challenges at suppliers (including suppliers of semiconductors), a disruption in deliveries to or from suppliers or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs.
We rely on suppliers to produce or secure material required for the manufacture of our products. Production challenges at suppliers (including suppliers of semiconductors), a disruption in deliveries to or from suppliers or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs.
We sell finished products primarily through an independent dealer network and directly to OEMs and are subject to risks relating to their inventory management decisions and operational and sourcing practices.
Our business is subject to the inventory management decisions and sourcing practices of our dealers and our OEM customers. We sell finished products primarily through an independent dealer network and directly to OEMs and are subject to risks relating to their inventory management decisions and operational and sourcing practices.
Furthermore, we make strategic divestitures from time to time. In the case of divestitures, we may agree to indemnify acquiring parties for certain liabilities arising from our former businesses. These divestitures may also result in continued financial involvement in the divested businesses following the transaction, including through guarantees or other financial arrangements.
In the case of divestitures, we may agree to indemnify acquiring parties for certain liabilities arising from our former businesses. These divestitures may also result in continued financial involvement in the divested businesses following the transaction, including through guarantees or other financial arrangements. Lower performance by those divested businesses could affect our future financial results.
While various procedures and controls have been and are being utilized to mitigate such risks, there can be no guarantee that the actions and controls we have implemented and are implementing, or which we cause or have caused third-party service providers to implement, will be sufficient to protect and mitigate associated risks to our systems, information or other property.
While various procedures and controls have been and are being utilized to mitigate such risks, there can be no guarantee that the actions and controls we have implemented and are implementing, or which we cause or have caused third-party service providers to implement, will be sufficient to protect and mitigate associated risks to our systems, information or other property. 12 Table of Contents We have experienced cybersecurity threats and vulnerabilities in our systems and those of our third party providers, and we have experienced viruses and attacks targeting our information technology systems and networks.
In addition, data we collect, store and process are subject to a variety of U.S. and international laws and regulations, such as the European Union's General Data Protection Regulation and the California Consumer Privacy Act, which may carry significant potential penalties for noncompliance. 13 Table of Contents Our business is subject to the inventory management decisions and sourcing practices of our dealers and our OEM customers.
In addition, data we collect, store and process are subject to a variety of U.S. and international laws and regulations, such as the European Union's General Data Protection Regulation and the California Consumer Privacy Act, which may carry significant potential penalties for noncompliance.
Furthermore, changes in global economic conditions, including material cost increases and decreases in economic activity in key markets we serve, and the success of plans to manage cost increases, inventory and other important elements of our business may significantly impact our ability to generate funds from operations.
Furthermore, changes in global economic conditions, including material cost increases and decreases in economic activity in key markets we serve, and the success of plans to manage cost increases, inventory and other important elements of our business may significantly impact our ability to generate funds from operations. 14 Table of Contents In addition, demand for our products generally depends on customers’ ability to pay for our products, which, in turn, depends on their access to funds.
Due to the international scope of our operations, we are subject to a complex system of import- and export-related laws and regulations.
LEGAL & REGULATORY RISKS Our global operations are subject to a wide-range of trade and anti-corruption laws and regulations. Due to the international scope of our operations, we are subject to a complex system of import- and export-related laws and regulations.
The COVID-19 pandemic has significantly increased economic and customer demand uncertainty, has caused inflationary pressure in the U.S. and elsewhere and has led to volatility in customer demand for the Company’s products and services and caused supply chain disruptions.
Pandemics can significantly increase economic and customer demand uncertainty, cause inflationary pressure in the U.S. and elsewhere and lead to volatility in customer demand for the Company’s products and services and cause supply chain disruptions.
For information regarding additional legal matters related to our taxes, please see Note 6 — “Income taxes” and Note 22 — “Environmental and legal matters” of Part II, Item 8 “Financial Statements and Supplementary Data” to this Annual Report on Form 10-K . 19 Table of Contents Costs associated with lawsuits or investigations or adverse rulings in enforcement or other legal proceedings may have an adverse effect on our results of operations.
For information regarding additional legal matters related to our taxes, please see Note 6 — “Income taxes” and Note 22 — “Environmental and legal matters” of Part II, Item 8 “Financial Statements and Supplementary Data” to this Annual Report on Form 10-K .
We are subject to a variety of legal proceedings and legal compliance risks in virtually every part of the world. We face risk of exposure to various types of claims, lawsuits and government investigations.
Costs associated with lawsuits or investigations or adverse rulings in enforcement or other legal proceedings may have an adverse effect on our results of operations. We are subject to a variety of legal proceedings and legal compliance risks in virtually every part of the world. We face risk of exposure to various types of claims, lawsuits and government investigations.
For example, the COVID-19 pandemic has had, and continues to have, a significant impact around the world, prompting governments and businesses to take unprecedented measures in response. Such measures have included travel bans and restrictions, quarantines, shelter in place orders and shutdowns.
For example, a pandemic had a significant impact around the world, prompting governments and businesses to take unprecedented measures in response. Such measures included travel bans and restrictions, quarantines, shelter in place orders and shutdowns. Those measures impacted or could again impact all or portions of our workforce and operations and the operations of our customers, dealers and suppliers.
Increases in interest rates could negatively impact sales and create supply chain inefficiencies. 11 Table of Contents Central banks and other policy arms of many countries may take actions to vary the amount of liquidity and credit available in an economy.
Central banks and other policy arms of many countries may take actions to vary the amount of liquidity and credit available in an economy.
Capital and credit market volatility and uncertainty may cause financial institutions to revise their lending standards, resulting in customers’ decreased access to capital.
Changes in global economic conditions may result in customers experiencing increased difficulty in generating funds from operations. Capital and credit market volatility and uncertainty may cause financial institutions to revise their lending standards, resulting in customers’ decreased access to capital.
Because a significant number of the loans made by Cat Financial are made utilizing fixed interest rates, its business results are subject to fluctuations in interest rates. Certain loans made by Cat Financial and various financing extended to Cat Financial are made at variable rates that use LIBOR as a benchmark for establishing the interest rate.
Because a significant number of the loans made by Cat Financial are made utilizing fixed interest rates, its business results are subject to fluctuations in interest rates.
Significant adverse changes in credit or capital markets could result in actual rates of return on pension investments being materially lower than projected and result in increased contribution requirements.
Significant adverse changes in credit or capital markets could result in actual rates of return on pension investments being materially lower than projected and result in increased contribution requirements. These factors could significantly increase our payment obligations under the plans, and as a result, adversely affect our business and overall financial condition.
If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, they could negatively impact our reputation, business, capital expenditures, results of operations, financial condition and competitive position. 20 Table of Contents The Company’s amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its shareholders, which could discourage claims or limit the ability of the Company’s shareholders to bring a claim in a judicial forum viewed by the shareholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.
The Company’s amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its shareholders, which could discourage claims or limit the ability of the Company’s shareholders to bring a claim in a judicial forum viewed by the shareholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.
We have experienced cyber security threats and vulnerabilities in our systems and those of our third party providers, and we have experienced viruses and attacks targeting our information technology systems and networks. Such prior events, to date, have not had a material impact on our financial condition, results of operations or liquidity.
Such prior events, to date, have not had a material impact on our financial condition, results of operations or liquidity.
The rates of infrastructure spending, commercial construction and housing starts also play a significant role in our results.
The rates of infrastructure spending, commercial construction and housing starts also play a significant role in our results. Our products are an integral component of these activities, and as these activities decrease, demand for our products and services may be significantly impacted, which could negatively impact our results.
Our products are an integral component of these activities, and as these activities decrease, demand for our products and services may be significantly impacted, which could negatively impact our results. 10 Table of Contents Catastrophic events, including global pandemics such as the COVID-19 pandemic, could materially adversely affect our business, results of operations and/or financial condition.
Catastrophic events, including global pandemics, could materially adversely affect our business, results of operations and/or financial condition.
The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.
Certain loans made by Cat Financial and various financing extended to Cat Financial are made at variable rates that use floating reference rates or indices, including the Secured Overnight Financing Rate, or SOFR, an index calculated by short-term repurchase agreements, backed by Treasury securities,as a benchmark for establishing the interest rate.
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These measures have impacted and may continue to impact all or portions of our workforce and operations and the operations of our customers, dealers and suppliers. Although certain restrictions related to the COVID-19 pandemic have eased, uncertainty continues to exist regarding such measures and potential future measures.
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We are a significant user of steel and many other commodities required for the manufacture of our products.
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The adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event, such as the COVID-19 pandemic.
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If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, they could negatively impact our reputation, business, capital expenditures, results of operations, financial condition and competitive position.
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Additionally, we have experienced and expect to continue to experience transportation delays for parts, components and finished machines due to capacity constraints and congestion at ports throughout the globe although the situation has improved compared to recent periods.
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In addition, demand for our products generally depends on customers’ ability to pay for our products, which, in turn, depends on their access to funds. Changes in global economic conditions may result in customers experiencing increased difficulty in generating funds from operations.
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Changes in interest rates and market liquidity conditions could have an adverse impact on Cat Financial's and our earnings and cash flows.
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While interest rates had remained at historically low levels in recent years, the Federal Reserve Board significantly increased the federal funds rate in 2022 and has indicated that it expects continued increases in interest rates in 2023 and 2024 to combat rising inflation in the U.S.
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LIBOR is the subject of recent proposals for reform. On July 27, 2017, the United Kingdom’s Financial Conduct Authority ("FCA") announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.
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Immediately following the LIBOR publication on December 31, 2021, ICE Benchmark Administration ("IBA") ceased the publication of all GBP, EUR, CHF and JPY LIBOR settings, as well as the one-week and two-month USD LIBOR tenors.
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On November 30, 2020, IBA, with the support of the United States Federal Reserve and the FCA, announced plans to consult on ceasing publication of all other remaining USD LIBOR tenors on June 30, 2023.
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While the November 30 announcement extended the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021. Further, on March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act, was signed into law in the U.S.
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This legislation establishes a uniform benchmark replacement process for financial contracts maturing after June 30, 2023 that do not contain clearly defined or practicable fallback provisions. The legislation also creates a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Federal Reserve.
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At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is anticipated in coming years.
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There continue to be uncertainties regarding the transition from LIBOR, including but not limited to the need to renegotiate certain terms of our loan agreements with LIBOR as the referenced rate, which could require us to incur significant expense and may subject us to disputes or litigation over the appropriateness or comparability to LIBOR of the replacement reference rates.
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The consequences of these developments cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, derivatives, and other financial obligations or extensions of credit held by or due to Cat Financial, as well as the revenue and expenses associated with those securities, loans and financial instruments.
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These factors could significantly increase our payment obligations under the plans, and as a result, adversely affect our business and overall financial condition. 18 Table of Contents LEGAL & REGULATORY RISKS Our global operations are subject to a wide-range of trade and anti-corruption laws and regulations.
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Unresolved Staff Comments. None. 21 Table of Contents

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Item 1C. Executive Officers of the Registrant. Name and age Present Caterpillar Inc. position and date of initial election Principal positions held during the past five years if other than Caterpillar Inc. position currently held D. James Umpleby III (64) Chairman of the Board (2018) and Chief Executive Officer (2017) Group President (2013-2016) Andrew R.J.
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Item 1C. Cybersecurity As required by Item 106 of Regulation S-K, the following sets forth information regarding our cybersecurity strategy, risk management and governance. 19 Cybersecurity Strategy and Risk Management Cybersecurity is critical to advancing our overall objectives and enabling our digital efforts.
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Bonfield (60) Chief Financial Officer (2018) Group Chief Financial Officer for a multinational electricity and gas utility company (2010-2018) Bob De Lange (53) Group President (2017) Vice President (2015-2016), Worldwide Product Manager, Medium Wheel Loaders, (2013-2014) Denise C. Johnson (56) Group President (2016) Vice President (2012-2016) Joseph E.
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As a global company, we face a wide variety of cybersecurity threats that range from common attacks such as ransomware and denial-of-service, to attacks from more advanced adversaries. Our customers, suppliers, and other partners face similar cybersecurity threats, and a cybersecurity incident impacting these entities could materially adversely affect our operations, performance and results.
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Creed (47) Group President (2021) Vice President, Oil & Gas and Marine Division (2019-2020), Interim Chief Financial Officer (2018), Vice President, Finance Services Division (2017), Group Chief Financial Officer, Energy and Transportation (2013-2016) Anthony D. Fassino (52) Group President (2021) Vice President, Building Construction Products (2018-2020), Director of Worldwide Forestry Products (2016-2018) Suzette M.
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These cybersecurity threats and related risks make it imperative that we maintain focus on cybersecurity and systemic risks. We maintain a comprehensive cybersecurity program which is integrated within the Company’s enterprise risk management system and encompasses the corporate information technology and operational technology environments as well as customer-facing products.
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Long (57) Chief Legal Officer and General Counsel (2017) Interim Executive Vice President, Law and Public Policy (2017), Deputy General Counsel (2013-2017) Cheryl H. Johnson (62) Chief Human Resources Officer (2017) Executive Vice President of Human Resources for a global multi-industry aerospace, defense and industrial manufacturing company (2012-2017) William E.
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Our cybersecurity program has implemented a governance structure and process to identify, assess, manage, mitigate, respond to and report on cybersecurity risks. We utilize cybersecurity policies and frameworks based on industry and government standards.
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Schaupp (51) Vice President and Chief Accounting Officer (2022) Finance Director, Global Finance Services Division (2021-2022), Vice President and Controller and Chief Accounting Officer of PPG Industries, Inc. (2018-2021), Assistant Controller and Acting Controller for PPG Industries, Inc. (2018), Director Corporate Audit Services for PPG Industries, Inc. (2017-2018)
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Our cyber risk management program controls are based on recognized best practices and standards, including the National Institute of Standards and Technology (NIST) Cyber Security Framework and the International Organization for Standardization (ISO 27001) Information Security Management System Requirements. We partner with third parties to support and evaluate our cybersecurity program.
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These third-party services span areas including cybersecurity maturity assessments, incident response, penetration testing, consulting on best practices, and others. We also consume threat intelligence from several paid and non-paid sources.
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We maintain a 24 x 7 operations center which serves as a central location for the reporting of cybersecurity matters, provides monitoring of our global cybersecurity environment, and coordinates the investigation and remediation of alerts. As cybersecurity events occur, the cybersecurity team focuses on responding to and containing the threat and minimizing impact.
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In the event of an incident, the cybersecurity team assesses, among other factors, safety impact, supply chain and manufacturing disruption, data and personal information loss, business operations disruption, projected cost and potential for reputational harm, with participation from technical, legal and law enforcement support, as appropriate.
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We have implemented a cybersecurity awareness program which covers topics such as phishing, social networking safety, password security and mobile device usage. We have mandatory training in the areas of cybersecurity, privacy, and confidential information handling. We also conduct regular phishing training and simulations for our employees and contractors.
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We provide extensive specialized role-based training to technical professionals in cybersecurity, secure application development, and other focus areas. We also conduct periodic tabletop exercises to validate our preparation for cyber events.
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We operate a third-party cybersecurity program with the goal of minimizing disruption to the Company’s business and production operations, strengthening supply chain resilience, and supporting the integrity of components and systems used in its products and services.
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We rely heavily on our supply chain to deliver our products and services to our customers, and a cybersecurity incident at a supplier, subcontractor or joint venture partner could materially adversely impact us. We assess third-party cybersecurity controls through a cybersecurity third-party risk assessment process. Identified deficiencies are addressed through a risk remediation process.
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For select suppliers, we engage third-party cybersecurity monitoring and alerting services, and seek to work directly with those suppliers to address potential deficiencies identified.
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As of the date of this report, we do not believe that risks from any cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to affect us, including our business strategy, results of operations or financial condition. That said, as discussed more fully under Item 1A.
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“Risk Factors—Operational Risks— Increased information technology security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services” of this Form 10-K, these threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.
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Cybersecurity attacks could also include attacks targeting customer data or the security, integrity and/or reliability of the hardware and software installed in our products. It is possible that our information technology systems and networks, or those managed or provided by third parties, could have vulnerabilities, which could go unnoticed for a period of time.
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While various procedures and controls have been and are being utilized to mitigate such risks, there can be no guarantee that the actions and controls we have implemented and are implementing, or which we cause or have caused third-party service providers to implement, will be sufficient to protect and mitigate associated risks to our systems, information or other property.
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Cybersecurity Governance Caterpillar’s board has oversight for risk management with a focus on the most significant risks facing the Company, including strategic, operational, financial and legal compliance risks.
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The board’s risk oversight process builds upon management’s risk assessment and mitigation processes, which include an enterprise risk management program of which our cybersecurity processes are an integral component. 20 The board implements its risk oversight function both as a board and through delegation to board committees, which meet regularly and report back to the board.
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The board has delegated the oversight of specific risks to board committees that align with their functional responsibilities. The Audit Committee (the “AC”) assists the board in overseeing the enterprise risk management program and evaluates and monitors risks related to, among other things, the Company’s information security program.
Added
The AC assesses cybersecurity and information technology risks and the controls implemented to monitor and mitigate these risks. The Company’s Chief Information Officer & Senior Vice President, Caterpillar IT (the “CIO”) attends all bimonthly AC meetings and provides cybersecurity updates to the AC and board.
Added
Our cybersecurity program is overseen by our CIO, who has been a Caterpillar employee for nearly twenty-five years. Prior to her current appointment as our CIO in September 2020, she was the Chief Information Officer for the Company’s Financial Products Division.
Added
Her extensive background in IT includes global leadership for large-scale systems transformations, cybersecurity, cloud and application management, global data center management, worldwide network, servers and storage, database management and end-user services. Our CIO leads a cross-functional cybersecurity team comprised of professionals from our product, cybersecurity, legal and compliance organizations who focus on managing the security of our connected solutions.
Added
This team manages the Company’s global IT systems, IT risk management, cybersecurity, global infrastructure and IT transformations.

Item 2. Properties

Properties — owned and leased real estate

5 edited+0 added−0 removed8 unchanged
Biggest changeWe do not anticipate any difficulty in retaining occupancy of any leased facilities, either by renewing leases prior to expiration or by replacing them with equivalent leased facilities. 22 Table of Contents Headquarters and Other Key Offices Our corporate headquarters is in a leased office located in Irving, Texas. Our Financial Products business is headquartered in offices in Nashville, Tennessee.
Biggest changeHeadquarters and Other Key Offices Our corporate headquarters is in a leased office located in Irving, Texas. Our Financial Products business is headquartered in offices in Nashville, Tennessee. Additional key offices are located inside and outside the United States.
Construction Industries Arkansas: North Little Rock Brazil: Campo Largo, Piracicaba Georgia: Athens China: Suzhou, Wujiang, Xuzhou, Qingzhou Illinois: Decatur, East Peoria France: Grenoble, Echirolles Kansas: Wamego Hungary: Godollo Minnesota: Brooklyn Park India: Hosur, Thiruvallur North Carolina: Clayton, Sanford Italy: Minerbio, Cattolica Texas: Victoria Japan: Akashi Mexico: Torreon Netherlands: Den Bosch Poland: Janow, Sosnowiec Russia: Tosno Thailand: Rayong United Kingdom: Desford, Stockton Resource Industries Illinois: Decatur, East Peoria China: Qingzhou, Wuxi South Carolina: Sumter Germany: Dortmund, Lunen Texas: Denison India: Thiruvallur Wisconsin: South Milwaukee Indonesia: Batam Italy: Jesi Mexico: Acuna, Monterrey, Reynosa Russia: Tosno Thailand: Rayong United Kingdom: Peterlee Energy & Transportation Alabama: Albertville, Montgomery Australia: Cardiff, Perth, Redbank, Revesby California: San Diego Brazil: Curitiba, Hortolandia, Piracicaba, Sete Lagoas Georgia: Griffin, Patterson China : Tianjin, Wuxi Illinois: East Peoria, Mossville, Mapleton, Pontiac Czech Republic: Zatec, Zebrak Indiana: Lafayette, Muncie Germany: Kiel, Mannheim, Rostock Kentucky: Decoursey, Mayfield India: Aurangabad, Hosur Oklahoma: Broken Arrow Italy : Pistoria North Carolina: Winston-Salem Mexico: San Luis Potosi, Tijuana Texas: Channelview, DeSoto, Fort Worth, Mabank, San Antonio, Schertz, Seguin, Sherman United Kingdom: Larne, Peterborough, Sandiacre, South Queensferry, Springvale, Stafford, Wimborne 24 Table of Contents
Construction Industries Arkansas: North Little Rock Brazil: Campo Largo, Piracicaba Georgia: Athens China: Suzhou, Wujiang, Xuzhou, Qingzhou Illinois: Decatur, East Peoria France: Grenoble, Echirolles Kansas: Wamego Hungary: Godollo Minnesota: Brooklyn Park India: Hosur, Thiruvallur North Carolina: Clayton, Sanford Italy: Minerbio, Cattolica Texas: Victoria Japan: Akashi Mexico: Torreon Netherlands: Den Bosch Poland: Janow, Sosnowiec Thailand: Rayong United Kingdom: Desford, Stockton Resource Industries Illinois: Decatur, East Peoria China: Qingzhou, Wuxi South Carolina: Sumter Germany: Lunen Texas: Denison India: Thiruvallur Wisconsin: South Milwaukee Indonesia: Batam Mexico: Acuna, Monterrey, Reynosa Thailand: Rayong United Kingdom: Peterlee Energy & Transportation Alabama: Albertville, Montgomery Australia: Cardiff, Perth, Redbank, Revesby California: San Diego Brazil: Curitiba, Hortolandia, Piracicaba, Sete Lagoas Georgia: Griffin, Patterson China : Tianjin, Wuxi Illinois: East Peoria, Mossville, Mapleton, Pontiac Czech Republic: Zatec, Zebrak Indiana: Lafayette, Muncie Germany: Kiel, Mannheim, Rostock Kentucky: Decoursey, Mayfield India: Aurangabad, Hosur Oklahoma: Broken Arrow Italy : Pistoria North Carolina: Winston-Salem Mexico: San Luis Potosi, Tijuana Texas: Channelview, DeSoto, Fort Worth, Mabank, San Antonio, Schertz, Seguin, Sherman United Kingdom: Larne, Peterborough, Sandiacre, South Queensferry, Springvale, Stafford, Wimborne 23 Table of Contents
Our principal manufacturing facilities include those used by the following segments in the following locations: 23 Table of Contents Segment U.S. Facilities Facilities Outside the U.S.
Our principal manufacturing facilities include those used by the following segments in the following locations: 22 Table of Contents Segment U.S. Facilities Facilities Outside the U.S.
Additional key offices are located inside and outside the United States. Technical Center, Training Centers, Demonstration Areas and Proving Grounds We operate Technical Centers located in Aurora and Mossville, Illinois; Wuxi, China; and Chennai, India. Our demonstration centers are located in Tinaja Hills, Arizona; Edwards, Illinois; Chichibu, Japan and Malaga, Spain.
Technical Center, Training Centers, Demonstration Areas and Proving Grounds We operate Technical Centers located in Aurora and Mossville, Illinois; Wuxi, China; and Chennai, India. Our demonstration centers are located in Tinaja Hills, Arizona; Edwards, Illinois; Chichibu, Japan and Malaga, Spain.
Properties we lease are covered by leases expiring over terms of generally one to ten years.
Properties we lease are covered by leases expiring over terms of generally one to ten years. We do not anticipate any difficulty in retaining occupancy of any leased facilities, either by renewing leases prior to expiration or by replacing them with equivalent leased facilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−1 removed1 unchanged
Biggest changeNumber of Shareholders: Shareholders of record at the end of 2022 totaled 21,935 , compared with 22,559 at the end of 2021. 25 Table of Contents Performance Graph: Total Cumulative Shareholder Return for Five-Year Period Ending December 31, 2022 The graph below shows the cumulative shareholder return assuming an investment of $100 on December 31, 2017, and reinvestment of dividends issued thereafter. 2017 2018 2019 2020 2021 2022 Caterpillar Inc. $ 100.00 $ 82.44 $ 98.53 $ 125.10 $ 145.06 $ 172.04 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 S&P 500 Machinery $ 100.00 $ 85.36 $ 111.22 $ 137.27 $ 164.94 $ 167.25 26 Table of Contents Non-U.S.
Biggest changeNumber of Shareholders: Shareholders of record at the end of 2023 totaled 21,217, compared with 21,935 at the end of 2022. 24 Table of Contents Performance Graph: Total Cumulative Shareholder Return for Five-Year Period Ending December 31, 2023 The graph below shows the cumulative shareholder return assuming an investment of $100 on December 31, 2018, and reinvestment of dividends issued thereafter. 2018 2019 2020 2021 2022 2023 Caterpillar Inc. $ 100.00 $ 119.51 $ 151.74 $ 175.95 $ 208.67 $ 262.82 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P 500 Machinery $ 100.00 $ 130.29 $ 160.81 $ 193.23 $ 195.93 $ 235.49 25 Table of Contents Non-U.S.
Employee Stock Purchase Plans As of December 31, 2022, we had 28 employee stock purchase plans (the “EIP Plans”) administered outside the United States for our non-U.S. employees, which had approximately 13,000 active participants in the aggregate.
Employee Stock Purchase Plans As of December 31, 2023, we had 28 employee stock purchase plans (the “EIP Plans”) administered outside the United States for our non-U.S. employees, which had approximately 14,000 active participants in the aggregate.
During the fourth quarter of 2022, approximately 71,000 shares of Caterpillar common stock were purchased by the EIP Plans pursuant to the terms of such plans.
During the fourth quarter of 2023, approximately 78,000 shares of Caterpillar common stock were purchased by the EIP Plans pursuant to the terms of such plans.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased 2 Average Price Paid per Share 2 Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased under the Program (in billions) 1 October 1-31, 2022 3,944,442 $ 178.91 3,944,442 $ 13.014 November 1-30, 2022 482,300 $ 228.01 482,300 $ 12.904 December 1-31, 2022 448,257 $ 234.23 448,257 $ 12.799 Total 4,874,999 $ 188.85 4,874,999 1 In May 2022, the Board approved a new share repurchase authorization (the 2022 Authorization) of up to $15.0 billion of Caterpillar common stock effective August 1, 2022, with no expiration.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased under the Program (in billions) 1 October 1-31, 2023 965,566 $ 260.01 965,566 $ 10.340 November 1-30, 2023 7,250,965 $ 239.97 7,250,965 2 $ 8.300 December 1-31, 2023 1,749,834 $ 271.45 1,749,834 $ 7.825 Total 9,966,365 $ 247.44 9,966,365 1 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.
Removed
As of December 31, 2022, approximately $12.8 billion remained available under the 2022 Authorization. 2 In October, November and December of 2022, we repurchased 3.9 million, 0.5 million and 0.5 million shares respectively, for an aggregate of $921 million in open market transactions at an average price per share of $178.91, $228.01 and $234.23, respectively.
Added
As of December 31, 2023, approximately $7.8 billion remained available under the 2022 Authorization. 2 Includes shares acquired pursuant to the accelerated share repurchase agreement entered into during the fourth quarter of 2023. Item 6. [Reserved] 26 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

139 edited+42 added−47 removed81 unchanged
Biggest changeCertain amounts for prior periods have been reclassified to conform to current year presentation. 50 Table of Contents Supplemental Data for Results of Operations For The Years Ended December 31 Supplemental consolidating data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments (Millions of dollars) 2022 2021 2020 2022 2021 2020 2022 2021 2020 2022 2021 2020 Sales and revenues: Sales of Machinery, Energy & Transportation $ 56,574 $ 48,188 $ 39,022 $ 56,574 $ 48,188 $ 39,022 $ — $ — $ — $ — $ — $ — Revenues of Financial Products 2,853 2,783 2,726 — — — 3,376 3,172 3,110 (523) 1 (389) 1 (384) 1 Total sales and revenues 59,427 50,971 41,748 56,574 48,188 39,022 3,376 3,172 3,110 (523) (389) (384) Operating costs: Cost of goods sold 41,350 35,513 29,082 41,356 35,521 29,088 — — — (6) 2 (8) 2 (6) 2 Selling, general and administrative expenses 5,651 5,365 4,642 4,999 4,724 3,915 672 654 746 (20) 2 (13) 2 (19) 2 Research and development expenses 1,814 1,686 1,415 1,814 1,686 1,415 — — — — — — Interest expense of Financial Products 565 455 589 — — — 565 455 591 — — (2) 3 Goodwill impairment charge 925 — — 925 — — — — — — — — Other operating (income) expenses 1,218 1,074 1,467 47 (106) 283 1,249 1,247 1,236 (78) 2 (67) 2 (52) 2 Total operating costs 51,523 44,093 37,195 49,141 41,825 34,701 2,486 2,356 2,573 (104) (88) (79) Operating profit 7,904 6,878 4,553 7,433 6,363 4,321 890 816 537 (419) (301) (305) Interest expense excluding Financial Products 443 488 514 444 488 513 — — — (1) 3 — 1 3 Other income (expense) 1,291 1,814 (44) 1,374 2,276 (62) (26) 87 32 (57) 4 (549) 4 (14) 4 Consolidated profit before taxes 8,752 8,204 3,995 8,363 8,151 3,746 864 903 569 (475) (850) (320) Provision (benefit) for income taxes 2,067 1,742 1,006 1,858 1,517 853 209 225 153 — — — Profit of consolidated companies 6,685 6,462 2,989 6,505 6,634 2,893 655 678 416 (475) (850) (320) Equity in profit (loss) of unconsolidated affiliated companies 19 31 14 26 42 29 — — — (7) 5 (11) 5 (15) 5 Profit of consolidated and affiliated companies 6,704 6,493 3,003 6,531 6,676 2,922 655 678 416 (482) (861) (335) Less: Profit (loss) attributable to noncontrolling interests (1) 4 5 (1) 3 5 7 12 15 (7) 6 (11) 6 (15) 6 Profit 7 $ 6,705 $ 6,489 $ 2,998 $ 6,532 $ 6,673 $ 2,917 $ 648 $ 666 $ 401 $ (475) $ (850) $ (320) 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 interest expense recorded between Financial Products and ME&T. 4 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. 5 Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries. 6 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 7 Profit attributable to common shareholders. 51 Table of Contents Supplemental Data for Financial Position At December 31 Supplemental consolidating data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments (Millions of dollars) 2022 2021 2022 2021 2022 2021 2022 2021 Assets Current assets: Cash and cash equivalents $ 7,004 $ 9,254 $ 6,042 $ 8,428 $ 962 $ 826 $ — $ — Receivables - trade and other 8,856 8,477 3,710 3,279 519 435 4,627 1,2 4,763 1,2 Receivables - finance 9,013 8,898 — — 13,902 13,828 (4,889) 2 (4,930) 2 Prepaid expenses and other current assets 2,642 2,788 2,488 2,567 290 358 (136) 3 (137) 3 Inventories 16,270 14,038 16,270 14,038 — — — — Total current assets 43,785 43,455 28,510 28,312 15,673 15,447 (398) (304) Property, plant and equipment - net 12,028 12,090 8,186 8,172 3,842 3,918 — — Long-term receivables - trade and other 1,265 1,204 418 375 339 204 508 1,2 625 1,2 Long-term receivables - finance 12,013 12,707 — — 12,552 13,358 (539) 2 (651) 2 Noncurrent deferred and refundable income taxes 2,213 1,840 2,755 2,396 115 105 (657) 4 (661) 4 Intangible assets 758 1,042 758 1,042 — — — — Goodwill 5,288 6,324 5,288 6,324 — — — — Other assets 4,593 4,131 3,882 3,388 1,892 1,952 (1,181) 5 (1,209) 5 Total assets $ 81,943 $ 82,793 $ 49,797 $ 50,009 $ 34,413 $ 34,984 $ (2,267) $ (2,200) Liabilities Current liabilities: Short-term borrowings $ 5,957 $ 5,404 $ 3 $ 9 $ 5,954 $ 5,395 $ — $ — Accounts payable 8,689 8,154 8,657 8,079 294 242 (262) 6 (167) 6 Accrued expenses 4,080 3,757 3,687 3,385 393 372 — — Accrued wages, salaries and employee benefits 2,313 2,242 2,264 2,186 49 56 — — Customer advances 1,860 1,087 1,860 1,086 — 1 — — Dividends payable 620 595 620 595 — — — — Other current liabilities 2,690 2,256 2,215 1,773 635 642 (160) 4,7 (159) 4,7 Long-term debt due within one year 5,322 6,352 120 45 5,202 6,307 — — Total current liabilities 31,531 29,847 19,426 17,158 12,527 13,015 (422) (326) Long-term debt due after one year 25,714 26,033 9,529 9,772 16,216 16,287 (31) 8 (26) 8 Liability for postemployment benefits 4,203 5,592 4,203 5,592 — — — — Other liabilities 4,604 4,805 3,677 4,106 1,638 1,425 (711) 4 (726) 4 Total liabilities 66,052 66,277 36,835 36,628 30,381 30,727 (1,164) (1,078) Commitments and contingencies Shareholders’ equity Common stock 6,560 6,398 6,560 6,398 905 919 (905) 9 (919) 9 Treasury stock (31,748) (27,643) (31,748) (27,643) — — — — Profit employed in the business 43,514 39,282 39,435 35,390 4,068 3,881 11 9 11 9 Accumulated other comprehensive income (loss) (2,457) (1,553) (1,310) (799) (1,147) (754) — — Noncontrolling interests 22 32 25 35 206 211 (209) 9 (214) 9 Total shareholders’ equity 15,891 16,516 12,962 13,381 4,032 4,257 (1,103) (1,122) Total liabilities and shareholders’ equity $ 81,943 $ 82,793 $ 49,797 $ 50,009 $ 34,413 $ 34,984 $ (2,267) $ (2,200) 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 Elimination of prepaid insurance in Financial Products’ other liabilities. 8 Elimination of debt between ME&T and Financial Products. 9 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries. 52 Table of Contents Supplemental Data for Statement of Cash Flow For the Years Ended December 31 Supplemental consolidating data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments (Millions of dollars) 2022 2021 2022 2021 2022 2021 2022 2021 Cash flow from operating activities: Profit (loss) of consolidated and affiliated companies $ 6,704 $ 6,493 $ 6,531 $ 6,676 $ 655 $ 678 $ (482) 1,5 $ (861) 1,5 Adjustments for non-cash items: Depreciation and amortization 2,219 2,352 1,439 1,550 780 802 — — Actuarial (gain) loss on pension and postretirement benefits (606) (833) (606) (833) — — — — Provision (benefit) for deferred income taxes (377) (383) (368) (329) (9) (54) — — Goodwill impairment charge 925 — 925 — — — — — Other 701 216 452 131 (205) (209) 454 2 294 2 Changes in assets and liabilities, net of acquisitions and divestitures: Receivables - trade and other (220) (1,259) (390) (463) 143 47 27 2,3 (843) 2,3 Inventories (2,589) (2,586) (2,572) (2,581) — — (17) 2 (5) 2 Accounts payable 798 2,041 811 2,015 82 49 (95) 2 (23) 2 Accrued expenses 317 196 274 288 43 (92) — — Accrued wages, salaries and employee benefits 90 1,107 97 1,066 (7) 41 — — Customer advances 768 34 769 33 (1) 1 — — Other assets—net (210) (97) (183) (200) (35) 25 8 2 78 2 Other liabilities—net (754) (83) (821) (176) 71 132 (4) 2 (39) 2 Net cash provided by (used for) operating activities 7,766 7,198 6,358 7,177 1,517 1,420 (109) (1,399) Cash flow from investing activities: Capital expenditures—excluding equipment leased to others (1,296) (1,093) (1,279) (1,088) (20) (16) 3 2 11 2 Expenditures for equipment leased to others (1,303) (1,379) (19) (41) (1,310) (1,347) 26 2 9 2 Proceeds from disposals of leased assets and property, plant and equipment 830 1,265 78 186 764 1,095 (12) 2 (16) 2 Additions to finance receivables (13,239) (13,002) — — (14,223) (13,845) 984 3 843 3 Collections of finance receivables 13,177 12,430 — — 14,052 13,337 (875) 3 (907) 3 Net intercompany purchased receivables — — — — 492 (609) (492) 3 609 3 Proceeds from sale of finance receivables 57 51 — — 57 51 — — Net intercompany borrowings — — — 1,000 9 5 (9) 4 (1,005) 4 Investments and acquisitions (net of cash acquired) (88) (490) (88) (490) — — — — Proceeds from sale of businesses and investments (net of cash sold) 1 36 1 36 — — — — Proceeds from sale of securities 2,383 785 1,948 274 435 511 — — Investments in securities (3,077) (1,766) (2,549) (1,189) (528) (577) — — Other—net 14 79 98 81 (84) (2) — — Net cash provided by (used for) investing activities (2,541) (3,084) (1,810) (1,231) (356) (1,397) (375) (456) Cash flow from financing activities: Dividends paid (2,440) (2,332) (2,440) (2,332) (475) (850) 475 5 850 5 Common stock issued, including treasury shares reissued 51 135 51 135 — — — — Common shares repurchased (4,230) (2,668) (4,230) (2,668) — — — — Net intercompany borrowings — — (9) (5) — (1,000) 9 4 1,005 4 Proceeds from debt issued (original maturities greater than three months) 6,674 6,989 — 494 6,674 6,495 — — Payments on debt (original maturities greater than three months) (7,728) (9,796) (25) (1,919) (7,703) (7,877) — — Short-term borrowings - net (original maturities three months or less) 402 3,488 (138) (1) 540 3,489 — — Other—net (10) (4) (10) (4) — — — — Net cash provided by (used for) financing activities (7,281) (4,188) (6,801) (6,300) (964) 257 484 1,855 Effect of exchange rate changes on cash (194) (29) (131) (35) (63) 6 — — Increase (decrease) in cash, cash equivalents and restricted cash (2,250) (103) (2,384) (389) 134 286 — — Cash, cash equivalents and restricted cash at beginning of period 9,263 9,366 8,433 8,822 830 544 — — Cash, cash equivalents and restricted cash at end of period $ 7,013 $ 9,263 $ 6,049 $ 8,433 $ 964 $ 830 $ — $ — 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. 53 Table of Contents
Biggest changeCertain amounts for prior periods have been reclassified to conform to current year presentation. 48 Table of Contents Supplemental Data for Results of Operations For The Years Ended December 31, Supplemental consolidating data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments (Millions of dollars) 2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021 Sales and revenues: Sales of Machinery, Energy & Transportation $ 63,869 $ 56,574 $ 48,188 $ 63,869 $ 56,574 $ 48,188 $ — $ — $ — $ — $ — $ — Revenues of Financial Products 3,191 2,853 2,783 — — — 3,927 3,376 3,172 (736) 1 (523) 1 (389) 1 Total sales and revenues 67,060 59,427 50,971 63,869 56,574 48,188 3,927 3,376 3,172 (736) (523) (389) Operating costs: Cost of goods sold 42,767 41,350 35,513 42,776 41,356 35,521 — — — (9) 2 (6) 2 (8) 2 Selling, general and administrative expenses 6,371 5,651 5,365 5,696 4,999 4,724 704 672 654 (29) 2 (20) 2 (13) 2 Research and development expenses 2,108 1,814 1,686 2,108 1,814 1,686 — — — — — — Interest expense of Financial Products 1,030 565 455 — — — 1,032 565 455 (2) 2 — — Goodwill impairment charge — 925 — — 925 — — — — — — — Other operating (income) expenses 1,818 1,218 1,074 630 47 (106) 1,268 1,249 1,247 (80) 2 (78) 2 (67) 2 Total operating costs 54,094 51,523 44,093 51,210 49,141 41,825 3,004 2,486 2,356 (120) (104) (88) Operating profit 12,966 7,904 6,878 12,659 7,433 6,363 923 890 816 (616) (419) (301) Interest expense excluding Financial Products 511 443 488 511 444 488 — — — — (1) 3 — Other income (expense) 595 1,291 1,814 340 1,374 2,276 (16) (26) 87 271 4 (57) 4 (549) 4 Consolidated profit before taxes 13,050 8,752 8,204 12,488 8,363 8,151 907 864 903 (345) (475) (850) Provision (benefit) for income taxes 2,781 2,067 1,742 2,560 1,858 1,517 221 209 225 — — — Profit of consolidated companies 10,269 6,685 6,462 9,928 6,505 6,634 686 655 678 (345) (475) (850) Equity in profit (loss) of unconsolidated affiliated companies 63 19 31 67 26 42 — — — (4) 5 (7) 5 (11) 5 Profit of consolidated and affiliated companies 10,332 6,704 6,493 9,995 6,531 6,676 686 655 678 (349) (482) (861) Less: Profit (loss) attributable to noncontrolling interests (3) (1) 4 (4) (1) 3 5 7 12 (4) 6 (7) 6 (11) 6 Profit 7 $ 10,335 $ 6,705 $ 6,489 $ 9,999 $ 6,532 $ 6,673 $ 681 $ 648 $ 666 $ (345) $ (475) $ (850) 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 interest expense recorded between Financial Products and ME&T. 4 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. 5 Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries. 6 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 7 Profit attributable to common shareholders. 49 Table of Contents Supplemental Data for Financial Position At December 31, Supplemental consolidating data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments (Millions of dollars) 2023 2022 2023 2022 2023 2022 2023 2022 Assets Current assets: Cash and cash equivalents $ 6,978 $ 7,004 $ 6,106 $ 6,042 $ 872 $ 962 $ — $ — Receivables - trade and other 9,310 8,856 3,971 3,710 570 519 4,769 1,2 4,627 1,2 Receivables - finance 9,510 9,013 — — 14,499 13,902 (4,989) 2 (4,889) 2 Prepaid expenses and other current assets 4,586 2,642 4,327 2,488 341 290 (82) 3 (136) 3 Inventories 16,565 16,270 16,565 16,270 — — — — Total current assets 46,949 43,785 30,969 28,510 16,282 15,673 (302) (398) Property, plant and equipment - net 12,680 12,028 8,694 8,186 3,986 3,842 — — Long-term receivables - trade and other 1,238 1,265 565 418 85 339 588 1,2 508 1,2 Long-term receivables - finance 12,664 12,013 — — 13,299 12,552 (635) 2 (539) 2 Noncurrent deferred and refundable income taxes 2,816 2,213 3,360 2,755 148 115 (692) 4 (657) 4 Intangible assets 564 758 564 758 — — — — Goodwill 5,308 5,288 5,308 5,288 — — — — Other assets 5,257 4,593 4,218 3,882 2,082 1,892 (1,043) 5 (1,181) 5 Total assets $ 87,476 $ 81,943 $ 53,678 $ 49,797 $ 35,882 $ 34,413 $ (2,084) $ (2,267) Liabilities Current liabilities: Short-term borrowings $ 4,643 $ 5,957 $ — $ 3 $ 4,643 $ 5,954 $ — $ — Accounts payable 7,906 8,689 7,827 8,657 314 294 (235) 6,7 (262) 6 Accrued expenses 4,958 4,080 4,361 3,687 597 393 — — Accrued wages, salaries and employee benefits 2,757 2,313 2,696 2,264 61 49 — — Customer advances 1,929 1,860 1,912 1,860 2 — 15 7 — Dividends payable 649 620 649 620 — — — — Other current liabilities 3,123 2,690 2,583 2,215 647 635 (107) 4,8 (160) 4,8 Long-term debt due within one year 8,763 5,322 1,044 120 7,719 5,202 — — Total current liabilities 34,728 31,531 21,072 19,426 13,983 12,527 (327) (422) Long-term debt due after one year 24,472 25,714 8,626 9,529 15,893 16,216 (47) 9 (31) 9 Liability for postemployment benefits 4,098 4,203 4,098 4,203 — — — — Other liabilities 4,675 4,604 3,806 3,677 1,607 1,638 (738) 4 (711) 4 Total liabilities 67,973 66,052 37,602 36,835 31,483 30,381 (1,112) (1,164) Commitments and contingencies Shareholders’ equity Common stock 6,403 6,560 6,403 6,560 905 905 (905) 10 (905) 10 Treasury stock (36,339) (31,748) (36,339) (31,748) — — — — Profit employed in the business 51,250 43,514 46,783 39,435 4,457 4,068 10 10 11 10 Accumulated other comprehensive income (loss) (1,820) (2,457) (783) (1,310) (1,037) (1,147) — — Noncontrolling interests 9 22 12 25 74 206 (77) 10 (209) 10 Total shareholders’ equity 19,503 15,891 16,076 12,962 4,399 4,032 (972) (1,103) Total liabilities and shareholders’ equity $ 87,476 $ 81,943 $ 53,678 $ 49,797 $ 35,882 $ 34,413 $ (2,084) $ (2,267) 1 Elimination of receivables between ME&T and Financial Products. 2 Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables. 3 Elimination of ME&T's insurance premiums that are prepaid to Financial Products. 4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction. 5 Elimination of other intercompany assets between ME&T and Financial Products. 6 Elimination of payables between ME&T and Financial Products. 7 Reclassification of Financial Products' payables to accrued expenses or customer advances. 8 Elimination of prepaid insurance in Financial Products’ other liabilities. 9 Elimination of debt between ME&T and Financial Products. 10 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries. 50 Table of Contents Supplemental Data for Statement of Cash Flow For the Years Ended December 31, Supplemental consolidating data Consolidated Machinery, Energy & Transportation Financial Products Consolidating Adjustments (Millions of dollars) 2023 2022 2023 2022 2023 2022 2023 2022 Cash flow from operating activities: Profit of consolidated and affiliated companies $ 10,332 $ 6,704 $ 9,995 $ 6,531 $ 686 $ 655 $ (349) 1,5 $ (482) 1,5 Adjustments for non-cash items: Depreciation and amortization 2,144 2,219 1,361 1,439 783 780 — — Actuarial (gain) loss on pension and postretirement benefits (97) (606) (97) (606) — — — — Provision (benefit) for deferred income taxes (592) (377) (576) (368) (16) (9) — — Loss on divestiture 572 — 572 — — — — — Goodwill impairment charge — 925 — 925 — — — — Other 375 701 444 452 (577) (205) 508 2 454 2 Changes in assets and liabilities, net of acquisitions and divestitures: Receivables - trade and other (437) (220) (367) (390) 61 143 (131) 2,3 27 2,3 Inventories (364) (2,589) (360) (2,572) — — (4) 2 (17) 2 Accounts payable (754) 798 (836) 811 41 82 41 2 (95) 2 Accrued expenses 796 317 690 274 106 43 — — Accrued wages, salaries and employee benefits 486 90 474 97 12 (7) — — Customer advances 80 768 78 769 2 (1) — — Other assets—net (95) (210) 94 (183) (110) (35) (79) 2 8 2 Other liabilities—net 439 (754) 216 (821) 118 71 105 2 (4) 2 Net cash provided by (used for) operating activities 12,885 7,766 11,688 6,358 1,106 1,517 91 (109) Cash flow from investing activities: Capital expenditures—excluding equipment leased to others (1,597) (1,296) (1,624) (1,279) (22) (20) 49 2 3 2 Expenditures for equipment leased to others (1,495) (1,303) (39) (19) (1,466) (1,310) 10 2 26 2 Proceeds from disposals of leased assets and property, plant and equipment 781 830 55 78 781 764 (55) 2 (12) 2 Additions to finance receivables (15,161) (13,239) — — (17,321) (14,223) 2,160 3 984 3 Collections of finance receivables 14,034 13,177 — — 15,634 14,052 (1,600) 3 (875) 3 Net intercompany purchased receivables — — — — 1,080 492 (1,080) 3 (492) 3 Proceeds from sale of finance receivables 63 57 — — 63 57 — — Net intercompany borrowings — — — — 10 9 (10) 4 (9) 4 Investments and acquisitions (net of cash acquired) (75) (88) (75) (88) — — — — Proceeds from sale of businesses and investments (net of cash sold) (4) 1 (4) 1 — — — — Proceeds from maturities and sale of securities 1,891 2,383 1,642 1,948 249 435 — — Investments in securities (4,405) (3,077) (3,982) (2,549) (423) (528) — — Other—net 97 14 106 98 (9) (84) — — Net cash provided by (used for) investing activities (5,871) (2,541) (3,921) (1,810) (1,424) (356) (526) (375) Cash flow from financing activities: Dividends paid (2,563) (2,440) (2,563) (2,440) (425) (475) 425 5 475 5 Common stock issued, including treasury shares reissued 12 51 12 51 — — — — Common shares repurchased (4,975) (4,230) (4,975) (4,230) — — — — Net intercompany borrowings — — (10) (9) — — 10 4 9 4 Proceeds from debt issued (original maturities greater than three months) 8,257 6,674 — — 8,257 6,674 — — Payments on debt (original maturities greater than three months) (6,318) (7,728) (106) (25) (6,212) (7,703) — — Short-term borrowings - net (original maturities three months or less) (1,345) 402 (3) (138) (1,342) 540 — — Other—net — (10) — (10) — — — — Net cash provided by (used for) financing activities (6,932) (7,281) (7,645) (6,801) 278 (964) 435 484 Effect of exchange rate changes on cash (110) (194) (60) (131) (50) (63) — — Increase (decrease) in cash, cash equivalents and restricted cash (28) (2,250) 62 (2,384) (90) 134 — — Cash, cash equivalents and restricted cash at beginning of period 7,013 9,263 6,049 8,433 964 830 — — Cash, cash equivalents and restricted cash at end of period $ 6,985 $ 7,013 $ 6,111 $ 6,049 $ 874 $ 964 $ — $ — 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. 51 Table of Contents
The Board evaluates the financial condition of the company and considers the economic outlook, corporate cash flow, the company's liquidity needs, and the health and stability of global credit markets to determine whether to maintain or change the quarterly dividend.
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.
Pension Benefits Other Postretirement Benefits 2022 2021 2020 2022 2021 2020 2022 2021 2020 Weighted-average assumptions used to determine benefit obligation, end of year: Discount rate 5.4 % 2.8 % 2.4 % 4.3 % 1.8 % 1.4 % 5.4 % 2.7 % 2.3 % Rate of compensation increase 1 — % — % — % 2.3 % 2.0 % 2.0 % 4.0 % 4.0 % 4.0 % Weighted-average assumptions used to determine net periodic benefit cost: Discount rate used to measure service cost 1 — % — % — % 1.7 % 1.4 % 1.5 % 2.8 % 2.5 % 3.2 % Discount rate used to measure interest cost 2.3 % 1.8 % 2.8 % 1.7 % 1.2 % 1.7 % 2.2 % 1.6 % 2.8 % Expected rate of return on plan assets 4.0 % 4.2 % 5.1 % 3.1 % 2.9 % 3.3 % 6.9 % 6.5 % 7.0 % Rate of compensation increase 1 — % — % — % 2.0 % 2.0 % 2.0 % 4.0 % 4.0 % 4.0 % Health care cost trend rates at year-end: Health care trend rate assumed for next year 6.5 % 5.6 % 5.8 % Rate that the cost trend rate gradually declines to 4.7 % 5.0 % 5.0 % Year that the cost trend rate reaches ultimate rate 2030 2025 2025 1 Effective December 31, 2019, all U.S. pension benefits were frozen, and accordingly this assumption is no longer applicable.
Pension Benefits Other Postretirement Benefits 2023 2022 2021 2023 2022 2021 2023 2022 2021 Weighted-average assumptions used to determine benefit obligation, end of year: Discount rate 5.0 % 5.4 % 2.8 % 3.9 % 4.3 % 1.8 % 5.1 % 5.4 % 2.7 % Rate of compensation increase 1 — % — % — % 2.3 % 2.3 % 2.0 % 4.0 % 4.0 % 4.0 % Weighted-average assumptions used to determine net periodic benefit cost: Discount rate used to measure service cost 1 — % — % — % 3.8 % 1.7 % 1.4 % 5.4 % 2.8 % 2.5 % Discount rate used to measure interest cost 5.2 % 2.3 % 1.8 % 4.2 % 1.7 % 1.2 % 5.3 % 2.2 % 1.6 % Expected rate of return on plan assets 5.8 % 4.0 % 4.2 % 5.2 % 3.1 % 2.9 % 7.4 % 6.9 % 6.5 % Rate of compensation increase 1 — % — % — % 2.3 % 2.0 % 2.0 % 4.0 % 4.0 % 4.0 % Health care cost trend rates at year-end: Health care trend rate assumed for next year 6.2 % 6.5 % 5.6 % Rate that the cost trend rate gradually declines to 4.7 % 4.7 % 5.0 % Year that the cost trend rate reaches ultimate rate 2030 2030 2025 1 Effective December 31, 2019, all U.S. pension benefits were frozen, and accordingly this assumption is no longer applicable.
We would report a goodwill impairment as a non-cash charge to earnings. Warranty liability – At the time we recognize a sale, we record estimated future warranty costs. We determine the warranty liability by applying historical claim rate experience to the current field population and dealer inventory.
We would report a goodwill impairment as a non-cash charge to earnings. Product warranty liability — At the time we recognize a sale, we record estimated future warranty costs. We determine the product warranty liability by applying historical claim rate experience to the current field population and dealer inventory.
Additional information related to income taxes is included in Note 6 - “Income taxes” of Part II, Item 8 “Financial statements and Supplementary Data.” 46 Table of Contents OTHER MATTERS Information related to legal proceedings appears in Note 22—Environmental and Legal Matters of Part II, Item 8 “Financial Statements and Supplementary Data.” RETIREMENT BENEFITS We recognize mark-to-market gains and losses immediately through earnings upon the remeasurement of our pension and OPEB plans.
Additional information related to income taxes is included in Note 6 — “Income taxes” of Part II, Item 8 “Financial statements and Supplementary Data.” 44 Table of Contents OTHER MATTERS Information related to legal proceedings appears in Note 22 — Environmental and Legal Matters of Part II, Item 8 “Financial Statements and Supplementary Data.” RETIREMENT BENEFITS We recognize mark-to-market gains and losses immediately through earnings upon the remeasurement of our pension and OPEB plans.
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. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the company’s business under Item 1A. Risk Factors of the 2022 Form 10-K.
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. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the company’s business under Item 1A. Risk Factors of the 2023 Form 10-K.
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 Cat machines and engines. 22. Restructuring Costs – May include costs for employee separation, long-lived asset impairments and contract terminations.
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 Cat machines and engines. 22. Restructuring Costs – May include costs for employee separation, long-lived asset impairments, contract terminations and divestiture impacts.
See Note 12 - “Postemployment benefit plans” of Part II, Item 8 “Financial Statement and Supplemental Data” for further information regarding the accounting for postretirement benefits. 45 Table of Contents Post-sale discount reserve – We provide discounts to dealers through merchandising programs. We have numerous programs that are designed to promote the sale of our products.
See Note 12 — “Postemployment benefit plans” of Part II, Item 8 “Financial Statement and Supplemental Data” for further information regarding the accounting for postretirement benefits. 43 Table of Contents Post-sale discount reserve — We provide discounts to dealers through merchandising programs. We have numerous programs that are designed to promote the sale of our products.
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 December 31, 2022, there were no borrowings under the Credit Facility.
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 December 31, 2023, there were no borrowings under the Credit Facility.
Without consideration of other factors such as third-party residual guarantees or contractual customer purchase options, a 10 percent non-temporary decrease in the market value of our equipment subject to operating leases would reduce residual value estimates and result in the recognition of approximately $80 million of additional annual depreciation expense.
Without consideration of other factors such as third-party residual guarantees or contractual customer purchase options, a 10 percent non-temporary decrease in the market value of our equipment subject to operating leases would reduce residual value estimates and result in the recognition of approximately $75 million of additional annual depreciation expense.
The product portfolio includes large track-type tractors; large mining trucks; hard rock vehicles; longwall miners; 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; select work tools; machinery components; electronics and control systems and related parts.
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; select work tools; machinery components; electronics and control systems and related parts.
In addition, the sum of the components reported across periods may not equal the total amount reported year-to-date due to rounding. 29 Table of Contents 2022 COMPARED WITH 2021 CONSOLIDATED SALES AND REVENUES The chart above graphically illustrates reasons for the change in consolidated sales and revenues between 2021 (at left) and 2022 (at right).
In addition, the sum of the components reported across periods may not equal the total amount reported year-to-date due to rounding. 29 Table of Contents 2023 COMPARED WITH 2022 CONSOLIDATED SALES AND REVENUES The chart above graphically illustrates reasons for the change in consolidated sales and revenues between 2022 (at left) and 2023 (at right).
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 Effective Tax Rate Profit Profit per Share Twelve Months Ended December 31, 2022 - U.S.
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 Effective Tax Rate Profit Profit per Share Twelve Months Ended December 31, 2023 - U.S.
The product portfolio includes asphalt pavers; backhoe loaders; compactors; cold planers; compact track and multi-terrain loaders; mini, small, medium and large track excavators; forestry machines; material handlers; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; small and medium track-type tractors; track-type loaders; wheel excavators; compact, small and medium wheel loaders; and related parts and work tools. 6.
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.
Accordingly, no assurance can be given that actual results would be consistent with the results of our estimate. 48 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.
Accordingly, no assurance can be given that actual results would be consistent with the results of our estimate. 46 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.
An analysis of the December 31, 2022 balance sheet, using these assumptions, estimates the impact of a 100 basis point immediate and sustained adverse change in interest rates to have a minimal impact on 2023 pre-tax earnings. Last year, similar assumptions and calculations yielded a minimal impact to 2022 pre-tax earnings.
An analysis of the December 31, 2023 balance sheet, using these assumptions, estimates the impact of a 100 basis point immediate and sustained adverse change in interest rates to have a minimal impact on 2024 pre-tax earnings. Last year, similar assumptions and calculations yielded a minimal impact to 2023 pre-tax earnings.
A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would have a minimal impact to the 2023 pre-tax earnings of ME&T. Last year, similar assumptions and calculations yielded a minimal impact to 2022 pre-tax earnings.
A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would have a minimal impact to the 2024 pre-tax earnings of ME&T. Last year, similar assumptions and calculations yielded a minimal impact to 2023 pre-tax earnings.
The majority of the balance in both 2022 and 2021 consisted of unearned insurance premiums. Postretirement benefits – We sponsor defined benefit pension plans and/or other postretirement benefit plans (retirement healthcare and life insurance) to employees in many of our locations throughout the world.
The majority of the balance in both 2023 and 2022 consisted of unearned insurance premiums. Postretirement benefits — We sponsor defined benefit pension plans and/or other postretirement benefit plans (retirement healthcare and life insurance) to employees in many of our locations throughout the world.
We have committed cash outflows related to postretirement benefit obligations, long-term debt and operating lease agreements. See Notes 12, 14 and 20, respectively, of Part II, Item 8 “Financial Statements and Supplementary Data” for additional information. 39 Table of Contents We have short-term obligations related to the purchase of goods and services made in the ordinary course of business.
We have committed cash outflows related to postretirement benefit obligations, long-term debt and operating lease agreements. See Notes 12, 14 and 20, respectively, of Part II, Item 8 “Financial Statements and Supplementary Data” for additional information. We have short-term obligations related to the purchase of goods and services made in the ordinary course of business.
Machinery, Energy & Transportation segments exclude most Financial Products revenues. 37 Table of Contents 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.
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.
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 Cat machinery; 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.
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.
Consolidating Adjustments – Elimination of transactions between Machinery, Energy & Transportation and Financial Products. 35 Table of Contents 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.
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.
Based on the anticipated and firmly committed cash inflow and outflow for our ME&T operations for the next 12 months and the foreign currency derivative instruments in place at year-end, a hypothetical 10 percent weakening of the U.S. dollar relative to all other currencies would adversely affect our expected 2023 cash flow for our ME&T operations by approximately $98 million.
Based on the anticipated and firmly committed cash inflow and outflow for our ME&T operations for the next 12 months and the foreign currency derivative instruments in place at year-end, a hypothetical 10 percent weakening of the U.S. dollar relative to all other currencies would adversely affect our expected 2024 cash flow for our ME&T operations by approximately $200 million.
In estimating the service and interest cost components of net periodic benefit cost, we utilize a full yield curve approach in determining a discount rate. This approach applies the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Discount rates are sensitive to changes in interest rates.
In estimating the service and interest cost components of net periodic benefit cost, we utilize a full yield curve approach in determining a discount rate. This approach applies the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.
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 vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products.
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.
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 $1.30 billion during 2022, compared to $1.13 billion in 2021.
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 $1.66 billion during 2023, compared to $1.30 billion in 2022.
Moody’s, Fitch 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.
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.
The most common dealer programs provide a discount when the dealer sells a product to a targeted end user. The amount of accrued post-sale discounts was $1.6 billion and $1.4 billion at December 31, 2022 and 2021, respectively. The reserve represents discounts that we expect to pay on previously sold units and is reviewed at least quarterly.
The most common dealer programs provide a discount when the dealer sells a product to a targeted end user. The amount of accrued post-sale discounts was $2.1 billion and $1.6 billion at December 31, 2023 and 2022, respectively. The reserve represents discounts that we expect to pay on previously sold units and is reviewed at least quarterly.
Financing plans include operating and finance leases, 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.
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.
Loss reserves, including incurred but not reported reserves, are based on estimates and ultimate settlements may vary significantly from such estimates due to increased claims frequency or severity over historical levels. The amount of these reserves totaled $1.3 billion and $1.2 billion at December 31, 2022 and 2021, respectively.
Loss reserves, including incurred but not reported reserves, are based on estimates and ultimate settlements may vary significantly from such estimates due to increased claims frequency or severity over historical levels. The amount of these reserves totaled $1.4 billion and $1.3 billion at December 31, 2023 and 2022, respectively.
Last year similar assumptions and calculations yielded a potential $89 million adverse impact on 2022 cash flow. We determine our net exposures by calculating the difference in cash inflow and outflow by currency and adding or subtracting outstanding foreign currency derivative instruments. We multiply these net amounts by 10 percent to determine the sensitivity.
Last year similar assumptions and calculations yielded a potential $98 million adverse impact on 2023 cash flow. We determine our net exposures by calculating the difference in cash inflow and outflow by currency and adding or subtracting outstanding foreign currency derivative instruments. We multiply these net amounts by 10 percent to determine the sensitivity.
The expected return on plan assets is based on the fair value of plan asset allocations as of our measurement date, December 31. • We use the expected rate of compensation increase to develop benefit obligations using projected pay at retirement. It represents average long-term salary increases. This rate is influenced by our long-term compensation policies.
The expected return on plan assets is based on the fair value of plan asset allocations as of our measurement date, December 31. • We use the expected rate of compensation increase to develop benefit obligations using projected pay at retirement. It represents average long-term salary increases.
Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the United States Securities and Exchange Commission on February 16, 2022 and hereby incorporated by reference.
Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the United States Securities and Exchange Commission on February 15, 2023 and hereby incorporated by reference.
We also have long-term contractual obligations primarily for logistics services agreements; systems support, software licenses and development contracts; information technology consulting contracts and outsourcing contracts for benefit plan administration. These obligations total $1.06 billion, with $537 million due in the next 12 months.
We also have long-term contractual obligations primarily for logistics services agreements; systems support, software licenses and development contracts; information technology consulting contracts and outsourcing contracts for benefit plan administration. These obligations total $1.49 billion, with $704 million due in the next 12 months.
Generally, we base historical claim rates on actual warranty experience for each product by machine model/engine size by customer or dealer location (inside or outside North America). We develop specific rates for each product shipment month and update them monthly based on actual warranty claim experience.
Generally, we base historical claim rates on actual warranty experience for each product by machine model/engine 41 Table of Contents size by customer or dealer location (inside or outside North America). We develop specific rates for each product shipment month and update them monthly based on actual warranty claim experience.
The table below summarizes the amounts of net periodic benefit cost recognized for 2022, 2021 and 2020, respectively, and includes expected cost for 2023. (Millions of dollars) 2023 Expected 2022 2021 2020 U.S. Pension Benefits $ (33) $ (268) $ (388) $ (309) Non-U.S.
The table below summarizes the amounts of net periodic benefit cost recognized for 2023, 2022 and 2021, respectively, and includes expected cost for 2024. (Millions of dollars) 2024 Expected 2023 2022 2021 U.S. Pension Benefits $ (74) $ (33) $ (268) $ (388) Non-U.S.
Pages 51 to 53 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information.
Pages 49 to 51 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information.
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 supply chain finance programs (the “Programs”) through participating financial institutions.
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. 38 Table of Contents We facilitate voluntary supplier finance programs (the “Programs”) through participating financial institutions.
Our primary exposure (excluding competitive risk) is to exchange rate movements in the Australian dollar, Chinese yuan, Mexican peso, Indian rupee and Euro.
Our primary exposure (excluding competitive risk) is to exchange rate movements in the Chinese yuan, Australian dollar, Euro, British pound and Mexican peso.
In 2022, we repurchased $4.23 billion of Caterpillar common stock, with $12.8 billion remaining under the 2022 Authorization as of December 31, 2022. Caterpillar's basic shares outstanding as of December 31, 2022 were approximately 516 million. Each quarter, our Board of Directors reviews the company's dividend for the applicable quarter.
In 2023, we repurchased $4.98 billion of Caterpillar common stock, with $7.8 billion remaining under the 2022 Authorization as of December 31, 2023. Caterpillar's basic shares outstanding as of December 31, 2023 were approximately 499 million. Each quarter, our Board of Directors reviews the company's dividend for the applicable quarter.
Dealer Inventories – Represents dealer machine and engine inventories, excluding aftermarket parts. 9. EAME – A geographic region including Europe, Africa, the Middle East and the Commonwealth of Independent States (CIS). 10. Earning Assets – Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases, less accumulated depreciation at Cat Financial. 11.
Dealer Inventories – Represents dealer machine and engine inventories, excluding aftermarket parts. 9. EAME – A geographic region including Europe, Africa, the Middle East and Eurasia. 35 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.
In December 2022, the Board of Directors approved maintaining our quarterly dividend representing $1.20 per share and we continue to expect our strong financial position to support the dividend. Dividends paid totaled $2.44 billion in 2022. Financial Products Financial Products operating cash flow was $1.52 billion in 2022, compared with $1.42 billion in 2021.
In December 2023, the Board of Directors approved maintaining our quarterly dividend representing $1.30 per share, and we continue to expect our strong financial position to support the dividend. Dividends paid totaled $2.56 billion in 2023. Financial Products Financial Products operating cash flow was $1.11 billion in 2023, compared with $1.52 billion in 2022.
Internal Revenue Service 717 — ME&T free cash flow $ 5,777 $ 6,048 1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on page 53. 49 Table of Contents Supplemental Consolidating Data We are providing supplemental consolidating data for the purpose of additional analysis.
Internal Revenue Service — 717 ME&T free cash flow $ 10,025 $ 5,777 1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on page 51. 47 Table of Contents Supplemental Consolidating Data We are providing supplemental consolidating data for the purpose of additional analysis.
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 calendar quarter for the rolling four quarter period then most recently ended, required by the Credit Facility.
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.
Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. During 2022, we had positive operating cash flow within both our ME&T and Financial Products' operations. On a consolidated basis, we ended 2022 with $7.00 billion of cash, a decrease of $2.25 billion from year-end 2021.
Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. During 2023, we had positive operating cash flow within both our ME&T and Financial Products' operations. On a consolidated basis, we ended 2023 with $6.98 billion of cash, a decrease of $26 million from year-end 2022.
The increase was primarily due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing costs , a goodwill impairment charge, higher selling, general and administrative (SG&A) and research and development (R&D) expenses, lower mark-to-market gains for remeasurement of pension and other postemployment benefit (OPEB) plans and higher restructuring costs.
The increase was primarily due to favorable price realization, higher sales volume and the absence of a 2022 goodwill impairment charge related to the Rail division, partially offset by higher selling, general and administrative (SG&A) and research and development (R&D) expenses, unfavorable manufacturing costs , the impact of the divestiture of the company's Longwall business and lower mark-to-market gains for remeasurement of pension and other postemployment benefit (OPEB) plans.
The three-year facility of $2.73 billion (of which $715 million is available to ME&T) expires in August 2025. • In September 2022, we amended and restated the five-year facility (as amended and restated, the "five-year facility"). The five-year facility of $4.62 billion (of which $1.21 billion is available to ME&T) expires in September 2027.
The three-year facility of $2.73 billion (of which $715 million is available to ME&T) expires in August 2026. • In August 2023, we amended and extended the five-year facility (as amended and restated, the "five-year facility"). The five-year facility of $4.62 billion (of which $1.21 billion is available to ME&T) expires in August 2028.
Notes: • Glossary of terms included on pages 35-37; first occurrence of terms shown in bold italics. • Information on non-GAAP financial measures is included on page 49. • Some amounts within this report are rounded to the millions or billions and may not add.
Risk Factors of the 2023 Form 10-K. 28 Table of Contents Notes: • Glossary of terms included on pages 35-37; first occurrence of terms shown in bold italics. • Information on non-GAAP financial measures is included on page 47. • Some amounts within this report are rounded to the millions or billions and may not add.
Dealers increased their inventories about $2.4 billion in 2022, compared to a decrease of about $100 million in 2021. 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 rental rates and other factors.
Dealer inventory increased about $2.1 billion during 2023, compared to an increase of about $2.4 billion during 2022. 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 rental rates and other factors.
Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees. The bar entitled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses . Operating profit was $7.904 billion in 2022, an increase of $1.026 billion, or 15 percent, compared with $6.878 billion in 2021.
Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees. The bar entitled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses . Operating profit was $12.966 billion in 2023, an increase of $5.062 billion, or 64 percent, compared with $7.904 billion in 2022.
Profit per share for 2021 was $11.83, and excluding the items in the table below, adjusted profit per share was $10.81. • 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 page 49.
Profit per share for 2022 was $12.64, and excluding the items in the table below, adjusted profit per share was $13.84. • 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 page 47.
These cons ist of invoices received and recorded as liabilities as of December 31, 2022, but scheduled for payment in 2023 of $8.69 billion. In addition, we have contractual obligations for material and services on order at December 31, 2022, but not yet invoiced or delivered, of $7.64 billion.
These consist of invoices received and recorded as liabilities as of December 31, 2023, but scheduled for payment in 2024 of $7.91 billion. In addition, we have contractual obligations for material and services on order at December 31, 2023, but not yet invoiced or delivered, of $7.22 billion.
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.
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.
At December 31, 2022, Caterpillar’s consolidated net worth was $15.93 billion, which was above the $9.00 billion required under the Credit Facility. The consolidated net worth is defined as the consolidated shareholders' equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).
At December 31, 2023, Caterpillar’s consolidated net worth was $19.55 billion, which was above the $9.00 billion required under the Credit Facility. The consolidated net worth is defined as the consolidated shareholders' equity including preferred stock but excluding the pension and other postretirement benefits balance within AOCI.
Material cash requirements for contractual obligations We believe our balances of cash and cash equivalents of $7.00 billion and available-for-sale debt securities of $1.48 billion as of December 31, 2022, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy our cash requirements over the next 12 months and beyond.
Material cash requirements for contractual obligations We believe our balances of cash and cash equivalents of $6.98 billion and available-for-sale debt securities and bank time deposits of $3.85 billion as of December 31, 2023, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy our cash requirements over the next 12 months and beyond.
We intend to maintain a strong cash and liquidity position. Consolidated operating cash flow for 2022 was $7.77 billion, up $568 million compared to 2021. The increase was primarily due to higher profit before taxes adjusted for non-cash items and decreased working capital requirements.
We intend to maintain a strong cash and liquidity position. Consolidated operating cash flow for 2023 was $12.89 billion, up $5.12 billion compared to 2022. The increase was primarily due to higher profit before taxes adjusted for non-cash items and lower working capital requirements.
In addition, ME&T has invested in available-for-sale debt securities that are considered highly liquid and are available for current operations. These securities are included in Prepaid expenses and other current assets and Other assets in the Consolidated Statement of Financial Position and were $1.48 billion at the end of December 31, 2022.
In addition, ME&T has invested in available-for-sale debt securities and bank time deposits that are considered highly liquid and are available for current operations. These ME&T securities were $3.85 billion as of December 31, 2023 and are included in Prepaid expenses and other current assets and Other assets in the Consolidated Statement of Financial Position.
This expected increase is primarily due to higher interest cost in 2023 as a result of higher discount rates at year-end 2022 (U.S. pension plans discount rate for 2023 interest cost is 5.2 percent compared to 2.3 percent for 2022) which is partially offset by higher expected return on plan assets in 2023 (U.S. pension plans expected return on plans assets is 5.8 percent for 2023 compared to 4.0 percent in 2022). • Increase in expense in 2022 compared to 2021 - Primarily due to lower mark-to-market gains in 2022 compared to 2021 and higher interest cost in 2022 as a result of higher discount rates at year-end 2021. • Decrease in expense in 2021 compared to 2020 - Primarily due to mark-to-market gains in 2021 compared to mark-to-market losses in 2020 and lower interest cost in 2021 as a result of lower discount rates at year-end 2020.
This expected decrease is primarily due to lower interest cost in 2024 as a result of lower discount rates at year-end 2023 (U.S. pension plans discount rate for 2024 interest cost is 5.0 percent compared to 5.2 percent for 2023) and a higher expected return on assets due to a higher world-wide asset base at year-end 2023 ($16.3 billion) compared to year-end 2022 ($15.8 billion). • Increase in expense in 2023 compared to 2022 — Primarily due to lower mark-to-market gains in 2023 compared to 2022 and higher interest cost in 2023 as a result of higher discount rates at year-end 2022. • Increase in expense in 2022 compared to 2021 — Primarily due to lower mark-to-market gains in 2022 compared to 2021 and higher interest cost in 2022 as a result of higher discount rates at year-end 2021.
This was partially offset by a higher actual return on plan assets compared to the expected return on plan assets (U.S. pension plans had an actual rate of return of 16.7 percent compared to an expected rate of return of 5.1 percent). 47 Table of Contents SENSITIVITY Foreign Exchange Rate Sensitivity ME&T operations use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow.
This was partially offset by various assumption changes and a lower actual return on plan assets compared to the expected return on plan assets (U.S. pension plans had an actual rate of return of 3.6 percent compared to an expected rate of return of 4.2 percent). 45 Table of Contents SENSITIVITY Foreign Exchange Rate Sensitivity ME&T operations use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow.
EAME sales increased 6 percent due to favorable price realization, the impact from changes in dealer inventories and higher sales of equipment to end users, partially offset by unfavorable currency impacts related to the euro and British pound. Dealers increased inventories more during 2022 than during 2021.
EAME sales increased 6 percent due to favorable price realization and higher sales of equipment to end users, partially offset by the impact from changes in dealer inventories. Dealer inventory increased more during 2022 than during 2023.
Pension Benefits 1 (10) (19) 18 Other Postretirement Benefits 188 161 118 147 Mark-to-market loss (gain) — 1 (606) (833) 383 Total net periodic benefit cost (benefit) $ 156 $ (723) $ (1,122) $ 239 1 Expected net periodic benefit cost (benefit) does not include an estimate for mark-to-market gains or losses. • Expected increase in expense in 2023 compared to 2022 - Excluding the impact of mark-to-market gains and losses, our net periodic benefit cost is expected to increase $273 million in 2023.
Pension Benefits (3) 2 (10) (19) Other Postretirement Benefits 178 188 161 118 Mark-to-market loss (gain) — 1 (97) (606) (833) Total net periodic benefit cost (benefit) $ 101 $ 60 $ (723) $ (1,122) 1 Expected net periodic benefit cost (benefit) does not include an estimate for mark-to-market gains or losses. • Expected decrease in expense in 2024 compared to 2023 — Excluding the impact of mark-to-market gains and losses, our net periodic benefit cost is expected to decrease $56 million in 2024.
Asia/Pacific sales increased 2 percent driven by favorable price realization, the impact from changes in dealer inventories and higher services, partially offset by lower sales of equipment to end users and unfavorable currency impacts related to the Australian dollar and Japanese yen. Dealers increased their inventories during 2022, compared to remaining about flat during 2021.
Asia/Pacific sales increased 2 percent driven by favorable price realization, partially offset by unfavorable currency impacts, primarily related to the Australian dollar and Japanese yen, lower sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased more during 2022 than during 2023.
Highlights for the full-year 2022 include: • Sales and revenues for 2022 were $59.427 billion, an increase of $8.456 billion, or 17 percent, compared with $50.971 billion for 2021. Sales were higher across the three primary segments. • Operating profit as a percent of sales and revenues was 13.3 percent in 2022, compared with 13.5 percent in 2021.
Highlights for the full-year 2023 include: • Sales and revenues for 2023 were $67.060 billion, an increase of $7.633 billion, or 13 percent, compared with $59.427 billion for 2022. Sales were higher across the three primary segments. • Operating profit as a percent of sales and revenues was 19.3 percent in 2023, compared with 13.3 percent in 2022.
We expect ME&T’s capital expenditures in 2023 to be around $1.5 billion. We made $346 million of contributions to our pension and OPEB plans during 2022. In comparison, we made $340 million of contributions to our pension and OPEB plans in 2021. We expect to make approximately $372 million of contributions to our pension and OPEB plans in 2023.
We expect ME&T’s capital expenditures in 2024 to be around $2.0 billion to $2.5 billion. We made $361 million of contributions to our pension and OPEB plans during 2023. In comparison, we made $346 million of contributions to our pension and OPEB plans in 2022.
The timing and amount of future repurchases may vary depending on market conditions and investing priorities. In July 2018, the Board of Directors approved an authorization to repurchase up to $10.0 billion of Caterpillar common stock (the 2018 Authorization) effective January 1, 2019, with no expiration.
The timing and amount of future repurchases may vary depending on market conditions and investing priorities. In May 2022, the Board approved a new share repurchase authorization (the 2022 Authorization) of up to $15.0 billion of Caterpillar common stock effective August 1, 2022 with no expiration.
Adjusted operating profit margin was 15.4 percent in 2022, compared with 13.7 percent in 2021. • Profit per share for 2022 was $12.64, and excluding the items in the table below, adjusted profit per share was $13.84.
Adjusted operating profit margin was 20.5 percent in 2023, compared with 15.4 percent in 2022. • Profit per share for 2023 was $20.12, and excluding the items in the table below, adjusted profit per share was $21.21.
At December 31, 2022, Cat Financial’s covenant interest coverage ratio was 2.36 to 1.
At December 31, 2023, Cat Financial’s covenant interest coverage ratio was 1.73 to 1.
The change was primarily due to lower portfolio funding requirements. Off-balance sheet arrangements We are a party to certain off-balance sheet arrangements, primarily in the form of guarantees.
Off-balance sheet arrangements We are a party to certain off-balance sheet arrangements, primarily in the form of guarantees.
In addition, at December 31, 2022, Cat Financial’s six-month covenant leverage ratio was 7.05 to 1 and year-end covenant leverage ratio was 7.21 to 1.
In addition, at December 31, 2023, Cat Financial’s six-month covenant leverage ratio was 6.88 to 1 and year-end covenant leverage ratio was 6.95 to 1.
For operating leases, we record adjustments to depreciation expense reflecting changes in residual value estimates prospectively on a straight-line basis. For finance leases, we recognize residual value adjustments through a reduction of finance revenue over the remaining lease term. We evaluate the carrying value of equipment on operating leases for potential impairment when we determine a triggering event has occurred.
During the term of our leases, we monitor residual values. For operating leases, we record adjustments to depreciation expense reflecting changes in residual value estimates prospectively on a straight-line basis. For finance leases, we recognize residual value adjustments through a reduction of finance revenue over the remaining lease term.
The change was primarily due to lower mark-to-market gains for remeasurement of OPEB plans, lower pension and OPEB income and unrealized losses on marketable securities, partially offset by higher investment and interest income. • The provision for income taxes for 2022 reflected an annual effective tax rate of 23.2 percent, compared with 22.9 percent for 2021, excluding the discrete items discussed below.
The change was primarily driven by lower mark-to-market gains for remeasurement of pension and OPEB plans and unfavorable impacts from pension and OPEB plan costs and foreign currency exchange, partially offset by higher investment and interest income. • The provision for income taxes for 2023 reflected an annual effective tax rate of 21.4 percent, compared with 23.2 percent for 2022, excluding the discrete items discussed below.
A decrease in the discount rate would increase our obligation and expense. • The expected long-term rate of return on plan assets is based on our estimate of long-term passive returns for equities and fixed income securities weighted by the allocation of our plan assets.
Discount rates are sensitive to changes in interest rates. • The expected long-term rate of return on plan assets is based on our estimate of long-term returns for equities and fixed income securities weighted by the allocation of our plan assets.
Pension Benefits: Assumed discount rate 17 (24) (311) 380 Expected rate of compensation increase 5 (4) 28 (22) Expected long-term rate of return on plan assets (41) 41 — — Other Postretirement Benefits: Assumed discount rate 9 (11) (218) 254 Expected rate of compensation increase — — 1 (1) Expected long-term rate of return on plan assets (2) 2 — — 1 Effective December 31, 2019, all U.S. pension benefits were frozen, and accordingly the expected rate of compensation increase assumption is no longer applicable.
Pension Benefits: Assumed discount rate 7 (9) (353) 435 Expected rate of compensation increase 4 (3) 31 (25) Expected long-term rate of return on plan assets (32) 32 — — Other Postretirement Benefits: Assumed discount rate 6 (7) (215) 252 Expected rate of compensation increase — — 1 (1) Expected long-term rate of return on plan assets (2) 2 — — 1 Effective December 31, 2019, all U.S. pension benefits were frozen, and accordingly the expected rate of compensation increase assumption is no longer applicable.
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 certain components, transportation and raw materials. Transportation shortages have resulted in delays and increased costs.
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.
When a triggering event occurs, we perform a test for recoverability by comparing projected undiscounted future cash flows to the carrying value of the equipment on operating leases. If the test for recoverability identifies a possible impairment, we measure the fair value of the equipment on operating leases in accordance with the fair value measurement framework.
We evaluate the carrying value of equipment on operating leases for potential impairment when we determine a triggering event has occurred. When a triggering event occurs, we perform a test for recoverability by comparing projected undiscounted future cash flows to the carrying value of the equipment on operating leases.
Dealers increased inventories during 2022, compared to a decrease during 2021. Sales increased 33 percent in Latin America due to higher sales of equipment to end users, favorable price realization and the impact from changes in dealer inventories. Dealers increased inventories more during 2022 than during 2021.
North America sales increased 25 percent driven by higher sales of equipment to end users, favorable price realization and the impact from changes in dealer inventories. Dealer inventory increased more during 2023 than during 2022.
Net cash used for investing activities was $356 million in 2022, compared with $1.40 billion used in 2021. The change was primarily due to portfolio related activity partially offset by lower proceeds from disposal of equipment. Net cash used for financing activities was $964 million in 2022, compared with net cash provided of $257 million in 2021.
Net cash used for investing activities was $1.42 billion in 2023, compared with $356 million used in 2022. The change was primarily due to portfolio related activity. Net cash provided by financing activities was $278 million in 2023, compared with net cash used of $964 million in 2022. The change was primarily due to higher portfolio funding requirements.
Decisions to purchase our products are dependent upon the performance of those industries, which in turn are dependent in part on commodity prices. Lower commodity prices or industry specific circumstances that have a negative impact to the valuation assumptions may reduce the fair value of our reporting units.
Lower commodity prices or industry specific circumstances that have a negative impact to the valuation assumptions may reduce the fair value of our reporting units.
GAAP $ 7,904 13.3 % $ 8,752 $ 2,067 23.6 % $ 6,705 $ 12.64 Goodwill impairment 925 1.6 % 925 36 3.9 % 889 1.68 Restructuring costs 299 0.5 % 299 72 24.0 % 227 0.43 Pension/OPEB mark-to-market (gains) losses $ — — % (606) (124) 20.5 % (482) (0.91) Twelve Months Ended December 31, 2022 - Adjusted $ 9,128 15.4 % $ 9,370 $ 2,051 21.9 % $ 7,339 $ 13.84 Twelve Months Ended December 31, 2021 - U.S.
GAAP $ 7,904 13.3 % $ 8,752 $ 2,067 23.6 % $ 6,705 $ 12.64 Goodwill impairment 925 1.6 % 925 36 3.9 % 889 1.68 Restructuring costs 299 0.5 % 299 72 24.0 % 227 0.43 Pension/OPEB mark-to-market (gains) losses — — % (606) (124) 20.5 % (482) (0.91) Twelve Months Ended December 31, 2022 - Adjusted $ 9,128 15.4 % $ 9,370 $ 2,051 21.9 % $ 7,339 $ 13.84 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 Twelve Months Ended December 31, 2023 2022 ME&T net cash provided by operating activities 1 $ 11,688 $ 6,358 ME&T capital expenditures (1,663) (1,298) Cash payments related to settlements with the U.S.
Pension Benefits: 1 Assumed discount rate $ 101 $ (131) $ (1,151) $ 1,363 Expected long-term rate of return on plan assets (167) 167 — — Non-U.S.
Pension Benefits: 1 Assumed discount rate $ 52 $ (66) $ (1,162) $ 1,375 Expected long-term rate of return on plan assets (120) 120 — — Non-U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInformation required by Item 7A appears in Note 1 — “Operations and summary of significant accounting policies,” Note 4 — “Derivative financial instruments and risk management,” Note 18 — “Fair value disclosures” and Note 19 — “Concentration of credit risk” of Part II, Item 8 “Financial Statements and Supplementary Data.” Other information required by Item 7A is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 54 Table of Contents
Biggest changeInformation required by Item 7A appears in Note 1 — “Operations and summary of significant accounting policies,” Note 4 — “Derivative financial instruments and risk management,” Note 18 — “Fair value disclosures” and Note 19 — “Concentration of credit risk” of Part II, Item 8 “Financial Statements and Supplementary Data.” Other information required by Item 7A is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 52 Table of Contents

Other CAT 10-K year-over-year comparisons