Item 8. Financial Statements and Supplementary Data.

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Item 8. Financial Statements and Supplementary Data.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Caterpillar Inc. (company) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2023. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on our assessment we concluded that, as of December 31, 2023, the company’s internal control over financial reporting was effective based on those criteria.

The effectiveness of the company’s internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their report appears on pages 54-55.


			/s/ D. James Umpleby III
			D. James Umpleby III
			Chief Executive Officer



			/s/ Andrew R.J. Bonfield
			Andrew R.J. Bonfield
			Chief Financial Officer



			February 16, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Caterpillar Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statement of financial position of Caterpillar Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of results of operations, of comprehensive income (loss), of changes in shareholders' equity and of cash flow for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Product Warranty Liability

As described in Notes 2 and 21 to the consolidated financial statements, the Company’s product warranty liability as of December 31, 2023 was $1,894 million. At the time the Company recognizes a sale, management records estimated future warranty costs. Management determines the product warranty liability by applying historical claim rate experience to the current field population and dealer inventory. Generally, management bases 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). Management develops specific rates for each product shipment month and updates them monthly based on actual warranty claim experience.

The principal considerations for our determination that performing procedures relating to the product warranty liability is a critical audit matter are (i) the significant judgment by management when developing the estimate of the product warranty liability, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to historical claim rates, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of the product warranty liability. These procedures also included, among others (i) testing the completeness and accuracy of underlying data provided by management and (ii) the involvement of professionals with specialized skill and knowledge to assist in evaluating the reasonableness of management’s estimate by performing one or a combination of procedures, including (a) developing an independent actuarial estimate of the product warranty liability, and comparing the independent estimate to management’s actuarial determined liability; and (b) evaluating the appropriateness of management’s actuarial methodologies and the reasonableness of management’s significant assumption related to historical claim rates.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas

February 16, 2024

We have served as the Company’s auditor since 1925.


STATEMENT 1	Caterpillar Inc.
Consolidated Results of Operations for the Years Ended December 31,
(Dollars in millions except per share data)
	2023		2022		2021
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	63,869	$	56,574	$	48,188
Revenues of Financial Products	3,191		2,853		2,783
Total sales and revenues	67,060		59,427		50,971

Operating costs:
Cost of goods sold	42,767		41,350		35,513
Selling, general and administrative expenses	6,371		5,651		5,365
Research and development expenses	2,108		1,814		1,686
Interest expense of Financial Products	1,030		565		455
Goodwill impairment charge	—		925		—
Other operating (income) expenses	1,818		1,218		1,074
Total operating costs	54,094		51,523		44,093

Operating profit	12,966		7,904		6,878

Interest expense excluding Financial Products	511		443		488
Other income (expense)	595		1,291		1,814

Consolidated profit before taxes	13,050		8,752		8,204

Provision (benefit) for income taxes	2,781		2,067		1,742
Profit of consolidated companies	10,269		6,685		6,462

Equity in profit (loss) of unconsolidated affiliated companies	63		19		31

Profit of consolidated and affiliated companies	10,332		6,704		6,493

Less: Profit (loss) attributable to noncontrolling interests	(3)		(1)		4

Profit 1	$	10,335	$	6,705	$	6,489


Profit per common share	$	20.24	$	12.72	$	11.93
Profit per common share — diluted 2	$	20.12	$	12.64	$	11.83

Weighted-average common shares outstanding (millions)
- Basic	510.6		526.9		544.0
- Diluted 2	513.6		530.4		548.5

1 Profit attributable to common shareholders.

2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.


See accompanying notes to Consolidated Financial Statements.


STATEMENT 2			Caterpillar Inc.
Consolidated Comprehensive Income (Loss) for the Years Ended December 31,
(Millions of dollars)
	2023		2022		2021

Profit (loss) of consolidated and affiliated companies	$	10,332	$	6,704	$	6,493
Other comprehensive income (loss), net of tax (Note 17):
Foreign currency translation:	546		(820)		(598)
Pension and other postretirement benefits:	(10)		23		(30)
Derivative financial instruments:	39		31		(3)
Available-for-sale securities:	62		(138)		(34)

Total other comprehensive income (loss), net of tax	637		(904)		(665)
Comprehensive income (loss)	10,969		5,800		5,828
Less: comprehensive income (loss) attributable to the noncontrolling interests	(3)		(1)		4
Comprehensive income (loss) attributable to shareholders	$	10,972	$	5,801	$	5,824


See accompanying notes to Consolidated Financial Statements.


STATEMENT 3	Caterpillar Inc.
Consolidated Financial Position at December 31,
(Dollars in millions)
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	6,978	$	7,004
Receivables – trade and other	9,310		8,856
Receivables – finance	9,510		9,013

Prepaid expenses and other current assets	4,586		2,642
Inventories	16,565		16,270
Total current assets	46,949		43,785

Property, plant and equipment – net	12,680		12,028
Long-term receivables – trade and other	1,238		1,265
Long-term receivables – finance	12,664		12,013
Noncurrent deferred and refundable income taxes	2,816		2,213
Intangible assets	564		758
Goodwill	5,308		5,288
Other assets	5,257		4,593
Total assets	$	87,476	$	81,943

Liabilities
Current liabilities:
Short-term borrowings:
Machinery, Energy & Transportation	$	—	$	3
Financial Products	4,643		5,954
Accounts payable	7,906		8,689
Accrued expenses	4,958		4,080
Accrued wages, salaries and employee benefits	2,757		2,313
Customer advances	1,929		1,860
Dividends payable	649		620
Other current liabilities	3,123		2,690
Long-term debt due within one year:
Machinery, Energy & Transportation	1,044		120
Financial Products	7,719		5,202
Total current liabilities	34,728		31,531
Long-term debt due after one year:
Machinery, Energy & Transportation	8,579		9,498
Financial Products	15,893		16,216
Liability for postemployment benefits	4,098		4,203
Other liabilities	4,675		4,604
Total liabilities	67,973		66,052
Commitments and contingencies (Notes 21 and 22)
Shareholders’ equity
Common stock of $1.00 par value:
Authorized shares: 2,000,000,000 Issued shares: (2023 and 2022 – 814,894,624 shares) at paid-in amount	6,403		6,560
Treasury stock: (2023 - 315,517,355 shares; and 2022 - 298,549,134 shares) at cost	(36,339)		(31,748)
Profit employed in the business	51,250		43,514
Accumulated other comprehensive income (loss)	(1,820)		(2,457)
Noncontrolling interests	9		22
Total shareholders’ equity	19,503		15,891
Total liabilities and shareholders’ equity	$	87,476	$	81,943


See accompanying notes to Consolidated Financial Statements.


STATEMENT 4			Caterpillar Inc.
Changes in Consolidated Shareholders’ Equity for the Years Ended December 31
(Dollars in millions)
	Common stock			Treasury stock		Profit employed in the business		Accumulated other comprehensive income (loss)		Noncontrolling interests		Total





Balance at December 31, 2020	$	6,230		$	(25,178)	$	35,167	$	(888)	$	47	$	15,378
Profit (loss) of consolidated and affiliated companies	—			—		6,489		—		4		6,493
Foreign currency translation, net of tax	—			—		—		(598)		—		(598)
Pension and other postretirement benefits, net of tax	—			—		—		(30)		—		(30)
Derivative financial instruments, net of tax	—			—		—		(3)		—		(3)
Available-for-sale securities, net of tax	—			—		—		(34)		—		(34)
Change in ownership from noncontrolling interests	—			—		—		—		(14)		(14)
Dividends declared	—			—		(2,374)		—		—		(2,374)
Distribution to noncontrolling interests	—			—		—		—		(4)		(4)
Common shares issued from treasury stock for stock-based compensation: 3,571,503	(68)			203		—		—		—		135
Stock-based compensation expense	200			—		—		—		—		200

Common shares repurchased: 12,987,299	—			(2,668)		—		—		—		(2,668)
Other	36			—		—		—		(1)		35
Balance at December 31, 2021	$	6,398		$	(27,643)	$	39,282	$	(1,553)	$	32	$	16,516





Profit (loss) of consolidated and affiliated companies	—			—		6,705		—		(1)		6,704
Foreign currency translation, net of tax	—			—		—		(820)		—		(820)
Pension and other postretirement benefits, net of tax	—			—		—		23		—		23
Derivative financial instruments, net of tax	—			—		—		31		—		31
Available-for-sale securities, net of tax	—			—		—		(138)		—		(138)
Change in ownership from noncontrolling interests	—			—		—		—		—		—
Dividends declared	—			—		(2,473)		—		—		(2,473)
Distribution to noncontrolling interests	—			—		—		—		(10)		(10)
Common shares issued from treasury stock for stock-based compensation: 2,340,887	(74)			125		—		—		—		51
Stock-based compensation expense	193			—		—		—		—		193

Common shares repurchased: 21,882,818	—			(4,230)		—		—		—		(4,230)
Other	43			—		—		—		1		44
Balance at December 31, 2022	$	6,560		$	(31,748)	$	43,514	$	(2,457)	$	22	$	15,891

(Continued)


STATEMENT 4			Caterpillar Inc.
Changes in Consolidated Shareholders’ Equity for the Years Ended December 31
(Dollars in millions)
	Common stock			Treasury stock		Profit employed in the business		Accumulated other comprehensive income (loss)		Noncontrolling interests		Total
Balance at December 31, 2022	$	6,560		$	(31,748)	$	43,514	$	(2,457)	$	22	$	15,891




Profit (loss) of consolidated and affiliated companies	—			—		10,335		—		(3)		10,332
Foreign currency translation, net of tax	—			—		—		546		—		546
Pension and other postretirement benefits, net of tax	—			—		—		(10)		—		(10)
Derivative financial instruments, net of tax	—			—		—		39		—		39
Available-for-sale securities, net of tax	—			—		—		62		—		62
Change in ownership from noncontrolling interests	—			—		—		—		(7)		(7)
Dividends declared 1	—			—		(2,599)		—		—		(2,599)

Common shares issued from treasury stock for stock-based compensation: 2,497,799	(112)			124		—		—		—		12
Stock-based compensation expense	208			—		—		—		—		208

Common shares repurchased: 19,466,020 2	—			(4,675)		—		—		—		(4,675)
Outstanding authorized accelerated share repurchase	(300)			—		—		—		—		(300)
Other	47			(40)		—		—		(3)		4
Balance at December 31, 2023	$	6,403		$	(36,339)	$	51,250	$	(1,820)	$	9	$	19,503

1Dividends per share of common stock of $5.10, $4.71 and $4.36 were declared in the years ended December 31, 2023, 2022 and 2021, respectively.

2See Note 16 regarding shares repurchased.


See accompanying notes to Consolidated Financial Statements.


STATEMENT 5			Caterpillar Inc.
Consolidated Statement of Cash Flow for the Years Ended December 31,
(Millions of dollars)
	2023			2022		2021
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	10,332		$	6,704	$	6,493
Adjustments for non-cash items:
Depreciation and amortization	2,144			2,219		2,352
Actuarial (gain) loss on pension and postretirement benefits	(97)			(606)		(833)
Provision (benefit) for deferred income taxes	(592)			(377)		(383)
Loss on divestiture	572			—		—
Goodwill impairment charge	—			925		—
Other	375			701		216
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	(437)			(220)		(1,259)
Inventories	(364)			(2,589)		(2,586)
Accounts payable	(754)			798		2,041
Accrued expenses	796			317		196
Accrued wages, salaries and employee benefits	486			90		1,107
Customer advances	80			768		34
Other assets – net	(95)			(210)		(97)
Other liabilities – net	439			(754)		(83)
Net cash provided by (used for) operating activities	12,885			7,766		7,198

Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(1,597)			(1,296)		(1,093)
Expenditures for equipment leased to others	(1,495)			(1,303)		(1,379)
Proceeds from disposals of leased assets and property, plant and equipment	781			830		1,265
Additions to finance receivables	(15,161)			(13,239)		(13,002)
Collections of finance receivables	14,034			13,177		12,430
Proceeds from sale of finance receivables	63			57		51
Investments and acquisitions (net of cash acquired)	(75)			(88)		(490)
Proceeds from sale of businesses and investments (net of cash sold)	(4)			1		36
Proceeds from maturities and sale of securities	1,891			2,383		785
Investments in securities	(4,405)			(3,077)		(1,766)
Other – net	97			14		79
Net cash provided by (used for) investing activities	(5,871)			(2,541)		(3,084)

Cash flow from financing activities:
Dividends paid	(2,563)			(2,440)		(2,332)
Common stock issued, including treasury shares reissued	12			51		135
Common shares repurchased	(4,975)			(4,230)		(2,668)



Proceeds from debt issued (original maturities greater than three months):
- Machinery, Energy & Transportation	—			—		494
- Financial Products	8,257			6,674		6,495
Payments on debt (original maturities greater than three months):
- Machinery, Energy & Transportation	(106)			(25)		(1,919)
- Financial Products	(6,212)			(7,703)		(7,877)
Short-term borrowings – net (original maturities three months or less)	(1,345)			402		3,488
Other – net	—			(10)		(4)
Net cash provided by (used for) financing activities	(6,932)			(7,281)		(4,188)
Effect of exchange rate changes on cash	(110)			(194)		(29)
Increase (decrease) in cash, cash equivalents and restricted cash	(28)			(2,250)		(103)
Cash, cash equivalents and restricted cash at beginning of period	7,013			9,263		9,366
Cash, cash equivalents and restricted cash at end of period	$	6,985		$	7,013	$	9,263

Cash equivalents primarily represent short-term, highly liquid investments with original maturities of generally three months or less.


See accompanying notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**1.**Operations and summary of significant accounting policies

A. Nature of operations

Information in our financial statements and related commentary are presented in the following categories:

Machinery, Energy & Transportation (ME&T) – We define ME&T as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T's information relates to the design, manufacturing and marketing of our products.

Financial Products – We define Financial Products as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

We sell our products primarily under the brands “Caterpillar,” “CAT,” design versions of “CAT” and “Caterpillar,” “EMD,” “FG Wilson,” “MWM,” “Perkins,” “Progress Rail,” “SEM” and “Solar Turbines.”

We conduct operations in our ME&T line of business under highly competitive conditions, including intense price competition. We place great emphasis on the high quality and performance of our products and our dealers’ service support. Although no one competitor is believed to produce all of the same types of equipment that we do, there are numerous companies, large and small, which compete with us in the sale of each of our products.

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. We also sell some of the reciprocating engines manufactured by our subsidiary Perkins Engines Company Limited through its worldwide network of 88 distributors covering 185 countries. We sell the FG Wilson branded electric power generation systems through its worldwide network of 110 distributors covering 109 countries. 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, to end customers through sales forces employed by the company. At times, these employees are assisted by independent sales representatives.

The Financial Products line of business also conducts operations under highly competitive conditions. Financing for users of Caterpillar products is available through a variety of competitive sources, principally commercial banks and finance and leasing companies. We offer various financing, insurance and risk management products designed to support sales of our products and generate financing income for our company. We conduct a significant portion of Financial Products activity in North America, with additional offices in Latin America, Asia/Pacific, Europe and Africa.

B. Basis of presentation

The consolidated financial statements include the accounts of Caterpillar Inc. and its subsidiaries where we have a controlling financial interest.

Investments in companies where our ownership exceeds 20 percent and we do not have a controlling interest or where the ownership is less than 20 percent and for which we have a significant influence are accounted for by the equity method.

We consolidate all variable interest entities (VIEs) where Caterpillar Inc. is the primary beneficiary. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. See Note 21 for further discussion on a consolidated VIE.

Cat Financial has end-user customers and dealers that are VIEs of which we are not the primary beneficiary. Our maximum exposure to loss from our involvement with these VIEs is limited to the credit risk inherently present in the financial support that we have provided. Credit risk was evaluated and reflected in our financial statements as part of our overall portfolio of finance receivables and related allowance for credit losses.

We include shipping and handling costs in Cost of goods sold in Statement 1. Other operating (income) expenses primarily include Cat Financial’s depreciation on equipment leased to others, (gains) losses on divestitures, Insurance Services’ underwriting expenses, employee separation charges, (gains) losses on disposal of long-lived assets and long-lived asset impairment charges.

Prepaid expenses and other current assets in Statement 3 primarily include investments in debt and equity securities, prepaid and refundable income taxes, right of return assets, prepaid insurance, contract assets, assets held for sale, core to be returned for remanufacturing, and restricted cash and other short-term investments.

Certain amounts for prior years have been reclassified to conform with the current-year financial statement presentation.

C. Inventories

We state inventories at the lower of cost or net realizable value. We principally determine cost using the last-in, first-out (LIFO) method. The value of inventories on the LIFO basis represented about 65 percent of total inventories at both December 31, 2023 and 2022, respectively.

If the FIFO (first-in, first-out) method had been in use, inventories would have been $3,423 million and $3,321 million higher than reported at December 31, 2023 and 2022, respectively.

D. Depreciation and amortization

We compute depreciation of plant and equipment principally using accelerated methods. We compute depreciation on equipment leased to others, primarily for Financial Products, using the straight-line method over the term of the lease. The depreciable basis is the original cost of the equipment less the estimated residual value of the equipment at the end of the lease term. In 2023, 2022 and 2021, Cat Financial depreciation on equipment leased to others was $713 million, $718 million and $755 million, respectively, which we include in Other operating (income) expenses in Statement 1. In 2023, 2022 and 2021, consolidated depreciation expense was $1,929 million, $1,937 million and $2,050 million, respectively. We compute amortization of purchased finite-lived intangibles principally using the straight-line method, generally not to exceed a period of 20 years.

E. Foreign currency translation

The functional currency for most of our ME&T consolidated subsidiaries is the U.S. dollar. The functional currency for most of our Financial Products consolidated subsidiaries is the respective local currency. We include gains and losses resulting from the remeasurement of foreign currency amounts to the functional currency in Other income (expense) in Statement 1. We include gains and losses resulting from translating assets and liabilities from the functional currency to U.S. dollars in Accumulated other comprehensive income (loss) (AOCI) in Statement 3.

F. Derivative financial instruments

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates and commodity prices. Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate and commodity price exposures. Our policy specifies that derivatives are not to be used for speculative purposes. Derivatives that we use are primarily foreign currency forward, option and cross currency contracts, interest rate contracts and commodity forward and option contracts. All derivatives are recorded at fair value. See Note 4 for more information.

G. Income taxes

We determine the provision for income taxes using the asset and liability approach taking into account guidance related to uncertain tax positions. Tax laws require items to be included in tax filings at different times than the items are reflected in the financial statements. We recognize a current liability for the estimated taxes payable for the current year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. We adjust deferred taxes for enacted changes in tax rates and tax laws. We record valuation allowances to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. See Note 6 for further discussion.

H. Goodwill

For acquisitions accounted for as a business combination, goodwill represents the excess of the cost over the fair value of the net assets acquired. We are required to test goodwill for impairment, at the reporting unit level, annually and when events or circumstances make it more likely than not that an impairment may have occurred. A reporting unit is an operating segment or one level below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded. We assign goodwill to reporting units based on our integration plans and the expected synergies resulting from the acquisition. Because Caterpillar is a highly integrated company, the businesses we acquire are sometimes combined with or integrated into existing reporting units. When changes occur in the composition of our operating segments or reporting units, we reassign goodwill to the affected reporting units based on their relative fair values.

We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. We review goodwill for impairment utilizing either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the quantitative goodwill impairment test, we compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, we do not consider the goodwill impaired. If the carrying value is higher than the fair value, we would recognize the difference as an impairment loss. See Note 10 for further details.

I. Estimates in financial statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts. The more significant estimates include: residual values for leased assets; fair values for goodwill impairment tests; warranty liability and reserves for product liability and insurance losses, postretirement benefits, post-sale discounts, credit losses and income taxes.

J. New accounting guidance

A. Adoption of new accounting standards

Supplier finance programs (ASU 2022-04) — In September 2022, the Financial Accounting Standards Board (FASB) issued guidance to enhance the transparency of supplier finance programs. The new standard requires annual disclosure of the key terms of the program, a description of where in the financial statements amounts outstanding under the program are presented, a rollforward of such amounts, and interim disclosure of amounts outstanding as of the end of each period. The guidance does not affect recognition, measurement, or financial statement presentation of supplier finance programs. The ASU was effective on January 1, 2023, except for the rollforward, which is effective on January 1, 2024. Our adoption of this guidance results in the following disclosures relating to our supplier finance programs and related obligations.

We facilitate voluntary supplier finance programs (the “Programs”) through participating financial institutions. The Programs are available to a wide range of suppliers and allow them the option to manage their cash flow. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the Programs. The range of payment terms, typically 60-90 days, we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the Programs. The amount of obligations outstanding that are confirmed as valid to the participating financial institutions for suppliers who voluntarily participate in the Programs, included in Accounts payable in Statement 3, were $803 million and $862 million at December 31, 2023 and 2022, respectively.

We consider the applicability and impact of all ASUs. We adopted the following ASUs effective January 1, 2023, none of which had a material impact on our financial statements:


ASU			Description
2021-08			Business combinations
2022-02			Financial instruments - Credit losses
2022-06			Reference rate reform

B. Accounting standards issued but not yet adopted

Segment reporting (ASU 2023-07) — In November 2023, the FASB issued accounting guidance that requires incremental disclosures related to reportable segments which includes significant segment expense categories and amounts for each reportable segment. The guidance is effective January 1, 2024, and will be adopted retrospectively. The adoption will result in incremental disclosures related to reportable segments in the 2024 year-end financial statements and interim periods beginning in 2025. We are in the process of evaluating the effect of this new guidance on the related disclosures.

Income tax reporting (ASU 2023-09) — In December 2023, the FASB issued accounting guidance to expand the annual disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. This guidance is effective January 1, 2025, with early adoption permitted. This guidance can be applied prospectively or retrospectively. We are in the process of evaluating the effect of this new guidance on the related disclosures.

We consider the applicability and impact of all ASUs. We assessed ASUs not listed above and determined that they either were not applicable or were not expected to have a material impact on our financial statements.

2. Sales and revenue recognition

A. Sales of Machinery, Energy & Transportation

We recognize sales of ME&T when all the following criteria are satisfied: (i) a contract with an independently owned and operated dealer or an end user exists which has commercial substance; (ii) it is probable we will collect the amount charged to the dealer or end user; and (iii) we have completed our performance obligation whereby the dealer or end user has obtained control of the product. A contract with commercial substance exists once we receive and accept a purchase order under a dealer sales agreement, or once we enter into a contract with an end user. If collectibility is not probable, the sale is deferred and not recognized until collection is probable or payment is received. Control of our products typically transfers when title and risk of ownership of the product has transferred to the dealer or end user. Typically, where product is produced and sold in the same country, title and risk of ownership transfer when we ship the product. Products that are exported from a country for sale typically transfer title and risk of ownership at the border of the destination country.

Our remanufacturing operations are primarily focused on the remanufacture of Cat engines and components and rail related products. In this business, we inspect, clean and remanufacture used engines and related components (core). In connection with the sale of our remanufactured product to dealers, we collect a deposit that is repaid if the dealer returns an acceptable core within a specified time period. Caterpillar owns and has title to the cores when they are returned from dealers. The rebuilt engine or component (the core plus any new content) is then sold as a remanufactured product to dealers and end users. We recognize revenue pursuant to the same transfer of control criteria as ME&T sales noted above. At the time of sale, we recognize the deposit in Other current liabilities in Statement 3, and we recognize the core to be returned as an asset in Prepaid expenses and other current assets in Statement 3 at the estimated replacement cost (based on historical experience with usable cores). Upon receipt of an acceptable core, we repay the deposit and relieve the liability. We then transfer the returned core asset into inventory. In the event that the deposit is forfeited (i.e., upon failure by the dealer to return an acceptable core in the specified time period), we recognize the core deposit and the cost of the core in Sales and Cost of goods sold, respectively.

We provide discounts to dealers through merchandising programs. We have numerous programs that are designed to promote the sale of our products. The most common dealer programs provide a discount when the dealer sells a product to a targeted end user. Generally, we estimate the cost of these discounts for each product by model by geographic region based on historical experience and known changes in merchandising programs. We report the cost of these discounts as a reduction to the transaction price when we recognize the product sale. We accrue a corresponding post-sale discount reserve in Statement 3, which represents discounts we expect to pay on units sold. If discounts paid differ from those estimated, we report the difference as a change in the transaction price.

Except for replacement parts, no right of return exists on the sale of our products. We estimate replacement part returns based on historical experience and recognize a parts return asset in Prepaid expenses and other current assets in Statement 3, which represents our right to recover replacement parts we expect will be returned. We also recognize a refund liability in Other current liabilities in Statement 3 for the refund we expect to pay for returned parts. If actual replacement part returns differ from those estimated, we recognize the difference in the estimated replacement part return asset and refund liability in Cost of goods sold and Sales, respectively.

Trade receivables represent amounts due from dealers and end users for the sale of our products, and include amounts due from wholesale inventory financing provided by Cat Financial for a dealer's purchase of inventory. See Note 7 for further information. We recognize trade receivables from dealers and end users in Receivables – trade and other and Long-term receivables – trade and other in Statement 3. Trade receivables from dealers and end users were $7,923 million, $7,551 million and $7,267 million as of December 31, 2023, 2022 and 2021, respectively. Long-term trade receivables from dealers and end users were $589 million, $506 million and $624 million as of December 31, 2023, 2022 and 2021, respectively.

Our standard dealer invoice terms are established by marketing region. Our invoice terms for end user sales are established by the responsible business unit. Payments from dealers are due shortly after the time of sale. When we make a sale to a dealer, the dealer is responsible for payment even if the product is not sold to an end user. Dealers and end users must make payment within the established invoice terms to avoid potential interest costs. Interest at or above prevailing market rates may be charged on any past due balance, and generally our practice is to not forgive this interest. Our allowance for credit losses is not significant for ME&T receivables.

For certain contracts, we invoice for payment when contractual milestones are achieved. We recognize a contract asset when a sale is recognized before achieving the contractual milestone for invoicing. We reduce the contract asset when we invoice for payment and recognize a corresponding trade receivable. Contract assets are included in Prepaid expenses and other current assets in Statement 3. Contract assets were $246 million, $247 million and $187 million as of December 31, 2023, 2022 and 2021, respectively.

We invoice in advance of recognizing the sale of certain products. We recognize advanced customer payments as a contract liability in Customer advances and Other liabilities in Statement 3. Contract liabilities were $2,389 million, $2,314 million and $1,557 million as of December 31, 2023, 2022 and 2021, respectively. We reduce the contract liability when we recognize revenue. During 2023, we recognized $1,660 million of revenue that was recorded as a contract liability at the beginning of 2023. During 2022, we recognized $902 million of revenue that was recorded as a contract liability at the beginning of 2022.

We have elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with a dealer or end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year.

As of December 31, 2023, we have entered into contracts with dealers and end users for which sales have not been recognized as we have not satisfied our performance obligations and transferred control of the products. The dollar amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $12.5 billion, with about one-half of the amount expected to be completed and revenue recognized in the twelve months following December 31, 2023. We have elected the practical expedient to not disclose unsatisfied performance obligations with an original contract duration of one year or less. Contracts with an original duration of one year or less are primarily sales to dealers for machinery, engines and replacement parts.

We exclude sales and other related taxes from the transaction price. We account for shipping and handling costs associated with outbound freight after control over a product has transferred as a fulfillment cost which is included in Cost of goods sold.

We provide a standard manufacturer’s warranty of our products at no additional cost. At the time we recognize a sale, we record estimated future warranty costs. See Note 21 for further discussion of our product warranty liabilities.

See Note 23 for further disaggregated sales and revenues information.

B. Revenues of Financial Products

Revenues of Financial Products are generated primarily from finance revenue on finance receivables and rental payments on operating leases. We record finance revenue over the life of the related finance receivables using the interest method, including the accretion of certain direct origination costs that are deferred. Operating lease revenue is recorded on a straight-line basis over the term of the lease.

We suspend recognition of finance revenue and operating lease revenue and place the account on non-accrual status when management determines that collection of future income is not probable (generally after 120 days past due). We resume recognition of revenue, and recognize previously suspended income, when we consider collection of remaining amounts to be probable. Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms. We write off interest earned but uncollected prior to the receivables being placed on non-accrual status through Provision for credit losses when, in the judgment of management, we consider it to be uncollectible. See Note 7 for more information.

3. Stock-based compensation

Our stock-based compensation plans primarily provide for the granting of stock options, restricted stock units (RSUs) and performance-based restricted stock units (PRSUs) to Officers and other key employees, as well as non-employee Directors. Stock options permit a holder to buy Caterpillar stock at the stock’s price when the option was granted. RSUs are agreements to issue shares of Caterpillar stock at the time of vesting. PRSUs are similar to RSUs and include performance conditions in the vesting terms of the award.

Our long-standing practices and policies specify that the Compensation Committee (the Committee) of the Board of Directors approve all stock-based compensation awards. The award approval process specifies the grant date, value and terms of the award. We consistently apply the same terms and conditions to all employee grants, including Officers. The Committee approves all individual Officer grants. We determine the number of stock-based compensation award units included in an individual’s award based on the methodology approved by the Committee. The exercise price methodology approved by the Committee is the closing price of the Company stock on the date of the grant. In June of 2014, shareholders approved the Caterpillar Inc. 2014 Long-Term Incentive Plan (the 2014 Plan) under which all new stock-based compensation awards were granted. In June of 2023, shareholders approved the Caterpillar Inc. 2023 Long-Term Incentive Plan (the 2023 Plan), which superseded and replaced the 2014 Plan.

Common stock issued from Treasury stock under the plans totaled 2,497,799 for 2023, 2,340,887 for 2022 and 3,571,503 for 2021. The total number of shares authorized for equity awards under the 2023 Plan is 42,500,000. As of December 31, 2023, 43,041,378 shares remained available for issuance, which includes shares returned to the 2023 Plan upon cancellation or shares withheld for taxes incurred in connection with issuance or vesting of grants made under the 2014 Plan.

Stock option and RSU awards generally vest according to a three-year graded vesting schedule. One-third of the award will become vested on the first anniversary of the grant date, one-third of the award will become vested on the second anniversary of the grant date and one-third of the award will become vested on the third anniversary of the grant date. PRSU awards generally have a three-year performance period and cliff vest at the end of the period based upon achievement of performance targets established at the time of grant.

Upon separation from service, if the participant is 55 years of age or older with more than five years of service, the participant meets the criteria for a “Long Service Separation.” Award terms for stock option and RSU grants allow for continued vesting as of each vesting date specified in the award document for employees who meet the criteria for a “Long Service Separation” and fulfill a requisite service period of six months. We recognize compensation expense for eligible employees for the grants over the period from the grant date to the end date of the six-month requisite service period. For employees who become eligible for a “Long Service Separation” subsequent to the end date of the six-month requisite service period and prior to the completion of the vesting period, we recognized compensation expense over the period from the grant date to the date eligibility is achieved.

Award terms for PRSU grants allow for continued vesting upon achievement of the performance target specified in the award document for employees who meet the criteria for a “Long Service Separation” and fulfill a requisite service period of six months. We recognize compensation expense for the PRSU grants with respect to employees who have met the criteria for a “Long Service Separation” over the period from the grant date to the end of the six-month requisite service period. For employees who become eligible for a “Long Service Separation” subsequent to the end date of the six-month requisite service period and prior to the completion of the vesting period, we recognize compensation expense over the period from the grant date to the date eligibility is achieved.

At grant, option awards have a term life of ten years. For awards granted prior to 2016, if the “Long Service Separation” criteria are met, the vested options have a life that is the lesser of ten years from the original grant date or five years from the separation date. For awards granted beginning in 2016, the vested options have a life equal to ten years from the original grant date.

Accounting guidance on share-based payments requires companies to estimate the fair value of options on the date of grant using an option-pricing model. The fair value of our option grants was estimated using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model considers a range of assumptions related to volatility, risk-free interest rate and historical employee behavior. Expected volatility was based on historical Caterpillar stock price movement and current implied volatilities from traded options on Caterpillar stock. The risk-free interest rate was based on U.S. Treasury security yields at the time of grant. The weighted-average dividend yield was based on historical information. We determine the expected life from the actual historical employee exercise behavior. The following table provides the assumptions used in determining the fair value of the option awards for the years ended December 31, 2023, 2022 and 2021, respectively.



	Grant Year
	2023		2022		2021
Weighted-average dividend yield	2.6	%	2.6	%	2.6	%
Weighted-average volatility	31.0	%	31.7	%	32.9	%
Range of volatilities	28.5%-35.5%		25.3%-36.8%		29.2%- 45.8%
Range of risk-free interest rates	3.92%-5.03%		1.03%-2%		0.06%-1.41%
Weighted-average expected lives	7 years		8 years		8 years

We credit RSU and PRSU awards with dividend equivalent units on each date that we pay a cash dividend to holders of Common stock. We determine the fair value of the RSU and PRSU awards granted in 2023, 2022 and 2021 as the closing stock price on the date of the grant.

Please refer to Tables I and II below for additional information on our stock-based compensation awards.



TABLE I — Financial Information Related to Stock-based Compensation

	Stock options			RSUs			PRSUs
	Shares	Weighted- Average Exercise Price		Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value

Outstanding at January 1, 2023	6,801,326	$	142.85	990,803	$	187.88	524,740	$	208.39
Granted to officers and key employees	777,275	$	253.98	397,650	$	252.24	235,637	$	251.97
Exercised	(2,404,868)	$	120.55	—	$	—	—	$	—
Vested	—	$	—	(529,200)	$	173.87	(270,150)	$	219.76
Forfeited / expired	(32,370)	$	212.67	(29,867)	$	222.37	(9,468)	$	222.48
Outstanding at December 31, 2023	5,141,363	$	169.57	829,386	$	226.44	480,759	$	223.09
Exercisable at December 31, 2023	3,366,714	$	139.91



Stock options outstanding and exercisable as of December 31, 2023:

	Outstanding						Exercisable
Exercise Prices	Shares Outstanding at 12/31/2023	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Aggregate Intrinsic Value 1		Shares Outstanding at 12/31/2023	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Aggregate Intrinsic Value 1
$74.77-$83.00	629,402	1.66	$	79.18	$	136	629,402	1.66	$	79.18	$	136
$95.66-$96.31	462,978	2.92	$	95.72	93		462,473	2.92	$	95.72	92
$127.60	642,416	6.25	$	127.60	108		642,416	6.25	$	127.60	108
$138.35-$151.12	756,964	4.78	$	144.22	115		756,964	4.78	$	144.22	115
$196.70-$219.76	1,885,071	7.78	$	208.14	165		875,459	7.60	$	212.23	73
$253.98	764,532	9.31	$	253.98	32		—	0.00	$	—	—
	5,141,363		$	169.57	$	649	3,366,714		$	139.91	$	524

1 The difference between a stock award’s exercise price and the underlying stock’s closing market price at December 31, 2023, for awards with market price greater than the exercise price. Amounts are in millions of dollars.

The computations of weighted-average exercise prices and aggregate intrinsic values are not applicable to RSUs or PRSUs since these awards represent an agreement to issue shares of stock at the time of vesting. At December 31, 2023, there were 829,386 outstanding RSUs with a weighted average remaining contractual life of 1.4 years and 480,759 outstanding PRSUs with a weighted-average remaining contractual life of 1.5 years.



TABLE II— Additional Stock-based Award Information

(Dollars in millions except per share data)	2023		2022		2021
Stock options activity:
Weighted-average fair value per share of stock awards granted	$	75.79	$	51.69	$	56.30
Intrinsic value of stock awards exercised	$	356	$	217	$	374
Fair value of stock awards vested 1	$	53	$	56	$	59
Cash received from stock awards exercised	$	98	$	123	$	212

RSUs activity:
Weighted-average fair value per share of stock awards granted	$	252.24	$	196.06	$	216.50
Fair value of stock awards vested 2	$	126	$	105	$	136

PRSUs activity:
Weighted-average fair value per share of stock awards granted	$	251.97	$	195.17	$	215.45
Fair value of stock awards vested 2	$	80	$	90	$	74

1 Based on the grant date fair value.

2 Based on the underlying stock’s closing market price on the vesting date.

In accordance with guidance on share-based payments, stock-based compensation expense is based on the grant date fair value and is classified within Cost of goods sold, Selling, general and administrative expenses and Research and development expenses corresponding to the same line item as the cash compensation paid to respective employees, officers and non-employee directors. We recognize stock-based compensation expense on a straight-line basis over the requisite service period for awards with terms that specify cliff or graded vesting and contain only service conditions. Stock-based compensation expense for PRSUs is based on the probable number of shares expected to vest and is recognized primarily on a straight-line basis.

Before tax, stock-based compensation expense for 2023, 2022 and 2021 was $208 million, $193 million and $200 million, respectively, with a corresponding income tax benefit of $33 million, $32 million and $23 million, respectively.

The amount of stock-based compensation expense capitalized for the years ended December 31, 2023, 2022 and 2021 did not have a significant impact on our financial statements.

At December 31, 2023, there was $134 million of total unrecognized compensation cost from stock-based compensation arrangements granted under the plans, which is related to non-vested stock-based awards. We expect to recognize the compensation expense over a weighted-average period of approximately 1.7 years.

We currently use shares in Treasury stock to satisfy share award exercises.

The cash tax benefits realized from stock awards exercised for 2023, 2022 and 2021 were $89 million, $63 million and $102 million, respectively. We use the direct only method and tax law ordering approach to calculate the tax effects of stock-based compensation.

4. Derivative financial instruments and risk management

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates and commodity prices. Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate and commodity price exposures. Our policy specifies that derivatives are not to be used for speculative purposes. Derivatives that we use are primarily foreign currency forward, option and cross currency contracts, interest rate contracts and commodity forward and option contracts. Our derivative activities are subject to the management, direction and control of our senior financial officers. We present at least annually to the Audit Committee of the Board of Directors on our risk management practices, including our use of financial derivative instruments.

We recognize all derivatives at their fair value in Statement 3. On the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flow (cash flow hedge) or (3) an undesignated instrument. We record in current earnings changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk. We record in AOCI changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge, to the extent effective, in Statement 3 until we reclassify them to earnings in the same period or periods during which the hedged transaction affects earnings. We report changes in the fair value of undesignated derivative instruments in current earnings. We classify cash flows from designated derivative financial instruments within the same category as the item being hedged on Statement 5. We include cash flows from undesignated derivative financial instruments in the investing category on Statement 5.

We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value hedges to specific assets and liabilities in Statement 3 and linking cash flow hedges to specific forecasted transactions or variability of cash flow.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the designated derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items. When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, we discontinue hedge accounting prospectively, in accordance with the derecognition criteria for hedge accounting.

**A.**Foreign currency exchange rate risk

Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costs incurred in foreign currencies. Movements in foreign currency rates also affect our competitive position as these changes may affect business practices and/or pricing strategies of non-U.S.-based competitors. Additionally, we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.

Our ME&T operations purchase, manufacture and sell products in many locations around the world. As we have a diversified revenue and cost base, we manage our future foreign currency cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to approximately five years. As of December 31, 2023, the maximum term of these outstanding contracts at inception was approximately 60 months.

We generally designate as cash flow hedges at inception of the contract any foreign currency forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current quarter-end. We perform designation on a specific exposure basis to support hedge accounting. The remainder of ME&T foreign currency contracts are undesignated.

In managing foreign currency risk for our Financial Products operations, our objective is to minimize earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions and future transactions denominated in foreign currencies. Our policy allows the use of foreign currency forward, option and cross currency contracts to offset the risk of currency mismatch between our assets and liabilities and exchange rate risk associated with future transactions denominated in foreign currencies. Our foreign currency forward and option contracts are primarily undesignated. We designate fixed-to-fixed cross currency contracts as cash flow hedges to protect against movements in exchange rates on foreign currency fixed-rate assets and liabilities.

**B.**Interest rate risk

Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate contracts to manage our exposure to interest rate changes.

Our ME&T operations generally use fixed-rate debt as a source of funding. Our objective is to minimize the cost of borrowed funds. Our policy allows us to enter into fixed-to-floating interest rate contracts and forward rate agreements to meet that objective. We designate fixed-to-floating interest rate contracts as fair value hedges at inception of the contract, and we designate certain forward rate agreements as cash flow hedges at inception of the contract.

Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating rate and duration) of Cat Financial’s debt portfolio with the interest rate profile of our receivables portfolio within predetermined ranges on an ongoing basis. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the receivables portfolio. This matched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.

Our policy allows us to use fixed-to-floating, floating-to-fixed and floating-to-floating interest rate contracts to meet the match-funding objective. We designate fixed-to-floating interest rate contracts as fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest rate. We designate most floating-to-fixed interest rate contracts as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.

We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate contracts at both ME&T and Financial Products. We amortize the gains or losses associated with these contracts at the time of liquidation into earnings over the original term of the previously designated hedged item.

**C.**Commodity price risk

Commodity price movements create a degree of risk by affecting the price we must pay for certain raw materials. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased materials.

Our ME&T operations purchase base and precious metals embedded in the components we purchase from suppliers. Our suppliers pass on to us price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.

Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five-year horizon. All such commodity forward and option contracts are undesignated.

The location and fair value of derivative instruments reported in Statement 3 were as follows:


(Millions of dollars)	Fair Value
	December 31, 2023				December 31, 2022
	Assets 1		Liabilities 2		Assets 1		Liabilities 2
Designated derivatives
Foreign exchange contracts	$	389	$	(155)	$	462	$	(152)
Interest rate contracts	58		(209)		93		(288)
Total	$	447	$	(364)	$	555	$	(440)

Undesignated derivatives
Foreign exchange contracts	$	55	$	(82)	$	65	$	(47)
Commodity contracts	18		(9)		24		(9)
Total	$	73	$	(91)	$	89	$	(56)

1 Assets are classified in Statement 3 as Receivables - trade and other or Long-term receivables - trade and other.
2 Liabilities are classified in Statement 3 as Accrued expenses or Other liabilities.

The total notional amounts of the derivative instruments as of December 31, 2023 and 2022 were $25.6 billion and $24.3 billion, respectively. The notional amounts of the derivative financial instruments do not represent amounts exchanged by the parties. We calculate the amounts exchanged by the parties by referencing the notional amounts and by other terms of the derivatives, such as foreign currency exchange rates, interest rates or commodity prices.

Gains (losses) on derivative instruments are categorized as follows:


(Millions of dollars)	Years ended December 31,
	Fair Value / Undesignated Hedges						Cash Flow Hedges
	Gains (Losses) Recognized in Statement 11						Gains (Losses) Recognized in AOCI						Gains (Losses) Reclassified from AOCI2
	2023		2022		2021		2023		2022		2021		2023		2022		2021
Foreign exchange contracts	$	12	$	(57)	$	104	$	39	$	264	$	169	$	(58)	$	329	$	227
Interest rate contracts	(135)		(6)		24		9		111		26		55		11		(31)
Commodity contracts	10		51		56		—		—		—		—		—		—
Total	$	(113)	$	(12)	$	184	$	48	$	375	$	195	$	(3)	$	340	$	196

1 Foreign exchange contract and Commodity contract gains (losses) are included in Other income (expense) in Statement 1. Interest rate contract gains (losses) are included in Interest expense of Financial Products and Interest expense excluding Financial Products in Statement 1.
2 Foreign exchange contract gains (losses) are primarily included in Other income (expense) in Statement 1. Interest rate contract gains (losses) are primarily included in Interest expense of Financial Products in Statement 1.

The following amounts were recorded in Statement 3 related to cumulative basis adjustments for fair value hedges:


(Millions of dollars)	Years ended December 31,
	Carrying Value of the Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities
	2023		2022		2023		2022
Long-term debt due within one year	$	982	$	—	$	(23)	$	—
Long-term debt due after one year	4,245		4,173		(156)		(280)
Total	$	5,227	$	4,173	$	(179)	$	(280)

We enter into International Swaps and Derivatives Association (ISDA) master netting agreements within ME&T and Financial Products that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements may also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event.

Collateral is typically not required of the counterparties or of our company under the master netting agreements. As of December 31, 2023 and 2022, no cash collateral was received or pledged under the master netting agreements.

The effect of the net settlement provisions of the master netting agreements on our derivative balances upon an event of default or termination event was as follows:


(Millions of dollars)	December 31, 2023				December 31, 2022
	Assets		Liabilities		Assets		Liabilities
Gross Amounts Recognized	$	520	$	(455)	$	644	$	(496)
Financial Instruments Not Offset	(202)		202		(233)		233

Net Amount	$	318	$	(253)	$	411	$	(263)

5. Other income (expense)


	Years ended December 31,
(Millions of dollars)	2023		2022		2021
Investment and interest income	$	494	$	167	$	80
Foreign exchange gains (losses) 1	(96)		104		110
License fee income	146		142		123
Gains (losses) on securities	11		(56)		134
Net periodic pension and OPEB income (cost), excluding service cost	47		868		1,279
Miscellaneous income (loss)	(7)		66		88
Total	$	595	$	1,291	$	1,814

1 Includes gains (losses) from foreign exchange derivative contracts. See Note 4 for further details.

6. Income taxes

Reconciliation of the U.S. federal statutory rate to effective rate:


	Years ended December 31,
(Millions of dollars)	2023				2022				2021
Taxes at U.S. statutory rate	$	2,740	21.0	%	$	1,838	21.0	%	$	1,723	21.0	%
(Decreases) increases resulting from:
Non-U.S. subsidiaries taxed at other than the U.S. rate	129		1.0	%	184		2.1	%	224		2.7	%
State and local taxes, net of federal 1	93		0.7	%	91		1.0	%	21		0.3	%

U.S. tax incentives	(170)		(1.3)	%	(166)		(1.9)	%	(123)		(1.5)	%






Nondeductible goodwill	—		—	%	159		1.8	%	—		—	%
Other—net	(11)		(0.1)	%	(39)		(0.4)	%	(103)		(1.3)	%
Provision (benefit) for income taxes	$	2,781	21.3	%	$	2,067	23.6	%	$	1,742	21.2	%

1 Excludes amount included in nondeductible goodwill line item.

The negative impact on the effective rate from the portion of the goodwill impairment not deductible for tax purposes is reported in the effective tax rate reconciliation line item above labeled "Nondeductible goodwill." Included in the line item above labeled “Non-U.S. subsidiaries taxed at other than the U.S. rate” are the effects of local and U.S. taxes related to earnings of non-U.S. subsidiaries, changes in the amount of unrecognized tax benefits associated with these earnings, losses at non-U.S. subsidiaries without local tax benefits due to valuation allowances and other permanent differences between tax and U.S. GAAP results.

Distributions of profits from non-U.S. subsidiaries are not expected to cause a significant incremental U.S. tax impact in the future. However, these distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions. Undistributed profits of non-U.S. subsidiaries of approximately $15 billion are considered indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not feasible primarily due to our legal entity structure and the complexity of U.S. and local tax laws.


The components of profit (loss) before taxes were:
	Years ended December 31,
(Millions of dollars)	2023		2022		2021
U.S.	$	6,463	$	2,962	$	2,740
Non-U.S.	6,587		5,790		5,464
	$	13,050	$	8,752	$	8,204

Profit before taxes, as shown above, is based on the location of the entity to which such earnings are attributable. Where an entity’s earnings are subject to taxation, however, may not correlate solely to where an entity is located. Thus, the income tax provision shown below as U.S. or non-U.S. may not correspond to the earnings shown above.


The components of the provision (benefit) for income taxes were:
	Years ended December 31,
(Millions of dollars)	2023		2022		2021
Current tax provision (benefit):
U.S.1	$	1,627	$	1,055	$	766
Non-U.S.	1,592		1,255		1,283
State (U.S.)	154		134		76
	3,373		2,444		2,125

Deferred tax provision (benefit):
U.S.1	(391)		(404)		(387)
Non-U.S.	(164)		50		54
State (U.S.)	(37)		(23)		(50)
	(592)		(377)		(383)
Total provision (benefit) for income taxes	$	2,781	$	2,067	$	1,742
1 Includes U.S. taxes related to non-U.S. earnings. We account for U.S. taxes on global intangible low-taxed income as a period cost.

We paid net income tax and related interest of $2,949 million, $3,076 million and $1,759 million in 2023, 2022 and 2021, respectively.

Accounting for income taxes under U.S. GAAP requires that individual tax-paying entities of the company offset all deferred tax liabilities and assets within each particular tax jurisdiction and present them as a noncurrent deferred tax liability or asset in the Consolidated Financial Position. Amounts in different tax jurisdictions cannot be offset against each other. The amount of deferred income taxes at December 31, included on the following lines in Statement 3, were as follows:


	December 31,
(Millions of dollars)	2023		2022
Assets:

Noncurrent deferred and refundable income taxes	$	2,634	$	2,047

Liabilities:

Other liabilities	454		471
Deferred income taxes—net	$	2,180	$	1,576


The components of deferred tax assets and liabilities were:
	December 31,
(Millions of dollars)	2023		2022
Deferred income tax assets:
Tax carryforwards	$	1,389	$	1,349
Research expenditures	1,350		949
Postemployment benefits	656		728
Employee compensation and benefits	634		459
Warranty reserves	325		282
Post sale discounts	253		159
Lease obligations	144		144
Inventory valuation	138		147

Allowance for credit losses	109		113


Other—net	197		376
	5,195		4,706

Deferred income tax liabilities:
Capital and intangible assets, including lease basis differences	(1,312)		(1,401)
Undistributed profits, including translation adjustments	(401)		(344)
Other outside basis differences	(267)		(264)

Bond discount	(101)		(107)
	(2,081)		(2,116)
Valuation allowance for deferred tax assets	(934)		(1,014)
Deferred income taxes—net	$	2,180	$	1,576

At December 31, 2023, deferred tax assets for U.S. state losses and credit carryforwards of $86 million expire on or before 2043 while the remaining $42 million may be carried carryforward indefinitely. Of these U.S. state deferred tax assets, $95 million were reduced by valuation allowances. The deferred tax assets for U.S. federal losses and credit carryforwards of $157 million expire on or before 2034 and were subject to a full valuation allowance. Deferred tax assets for losses and credit carryforwards of non-U.S. entities of $266 million expires on or before 2044 while the remaining $838 million may be carried over indefinitely. Non-U.S. entities that have not demonstrated consistent and/or sustainable profitability to support the realization of net deferred tax assets, including certain entities in Luxembourg, have recorded valuation allowances of $682 million against tax carryforwards and other deferred tax assets.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for uncertain tax positions, including positions impacting only the timing of tax benefits, follows.


Reconciliation of unrecognized tax benefits: 1
	Years ended December 31,
(Millions of dollars)	2023		2022		2021
Beginning balance	$	1,140	$	1,886	$	1,759

Additions for tax positions related to current year	94		72		141
Additions for tax positions related to prior years	42		91		43
Reductions for tax positions related to prior years	(19)		(66)		(30)
Reductions for settlements 2	(27)		(840)		(24)
Reductions for expiration of statute of limitations	(7)		(3)		(3)

Ending balance	$	1,223	$	1,140	$	1,886

Amount that, if recognized, would impact the effective tax rate	$	997	$	874	$	1,688

1Foreign currency impacts are included within each line as applicable.

2Includes cash payment or other reduction of assets to settle liability.

We classify interest and penalties on income taxes as a component of the provision for income taxes. We recognized a net provision for interest and penalties of $36 million, $49 million and $54 million during the years ended December 31, 2023, 2022 and 2021, respectively. The total amount of interest and penalties accrued was $135 million and $95 million as of December 31, 2023 and 2022, respectively.

On September 8, 2022, the company reached a settlement with the U.S. Internal Revenue Service (IRS) that resolves all issues for tax years 2007 through 2016, without any penalties. The company's settlement includes, among other issues, the resolution of disputed tax treatment of profits earned by Caterpillar SARL (CSARL) from certain parts transactions. We vigorously contested the IRS's application of the "substance-over-form" or "assignment-of-income" judicial doctrines and its proposed increases to tax and imposition of accuracy related penalties. The settlement does not include any increases to tax in the United States based on those judicial doctrines and does not include any penalties. The final tax assessed by the IRS for all issues under the settlement was $490 million for the ten-year period. This amount was primarily paid in 2022 along with associated interest of $250 million. The settlement was within the total amount of gross unrecognized tax benefits for uncertain tax positions and enables us to avoid the costs and burdens of further disputes with the IRS. As a result of the settlement, we recorded a tax benefit of $41 million in 2022 to reflect changes in estimates of prior years' taxes and related interest, net of tax.

We are subject to the continuous examination of our U.S. federal income tax returns by the IRS, and tax years 2017 to 2019 are currently under examination. In our major non-U.S. jurisdictions including Australia, Brazil, China, Germany, India, Japan, Mexico, Switzerland, Singapore and the U.K., tax years are typically subject to examination for three to ten years. Due to the uncertainty related to the timing and potential outcome of audits, we cannot estimate the range of reasonably possible change in unrecognized tax benefits in the next 12 months.

7. Cat Financial Financing Activities

**A.**Wholesale inventory receivables

Wholesale inventory receivables are receivables of Cat Financial that arise when Cat Financial provides financing for a dealer’s purchase of inventory and were $1,632 million and $1,102 million, at December 31, 2023 and 2022, respectively. We include these receivables in Receivables—trade and other and Long-term receivables—trade and other in Statement 3.


Contractual maturities of outstanding wholesale inventory receivables:
(Millions of dollars)	December 31, 2023
Amounts Due In	Wholesale Loans		Wholesale Leases		Total
2024	$	981	$	42	$	1,023
2025	203		34		237
2026	210		18		228
2027	49		9		58
2028	17		5		22
Thereafter	2		1		3
Total	1,462		109		1,571
Guaranteed residual value 1	33		21		54
Unguaranteed residual value 1	2		24		26
Less: Unearned income	(7)		(12)		(19)
Total	$	1,490	$	142	$	1,632

1 For Wholesale loans, represents residual value on failed sale leasebacks.

Cat Financial’s wholesale inventory receivables generally may be repaid or refinanced without penalty prior to contractual maturity.

Please refer to Note 18 for fair value information.

**B.**Finance receivables

Finance receivables are receivables of Cat Financial and are reported in Statement 3 net of an allowance for credit losses.


Contractual maturities of outstanding finance receivables:
(Millions of dollars)	December 31, 2023
Amounts Due In	Retail Loans		Retail Leases		Total
2024	$	7,104	$	2,547	$	9,651
2025	4,116		1,703		5,819
2026	2,819		1,035		3,854
2027	1,534		491		2,025
2028	703		172		875
Thereafter	168		43		211
Total	16,444		5,991		22,435
Guaranteed residual value 1	10		395		405
Unguaranteed residual value 1	1		604		605
Less: Unearned income	(374)		(622)		(996)
Total	$	16,081	$	6,368	$	22,449

1 For Retail loans, represents residual value on failed sale leasebacks.

Cat Financial’s finance receivables generally may be repaid or refinanced without penalty prior to contractual maturity.

Please refer to Note 18 for fair value information.

**C.**Allowance for credit losses

Portfolio segments

A portfolio segment is the level at which Cat Financial develops a systematic methodology for determining its allowance for credit losses. Cat Financial's portfolio segments and related methods for estimating expected credit losses are as follows:

Customer

Cat Financial provides loans and finance leases to end-user customers primarily for the purpose of financing new and used Caterpillar machinery, engines and equipment for commercial use. Cat Financial also provides financing for power generation facilities that, in most cases, incorporate Caterpillar products. The average original term of Cat Financial's customer finance receivable portfolio was approximately 51 months with an average remaining term of approximately 27 months as of December 31, 2023.

Cat Financial typically maintains a security interest in financed equipment and generally requires physical damage insurance coverage on the financed equipment, both of which provide Cat Financial with certain rights and protections. If Cat Financial's collection efforts fail to bring a defaulted account current, Cat Financial generally can repossess the financed equipment, after satisfying local legal requirements, and sell it within the Caterpillar dealer network or through third-party auctions.

Cat Financial estimates the allowance for credit losses related to its customer finance receivables based on loss forecast models utilizing probabilities of default and the estimated loss given default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific economic factors.

During the year ended December 31, 2023, Cat Financial's forecasts reflected a continuation of the trend of relatively low unemployment rates and delinquencies within their portfolio. However, industry delinquencies show an increasing trend as the central bank actions aimed at reducing inflation have weakened global economic growth. The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

Dealer

Cat Financial provides financing to Caterpillar dealers in the form of wholesale financing plans. Cat Financial's wholesale financing plans provide assistance to dealers by financing their mostly new Caterpillar equipment inventory and rental fleets on a secured and unsecured basis. In addition, Cat Financial provides a variety of secured and unsecured loans to Caterpillar dealers.

Cat Financial estimates the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

In general, Cat Financial's Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to its close working relationships with the dealers and their financial strength. Therefore, Cat Financial made no adjustments to historical loss rates during the year ended December 31, 2023.

Classes of finance receivables

Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk. Cat Financial's classes, which align with management reporting for credit losses, are as follows:

North America** — Finance receivables originated in the United States and Canada.
EAME** — Finance receivables originated in Europe, Africa, the Middle East and Eurasia.
Asia/Pacific** — Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.
Mining —** Finance receivables related to large mining customers worldwide.
Latin America —** Finance receivables originated in Mexico and Central and South American countries.
Power —** Finance receivables originated worldwide related to Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.

Receivable balances, including accrued interest, are written off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). Generally, the amount of the write-off is determined by comparing the fair value of the collateral, less cost to sell, to the amortized cost of the receivable. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.

An analysis of the allowance for credit losses was as follows:


(Millions of dollars)	December 31, 2023						December 31, 2022
	Customer		Dealer		Total		Customer		Dealer		Total
Allowance for Credit Losses:
Beginning balance	$	277	$	65	$	342	$	251	$	82	$	333

Write-offs	(115)		—		(115)		(108)		—		(108)
Recoveries	50		—		50		62		—		62
Provision for credit losses1	61		(14)		47		75		(17)		58
Other	3		—		3		(3)		—		(3)
Ending balance	$	276	$	51	$	327	$	277	$	65	$	342

Finance Receivables	$	20,571	$	1,878	$	22,449	$	19,772	$	1,585	$	21,357

1 Excludes provision for credit losses on unfunded commitments and other miscellaneous receivables.

Gross write-offs by origination year for the Customer portfolio segment were as follows:


(Millions of dollars)	Year Ended December 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Finance Receivables		Total

North America	$	2	$	11	$	11	$	5	$	3	$	2	$	12	$	46
EAME	1		5		6		4		1		—		—		17
Asia/Pacific	2		5		8		5		1		—		—		21

Latin America	—		8		5		6		1		10		—		30
Power	—		—		—		—		—		1		—		1
Total	$	5	$	29	$	30	$	20	$	6	$	13	$	12	$	115

Credit quality of finance receivables

At origination, Cat Financial evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, Cat Financial monitors credit quality based on past-due status as there is a meaningful correlation between the past-due status of customers and the risk of loss. In determining past-due status, Cat Financial considers the entire finance receivable past due when any installment is over 30 days past due.

Customer

The tables below summarize the aging category of Cat Financial's amortized cost of finance receivables in the Customer portfolio segment by origination year:



(Millions of dollars)	December 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	4,430	$	2,628	$	2,000	$	745	$	220	$	32	$	312	$	10,367
31-60 days past due	28		31		24		14		7		1		4		109
61-90 days past due	10		11		8		4		1		—		2		36
91+ days past due	12		23		18		9		4		1		2		69

EAME
Current	1,336		895		588		258		111		105		—		3,293
31-60 days past due	10		9		7		3		1		—		—		30
61-90 days past due	4		3		3		1		1		—		—		12
91+ days past due	7		17		15		8		3		1		—		51

Asia/Pacific
Current	943		594		293		73		16		4		—		1,923
31-60 days past due	5		6		7		2		—		—		—		20
61-90 days past due	2		3		3		2		—		—		—		10
91+ days past due	1		5		3		3		1		—		—		13

Mining
Current	1,039		686		381		121		68		27		66		2,388
31-60 days past due	—		—		—		—		—		—		—		—
61-90 days past due	—		—		—		—		1		1		—		2
91+ days past due	—		—		1		—		—		1		—		2

Latin America
Current	750		520		219		59		23		6		—		1,577
31-60 days past due	9		10		6		1		—		—		—		26
61-90 days past due	2		4		1		—		—		—		—		7
91+ days past due	2		10		8		5		8		11		—		44

Power
Current	152		49		64		75		28		59		162		589
31-60 days past due	—		—		—		—		—		—		—		—
61-90 days past due	—		—		—		—		—		—		—		—
91+ days past due	—		—		—		—		—		3		—		3

Totals by Aging Category
Current	8,650		5,372		3,545		1,331		466		233		540		20,137
31-60 days past due	52		56		44		20		8		1		4		185
61-90 days past due	18		21		15		7		3		1		2		67
91+ days past due	22		55		45		25		16		17		2		182
Total Customer	$	8,742	$	5,504	$	3,649	$	1,383	$	493	$	252	$	548	$	20,571



(Millions of dollars)	December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	3,915	$	3,276	$	1,525	$	653	$	206	$	34	$	240	$	9,849
31-60 days past due	25		26		18		12		4		1		4		90
61-90 days past due	9		15		7		3		1		—		3		38
91+ days past due	11		16		12		6		4		3		4		56

EAME
Current	1,270		953		477		280		155		68		—		3,203
31-60 days past due	10		12		7		1		1		—		—		31
61-90 days past due	8		4		3		1		—		—		—		16
91+ days past due	6		25		16		4		1		1		—		53

Asia/Pacific
Current	1,033		684		313		69		18		2		—		2,119
31-60 days past due	10		12		8		1		1		—		—		32
61-90 days past due	2		5		4		2		—		—		—		13
91+ days past due	2		6		6		4		—		—		—		18

Mining
Current	863		575		220		171		93		108		80		2,110
31-60 days past due	—		1		—		—		—		—		—		1
61-90 days past due	—		—		—		—		—		—		—		—
91+ days past due	—		—		—		—		—		1		—		1

Latin America
Current	770		400		150		69		26		20		—		1,435
31-60 days past due	7		8		4		2		—		1		—		22
61-90 days past due	2		5		1		1		—		—		—		9
91+ days past due	2		13		11		2		1		—		—		29

Power
Current	78		85		142		33		18		161		125		642
31-60 days past due	—		—		—		—		—		—		—		—
61-90 days past due	—		—		—		—		—		—		—		—
91+ days past due	—		—		—		—		—		5		—		5

Totals by Aging Category
Current	7,929		5,973		2,827		1,275		516		393		445		19,358
31-60 days past due	52		59		37		16		6		2		4		176
61-90 days past due	21		29		15		7		1		—		3		76
91+ days past due	21		60		45		16		6		10		4		162
Total Customer	$	8,023	$	6,121	$	2,924	$	1,314	$	529	$	405	$	456	$	19,772

Finance receivables in the Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other equipment. For those contracts where the borrower is experiencing financial difficulty, repayment of the outstanding amounts is generally expected to be provided through the operation or repossession and sale of the equipment.

Dealer

As of December 31, 2023 and 2022, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $44 million and $58 million, respectively, that was 91+ days past due in Latin America, all of which was originated prior to 2018.

Non-accrual finance receivables

In Cat Financial's Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:



	December 31, 2023						December 31, 2022
	Amortized Cost						Amortized Cost
(Millions of dollars)	Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing		Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing

North America	$	52	$	—	$	20	$	52	$	4	$	11
EAME	34		—		18		43		—		10
Asia/Pacific	8		—		5		11		—		7
Mining	2		—		—		—		1		—
Latin America	48		—		1		45		—		—
Power	8		—		—		5		11		—
Total	$	152	$	—	$	44	$	156	$	16	$	28

There were $44 million and $58 million, respectively, in finance receivables in Cat Financial's Dealer portfolio segment on non-accrual status for the year ended December 31, 2023 and 2022, all of which was in Latin America.

Modifications

Cat Financial periodically modifies the terms of their finance receivable agreements in response to borrowers’ financial difficulty. Typically, the types of modifications granted are payment deferrals, interest-only payment periods and/or term extensions. Many modifications Cat Financial grants are for commercial reasons or for borrowers experiencing some form of short-term financial stress and may result in insignificant payment delays. Cat Financial does not consider these borrowers to be experiencing financial difficulty. Modifications for borrowers Cat Financial does consider to be experiencing financial difficulty typically result in payment deferrals and/or reduced payments for a period of four months or longer, term extension of six months or longer or a combination of both.

During the year ended December 31, 2023, there were no finance receivable modifications granted to borrowers experiencing financial difficulty in Cat Financial's Dealer portfolio segment. The amortized cost basis of finance receivables modified for borrowers experiencing financial difficulty in the Customer portfolio segment during the year ended December 31, 2023, was $47 million, or 0.21 percent of Cat Financial's finance receivable portfolio.

For the year ended December 31, 2023, the financial effects of term extensions for borrowers experiencing financial difficulty added a weighted average of 15 months to the terms of modified contracts. For the year ended December 31, 2023, the financial effects of payment delays for borrowers experiencing financial difficulty resulted in weighted average payment deferrals and/or interest only payment periods of 7 months.

After Cat Financial modifies a finance receivable, they continue to track its performance under its most recent modified terms. As of December 31, 2023, all of the finance receivables modified with borrowers experiencing financial difficulty are current except for in EAME where there was $2 million that was 31-60 days past due, $1 million that was 61-90 days past due, and $1 million that was 91+ days past due.

The effect of most modifications made to finance receivables for borrowers experiencing financial difficulty is already included in the allowance for credit losses based on the methodologies used to estimate the allowance; therefore, a change to the allowance for credit losses is generally not recorded upon modification. On rare occasions when principal forgiveness is provided, the amount forgiven is written off against the allowance for credit losses.

8. Inventories

Inventories (principally using the LIFO method) are comprised of the following:


	December 31,
(Millions of dollars)	2023		2022
Raw materials	$	6,492	$	6,370
Work-in-process	1,411		1,452
Finished goods	8,308		8,138
Supplies	354		310
Total inventories	$	16,565	$	16,270

9. Property, plant and equipment


		December 31,
(Millions of dollars)	Useful Lives (Years)	2023		2022
Land	—	$	616	$	622
Buildings and land improvements	20-45	7,154		7,016
Machinery, equipment and other	2-10	12,150		12,282
Software	3-7	1,607		1,556
Equipment leased to others	1-7	5,837		5,568
Construction-in-process	—	1,259		1,020
Total property, plant and equipment, at cost		28,623		28,064
Less: Accumulated depreciation		(15,943)		(16,036)
Property, plant and equipment–net		$	12,680	$	12,028

10. Intangible assets and goodwill

**A.**Intangible assets

Intangible assets were comprised of the following:


		December 31, 2023
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount 1		Accumulated Amortization 1		Net
Customer relationships	16	$	2,232	$	(1,814)	$	418
Intellectual property	15	484		(380)		104
Other	17	117		(75)		42
Total finite-lived intangible assets	15	$	2,833	$	(2,269)	$	564



		December 31, 2022
	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net
Customer relationships	16	$	2,233	$	(1,675)	$	558
Intellectual property	12	1,473		(1,320)		153
Other	16	132		(85)		47
Total finite-lived intangible assets	14	$	3,838	$	(3,080)	$	758













1 For the year ended December 31, 2023, $1.0 billion of intangible assets were fully amortized and have been removed.

Finite-lived intangible assets are amortized over their estimated useful lives and tested for impairment if events or changes in circumstances indicate that the asset may be impaired.

Amortization expense related to intangible assets was $218 million, $284 million and $302 million for 2023, 2022 and 2021, respectively.

As of December 31, 2023, amortization expense related to intangible assets is expected to be:


(Millions of dollars)
2024	2025	2026	2027	2028	Thereafter
$175	$166	$95	$31	$24	$73

**B.**Goodwill

There were no goodwill impairments during 2023 or 2021.

Our annual impairment tests completed in the fourth quarter of 2022 indicated the fair value of each reporting unit was substantially above its respective carrying value, including goodwill, with the exception of our Rail reporting unit.

The Rail reporting unit is a part of our Energy & Transportation segment. Rail’s product portfolio includes diesel-electric locomotives and other rail-related products and services. The annual impairment test completed in the fourth quarter of 2022 indicated that the fair value of Rail was below its carrying value. Accordingly, we recognized a goodwill impairment charge of $925 million, resulting in a full impairment of Rail’s goodwill balance as of October 1, 2022. There was a $36 million tax benefit associated with this impairment charge. The valuation of the Rail reporting unit was based on estimates of future cash flows, which assumed a reduced demand forecast, lower margins due to continued inflationary cost pressures, and a discount rate approximately 140 basis points higher than utilized in the prior year valuation. The reduction in the demand forecast in the fourth quarter of 2022 was primarily driven by fourth quarter commercial developments, resulting in a lower outlook for the Company’s locomotive offerings.

The changes in carrying amount of goodwill by reportable segment for the years ended December 31, 2023 and 2022 were as follows:


(Millions of dollars)	December 31, 2022		Acquisitions		Impairment Loss		Other Adjustments 1		December 31, 2023
Construction Industries
Goodwill	$	287	$	—	$	—	$	(10)	$	277
Impairments	(22)		—		—		—		(22)
Net goodwill	265		—		—		(10)		255
Resource Industries
Goodwill	4,130		—		—		21		4,151
Impairments	(1,175)		—		—		—		(1,175)
Net goodwill	2,955		—		—		21		2,976
Energy & Transportation
Goodwill	2,947		—		—		12		2,959
Impairment	(925)		—		—		—		(925)
Net goodwill	2,022		—		—		12		2,034
All Other 2
Goodwill	46		—		—		(3)		43


Consolidated total
Goodwill	7,410		—		—		20		7,430
Impairments	(2,122)		—		—		—		(2,122)
Net goodwill	$	5,288	$	—	$	—	$	20	$	5,308

	December 31, 2021		Acquisitions		Impairment Loss		Other Adjustments 1		December 31, 2022
Construction Industries
Goodwill	$	302	$	—	$	—	$	(15)	$	287
Impairments	(22)		—		—		—		(22)
Net goodwill	280		—		—		(15)		265
Resource Industries
Goodwill	4,182		—		—		(52)		4,130
Impairments	(1,175)		—		—		—		(1,175)
Net goodwill	3,007		—		—		(52)		2,955
Energy & Transportation
Goodwill	2,985		25		—		(63)		2,947
Impairment	—		—		(925)		—		(925)
Net goodwill	2,985		25		(925)		(63)		2,022
All Other 2
Goodwill	52		—		—		(6)		46


Consolidated total
Goodwill	7,521		25		—		(136)		7,410
Impairments	(1,197)		—		(925)		—		(2,122)
Net goodwill	$	6,324	$	25	$	(925)	$	(136)	$	5,288

1 Other adjustments are comprised primarily of foreign currency translation. 2 Includes All Other operating segment (See Note 23).

**11.**Investments in debt and equity securities

We have investments in certain debt and equity securities, which we record at fair value and primarily include in Other assets in Statement 3.

We classify debt securities primarily as available-for-sale. We include the unrealized gains and losses arising from the revaluation of available-for-sale debt securities, net of applicable deferred income taxes, in equity (AOCI in Statement 3). We include the unrealized gains and losses arising from the revaluation of the equity securities in Other income (expense) in Statement 1. We generally determine realized gains and losses on sales of investments using the specific identification method for available-for-sale debt and equity securities and include them in Other income (expense) in Statement 1.

The cost basis and fair value of available-for-sale debt securities with unrealized gains and losses included in equity (AOCI in Statement 3) were as follows:


Available-for-sale debt securities	December 31, 2023						December 31, 2022
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)		Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)		Fair Value
Government debt securities
U.S. treasury bonds	$	10	$	—	$	10	$	9	$	—	$	9
Other U.S. and non-U.S. government bonds	62		(2)		60		60		(5)		55

Corporate debt securities
Corporate bonds and other debt securities	3,031		(36)		2,995		2,561		(95)		2,466
Asset-backed securities	195		(3)		192		187		(5)		182

Mortgage-backed debt securities
U.S. governmental agency	433		(23)		410		364		(31)		333
Residential	3		(1)		2		3		(1)		2
Commercial	137		(9)		128		127		(10)		117
Total available-for-sale debt securities	$	3,871	$	(74)	$	3,797	$	3,311	$	(147)	$	3,164


Available-for-sale debt securities in an unrealized loss position:

	December 31, 2023
	Less than 12 months 1				12 months or more 1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Government debt securities
Other U.S. and non-U.S. government bonds	$	—	$	—	$	25	$	3	$	25	$	3


Corporate debt securities
Corporate bonds	765		—		1,011		45		1,776		45
Asset-backed securities	9		—		97		3		106		3

Mortgage-backed debt securities
U.S. governmental agency	33		—		287		25		320		25
Residential	—		—		—		—		—		—
Commercial	2		—		121		9		123		9
Total	$	809	$	—	$	1,541	$	85	$	2,350	$	85


	December 31, 2022
	Less than 12 months 1				12 months or more 1				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Government debt securities
Other U.S. and non-U.S. government bonds	$	19	$	1	$	20	$	4	$	39	$	5

Corporate debt securities
Corporate bonds	1,815		46		357		50		2,172		96
Asset-backed securities	75		2		55		3		130		5

Mortgage-backed debt securities
U.S. governmental agency	229		16		98		15		327		31
Residential	2		—		1		1		3		1
Commercial	63		5		54		5		117		10
Total	$	2,203	$	70	$	585	$	78	$	2,788	$	148

1 Indicates the length of time that individual securities have been in a continuous unrealized loss position.

The unrealized losses on our investments in government debt securities, corporate debt securities, and mortgage-backed debt securities relate to changes in underlying interest rates and credit spreads since time of purchase. We do not intend to sell the investments, and it is not likely that we will be required to sell the investments before recovery of their respective amortized cost basis. In addition, we did not expect credit-related losses on these investments as of December 31, 2023.

The cost basis and fair value of available-for-sale debt securities at December 31, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.



	December 31, 2023
(Millions of dollars)	Cost Basis		Fair Value
Due in one year or less	$	970	$	963
Due after one year through five years	1,996		1,966
Due after five years through ten years	253		249
Due after ten years	79		79
U.S. governmental agency mortgage-backed securities	433		410
Residential mortgage-backed securities	3		2
Commercial mortgage-backed securities	137		128
Total debt securities – available-for-sale	$	3,871	$	3,797



Sales of available-for-sale debt securities:
	Years Ended December 31,
(Millions of dollars)	2023		2022		2021
Proceeds from the sale of available-for-sale securities	$	940	$	767	$	454
Gross gains from the sale of available-for-sale securities	$	—	$	—	$	4
Gross losses from the sale of available-for-sale securities	$	1	$	5	$	—

In addition, we had $1,900 million of investments in time deposits classified as held-to-maturity debt securities as of December 31, 2023. We did not have any investments classified as held-to-maturity debt securities as of December 31, 2022. All these investments mature within one year and we include them in Prepaid expenses and other current assets in Statement 3. We record held-to-maturity debt securities at amortized cost, which approximates fair value.

For the years ended December 31, 2023 and 2022, the net unrealized gains (losses) for equity securities held at December 31, 2023 and 2022 were $(12) million and $(49) million, respectively.

**12.**Postemployment benefit plans

We provide defined benefit pension plans, defined contribution plans and/or other postretirement benefit plans (retirement health care and life insurance) to employees in many of our locations throughout the world. Our defined benefit pension plans provide a benefit based on years of service and/or the employee’s average earnings near retirement. Our defined contribution plans allow employees to contribute a portion of their salary to help save for retirement, and in most cases, we provide a matching contribution. The benefit obligation related to our non-U.S. defined benefit pension plans are for employees located primarily in Europe, Japan and Brazil. For other postretirement benefits (OPEB), substantially all of our benefit obligation is for employees located in the United States.

A. Obligations, assets and funded status


	U.S. Pension Benefits				Non-U.S. Pension Benefits				Other Postretirement Benefits
(Millions of dollars)	2023		2022		2023		2022		2023		2022
Accumulated benefit obligation, end of year	$	13,137	$	13,069	$	3,151	$	2,859
Change in benefit obligation:
Benefit obligation, beginning of year	$	13,069	$	17,895	$	2,956	$	4,436	$	2,866	$	3,736
Service cost 1	—		—		40		50		67		99
Interest cost	656		401		124		69		144		80
Plan amendments	—		—		—		—		—		(29)
Actuarial loss (gain)	394		(4,231)		169		(1,084)		(115)		(779)
Foreign currency exchange rates	—		—		178		(333)		14		—
Participant contributions	—		—		5		5		43		43
Benefits paid - gross	(982)		(995)		(196)		(179)		(285)		(292)
Less: federal subsidy on benefits paid	—		—		—		—		7		8
Curtailments, settlements and termination benefits	—		(1)		(2)		(8)		—		—
Acquisitions, divestitures and other	—		—		(9)		—		—		—
Benefit obligation, end of year	$	13,137	$	13,069	$	3,265	$	2,956	$	2,741	$	2,866
Change in plan assets:
Fair value of plan assets, beginning of year	$	12,456	$	17,227	$	3,244	$	4,552	$	102	$	130
Actual return on plan assets	1,220		(3,821)		160		(852)		33		(25)
Foreign currency exchange rates	—		—		190		(328)		—		—
Company contributions	44		46		66		54		251		246
Participant contributions	—		—		5		5		43		43
Benefits paid	(982)		(995)		(196)		(179)		(285)		(292)
Settlements and termination benefits	—		(1)		(2)		(8)		—		—
Fair value of plan assets, end of year	$	12,738	$	12,456	$	3,467	$	3,244	$	144	$	102

Over (under) funded status	$	(399)	$	(613)	$	202	$	288	$	(2,597)	$	(2,764)

Amounts recognized in Statement 3:
Other assets (non-current asset)	$	354	$	256	$	563	$	615	$	—	$	—
Accrued wages, salaries and employee benefits (current liability)	(52)		(48)		(20)		(18)		(162)		(224)
Liability for postemployment benefits (non-current liability) 2	(701)		(821)		(341)		(309)		(2,435)		(2,540)
Net (liability) asset recognized	$	(399)	$	(613)	$	202	$	288	$	(2,597)	$	(2,764)



Amounts recognized in AOCI (pre-tax):
Prior service cost (credit)	$	—		$	—		$	21		$	20		$	(19)		$	(29)

Weighted-average assumptions used to determine benefit obligation, end of year:
Discount rate	5.0		%	5.4		%	3.9		%	4.3		%	5.1		%	5.4		%
Rate of compensation increase 1	—		%	—		%	2.3		%	2.3		%	4.0		%	4.0		%

1 All U.S. pension benefits are frozen, and accordingly there is no longer any service cost and certain assumptions are no longer applicable.

2 The Liability for postemployment benefits reported in Statement 3 includes liabilities for other postemployment benefits and non-qualified deferred compensation plans. For 2023, these liabilities were $56 million and $565 million, respectively. For 2022, these liabilities were $58 million and $475 million, respectively.

For 2023, Actuarial loss (gain) impacting the benefit obligation was primarily due to lower discount rates at the end of 2023 compared to the end of 2022. For 2022, Actuarial loss (gain) impacting the benefit obligation was primarily due to higher discount rates at the end of 2022 compared to the end of 2021.


	U.S. Pension Benefits				Non-U.S. Pension Benefits
(Millions of dollars)	2023		2022		2023		2022
Pension plans with projected benefit obligation in excess of plan assets:
Projected benefit obligation	$	10,557	$	10,413	$	623	$	606
Fair value of plan assets	$	9,805	$	9,544	$	262	$	280

Pension plans with accumulated benefit obligation in excess of plan assets:
Accumulated benefit obligation	$	10,557	$	10,413	$	534	$	482
Fair value of plan assets	$	9,805	$	9,544	$	224	$	202

The accumulated postretirement benefit obligation exceeds plan assets for all of our other postretirement benefit plans for all years presented.

B. Net periodic benefit cost


	U.S. Pension Benefits									Non-U.S. Pension Benefits									Other Postretirement Benefits
(Millions of dollars)	2023			2022			2021			2023			2022			2021			2023			2022			2021
Net periodic benefit cost:
Service cost 1	$	—		$	—		$	—		$	40		$	50		$	57		$	67		$	99		$	100
Interest cost	656			401			330			124			69			53			144			80			64
Expected return on plan assets	(689)			(669)			(718)			(163)			(130)			(128)			(11)			(12)			(6)
Curtailments, settlements and termination benefits	—			—			—			1			1			(1)			—			—			—
Amortization of prior service cost (credit)	—			—			—			—			—			—			(12)			(6)			(40)
Actuarial loss (gain) 2	(138)			259			(487)			172			(132)			(115)			(131)			(733)			(231)
Net Periodic benefit cost (benefit) 3	$	(171)		$	(9)		$	(875)		$	174		$	(142)		$	(134)		$	57		$	(572)		$	(113)

Amounts recognized in other comprehensive income (pre-tax):
Current year prior service cost (credit)	$	—		$	—		$	—		$	1		$	(3)		$	—		$	(2)		$	(30)		$	—
Amortization of prior service (cost) credit	—			—			—			—			—			—			12			6			40
Total recognized in other comprehensive income	—			—			—			1			(3)			—			10			(24)			40
Total recognized in net periodic cost and other comprehensive income	$	(171)		$	(9)		$	(875)		$	175		$	(145)		$	(134)		$	67		$	(596)		$	(73)

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		%

1 All U.S. pension benefits are frozen, and accordingly there is no longer any service cost and certain assumptions are no longer applicable.

2 Actuarial loss (gain) represents the effects of actual results differing from our assumptions and the effects of changing assumptions. We recognize actuarial loss (gain) immediately through earnings upon the annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

3 The service cost component is included in Operating costs and all other components are included in Other income (expense) in Statement 1.

Our expected long-term rate of return on U.S. plan assets is based on our estimate of long-term returns for equities and fixed income securities weighted by the fair value of plan asset allocations as of December 31. We use a similar process to determine this rate for our non-U.S. plans.

The assumed health care trend rate represents the rate at which health care costs are assumed to increase. We assumed a weighted-average increase of 6.5 percent in our calculation of 2023 benefit expense. We expect a weighted-average increase of 6.2 percent during 2024. The 2024 rates are assumed to decrease gradually to the ultimate health care trend rate of 4.7 percent in 2030.

C. Expected contributions and Benefit payments

The following table presents information about expected contributions and benefit payments for pension and other postretirement benefit plans:


(Millions of dollars)	2024
Expected employer contributions:
U.S. Pension Benefits	$	52
Non-U.S. Pension Benefits	$	60
Other Postretirement Benefits	$	161

Expected benefit payments:	2024		2025		2026		2027		2028		2029- 2033		Total
U.S. Pension Benefits	$	1,010	$	1,000	$	995	$	990	$	985	$	4,750	$	9,730
Non-U.S. Pension Benefits	$	185	$	185	$	195	$	200	$	210	$	1,095	$	2,070
Other Postretirement Benefits	$	245	$	245	$	240	$	240	$	240	$	1,150	$	2,360

Expected Medicare Part D subsidy:	$	6	$	6	$	5	$	5	$	5	$	20	$	47

The above table reflects the total expected employer contributions and expected benefits to be paid from the plan or from company assets and does not include the participants’ share of the cost. The expected benefit payments for our other postretirement benefits include payments for prescription drug benefits. The above table also includes Medicare Part D subsidy amounts expected to be received by the company which will offset other postretirement benefit payments.

D. Plan assets

In general, our strategy for both the U.S. and non-U.S. pensions includes ongoing alignment of our investments to our liabilities, while reducing risk in our portfolio. The current U.S. pension target asset allocation is 85 percent fixed income and 15 percent equities. We will revise this target allocation periodically to ensure it reflects our overall objectives. The non-U.S. pension weighted-average target allocations are 59 percent fixed income, 19 percent insurance contracts, 12 percent equities, 6 percent real estate, and 4 percent other. The target allocations for each plan vary based upon local statutory requirements, demographics of plan participants and funded status. We primarily invest the non-U.S. plan assets in non-U.S. securities.

Our target allocation for the other postretirement benefit plans is 70 percent equities and 30 percent fixed income.

We rebalance the U.S. plans to within the appropriate target asset allocation ranges on a monthly basis. The frequency of rebalancing for the non-U.S. plans varies depending on the plan. As a result of our diversification strategies, there are no significant concentrations of risk within the portfolio of investments.

We permit the use of certain derivative instruments where appropriate and necessary for achieving overall investment policy objectives. The plans do not use derivative contracts for speculative purposes.

The accounting guidance on fair value measurements specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques (Level 1, 2 and 3). Certain assets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. See Note 18 for a discussion of the fair value hierarchy.

We determine fair values as follows:

Equity securities are primarily based on valuations for identical instruments in active markets.
Fixed income securities are primarily based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.
Real estate is stated at the fund’s net asset value or at appraised value.
Insurance contracts are valued on an insurer pricing basis updated for changes in insurance market pricing, market rates, and inflation.
Cash, short-term instruments and other are based on the carrying amount, which approximates fair value, or the fund’s net asset value.

The fair value of the pension and other postretirement benefit plan assets by category is summarized below:


	December 31, 2023
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets at Fair Value
U.S. Pension
Equity securities:
U.S. equities	$	1,107	$	10	$	24	$	81	$	1,222
Non-U.S. equities	910		—		3		—		913

Fixed income securities:
U.S. corporate bonds	—		5,706		33		33		5,772
Non-U.S. corporate bonds	—		1,228		—		—		1,228
U.S. government bonds	—		2,988		—		—		2,988
U.S. governmental agency mortgage-backed securities	—		84		—		—		84
Non-U.S. government bonds	—		100		—		—		100

Real estate	—		—		3		—		3

Cash, short-term instruments and other	99		33		—		296		428
Total U.S. pension assets	$	2,116	$	10,149	$	63	$	410	$	12,738


	December 31, 2022
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets at Fair Value
U.S. Pension
Equity securities:
U.S. equities	$	1,098	$	20	$	26	$	99	$	1,243
Non-U.S. equities	948		—		2		—		950

Fixed income securities:
U.S. corporate bonds	—		5,460		40		37		5,537
Non-U.S. corporate bonds	—		1,244		—		—		1,244
U.S. government bonds	—		2,904		—		—		2,904
U.S. governmental agency mortgage-backed securities	—		19		—		—		19
Non-U.S. government bonds	—		118		—		—		118

Real estate	—		—		8		—		8

Cash, short-term instruments and other	108		14		2		309		433
Total U.S. pension assets	$	2,154	$	9,779	$	78	$	445	$	12,456


	December 31, 2023
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets at Fair Value
Non-U.S. Pension
Equity securities:
U.S. equities	$	73	$	—	$	—	$	—	$	73
Non-U.S. equities	228		33		—		21		282
Global equities 1	28		—		—		20		48

Fixed income securities:
U.S. corporate bonds	—		91		—		—		91
Non-U.S. corporate bonds	—		466		—		—		466
U.S. government bonds	—		63		—		—		63
Non-U.S. government bonds	—		998		—		—		998
Global fixed income 1	—		91		—		216		307

Real estate	—		210		—		9		219

Insurance contracts	—		—		675		—		675

Cash, short-term instruments and other 2	54		191		—		—		245
Total non-U.S. pension assets	$	383	$	2,143	$	675	$	266	$	3,467


	December 31, 2022
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets at Fair Value
Non-U.S. Pension
Equity securities:
U.S. equities	$	61	$	—	$	—	$	—	$	61
Non-U.S. equities	208		28		—		21		257
Global equities 1	26		10		—		17		53

Fixed income securities:
U.S. corporate bonds	—		186		—		—		186
Non-U.S. corporate bonds	—		631		—		—		631
U.S. government bonds	—		66		—		—		66
Non-U.S. government bonds	—		1,273		—		—		1,273
Global fixed income 1	—		82		—		248		330

Real estate	—		198		—		—		198

Cash, short-term instruments and other 2	72		117		—		—		189
Total non-U.S. pension assets	$	367	$	2,591	$	—	$	286	$	3,244

1 Includes funds that invest in both U.S. and non-U.S. securities.
2 Includes funds that invest in multiple asset classes, hedge funds and other.


	December 31, 2023
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets at Fair Value
Other Postretirement Benefits
Equity securities:
U.S. equities	$	65	$	—	$	—	$	5	$	70
Non-U.S. equities	23		—		—		2		25

Fixed income securities:
U.S. corporate bonds	—		—		—		30		30





Cash, short-term instruments and other	1		—		—		18		19
Total other postretirement benefit assets	$	89	$	—	$	—	$	55	$	144



	December 31, 2022
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets at Fair Value
Other Postretirement Benefits
Equity securities:
U.S. equities	$	41	$	—	$	—	$	2	$	43
Non-U.S. equities	16		—		—		3		19








Cash, short-term instruments and other	3		—		—		37		40
Total other postretirement benefit assets	$	60	$	—	$	—	$	42	$	102

The activity attributable to U.S. pension assets measured at fair value using Level 3 inputs for the years ended December 31, 2023 and 2022 was insignificant. During 2023, activity in our non-U.S. pension Level 3 assets involved insurance contracts, including purchases of $633 million, settlements of $9 million and unrealized gains of $51 million. We valued these instruments using pricing models that, in management’s judgment, reflect the assumptions a market participant would use.

E. Defined contribution plans

We have both U.S. and non-U.S. employee defined contribution plans to help employees save for retirement. Our primary U.S. 401(k) plan allows eligible employees to contribute a portion of their cash compensation to the plan on a tax-deferred basis. Employees are eligible for matching contributions equal to 100 percent of employee contributions to the plan up to 6 percent of cash compensation and an annual employer contribution that ranges from 3 to 5 percent of cash compensation (depending on years of service and age).

These 401(k) plans include various investment funds, including a non-leveraged employee stock ownership plan (ESOP). As of December 31, 2023 and 2022, the ESOP held 11.3 million and 12.0 million shares, respectively. We allocate all of the shares held by the ESOP to participant accounts. Dividends paid to participants are automatically reinvested into company shares unless the participant elects to have all or a portion of the dividend paid to the participant. Various other U.S. and non-U.S. defined contribution plans generally allow eligible employees to contribute a portion of their cash compensation to the plans, and in most cases, we provide a matching contribution to the funds.

Total company costs related to U.S. and non-U.S. defined contribution plans were as follows:


(Millions of dollars)	2023		2022		2021
U.S. plans	$	567	$	392	$	440
Non-U.S. plans	114		114		114
	$	681	$	506	$	554

For our U.S. plans, changes in annual defined contribution costs are primarily due to fair value adjustments related to our non-qualified deferred compensation plans.

**13.**Short-term borrowings


	December 31,
(Millions of dollars)	2023		2022
Machinery, Energy & Transportation:
Notes payable to banks	$	—	$	3


	—		3
Financial Products:
Notes payable to banks	330		234
Commercial paper	4,069		5,455
Demand notes	244		265
	4,643		5,954
Total short-term borrowings	$	4,643	$	5,957

The weighted-average interest rates on short-term borrowings outstanding were:


	December 31,
	2023		2022
Notes payable to banks	10.0	%	11.3	%
Commercial paper	5.2	%	4.2	%
Demand notes	5.2	%	3.4	%

Please refer to Note 18 for fair value information on short-term borrowings.

14. Long-term debt


		December 31,
(Millions of dollars)	Effective Yield to Maturity 1	2023		2022
Machinery, Energy & Transportation:
Notes—$759 million of 5.200% due 2041 2	5.27%	$	752	$	752


Debentures—$1,000 million of 3.400% due 2024	3.46%	—		999
Debentures—$193 million of 6.625% due 2028 2	6.68%	193		192
Debentures—$500 million of 2.600% due 2029 2	2.67%	498		498
Debentures—$800 million of 2.600% due 2030 2	2.72%	795		794
Debentures—$500 million of 1.900% due 2031 2	2.04%	496		495
Debentures—$242 million of 7.300% due 2031 2	7.38%	241		240
Debentures—$307 million of 5.300% due 2035 2	8.64%	233		229
Debentures—$460 million of 6.050% due 2036 2	6.12%	456		456
Debentures—$65 million of 8.250% due 2038 2	8.38%	64		64
Debentures—$160 million of 6.950% due 2042 2	7.02%	158		158
Debentures—$1,722 million of 3.803% due 2042 2	6.39%	1,355		1,336
Debentures—$500 million of 4.300% due 2044	4.39%	494		493
Debentures—$1,000 million of 3.250% due 2049 2	3.34%	984		983
Debentures—$1,200 million of 3.250% due 2050 2	3.32%	1,186		1,186
Debentures—$500 million of 4.750% due 2064	4.81%	494		494
Debentures—$246 million of 7.375% due 2097 2	7.51%	241		241
Finance lease obligations & other 3		(61)		(112)
Total Machinery, Energy & Transportation		8,579		9,498
Financial Products:

Medium-term notes		15,581		15,940
Other		312		276
Total Financial Products		15,893		16,216
Total long-term debt due after one year		$	24,472	$	25,714

1 Effective yield to maturity includes the impact of discounts, premiums and debt issuance costs.

2 Redeemable at our option in whole or in part at any time at a redemption price equal to the greater of (i) 100% of the principal amount or (ii) the discounted present value of the notes or debentures, calculated in accordance with the terms of such notes or debentures.

3 Includes $(133) million and $(168) million of mark-to-market adjustments related to fair value interest rate swap contracts as of December 31, 2023 and 2022, respectively.

All outstanding notes and debentures are unsecured and rank equally with one another.

Cat Financial’s medium-term notes are offered by prospectus and are issued through agents at fixed and floating rates. Medium-term notes due after one year have a weighted average interest rate of 3.5% with remaining maturities up to 5 years at December 31, 2023.

The aggregate amounts of maturities of long-term debt during each of the years 2024 through 2028, including amounts due within one year and classified as current, are:


	December 31,
(Millions of dollars)	2024		2025		2026		2027		2028
Machinery, Energy & Transportation	$	1,044	$	19	$	15	$	13	$	199
Financial Products	7,719		7,811		5,634		2,479		14
	$	8,763	$	7,830	$	5,649	$	2,492	$	213

Medium-term notes of $500 million maturing in the first quarter of 2024 were excluded from the current maturities of long-term debt in Statement 3 as of December 31, 2023 due to a $500 million issuance of medium-term notes on January 8, 2024 which mature in 2027. The preceding maturity table reflects the reclassification of $500 million from maturities in 2024 to 2027.

Interest paid on short-term and long-term borrowings for 2023, 2022 and 2021 was $1,711 million, $959 million and $920 million, respectively.

Please refer to Note 18 for fair value information on long-term debt.

**15.**Credit commitments


	December 31, 2023
(Millions of dollars)	Consolidated		Machinery, Energy & Transportation		Financial Products
Credit lines available:
Global credit facilities	$	10,500	$	2,750	$	7,750
Other external	4,164		625		3,539
Total credit lines available	14,664		3,375		11,289
Less: Commercial paper outstanding	(4,069)		—		(4,069)
Less: Utilized credit	(853)		—		(853)
Available credit	$	9,742	$	3,375	$	6,367

We have three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes. Based on management's allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of December 31, 2023 was $2.75 billion. Information on our Credit Facility is as follows:

In August 2023, we entered into a new 364-day facility. The 364-day facility of $3.15 billion (of which $825 million is available to ME&T) expires in August 2024.
In August 2023, we amended and extended the three-year facility (as amended and restated, the "three-year facility"). 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.

Other consolidated credit lines with banks as of December 31, 2023 totaled $4.16 billion. These committed and uncommitted credit lines, which may be eligible for renewal at various future dates or have no specified expiration date, are used primarily by our subsidiaries for local funding requirements. Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines.

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.

At December 31, 2023, Cat Financial’s covenant interest coverage ratio was 1.73 to 1. This was above the 1.15 to 1 minimum ratio, calculated as (1) profit excluding income taxes, interest expense and net gain/(loss) from interest rate derivatives to (2) interest expense calculated at the end of each fiscal quarter for the prior four consecutive fiscal quarter period, required by the Credit Facility.

In addition, at 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. This was below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31, required by the Credit Facility.

In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of banks may terminate the commitments allocated to the party that does not meet its covenants. Additionally, in such event, certain of Cat Financial’s other lenders under other loan agreements where similar financial covenants or cross default provisions are applicable may, at their election, choose to pursue remedies under those loan agreements, including accelerating the repayment of outstanding borrowings. At December 31, 2023, there were no borrowings under the Credit Facility.

**16.**Profit per share


Computations of profit per share:
(Dollars in millions except per share data)	2023		2022		2021
Profit for the period (A) 1	$	10,335	$	6,705	$	6,489
Determination of shares (in millions):
Weighted average number of common shares outstanding (B)	510.6		526.9		544.0
Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price	3.0		3.5		4.5
Average common shares outstanding for fully diluted computation (C) 2	513.6		530.4		548.5
Profit per share of common stock:
Assuming no dilution (A/B)	$	20.24	$	12.72	$	11.93
Assuming full dilution (A/C) 2	$	20.12	$	12.64	$	11.83
Shares outstanding as of December 31 (in millions)	499.4		516.3		535.9

1Profit attributable to common shareholders.

2Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

For the years ended December 31, 2023, 2022 and 2021, we excluded 0.8 million, 2.0 million and 1.1 million of outstanding stock options, respectively, from the computation of diluted earnings per share because the effect would have been antidilutive.

In July 2018, the Board approved a share repurchase authorization (the 2018 Authorization) of up to $10.0 billion of Caterpillar common stock effective January 1, 2019, with no expiration. 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. Utilization of the 2022 Authorization for all share repurchases commenced on August 1, 2022, leaving $70 million unutilized under the 2018 Authorization. As of December 31, 2023, approximately $7.8 billion remained available under the 2022 Authorization.

During 2023, 2022 and 2021, we repurchased 19.5 million, 21.9 million and 13.0 million shares of Caterpillar common stock, respectively, at an aggregate cost of $4.7 billion, $4.2 billion and $2.7 billion, respectively. We made these purchases through a combination of accelerated stock repurchase agreements with third-party financial institutions and open market transactions.

**17.**Accumulated other comprehensive income (loss)

We present comprehensive income and its components in Statement 2. Changes in the balances for each component of AOCI were as follows:



(Millions of dollars)
	2023		2022		2021
Foreign currency translation
Beginning balance	$	(2,328)	$	(1,508)	$	(910)


Gains (losses) on foreign currency translation	32		(794)		(559)
Less: Tax provision /(benefit)	(21)		26		41
Net gains (losses) on foreign currency translation	53		(820)		(600)
(Gains) losses reclassified to earnings	493		—		2
Less: Tax provision /(benefit)	—		—		—
Net (gains) losses reclassified to earnings	493		—		2
Other comprehensive income (loss), net of tax	546		(820)		(598)
Ending balance	$	(1,782)	$	(2,328)	$	(1,508)

Pension and other postretirement benefits
Beginning balance	$	(39)	$	(62)	$	(32)


Current year prior service credit (cost)	1		33		—
Less: Tax provision /(benefit)	—		5		—
Net current year prior service credit (cost)	1		28		—
Amortization of prior service (credit) cost	(12)		(6)		(40)
Less: Tax provision /(benefit)	(1)		(1)		(10)
Net amortization of prior service (credit) cost	(11)		(5)		(30)
Other comprehensive income (loss), net of tax	(10)		23		(30)
Ending balance	$	(49)	$	(39)	$	(62)

Derivative financial instruments
Beginning balance	$	28	$	(3)	$	—


Gains (losses) deferred	48		375		195
Less: Tax provision /(benefit)	11		86		21
Net gains (losses) deferred	37		289		174
(Gains) losses reclassified to earnings	3		(340)		(196)
Less: Tax provision /(benefit)	1		(82)		(19)
Net (gains) losses reclassified to earnings	2		(258)		(177)
Other comprehensive income (loss), net of tax	39		31		(3)
Ending balance	$	67	$	28	$	(3)



Available-for-sale securities
Beginning balance	$	(118)	$	20	$	54


Gains (losses) deferred	72		(179)		(39)
Less: Tax provision /(benefit)	11		(37)		(8)
Net gains (losses) deferred	61		(142)		(31)
(Gains) losses reclassified to earnings	1		5		(4)
Less: Tax provision /(benefit)	—		1		(1)
Net (gains) losses reclassified to earnings	1		4		(3)
Other comprehensive income (loss), net of tax	62		(138)		(34)
Ending balance	$	(56)	$	(118)	$	20

Total AOCI Ending Balance at December 31,	$	(1,820)	$	(2,457)	$	(1,553)

**18.**Fair value disclosures

**A.**Fair value measurements

The guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy:

Level 1** — Quoted prices for identical instruments in active markets.
Level 2** — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
Level 3** — Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1. In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon valuations in which one or more significant inputs are unobservable, including internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.

We classify fair value measurements according to the lowest level input or value-driver that is significant to the valuation. We may therefore classify a measurement within Level 3 even though there may be significant inputs that are readily observable.

Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty or Caterpillar) will not be fulfilled. For financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (certain Level 2 and Level 3), our fair value calculations have been adjusted accordingly.

Investments in debt and equity securities

We have investments in certain debt and equity securities that are recorded at fair value. Fair values for our U.S. treasury bonds and large capitalization value and smaller company growth equity securities are based upon valuations for identical instruments in active markets. Fair values for other government debt securities, corporate debt securities and mortgage-backed debt securities are based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.

We also have investments in time deposits classified as held-to-maturity debt securities. The fair value of these investments is based upon valuations observed in less active markets than Level 1. These investments have a maturity of less than one year and are recorded at amortized costs, which approximate fair value.

In addition, Insurance Services has an equity investment in a real estate investment trust (REIT) which is recorded at fair value based on the net asset value (NAV) of the investment and is not classified within the fair value hierarchy.

See Note 11 for additional information on our investments in debt and equity securities.

Derivative financial instruments

The fair value of interest rate contracts is primarily based on a standard industry accepted valuation model that utilizes the appropriate market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows. The fair value of foreign currency and commodity forward, option and cross currency contracts is based on standard industry accepted valuation models that discount cash flows resulting from the differential between the contract price and the market-based forward rate.

See Note 4 for additional information.

Assets and liabilities measured on a recurring basis at fair value included in Statement 3 as of December 31, 2023 and 2022 were as follows:


	December 31, 2023
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets / Liabilities, at Fair Value
Assets
Debt securities
Government debt securities
U.S. treasury bonds	$	10	$	—	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		60		—		—		60

Corporate debt securities
Corporate bonds and other debt securities	—		2,995		—		—		2,995
Asset-backed securities	—		192		—		—		192

Mortgage-backed debt securities
U.S. governmental agency	—		410		—		—		410
Residential	—		2		—		—		2
Commercial	—		128		—		—		128
Total debt securities	10		3,787		—		—		3,797
Equity securities
Large capitalization value	223		—		—		—		223
Smaller company growth	35		—		—		—		35
REIT	—		—		—		180		180
Total equity securities	258		—		—		180		438
Derivative financial instruments - assets
Foreign currency contracts - net	—		207		—		—		207

Commodity contracts - net	—		9		—		—		9
Total assets	$	268	$	4,003	$	—	$	180	$	4,451

Liabilities
Derivative financial instruments - liabilities

Interest rate contracts - net	—		151		—		—		151

Total liabilities	$	—	$	151	$	—	$	—	$	151


	December 31, 2022
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets / Liabilities, at Fair Value
Assets
Debt securities
Government debt securities
U.S. treasury bonds	$	9	$	—	$	—	$	—	$	9
Other U.S. and non-U.S. government bonds	—		55		—		—		55

Corporate debt securities
Corporate bonds and other debt securities	—		2,416		50		—		2,466
Asset-backed securities	—		182		—		—		182

Mortgage-backed debt securities
U.S. governmental agency	—		333		—		—		333
Residential	—		2		—		—		2
Commercial	—		117		—		—		117
Total debt securities	9		3,105		50		—		3,164
Equity securities
Large capitalization value	203		—		—		—		203
Smaller company growth	31		—		—		—		31
REIT	—		—		—		207		207
Total equity securities	234		—		—		207		441
Derivative financial instruments - assets
Foreign currency contracts - net	—		328		—		—		328

Commodity contracts - net	—		15		—		—		15
Total assets	$	243	$	3,448	$	50	$	207	$	3,948

Liabilities
Derivative financial instruments - liabilities
Interest rate contracts - net	$	—	$	195	$	—	$	—	$	195
Total liabilities	$	—	$	195	$	—	$	—	$	195

In addition to the amounts above, certain Cat Financial loans are subject to measurement at fair value on a nonrecurring basis and are classified as Level 3 measurements. A loan is measured at fair value when management determines that collection of contractual amounts due is not probable and the loan is individually evaluated. In these cases, an allowance for credit losses may be established based either on the present value of expected future cash flows discounted at the receivables’ effective interest rate, the fair value of the collateral for collateral-dependent receivables, or the observable market price of the receivable. In determining collateral value, Cat Financial estimates the current fair market value of the collateral less selling costs. Cat Financial had loans carried at fair value of $55 million and $68 million as of December 31, 2023 and 2022, respectively.

**B.**Fair values of financial instruments

In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair value measurements section above, we use the following methods and assumptions to estimate the fair value of our financial instruments:

Cash and cash equivalents

Carrying amount approximates fair value. We classify cash and cash equivalents as Level 1. See Statement 3.

Restricted cash and short-term investments

Carrying amount approximates fair value. We include restricted cash and short-term investments in Prepaid expenses and other current assets in Statement 3. We classify these instruments as Level 1 except for time deposits which are Level 2, and certain corporate debt securities which are Level 3. See Note 11 for additional information.

Finance receivables

We estimate fair value by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Wholesale inventory receivables

We estimate fair value by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Short-term borrowings

Carrying amount approximates fair value. We classify short-term borrowings as Level 1. See Note 13 for additional information.

Long-term debt

We estimate fair value for fixed and floating rate debt based on quoted market prices.

Guarantees

The fair value of guarantees is based upon our estimate of the premium a market participant would require to issue the same guarantee in a stand-alone arms-length transaction with an unrelated party. If quoted or observable market prices are not available, fair value is based upon internally developed models that utilize current market-based assumptions. We classify guarantees as Level 3. See Note 21 for additional information.

Our financial instruments not carried at fair value were as follows:



	2023				2022
(Millions of dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Assets at December 31,
Finance receivables–net (excluding finance leases 1)	$	15,386	$	15,017	$	13,965	$	13,377	3	Notes 7 & 19
Wholesale inventory receivables–net (excluding finance leases 1)	1,415		1,368		827		778		3	Notes 7 & 19

Liabilities at December 31,
Long-term debt (including amounts due within one year):
Machinery, Energy & Transportation	9,623		9,550		9,618		9,240		2	Note 14
Financial Products	23,612		23,299		21,418		20,686		2	Note 14

1Represents finance leases and failed sale leasebacks of $6,953 million and $7,325 million at December 31, 2023 and 2022, respectively.

**19.**Concentration of credit risk

Financial instruments with potential credit risk consist primarily of trade and finance receivables and short-term and long-term investments. Additionally, to a lesser extent, we have a potential credit risk associated with counterparties to derivative contracts.

Trade receivables are primarily short-term receivables from independently owned and operated dealers and customers which arise in the normal course of business. We perform regular credit evaluations of our dealers and customers. Collateral generally is not required, and the majority of our trade receivables are unsecured. We do, however, when deemed necessary, make use of various devices such as security agreements and letters of credit to protect our interests. No single dealer or customer represents a significant concentration of credit risk.

Finance receivables and wholesale inventory receivables primarily represent receivables under installment sales contracts, receivables arising from leasing transactions and notes receivable. We typically maintain a security interest in retail financed equipment and, in some instances, wholesale financed equipment. We also generally require physical damage insurance coverage on financed equipment. No single customer or dealer represented a significant concentration of credit risk.

Short-term and long-term investments are held with high quality institutions and, by policy, the amount of credit exposure to any one institution is limited. Long-term investments, primarily included in Other assets in Statement 3, are comprised primarily of available-for-sale debt securities and equity securities.

For derivative contracts, collateral is generally not required of the counterparties or of our company. The company generally enters into International Swaps and Derivatives Association (ISDA) master netting agreements within ME&T and Financial Products that permit the net settlement of amounts owed under their respective derivative contracts. Our exposure to credit loss in the event of nonperformance by the counterparties is limited to only those gains that we have recorded, but for which we have not yet received cash payment. The master netting agreements reduce the amount of loss the company would incur should the counterparties fail to meet their obligations. At December 31, 2023 and 2022, the maximum exposure to credit loss was $520 million and $644 million, respectively, before the application of any master netting agreements.

Refer to Note 18 for fair value information.

**20.**Leases

A. Lessee arrangements

We lease certain property, information technology equipment, warehouse equipment, vehicles and other equipment through operating leases. We recognize a lease liability and corresponding right-of-use asset based on the present value of lease payments. To determine the present value of lease payments for most of our leases, we use our incremental borrowing rate based on information available on the lease commencement date. For certain property and information technology equipment leases, we have elected to separate payments for lease components from non-lease components. For all other leases, we have elected not to separate payments for lease and non-lease components. Our lease agreements may include options to extend or terminate the lease. When it is reasonably certain that we will exercise that option, we have included the option in the recognition of right-of-use assets and lease liabilities. We have elected not to recognize right-of-use assets or lease liabilities for leases with a term of twelve months or less.

Our finance leases are not significant and therefore are not included in the following disclosures.

The components of lease costs were as follows:



(Millions of dollars)
	Years Ended December 31,
	2023		2022		2021
Operating lease cost	$	189	$	187	$	214
Short-term lease cost	$	62	$	59	$	46

We recognize operating lease right-of-use assets in Other assets in Statement 3. We recognize the operating lease liabilities in Other current liabilities and Other liabilities.

Supplemental information related to leases was as follows:



(Millions of dollars)
	December 31, 2023			December 31, 2022
Operating Leases
Other assets	$	556		$	564
Other current liabilities	$	147		$	151
Other liabilities	$	427		$	428










Weighted average remaining lease term
Operating leases	7 years			7 years


Weighted average discount rates
Operating leases	3		%	2		%

Maturities of operating lease liabilities were as follows:



(Millions of dollars)	December 31, 2023

Amounts Due In
2024	$	160
2025	125
2026	91
2027	69
2028	48
Thereafter	151
Total lease payments	644
Less: Imputed interest	(70)
Total	$	574

Supplemental cash flow information related to leases was as follows:



(Millions of dollars)
	Years ended December 31,
	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	180	$	178	$	206


Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	148	$	123	$	238

B. Lessor arrangements

We lease Caterpillar machinery, engines and other equipment to customers and dealers around the world, primarily through Cat Financial. Cat Financial leases to customers primarily through sales-type (non-tax) leases, where the lessee for tax purposes is considered to be the owner of the equipment during the term of the lease. Cat Financial also offers tax leases that are classified as either operating or direct finance leases for financial accounting purposes, depending on the characteristics of the lease. For tax purposes, Cat Financial is considered the owner of the equipment. Our lease agreements may include options for the lessee to purchase the underlying asset at the end of the lease term for either a stated fixed price or fair market value.

We determine the residual value of Cat Financial’s leased equipment based on its estimated end-of-term market value. We estimate the residual value of leased equipment at the inception of the lease based on a number of factors, including historical wholesale market sales prices, past remarketing experience and any known significant market/product trends. We also consider the following critical factors in our residual value estimates: lease term, market size and demand, total expected hours of usage, machine configuration, application, location, model changes, quantities, third-party residual guarantees and contractual customer purchase options.

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.

See Note 7 for contractual maturities of finance lease receivables (sales-type and direct finance leases).

The carrying amount of equipment leased to others, included in Property, plant and equipment - net in Statement 3, under operating leases was as follows:



	December 31,
(Millions of dollars)	2023		2022
Equipment leased to others - at original cost	$	5,837	$	5,568
Less: Accumulated depreciation	(1,902)		(1,790)
Equipment leased to others - net	$	3,935	$	3,778

Payments due for operating leases as of December 31, 2023, were as follows:



(Millions of dollars)
2024	2025	2026	2027	2028	Thereafter	Total
$894	$586	$329	$157	$80	$29	$2,075

Revenues from finance and operating leases, primarily included in Revenues of Financial Products on Statement 1, were as follows:



(Millions of dollars)
	Year ended December 31,
	2023		2022		2021
Finance lease revenue	$	420	$	430	$	485
Operating lease revenue	1,166		1,085		1,128
Total	$	1,586	$	1,515	$	1,613

We present revenues net of sales and other related taxes.

**21.**Guarantees and product warranty

Dealer performance guarantees mainly consists of an indemnity to a third-party insurance company for potential losses related to performance bonds issued on behalf of Caterpillar dealers. The bonds have varying terms and are issued to insure governmental agencies against nonperformance by certain dealers. The guarantees began to expire during the third quarter of 2023. No payments were made under the guarantees.

We have dealer performance guarantees and third-party performance guarantees that do not limit potential payment to end users related to indemnities and other commercial contractual obligations. In addition, we have entered into contracts involving industry standard indemnifications that do not limit potential payment. For these unlimited guarantees, we are unable to estimate a maximum potential amount of future payments that could result from claims made.

No significant loss has been experienced or is anticipated under any of these guarantees. At December 31, 2023 and 2022, the related recorded liability was $3 million and $2 million, respectively. The maximum potential amount of future payments that we can estimate (undiscounted and without reduction for any amounts that may possibly be recovered under recourse or collateralized provisions) and we could be required to make under the guarantees at December 31 was as follows:


(Millions of dollars)	2023		2022
Caterpillar dealer performance guarantees	$	42	$	188




Other guarantees	311		323
Total guarantees	$	353	$	511

Cat Financial provides guarantees to purchase certain loans of Caterpillar dealers from a special-purpose corporation (SPC) that qualifies as a variable interest entity. The purpose of the SPC is to provide short-term working capital loans to Caterpillar dealers. This SPC issues commercial paper and uses the proceeds to fund its loan program. Cat Financial receives a fee for providing this guarantee. Cat Financial is the primary beneficiary of the SPC as its guarantees result in Cat Financial having both the power to direct the activities that most significantly impact the SPC’s economic performance and the obligation to absorb losses, and therefore Cat Financial has consolidated the financial statements of the SPC. As of December 31, 2023 and 2022, the SPC’s assets of $1.35 billion and $971 million, respectively, were primarily comprised of loans to dealers, and the SPC’s liabilities of $1.35 billion and $970 million, respectively, were primarily comprised of commercial paper. The assets of the SPC are not available to pay Cat Financial’s creditors. Cat Financial may be obligated to perform under the guarantee if the SPC experiences losses. No loss has been experienced or is anticipated under this loan purchase agreement.

Cat Financial has commitments to extend credit to customers through lines of credit and other pre-approved credit arrangements. Cat Financial applies the same credit policies and approval process for these commitments as we do for other financing. Collateral is not required, but if credit is extended, collateral is generally required upon funding. The unused commitments to extend credit to customers that are not unconditionally cancellable was $774 million at December 31, 2023. Cat Financial also has pre-approved lines of credit and other credit arrangements with Caterpillar dealers; however, we generally have the right to unconditionally cancel, alter, or amend the terms at any time.

We determine our product warranty liability by applying historical claim rate experience to the current field population and dealer inventory. 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.

The reconciliation of the change in our product warranty liability balances for the years ended December 31, was as follows:


(Millions of dollars)	2023		2022
Warranty liability, beginning of period	$	1,761	$	1,689
Reduction in liability (payments)	(835)		(778)
Increase in liability (new warranties)	968		850
Warranty liability, end of period	$	1,894	$	1,761

22. Environmental and legal matters

The Company is regulated by federal, state and international environmental laws governing its 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. 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. When it is probable we will pay remedial costs at a site, and those costs can be reasonably estimated, we accrue the investigation, remediation, and operating and maintenance costs against our earnings. We accrue costs 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. Where multiple potentially responsible parties are involved, we consider our proportionate share of the probable costs. In formulating the estimate of probable costs, we do not consider amounts expected to be recovered from insurance companies or others. We reassess these accrued amounts on a quarterly basis. The amount recorded for environmental remediation is not material and is included in Accrued expenses. We believe there is no more than a remote chance that a material amount for remedial activities at any individual site, or at all the sites in the aggregate, will be required.

On January 27, 2020, the Brazilian Federal Environmental Agency (“IBAMA”) issued Caterpillar Brasil Ltda a notice of violation regarding allegations around the requirements for use of imported oils at the Piracicaba, Brazil facility. We have instituted processes to address the allegations. While we are still discussing resolution of these allegations with IBAMA, the initial notice from IBAMA included a proposed fine of approximately $300,000. We do not expect this fine or our response to address the allegations to have a material adverse effect on the Company's consolidated results of operations, financial position or liquidity.

On January 7, 2015, the U.S. Attorney’s Office for the Central District of Illinois issued a grand jury subpoena to the Company and thereafter issued additional subpoenas; these subpoenas sought information regarding, among other things, movements of cash among U.S. and non-U.S. Caterpillar subsidiaries, the purchase and resale of replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, and Caterpillar SARL (CSARL) and related structures. On March 2-3, 2017, federal agents executed search and seizure warrants, which concerned both tax and export activities, at three facilities of the Company in the Peoria, Illinois area, including its former corporate headquarters. The Tax Division of the U.S. Department of Justice conducted a review of the grand jury investigation and informed the Company on November 28, 2022 that it does not have a pending criminal tax matter involving the Company. In January 2023, the government began returning to the Company the documents and information seized under the search warrants, which, as noted, related to both tax and export issues, as well as the documents and information the Company produced under the grand jury subpoenas.

In addition, we are involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of these unresolved actions involve disputes related to product design, manufacture and performance liability (including claimed asbestos exposure), contracts, employment issues, environmental matters, intellectual property rights, taxes (other than income taxes) and securities laws. The aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal actions is not material. In some cases, we cannot reasonably estimate a range of loss because there is insufficient information regarding the matter. However, we believe there is no more than a remote chance that any liability arising from these matters would be material. Although it is not possible to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will not individually or in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.

23. Segment information

A. Basis for segment information

Our Executive Office is comprised of a Chief Executive Officer (CEO), Chief Operating Officer (COO), four Group Presidents, a Chief Financial Officer (CFO), a Chief Legal Officer and General Counsel and a Chief Human Resources Officer. The COO, Group Presidents and CFO are accountable for a related set of end-to-end businesses that they manage. The Chief Legal Officer and General Counsel leads the Law, Security and Public Policy Division. The Chief Human Resources Officer leads the Human Resources Organization. The CEO allocates resources and manages performance at the COO/Group President/CFO level. As such, the CEO serves as our Chief Operating Decision Maker, and operating segments are primarily based on the COO/Group President/CFO reporting structure.

Three of our operating segments, Construction Industries, Resource Industries and Energy & Transportation are led by Group Presidents. One operating segment, Financial Products, is led by the CFO who also has responsibility for Corporate Services. Corporate Services is a cost center primarily responsible for the performance of certain support functions globally and to provide centralized services; it does not meet the definition of an operating segment. One Group President leads one smaller operating segment that is included in the All Other operating segment. The Law, Security and Public Policy Division and the Human Resources Organization are cost centers and do not meet the definition of an operating segment.

Segment information for 2021 has been recast due to a methodology change related to how we assign intersegment sales and segment profit from our technology products and services to Construction Industries, Resource Industries and Energy & Transportation. This methodology change did not have a material impact on our segment results.

B. Description of segments

We have five operating segments, of which four are reportable segments. Following is a brief description of our reportable segments and the business activities included in the All Other operating segment:

Construction Industries: A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes asphalt pavers; backhoe loaders; cold planers; compactors; compact track loaders; forestry machines; material handlers; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; track-type loaders; track-type tractors (small, medium); track excavators (mini, small, medium, large); wheel excavators; wheel loaders (compact, small, medium); and related parts and work tools. Inter-segment sales are a source of revenue for this segment.

Resource Industries: A segment primarily responsible for supporting customers using machinery in mining, heavy construction and quarry and aggregates. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors; large mining trucks; hard rock vehicles; electric rope shovels; draglines; hydraulic shovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers; wheel dozers; landfill compactors; soil compactors; select work tools; machinery components; electronics and control systems and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics, autonomous machine capabilities, safety services and mining performance solutions. Resource Industries also manages areas that provide services to other parts of the company, including strategic procurement, lean center of excellence, integrated manufacturing, research and development for hydraulic systems, automation, electronics and software for Cat machines and engines. Inter-segment sales are a source of revenue for this segment.

Energy & Transportation: A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses. Responsibilities include business strategy, product design, product management, development and testing manufacturing, marketing and sales and product support. The product and services portfolio includes turbines, centrifugal gas compressors, and turbine-related services; reciprocating engine-powered generator sets; integrated systems and solutions used in the electric power generation industry; reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries; reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machines; electrified powertrain and zero-emission power sources and service solutions development; and

diesel-electric locomotives and components and other rail-related products and services, including remanufacturing and leasing. Responsibilities also include the remanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies; and product support of on-highway vocational trucks for North America. Inter-segment sales are a source of revenue for this segment.

Financial Products Segment: Provides financing alternatives to customers and dealers around the world for Caterpillar products and services, as well as financing for power generation facilities that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, revolving charge accounts, installment sale contracts, repair/rebuild financing, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage and maintenance plans for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of Caterpillar equipment. The segment also earns revenues from ME&T, but the related costs are not allocated to operating segments. Financial Products’ segment profit is determined on a pretax basis and includes other income/expense items.

All Other operating segment: Primarily includes activities such as: business strategy; product management and development; manufacturing and sourcing of filters and fluids, undercarriage, ground-engaging tools, fluid transfer products, precision seals, rubber sealing and connecting components primarily for Cat® products; parts distribution; integrated logistics solutions; distribution services responsible for dealer development and administration, including one wholly owned dealer in Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience. Results for the All Other operating segment are included as a reconciling item between reportable segments and consolidated external reporting.

C. Segment measurement and reconciliations

There are several methodology differences between our segment reporting and our external reporting. The following is a list of the more significant methodology differences:

ME&T segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles, accounts payable and customer advances. We generally manage at the corporate level liabilities other than accounts payable and customer advances, and we do not include these in segment operations. Financial Products Segment assets generally include all categories of assets.
We value segment inventories and cost of sales using a current cost methodology.
We amortize goodwill allocated to segments using a fixed amount based on a 20-year useful life. This methodology difference only impacts segment assets. We do not include goodwill amortization expense in segment profit. In addition, we have allocated to segments only a portion of goodwill for certain acquisitions made in 2011 or later.
We generally manage currency exposures for ME&T at the corporate level and do not include in segment profit the effects of changes in exchange rates on results of operations within the year. We report the net difference created in the translation of revenues and costs between exchange rates used for U.S. GAAP reporting and exchange rates used for segment reporting as a methodology difference.
We do not include stock-based compensation expense in segment profit.
Postretirement benefit expenses are split; segments are generally responsible for service costs, with the remaining elements of net periodic benefit cost included as a methodology difference.
We determine ME&T segment profit on a pretax basis and exclude interest expense and most other income/expense items. We determine Financial Products Segment profit on a pretax basis and include other income/expense items.

Reconciling items are created based on accounting differences between segment reporting and our consolidated external reporting. Please refer to pages 115 to 117 for financial information regarding significant reconciling items. Most of our reconciling items are self-explanatory given the above explanations. For the reconciliation of profit, we have grouped the reconciling items as follows:

Corporate costs:** These costs are related to corporate requirements primarily for compliance and legal functions for the benefit of the entire organization.
Restructuring costs:** May include costs for employee separation, long-lived asset impairments and contract terminations. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold. See Note 25 for more information.
Methodology differences:** See previous discussion of significant accounting differences between segment reporting and consolidated external reporting.
Timing:** Timing differences in the recognition of costs between segment reporting and consolidated external reporting. For example, we report certain costs on the cash basis for segment reporting and the accrual basis for consolidated external reporting.

For the years ended December 31, 2023, 2022 and 2021, sales and revenues by geographic region reconciled to consolidated sales and revenues were as follows:


Sales and Revenues by Geographic Region
(Millions of dollars)	NorthAmerica		LatinAmerica		EAME		Asia/Pacific		External Sales and Revenues			Intersegment Sales and Revenues		Total Sales and Revenues
2023
Construction Industries	$	15,343	$	2,307	$	5,254	$	4,390	$	27,294		$	124	$	27,418
Resource Industries	5,256		2,040		2,069		3,879		13,244			339		13,583
Energy & Transportation	11,982		1,983		5,929		3,461		23,355			4,646		28,001
Financial Products Segment	2,440		416		491		438		3,785		1	—		3,785
Total sales and revenues from reportable segments	35,021		6,746		13,743		12,168		67,678			5,109		72,787
All Other operating segment	65		(1)		18		49		131			318		449
Corporate Items and Eliminations	(480)		(80)		(88)		(101)		(749)			(5,427)		(6,176)
Total Sales and Revenues	$	34,606	$	6,665	$	13,673	$	12,116	$	67,060		$	—	$	67,060


2022
Construction Industries	$	12,367	$	2,843	$	5,099	$	4,818	$	25,127		$	142	$	25,269
Resource Industries	4,531		1,840		2,205		3,437		12,013			301		12,314
Energy & Transportation	9,175		1,784		5,232		3,146		19,337			4,415		23,752
Financial Products Segment	2,078		348		396		431		3,253		1	—		3,253
Total sales and revenues from reportable segments	28,151		6,815		12,932		11,832		59,730			4,858		64,588
All Other operating segment	64		2		(66)		145		145			305		450
Corporate Items and Eliminations	(234)		(79)		(52)		(83)		(448)			(5,163)		(5,611)
Total Sales and Revenues	$	27,981	$	6,738	$	12,814	$	11,894	$	59,427		$	—	$	59,427

2021
Construction Industries	$	9,676	$	1,913	$	4,858	$	5,547	$	21,994		$	112	$	22,106
Resource Industries	2,987		1,724		1,987		2,804		9,502			308		9,810
Energy & Transportation	7,611		1,233		4,908		2,918		16,670			3,617		20,287
Financial Products Segment	1,935		265		402		471		3,073		1	—		3,073
Total sales and revenues from reportable segments	22,209		5,135		12,155		11,740		51,239			4,037		55,276
All Other operating segment	56		2		18		69		145			366		511
Corporate Items and Eliminations	(242)		(51)		(36)		(84)		(413)			(4,403)		(4,816)
Total Sales and Revenues	$	22,023	$	5,086	$	12,137	$	11,725	$	50,971		$	—	$	50,971

1 Includes revenues from Construction Industries, Resource Industries, Energy & Transportation and All Other operating segment of $690 million, $478 million and $351 million in the years ended December 31, 2023, 2022 and 2021, respectively.

For the years ended December 31, 2023, 2022 and 2021, Energy & Transportation segment sales by end user application were as follows:


Energy & Transportation External Sales

(Millions of dollars)
	2023		2022		2021
Oil and gas	$	6,988	$	5,330	$	4,460
Power generation	6,362		4,940		4,292
Industrial	4,871		4,426		3,612
Transportation	5,134		4,641		4,306
Energy & Transportation External Sales	$	23,355	$	19,337	$	16,670


Reconciliation of Consolidated profit before taxes:
(Millions of dollars)
	2023		2022		2021
Profit from reportable segments:
Construction Industries	$	6,975	$	4,743	$	3,732
Resource Industries	2,834		1,827		1,229
Energy & Transportation	4,936		3,309		2,804
Financial Products Segment	909		864		908
Total profit from reportable segments	15,654		10,743		8,673
Profit from All Other operating segment	18		(11)		(14)
Cost centers	(7)		(13)		(4)
Corporate costs	(913)		(751)		(699)
Timing	(30)		(309)		(263)
Restructuring costs	(780)		(299)		(90)
Methodology differences:
Inventory/cost of sales	160		413		122
Postretirement benefit income (expense)	(65)		916		1,171
Stock-based compensation expense	(208)		(193)		(199)
Financing costs	(91)		(331)		(449)
Currency	6		23		258
Goodwill impairment charge	—		(925)		—
Other income/expense methodology differences	(624)		(409)		(267)
Other methodology differences	(70)		(102)		(35)
Total consolidated profit before taxes	$	13,050	$	8,752	$	8,204


Reconciliation of Assets:
(Millions of dollars)	December 31,
	2023		2022
Assets from reportable segments:
Construction Industries	$	5,384	$	5,168
Resource Industries	5,742		5,775
Energy & Transportation	10,555		9,455
Financial Products Segment	35,685		34,269
Total assets from reportable segments	57,366		54,667
Assets from All Other operating segment	1,890		1,828
Items not included in segment assets:
Cash and cash equivalents	6,106		6,042


Deferred income taxes	2,668		2,098
Goodwill and intangible assets	4,452		4,248
Property, plant and equipment – net and other assets	6,548		4,234
Inventory methodology differences	(3,169)		(3,063)
Liabilities included in segment assets	11,781		12,519
Other	(166)		(630)
Total assets	$	87,476	$	81,943


Reconciliation of Depreciation and amortization:
(Millions of dollars)
	2023		2022		2021
Depreciation and amortization from reportable segments:
Construction Industries	$	221	$	231	$	237
Resource Industries	302		368		403
Energy & Transportation	551		547		571
Financial Products Segment	731		734		772
Total depreciation and amortization from reportable segments	1,805		1,880		1,983
Items not included in segment depreciation and amortization:
All Other operating segment	236		229		243
Cost centers	91		84		98
Other	12		26		28
Total depreciation and amortization	$	2,144	$	2,219	$	2,352


Reconciliation of Capital expenditures:
(Millions of dollars)
	2023		2022		2021
Capital expenditures from reportable segments:
Construction Industries	$	376	$	271	$	255
Resource Industries	245		237		199
Energy & Transportation	944		756		627
Financial Products Segment	1,299		1,141		1,218
Total capital expenditures from reportable segments	2,864		2,405		2,299
Items not included in segment capital expenditures:
All Other operating segment	260		219		182
Cost centers	102		76		56
Timing	(44)		(54)		(74)
Other	(90)		(47)		9
Total capital expenditures	$	3,092	$	2,599	$	2,472


Enterprise-wide Disclosures
Information about Geographic Areas:
							Property, plant and equipment - net
	External sales and revenues 1						December 31,
(Millions of dollars)	2023		2022		2021		2023		2022
Inside United States	$	31,053	$	24,368	$	19,298	$	7,658	$	7,042
Outside United States	36,007		35,059		31,673		5,022		4,986
Total	$	67,060	$	59,427	$	50,971	$	12,680	$	12,028

1 Sales of ME&T are based on dealer or customer location. Revenues from services provided are based on where service is rendered.

24. Acquisitions

SPM Oil & Gas

On February 1, 2021, Caterpillar completed the acquisition of varying equity interests and assets of the Weir Group PLC, collectively known as SPM Oil & Gas (SPM). Headquartered near Fort Worth, Texas, SPM Oil & Gas produces a full line of pumps, flow iron, consumable parts, wellhead and pressure control products that are offered via an extensive global network of service centers. This acquisition, included in the Energy & Transportation segment, is consistent with our strategy of providing our customers expanded offerings and services which will now be one of the broadest in the well service industry. The purchase price, net of $22 million of acquired cash, was approximately $359 million.

We financed the transaction with available cash. Tangible assets as of the acquisition date were $520 million, recorded at their fair values, and primarily included cash of $22 million, receivables of $106 million, inventories of $159 million, leased assets of $105 million, and property, plant, and equipment of $117 million. Finite-lived intangible assets acquired of $23 million included developed technology and trade names and will be amortized on a straight-line basis over a weighted-average amortization period of approximately 8 years. Liabilities assumed as of the acquisition date were $192 million, recorded at their fair values, and primarily included lease liabilities of $105 million and accounts payable of $33 million. Goodwill of $30 million represented the excess of the consideration transferred over the net assets acquired. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.

25. Restructuring costs

Our accounting for employee separations is dependent upon how the particular program is designed. For voluntary programs, we recognize eligible separation costs at the time of employee acceptance unless the acceptance requires explicit approval by the company. For involuntary programs, we recognize eligible costs when management has approved the program, the affected employees have been properly notified and the costs are estimable.

Restructuring costs for 2023, 2022 and 2021 were as follows:













(Millions of dollars)	2023		2022		2021
Employee separations 1	$	74	$	77	$	92
Longwall divestiture 1	586		—		—
Contract terminations 1	7		1		2
Long-lived asset impairments 1	3		6		(63)

Other 2	110		215		59
Total restructuring costs	$	780	$	299	$	90

1 Recognized in Other operating (income) expenses.

2 Represents costs related to our restructuring programs, primarily for inventory write-downs, accelerated depreciation, project management and equipment relocation, all of which are primarily included in Cost of goods sold.

The restructuring costs in 2023 were primarily related to the divestiture of the company's Longwall business within Resource Industries. The divestiture closed on February 1, 2023 and resulted in a pre-tax loss of approximately $586 million, primarily a non-cash item driven by the release of $494 million of accumulated foreign currency translation. The restructuring costs in 2022 were primarily related to actions across the company, including $193 million related to the Rail division that was primarily inventory write-downs, and other strategic actions to address a small number of products. The inventory write-downs were included in "Other" in the table above. The restructuring costs in 2021 were primarily related to actions across the company including strategic actions to address a small number of products, which were partially offset by a gain on the sale of a manufacturing facility that had been closed. The gain in 2021 was included in Long-lived asset impairments in the table above.

In 2023, 2022 and 2021, all restructuring costs were excluded from segment profit.

The following table summarizes the 2023 and 2022 employee separation activity:



(Millions of dollars)	2023		2022
Liability balance, beginning of period	$	39	$	61
Increase in liability (separation charges)	74		77
Reduction in liability (payments)	(73)		(99)
Liability balance, end of period	$	40	$	39

Most of the remaining liability balance as of December 31, 2023 is expected to be paid in 2024.

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