Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide information that will assist the reader in understanding the company’s Consolidated Financial Statements, the changes in certain key items in those financial statements between select periods and the primary factors that accounted for those changes. In addition, we discuss how certain accounting principles, policies and critical estimates affect our Consolidated Financial Statements. Our discussion also contains certain forward-looking statements related to future events and expectations as well as a discussion of the many factors that we believe may have an impact on our business on an ongoing basis. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the company’s business under Part I, Item 1A. Risk Factors of the 2022 Form 10-K.

Highlights for the second quarter of 2023 include:

• Total sales and revenues for the second quarter of 2023 were $17.318 billion, an increase of $3.071 billion, or 22 percent, compared with $14.247 billion in the second quarter of 2022. Sales were higher across the three primary segments.

• Operating profit margin was 21.1 percent for the second quarter of 2023, compared with 13.6 percent for the second quarter of 2022. Adjusted operating profit margin was 21.3 percent for the second quarter of 2023, compared with 13.8 percent for the second quarter of 2022.

• Second-quarter 2023 profit per share was $5.67, and excluding the items in the table below, adjusted profit per share was $5.55. Second-quarter 2022 profit per share was $3.13, and excluding the items in the table below, adjusted profit per share was $3.18.

• Caterpillar ended the second quarter of 2023 with $7.4 billion of enterprise cash.

Highlights for the six months ended June 30, 2023 include:

• Total sales and revenues were $33.180 billion for the six months ended June 30, 2023, an increase of $5.344 billion, or 19 percent, compared with $27.836 billion for the six months ended June 30, 2022.

• Operating profit margin was 19.2 percent for the six months ended June 30, 2023, compared with 13.6 percent for the six months ended June 30, 2022. Adjusted operating profit margin was 21.2 percent for the six months ended June 30, 2023, compared with 13.8 percent for the six months ended June 30, 2022.

• Profit per share for the six months ended June 30, 2023, was $9.41, and excluding the items in the table below, adjusted profit per share was $10.46. Profit per share for the six months ended June 30, 2022, was $5.99, and excluding the items in the table below, adjusted profit per share was $6.06.

• Enterprise operating cash flow was $4.8 billion for the six months ended June 30, 2023.

• In order for our results to be more meaningful to our readers, we have separately quantified the impact of several significant items. A detailed reconciliation of GAAP to non-GAAP financial measures is included on page 66.

			Three Months Ended June 30, 2023									Three Months Ended June 30, 2022									Six Months Ended June 30, 2023									Six Months Ended June 30, 2022
(Dollars in millions except per share data)			Profit Before Taxes			Profit Per Share						Profit Before Taxes			Profit Per Share						Profit Before Taxes			Profit Per Share						Profit Before Taxes			Profit Per Share
Profit			$	3,652		$	5.67					$	2,096		$	3.13					$	6,286		$	9.41					$	4,095		$	5.99
Restructuring costs - Longwall divestiture			—			—						—			—						586			1.13						—			—
Other restructuring costs			31			0.05						28			0.05						56			0.09						41			0.07
Deferred tax valuation allowance adjustments			—			(0.17)						—			—						—			(0.17)						—			—
Adjusted profit			$	3,683		$	5.55					$	2,124		$	3.18					$	6,928		$	10.46					$	4,136		$	6.06

Overview

Total sales and revenues for the second quarter of 2023 were $17.318 billion, an increase of $3.071 billion, or 22 percent, compared with $14.247 billion in the second quarter of 2022. The increase was due to higher sales volume and favorable price realization. The increase in sales volume was driven by higher sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased during the second quarter of 2023 (primarily Energy & Transportation), compared with a decrease during the second quarter of 2022 (primarily Construction Industries). Sales were higher across the three primary segments.

Second-quarter 2023 profit per share was $5.67, compared with $3.13 profit per share in the second quarter of 2022. Second-quarter 2023 and 2022 profit per share included restructuring costs. Second-quarter 2023 profit per share also included a discrete tax benefit to adjust deferred tax balances. Profit for the second quarter of 2023 was $2.922 billion, an increase of $1.249 billion, or 75 percent compared with $1.673 billion for the second quarter of 2022. The increase was primarily due to

favorable price realization and higher sales volume, partially offset by higher manufacturing costs and higher selling, general and administrative (SG&A) and research and development (R&D) expenses.

Trends and Economic Conditions

Outlook for Key End Markets

In Construction Industries, we continue to see positive momentum in 2023 for North America. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia Pacific, excluding China, we expect growth due to public infrastructure spending and supportive commodity prices. We expect continued weakness in China in the excavator industry above 10-tons, which we anticipate to remain below 2022 levels due to low construction activity. In EAME, we anticipate business activity will be flat to slightly up overall versus 2022, with the Middle East exhibiting strong construction demand, whereas Europe demand is expected to be down. Construction activity in Latin America is expected to be down versus a strong 2022 performance.

In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds; however, customers continue to remain capital disciplined. We anticipate production and utilization levels will remain elevated. We expect the age of the fleet and low level of parked trucks to support future demand for our equipment and services. The energy transition is expected to support increased commodity demand, expanding our total addressable market and providing opportunities for long-term profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth supported by infrastructure and major non-residential construction projects.

In Energy & Transportation, in Oil & Gas reciprocating engines, although customers remain disciplined, we are encouraged by continued strength in demand for gas compression. Power Generation reciprocating engine demand is expected to remain healthy, including data center strength. New equipment orders and services for turbines and turbine-related services in both Oil & Gas and Power Generation are robust. Industrial remains healthy. In Transportation, we anticipate strength in high-speed marine as customers continue to upgrade aging fleets.

Company Trends and Expectations

For the full-year 2023, we expect a strong top line supported by price realization and higher sales of equipment to end users. We expect dealer inventory to be slightly higher at year-end 2023 versus year-end 2022. The environment remains positive with an improving supply chain, a strong backlog and healthy demand across most end markets.

In the second half of 2023, we expect higher sales and revenues compared to the second half of 2022 supported by strong sales of equipment to end users and favorable price realization, partially offset by the impact of changes in dealer inventories. We expect dealer inventory to decrease in the second half of 2023, compared to an increase in the second half of 2022. We expect sales in the third quarter of 2023 to be higher than the third quarter of 2022, but lower compared to the second quarter of 2023, following a typical sequential decline.

We expect operating profit to increase in 2023, compared to 2022. We expect price realization to continue to be favorable in 2023. Throughout 2023, we expect to see moderation of price realization and manufacturing costs. We anticipate the year-over-year benefit of price realization in the second half of 2023 to moderate compared to the benefit we saw in the first half of 2023 as we lap prior price year increases. Increases in SG&A/R&D expenses are expected throughout 2023 as we continue to invest in strategic initiatives such as services growth and technology, including digital, electrification and autonomy. We continue to anticipate higher pension expense within other income (expense) in 2023, compared to 2022, due to higher interest costs from higher interest rates. The change is estimated to be just over $300 million for the full year as compared to 2022, or about $80 million per quarter.

Global Business Conditions

We continue to monitor a variety of external factors around the world, such as supply chain disruptions, inflationary cost and labor pressures. Areas of particular focus include certain components, transportation and raw materials. Contingency plans have been developed and continue to be modified to minimize supply chain challenges that may impact our ability to meet increasing customer demand. We continue to assess the environment to determine if additional actions need to be taken.

Risk Factors

Risk factors are disclosed within Item 1A. Risk Factors of the 2022 Form 10-K.

Notes:

• Glossary of terms is included on pages 60 - 62; first occurrence of terms shown in bold italics.

• Information on non-GAAP financial measures is included on page 66.

• Certain amounts may not add due to rounding.

Consolidated Results of Operations

THREE MONTHS ENDED JUNE 30, 2023 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2022

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the second quarter of 2022 (at left) and the second quarter of 2023 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees.

Total sales and revenues for the second quarter of 2023 were $17.318 billion, an increase of $3.071 billion, or 22 percent, compared with $14.247 billion in the second quarter of 2022. The increase was due to higher sales volume and favorable price realization. The increase in sales volume was driven by higher sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased during the second quarter of 2023 (primarily Energy & Transportation), compared with a decrease during the second quarter of 2022 (primarily Construction Industries).

Sales were higher across the three primary segments.

North America sales increased 33 percent due to higher sales of equipment to end users and favorable price realization.

Sales increased 5 percent in Latin America due to favorable price realization and higher sales of equipment to end users, partially offset by lower services sales volume and the impact from changes in dealer inventories. Dealer inventory decreased more during the second quarter of 2023 than during the second quarter of 2022.

EAME sales increased 18 percent due to favorable price realization and the impact from changes in dealer inventories. Dealer inventory increased during the second quarter of 2023, compared with a decrease during the second quarter of 2022.

Asia/Pacific sales increased 10 percent driven by favorable price realization, the impact from changes in dealer inventories and higher sales of equipment to end users, partially offset by unfavorable currency impacts, related to the Australian dollar and Japanese yen. Dealer inventory decreased during the second quarter of 2022, compared with an increase during the second quarter of 2023.

Dealer inventory increased by $600 million during the second quarter of 2023, compared with a decrease of $400 million during the second quarter of 2022. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers’ demand expectations take into account seasonal changes, macroeconomic conditions, machine rentals and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers. We expect dealer inventory to be slightly higher at year-end 2023 versus year-end 2022.

Sales and Revenues by Segment
(Millions of dollars)			Second Quarter 2022						Sales Volume						Price Realization						Currency						Inter-Segment / Other						Second Quarter 2023						$ Change						% Change
Construction Industries			$	6,033					$	606					$	629					$	(105)					$	(9)					$	7,154					$	1,121					19		%
Resource Industries			2,961						250						375						(47)						24						3,563						602						20		%
Energy & Transportation			5,705						932						417						(32)						197						7,219						1,514						27		%
All Other Segment			118						(4)						—						(1)						3						116						(2)						(2		%)
Corporate Items and Eliminations			(1,278)						(13)						1						(2)						(215)						(1,507)						(229)
Machinery, Energy & Transportation Sales			13,539						1,771						1,422						(187)						—						16,545						3,006						22		%
Financial Products Segment			798						—						—						—						125						923						125						16		%
Corporate Items and Eliminations			(90)						—						—						—						(60)						(150)						(60)
Financial Products Revenues			708						—						—						—						65						773						65						9		%
Consolidated Sales and Revenues			$	14,247					$	1,771					$	1,422					$	(187)					$	65					$	17,318					$	3,071					22		%

Sales and Revenues by Geographic Region

			North America												Latin America												EAME												Asia/Pacific												External Sales and Revenues												Inter-Segment												Total Sales and Revenues
(Millions of dollars)			$						% Chg						$						% Chg						$						% Chg						$						% Chg						$						% Chg						$						% Chg						$						% Chg
Second Quarter 2023
Construction Industries			$	3,968					32		%				$	566					(11		%)				$	1,438					20		%				$	1,149					—		%				$	7,121					19		%				$	33					(21		%)				$	7,154					19		%
Resource Industries			1,342						31		%				538						15		%				517						6		%				1,076						18		%				3,473						20		%				90						36		%				3,563						20		%
Energy & Transportation			3,120						37		%				459						20		%				1,479						22		%				899						17		%				5,957						28		%				1,262						18		%				7,219						27		%
All Other Segment			16						(11		%)				—						—		%				4						(20		%)				14						(7		%)				34						(11		%)				82						3		%				116						(2		%)
Corporate Items and Eliminations			(32)												(2)												(2)												(4)												(40)												(1,467)												(1,507)
Machinery, Energy & Transportation Sales			8,414						33		%				1,561						5		%				3,436						18		%				3,134						10		%				16,545						22		%				—						—		%				16,545						22		%
Financial Products Segment			593						17		%				102						17		%				118						22		%				110						1		%				923			1			16		%				—						—		%				923						16		%
Corporate Items and Eliminations			(85)												(21)												(21)												(23)												(150)												—												(150)
Financial Products Revenues			508						10		%				81						23		%				97						11		%				87						(5		%)				773						9		%				—						—		%				773						9		%
Consolidated Sales and Revenues			$	8,922					32		%				$	1,642					6		%				$	3,533					18		%				$	3,221					10		%				$	17,318					22		%				$	—					—		%				$	17,318					22		%
Second Quarter 2022
Construction Industries			$	3,006											$	635											$	1,202											$	1,148											$	5,991											$	42											$	6,033
Resource Industries			1,027												466												489												913												2,895												66												2,961
Energy & Transportation			2,277												382												1,215												766												4,640												1,065												5,705
All Other Segment			18												—												5												15												38												80												118
Corporate Items and Eliminations			(20)												(2)												—												(3)												(25)												(1,253)												(1,278)
Machinery, Energy & Transportation Sales			6,308												1,481												2,911												2,839												13,539												—												13,539
Financial Products Segment			505												87												97												109												798			1									—												798
Corporate Items and Eliminations			(42)												(21)												(10)												(17)												(90)												—												(90)
Financial Products Revenues			463												66												87												92												708												—												708
Consolidated Sales and Revenues			$	6,771											$	1,547											$	2,998											$	2,931											$	14,247											$	—											$	14,247

1 Includes revenues from Machinery, Energy & Transportation of $172 million and $108 million in the second quarter of 2023 and 2022, respectively.

CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the second quarter of 2022 (at left) and the second quarter of 2023 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other operating (income) expenses.

Operating profit for the second quarter of 2023 was $3.652 billion, an increase of $1.708 billion, or 88 percent, compared with $1.944 billion in the second quarter of 2022. The increase was primarily due to favorable price realization and higher sales volume, partially offset by higher manufacturing costs and higher SG&A/R&D expenses. Unfavorable manufacturing costs largely reflected higher material costs. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives and an unfavorable change in fair value adjustments related to deferred compensation plans.

Operating profit margin was 21.1 percent for the second quarter of 2023, compared with 13.6 percent for the second quarter of 2022.

Profit (Loss) by Segment
(Millions of dollars)			Second Quarter 2023						Second Quarter 2022						$ Change						% Change
Construction Industries			$	1,803					$	989					$	814					82		%
Resource Industries			740						355						385						108		%
Energy & Transportation			1,269						659						610						93		%
All Other Segment			10						31						(21)						(68		%)
Corporate Items and Eliminations			(272)						(230)						(42)
Machinery, Energy & Transportation			3,550						1,804						1,746						97		%
Financial Products Segment			240						217						23						11		%
Corporate Items and Eliminations			17						17						—
Financial Products			257						234						23						10		%
Consolidating Adjustments			(155)						(94)						(61)
Consolidated Operating Profit			$	3,652					$	1,944					$	1,708					88		%

Other Profit/Loss and Tax Items

▪Interest expense excluding Financial Products in the second quarter of 2023 was $127 million, compared with $108 million in the second quarter of 2022. The increase was due to higher average borrowing rates.

▪Other income (expense) in the second quarter of 2023 was income of $127 million, compared with income of $260 million in the second quarter of 2022. The change was primarily driven by unfavorable impacts from foreign currency exchange and pension and other postemployment benefit (OPEB) plan costs, partially offset by higher investment and interest income and lower unrealized losses on marketable securities.

▪The provision for income taxes for the second quarter of 2023 reflected an estimated annual tax rate of 23 percent, compared with 23.5 percent for the second quarter of 2022, excluding the discrete items discussed below. The comparative tax rate for full-year 2022 was 23.2 percent.

In the second quarter of 2023, the company recorded a discrete tax benefit of $88 million due to a change in the valuation allowance for certain deferred tax assets compared to a benefit of $55 million in the second quarter of 2022 primarily for a prior year tax adjustment due to a change in estimate. In the second quarter of 2022, the company also recorded a $10 million benefit due to the change from the first-quarter estimated annual tax rate.

Construction Industries

Construction Industries’ total sales were $7.154 billion in the second quarter of 2023, an increase of $1.121 billion, or 19 percent, compared with $6.033 billion in the second quarter of 2022. The increase was due to favorable price realization and higher sales volume. The increase in sales volume was driven by the impact from changes in dealer inventories and higher sales of equipment to end users. Dealer inventory decreased during the second quarter of 2022, compared with a modest increase during the second quarter of 2023.

▪In North America, sales increased due to higher sales volume and favorable price realization. Higher sales volume was driven by higher sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory decreased during the second quarter of 2022, compared with an increase during the second quarter of 2023.

▪Sales decreased in Latin America primarily due to lower sales volume, partially offset by favorable price realization. Lower sales volume was driven by the impact from changes in dealer inventories and lower sales of equipment to end users. Dealer inventory decreased more during the second quarter of 2023 than during the second quarter of 2022.

▪In EAME, sales increased primarily due to higher sales volume and favorable price realization. Higher sales volume was primarily due to the impact from changes in dealer inventories, partially offset by lower sales of equipment to end users. Dealer inventory decreased during the second quarter of 2022, compared with an increase during the second quarter of 2023.

▪Sales were about flat in Asia/Pacific.

Construction Industries’ profit was $1.803 billion in the second quarter of 2023, an increase of $814 million, or 82 percent, compared with $989 million in the second quarter of 2022. The increase was mainly due to favorable price realization and higher sales volume.

Construction Industries’ profit as a percent of total sales was 25.2 percent in the second quarter of 2023, compared with 16.4 percent in the second quarter of 2022.

Resource Industries

Resource Industries’ total sales were $3.563 billion in the second quarter of 2023, an increase of $602 million, or 20 percent, compared with $2.961 billion in the second quarter of 2022. The increase was primarily due to favorable price realization and higher sales volume. The increase in sales volume was due to higher sales of equipment to end users, partially offset by lower aftermarket parts sales volume.

Resource Industries’ profit was $740 million in the second quarter of 2023, an increase of $385 million, or 108 percent, compared with $355 million in the second quarter of 2022. The increase was mainly due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing costs. Unfavorable manufacturing costs largely reflected higher material costs.

Resource Industries’ profit as a percent of total sales was 20.8 percent in the second quarter of 2023, compared with 12.0 percent in the second quarter of 2022.

Energy & Transportation

Sales by Application
(Millions of dollars)						Second Quarter 2023						Second Quarter 2022						$ Change						% Change
Oil and Gas						$	1,760					$	1,232					$	528					43		%
Power Generation						1,645						1,186						459						39		%
Industrial						1,318						1,117						201						18		%
Transportation						1,234						1,105						129						12		%
External Sales						5,957						4,640						1,317						28		%
Inter-segment						1,262						1,065						197						18		%
Total Sales						$	7,219					$	5,705					$	1,514					27		%

Energy & Transportation’s total sales were $7.219 billion in the second quarter of 2023, an increase of $1.514 billion, or 27 percent, compared with $5.705 billion in the second quarter of 2022. Sales increased across all applications and inter-segment sales. The increase in sales was primarily due to higher sales volume and favorable price realization.

▪Oil and Gas – Sales increased for turbines and turbine-related services. Sales also increased in reciprocating engines used in gas compression and well servicing applications.

▪Power Generation – Sales increased in large reciprocating engines, primarily data center applications, and small reciprocating engines. Turbines and turbine-related services increased as well.

▪Industrial – Sales were up across all regions.

▪Transportation – Sales increased in marine and rail services.

Energy & Transportation’s profit was $1.269 billion in the second quarter of 2023, an increase of $610 million, or 93 percent, compared with $659 million in the second quarter of 2022. The increase was mainly due to higher sales volume and favorable price realization, partially offset by unfavorable manufacturing costs and higher SG&A/R&D expenses. Unfavorable manufacturing costs were driven by higher material costs and increased period manufacturing costs. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives.

Energy & Transportation’s profit as a percent of total sales was 17.6 percent in the second quarter of 2023, compared with 11.6 percent in the second quarter of 2022.

Financial Products Segment

Financial Products’ segment revenues were $923 million in the second quarter of 2023, an increase of $125 million, or 16 percent, compared with $798 million in the second quarter of 2022. The increase was primarily due to higher average financing rates across all regions.

Financial Products’ segment profit was $240 million in the second quarter of 2023, an increase of $23 million, or 11 percent, compared with $217 million in the second quarter of 2022. The increase was mainly due to lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expenses.

At the end of the second quarter of 2023, past dues at Cat Financial were 2.15 percent, compared with 2.19 percent at the end of the second quarter of 2022. Write-offs, net of recoveries, were $8 million for the second quarter of 2023, compared with less than $1 million for the second quarter of 2022. As of June 30, 2023, Cat Financial's allowance for credit losses totaled $320 million, or 1.15 percent of finance receivables, compared with $348 million, or 1.27 percent of finance receivables at March 31, 2023. The allowance for credit losses at year-end 2022 was $346 million, or 1.29 percent of finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $255 million in the second quarter of 2023, an increase of $42 million from the second quarter of 2022. Lower corporate costs and decreased expenses due to timing differences were more than offset by an unfavorable change in fair value adjustments related to deferred compensation plans and unfavorable impacts of segment reporting methodology differences.

SIX MONTHS ENDED JUNE 30, 2023 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2022

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the six months ended June 30, 2022 (at left) and the six months ended June 30, 2023 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees.

Total sales and revenues were $33.180 billion for the six months ended June 30, 2023, an increase of $5.344 billion, or 19 percent, compared with $27.836 billion for the six months ended June 30, 2022. The increase was primarily due to favorable price realization and higher sales volume. The increase in sales volume was driven by higher sales of equipment to end users and the impact from changes in dealer inventories, partially offset by lower services sales volume. Dealer inventory increased more during the six months ended June 30, 2023, than the during the six months ended June 30, 2022.

Sales were higher in the three primary segments.

North America sales increased 33 percent driven by favorable price realization, higher sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased more during the six months ended June 30, 2023, than during the six months ended June 30, 2022.

Sales increased 7 percent in Latin America due to favorable price realization and higher sales of equipment to end users, partially offset by lower services sales volume and the impact from changes in dealer inventories. Dealer inventory increased during the six months ended June 30, 2022, compared with a decrease during the six months ended June 30, 2023.

EAME sales increased 13 percent due to favorable price realization and higher sales of equipment to end users.

Asia/Pacific sales increased 6 percent driven by favorable price realization, partially offset by unfavorable currency impacts related to the Australian dollar and Japanese yen.

Dealer inventory increased about $2.2 billion during the six months ended June 30, 2023, compared with an increase of $900 million during the six months ended June 30, 2022. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers’ demand expectations take into account seasonal changes, macroeconomic conditions, machine rentals and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers.

Sales and Revenues by Segment
(Millions of dollars)			Six Months Ended June 30, 2022						Sales Volume						Price Realization						Currency						Inter-Segment / Other						Six Months Ended June 30, 2023						$ Change						% Change
Construction Industries			$	12,148					$	433					$	1,571					$	(256)					$	4					$	13,900					$	1,752					14		%
Resource Industries			5,791						407						847						(76)						21						6,990						1,199						21		%
Energy & Transportation			10,743						1,553						897						(110)						390						13,473						2,730						25		%
All Other Segment			236						(6)						—						(2)						(1)						227						(9)						(4		%)
Corporate Items and Eliminations			(2,493)						(39)						1						(1)						(414)						(2,946)						(453)
Machinery, Energy & Transportation Sales			26,425						2,348						3,316						(445)						—						31,644						5,219						20		%
Financial Products Segment			1,581						—						—						—						244						1,825						244						15		%
Corporate Items and Eliminations			(170)						—						—						—						(119)						(289)						(119)
Financial Products Revenues			1,411						—						—						—						125						1,536						125						9		%
Consolidated Sales and Revenues			$	27,836					$	2,348					$	3,316					$	(445)					$	125					$	33,180					$	5,344					19		%

Sales and Revenues by Geographic Region

			North America												Latin America												EAME												Asia/Pacific												External Sales and Revenues												Inter-Segment												Total Sales and Revenues
(Millions of dollars)			$						% Chg						$						% Chg						$						% Chg						$						% Chg						$						% Chg						$						% Chg						$						% Chg
Six Months Ended June 30, 2023
Construction Industries			$	7,576					32		%				$	1,165					(8		%)				$	2,774					12		%				$	2,310					(11		%)				$	13,825					14		%				$	75					6		%				$	13,900					14		%
Resource Industries			2,650						30		%				1,012						17		%				1,116						3		%				2,054						24		%				6,832						21		%				158						15		%				6,990						21		%
Energy & Transportation			5,692						35		%				839						21		%				2,863						19		%				1,618						18		%				11,012						27		%				2,461						19		%				13,473						25		%
All Other Segment			34						(6		%)				—						—		%				8						(20		%)				27						(13		%)				69						(10		%)				158						(1		%)				227						(4		%)
Corporate Items and Eliminations			(80)												(2)												(3)												(9)												(94)												(2,852)												(2,946)
Machinery, Energy & Transportation Sales			15,872						33		%				3,014						7		%				6,758						13		%				6,000						6		%				31,644						20		%				—						—		%				31,644						20		%
Financial Products Segment			1,168						16		%				206						29		%				232						20		%				219						—		%				1,825			1			15		%				—						—		%				1,825						15		%
Corporate Items and Eliminations			(168)												(39)												(39)												(43)												(289)												—												(289)
Financial Products Revenues			1,000						8		%				167						37		%				193						11		%				176						(5		%)				1,536						9		%				—						—		%				1,536						9		%
Consolidated Sales and Revenues			$	16,872					31		%				$	3,181					8		%				$	6,951					13		%				$	6,176					6		%				$	33,180					19		%				$	—					—		%				$	33,180					19		%
Six Months Ended June 30, 2022
Construction Industries			$	5,726											$	1,262											$	2,479											$	2,610											$	12,077											$	71											$	12,148
Resource Industries			2,045												865												1,083												1,661												5,654												137												5,791
Energy & Transportation			4,215												692												2,399												1,366												8,672												2,071												10,743
All Other Segment			36												—												10												31												77												159												236
Corporate Items and Eliminations			(44)												(1)												(2)												(8)												(55)												(2,438)												(2,493)
Machinery, Energy & Transportation Sales			11,978												2,818												5,969												5,660												26,425												—												26,425
Financial Products Segment			1,008												160												193												220												1,581			1									—												1,581
Corporate Items and Eliminations			(78)												(38)												(19)												(35)												(170)												—												(170)
Financial Products Revenues			930												122												174												185												1,411												—												1,411
Consolidated Sales and Revenues			$	12,908											$	2,940											$	6,143											$	5,845											$	27,836											$	—											$	27,836

1 Includes revenues from Machinery, Energy & Transportation of $334 million and $208 million in the six months ended June 30, 2023 and 2022, respectively.

CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the six months ended June 30, 2022 (at left) and the six months ended June 30, 2023 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees. The bar titled Longwall Divestiture is included in total restructuring costs. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation’s other operating (income) expenses.

Operating profit for the six months ended June 30, 2023, was $6.383 billion, an increase of $2.584 billion, or 68 percent, compared with $3.799 billion for the six months ended June 30, 2022. The increase was due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing costs, the impact of the divestiture of the company's Longwall business and higher SG&A/R&D expenses. Unfavorable manufacturing costs largely reflected higher material costs. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives and an unfavorable change in fair value adjustments related to deferred compensation plans.

In the first quarter of 2023, the divestiture of the company’s Longwall business was finalized, resulting in an unfavorable impact to operating profit of $586 million, primarily a non-cash item driven by the release of accumulated foreign currency translation.

Operating profit margin was 19.2 percent for the six months ended June 30, 2023, compared with 13.6 percent for the six months ended June 30, 2022.

Profit (Loss) by Segment
(Millions of dollars)			Six Months Ended June 30, 2023						Six Months Ended June 30, 2022						$ Change						% Change
Construction Industries			$	3,593					$	2,046					$	1,547					76		%
Resource Industries			1,504						716						788						110		%
Energy & Transportation			2,326						1,197						1,129						94		%
All Other Segment			21						34						(13)						(38		%)
Corporate Items and Eliminations			(1,280)						(474)						(806)
Machinery, Energy & Transportation			6,164						3,519						2,645						75		%
Financial Products Segment			472						455						17						4		%
Corporate Items and Eliminations			42						—						42
Financial Products			514						455						59						13		%
Consolidating Adjustments			(295)						(175)						(120)
Consolidated Operating Profit			$	6,383					$	3,799					$	2,584					68		%

Other Profit/Loss and Tax Items

▪Interest expense excluding Financial Products for the six months ended June 30, 2023, was $256 million, compared with $217 million for the six months ended June 30, 2022. The increase was due to higher average borrowing rates.

▪Other income (expense) for the six months ended June 30, 2023, was income of $159 million, compared with income of $513 million for the six months June 30, 2022. The change was primarily driven by unfavorable impacts from foreign currency exchange and pension and OPEB plan costs, partially offset by higher investment and interest income.

▪The provision for income taxes for the six months ended June 30, 2023 reflected an estimated annual tax rate of 23 percent, compared with 23.5 percent for the six months ended June 30, 2022, excluding the discrete items discussed below. The comparative tax rate for full-year 2022 was 23.2 percent.

The 2023 estimated annual tax rate excludes the impact of the nondeductible loss of $586 million related to the divestiture of the company’s Longwall business. In the six months ended June 30, 2023, the company recorded a discrete tax benefit of $88 million due to a change in the valuation allowance for certain deferred tax assets. In addition, the company recorded a discrete tax benefit of $32 million for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense, compared with a $18 million benefit for the six months ended June 30, 2022. In the six months ended June 30, 2022, the company also recorded discrete tax benefits of $49 million for a prior year tax adjustment due to a change in estimate.

Construction Industries

Construction Industries’ total sales were $13.900 billion for the six months ended June 30, 2023, an increase of $1.752 billion, or 14 percent, compared with $12.148 billion for the six months ended June 30, 2022. The increase was due to favorable price realization.

• In North America, sales increased due to favorable price realization and higher sales volume. Higher sales volume was driven by the impact from changes in dealer inventories and higher sales of equipment to end users. Dealer inventory increased during the six months ended June 30, 2023, compared to remaining about flat during the six months ended June 30, 2022.

• Sales decreased in Latin America primarily due to lower sales volume, partially offset by favorable price realization. Lower sales volume was driven by the impact from changes in dealer inventories and lower sales of equipment to end users. Dealer inventory decreased during the six months ended June 30, 2023, compared with an increase during the six months ended June 30, 2022.

• In EAME, sales increased primarily due to favorable price realization and higher sales volume, partially offset by unfavorable currency impacts, mainly related to the euro and British pound. Higher sales volume was due to the impact from changes in dealer inventories, partially offset by lower sales of equipment to end users. Dealer inventory increased more during the six months ended June 30, 2023, than during the six months ended June 30, 2022.

• Sales decreased in Asia/Pacific due to lower sales volume and unfavorable currency impacts, primarily related to the Japanese yen, Chinese yuan and Australian dollar, partially offset by favorable price realization. Lower sales volume was driven by lower sales of equipment to end users.

Construction Industries’ profit was $3.593 billion for the six months ended June 30, 2023, an increase of $1.547 billion, or 76 percent, compared with $2.046 billion for the six months ended June 30, 2022. The increase was mainly due to favorable price realization.

Construction Industries’ profit as a percent of total sales was 25.8 percent for the six months ended June 30, 2023, compared with 16.8 percent for the six months ended June 30, 2022.

Resource Industries

Resource Industries’ total sales were $6.990 billion for the six months ended June 30, 2023, an increase of $1.199 billion, or 21 percent, compared with $5.791 billion for the six months ended June 30, 2022. The increase was due to favorable price realization and higher sales volume. The increase in sales volume was driven by higher sales of equipment to end users, partially offset by lower aftermarket parts sales volume.

Resource Industries’ profit was $1.504 billion for the six months ended June 30, 2023, an increase of $788 million, or 110 percent, compared with $716 million for the six months ended June 30, 2022. The increase was mainly due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing costs. Unfavorable manufacturing costs largely reflected higher material costs.

Resource Industries’ profit as a percent of total sales was 21.5 percent for the six months ended June 30, 2023, compared with 12.4 percent for the six months ended June 30, 2022.

Energy & Transportation

Sales by Application
(Millions of dollars)						Six Months Ended June 30, 2023						Six Months Ended June 30, 2022						$ Change						% Change
Oil and Gas						$	3,074					$	2,180					$	894					41		%
Power Generation						2,929						2,198						731						33		%
Industrial						2,573						2,137						436						20		%
Transportation						2,436						2,157						279						13		%
External Sales						11,012						8,672						2,340						27		%
Inter-Segment						2,461						2,071						390						19		%
Total Sales						$	13,473					$	10,743					$	2,730					25		%

Energy & Transportation’s total sales were $13.473 billion for the six months ended June 30, 2023, an increase of $2.730 billion, or 25 percent, compared with $10.743 billion for the six months ended June 30, 2022. Sales increased across all applications and inter-segment sales. The increase in sales was primarily due to higher sales volume and favorable price realization.

• Oil and Gas – Sales increased for turbines and turbine-related services. Sales also increased in reciprocating engines used in well servicing and gas compression applications.

• Power Generation – Sales increased in large reciprocating engines, primarily data center applications, and small reciprocating engines. Turbines and turbine-related services increased as well.

• Industrial – Sales were up across all regions.

• Transportation – Sales increased in marine and rail services.

Energy & Transportation’s profit was $2.326 billion for the six months ended June 30, 2023, an increase of $1.129 billion, or 94 percent, compared with $1.197 billion for the six months ended June 30, 2022. The increase was mainly due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing costs and higher SG&A/R&D expenses. Unfavorable manufacturing costs were driven by higher material costs. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives.

Energy & Transportation’s profit as a percent of total sales was 17.3 percent for the six months ended June 30, 2023, compared with 11.1 percent for the six months ended June 30, 2022.

Financial Products Segment

Financial Products’ segment revenues were $1.825 billion for the six months ended June 30, 2023, an increase of $244 million, or 15 percent, compared with $1.581 billion for the six months ended June 30, 2022. The increase was primarily due to higher average financing rates across all regions.

Financial Products’ segment profit was $472 million for the six months ended June 30, 2023, an increase of $17 million, or 4 percent, compared with $455 million for the six months ended June 30, 2022. The increase was mainly due to lower provision for credit losses at Cat Financial and higher net yield on average earning assets, partially offset by unfavorable currency impacts and an increase in SG&A expenses.

Corp****orate Items and Eliminations

Expense for corporate items and eliminations was $1.238 billion for the six months ended June 30, 2023, an increase of $764 million from the six months ended June 30, 2022, primarily driven by the impact of the divestiture of the company's Longwall business and an unfavorable change in fair value adjustments related to deferred compensation plans.

In the first quarter of 2023, the divestiture of the company’s Longwall business was finalized, resulting in an unfavorable impact to operating profit of $586 million, primarily a non-cash item driven by the release of accumulated foreign currency translation. This impact was included in total restructuring costs.

RESTRUCTURING COSTS

In 2023, we expect to incur about $700 million of restructuring costs, which includes a pre-tax loss of approximately $586 million from the divestiture of our Longwall business within Resource Industries on February 1, 2023. In addition, we expect to incur about $100 million of restructuring costs this year primarily related to strategic actions to address a small number of products. We expect that prior restructuring actions will result in an incremental benefit to operating costs, primarily Cost of goods sold and SG&A expenses of about $75 million in 2023 compared with 2022.

Additional information related to restructuring costs is included in Note 20 - "Restructuring Costs" of Part I, Item 1 "Financial Statements".

GLOSSARY OF TERMS

1.Adjusted Operating Profit Margin – Operating profit excluding restructuring costs, which include the divestiture of the company’s Longwall business, as a percent of sales and revenues.

2.Adjusted Profit Per Share – Profit per share excluding restructuring costs, which include the divestiture of the company’s Longwall business, and a discrete tax benefit to adjust deferred tax balances.

3.All Other Segment – Primarily includes activities such as: business strategy; product management and development; manufacturing and sourcing of 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 a wholly owned dealer in Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience.

4.Consolidating Adjustments – Elimination of transactions between Machinery, Energy & Transportation and Financial Products.

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

6.Corporate Items and Eliminations – Includes corporate-level expenses, timing differences (as some expenses are reported in segment profit on a cash basis), methodology differences between segment and consolidated external reporting, certain restructuring costs and inter-segment eliminations.

7.Currency – With respect to sales and revenues, currency represents the translation impact on sales resulting from changes in foreign currency exchange rates versus the U.S. dollar. With respect to operating profit, currency represents the net translation impact on sales and operating costs resulting from changes in foreign currency exchange rates versus the U.S. dollar. Currency only includes the impact on sales and operating profit for the Machinery, Energy & Transportation line of business; currency impacts on Financial Products revenues and operating profit are included in the Financial Products portions of the respective analyses. With respect to other income/expense, currency represents the effects of forward and option contracts entered into by the company to reduce the risk of fluctuations in exchange rates (hedging) and the net effect of changes in foreign currency exchange rates on our foreign currency assets and liabilities for consolidated results (translation).

8.Dealer Inventories – Represents dealer machine and engine inventories, excluding aftermarket parts.

9.EAME – A geographic region including Europe, Africa, the Middle East and Eurasia.

10.Earning Assets – Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases net of accumulated depreciation at Cat Financial.

11.Energy & Transportation – A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses. 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 Cat machinery; electrified powertrain and zero-emission power sources and service solutions development; and diesel-electric locomotives and components and other rail-related products and services, including remanufacturing and leasing. 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.

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

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

14.Latin America – A geographic region including Central and South American countries and Mexico.

15.Machinery, Energy & Transportation (ME&T) – The company defines ME&T as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of its products.

16.Machinery, Energy & Transportation Other Operating (Income) Expenses – Comprised primarily of gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements and accruals.

17.Manufacturing Costs – Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs. Variable manufacturing costs are defined as having a direct relationship with the volume of production. This includes material costs, direct labor and other costs that vary directly with production volume, such as freight, power to operate machines and supplies that are consumed in the manufacturing process. Period manufacturing costs support production but are defined as generally not having a direct relationship to short-term changes in volume. Examples include machinery and equipment repair, depreciation on manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and operations management.

18.Mark-to-market gains/losses – Represents the net gain or loss of actual results differing from the company’s assumptions and the effects of changing assumptions for our defined benefit pension and OPEB plans. These gains and losses are immediately recognized through earnings upon the annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

19.Pension and Other Postemployment Benefits (OPEB) – The company’s defined-benefit pension and postretirement benefit plans.

20.Price Realization – The impact of net price changes excluding currency and new product introductions. Price realization includes geographic mix of sales, which is the impact of changes in the relative weighting of sales prices between geographic regions.

21.Resource Industries – A segment primarily responsible for supporting customers using machinery in mining, heavy construction and quarry and aggregates. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors; large mining trucks; hard rock vehicles; electric rope shovels; draglines; hydraulic shovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers; wheel dozers; landfill compactors; soil compactors; 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.

22.Restructuring Costs – May include costs for employee separation, long-lived asset impairments, contract terminations and divestiture impacts. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold.

23.Sales Volume – With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation as well as the incremental sales impact of new product introductions, including emissions-related product updates. With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Energy & Transportation sales with respect to total sales. The impact of sales volume on segment profit includes inter-segment sales.

24.Services – Enterprise services include, but are not limited to, aftermarket parts, Financial Products revenues and other service-related revenues. Machinery, Energy & Transportation segments exclude most Financial Products revenues.

LIQUIDITY AND CAPITAL RESOURCES

Sources of funds

We generate significant capital resources from operating activities, which are the primary source of funding for our ME&T operations. Funding for these businesses is also available from commercial paper and long-term debt issuances. Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. On a consolidated basis, we had positive operating cash flow in the first six months of 2023 and ended the second quarter with $7.39 billion of cash, an increase of $383 million from year-end 2022. In addition, ME&T has invested in available-for-sale debt securities and bank time deposits with varying maturity dates within one year that are considered highly liquid and are available for current operations. These ME&T securities were $2.02 billion at the end of June 30, 2023 and are included in Prepaid expenses and other current assets and Other assets in the Consolidated Statement of Financial Position. We intend to maintain a strong cash and liquidity position.

Consolidated operating cash flow for the first six months of 2023 was $4.82 billion, up $2.28 billion compared to the same period a year ago. The increase was primarily due to higher profit before taxes adjusted for non-cash items, including the loss on divestiture of the company's Longwall business.

Total debt as of June 30, 2023 was $37.70 billion, an increase of $706 million from year-end 2022. Debt related to ME&T decreased $35 million in the first six months of 2023 while debt related to Financial Products increased $749 million.

As of June 30, 2023, we had three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes. Based on management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of June 30, 2023 was $2.75 billion. Information on our Credit Facility is as follows:

• The 364-day facility of $3.15 billion (of which $825 million is available to ME&T) expires in August 2023.

• The three-year facility, as amended and restated in September 2022, of $2.73 billion (of which $715 million is available to ME&T) expires in August 2025.

• The five-year facility, as amended and restated in September 2022, of $4.62 billion (of which $1.21 billion is available to ME&T) expires in September 2027.

At June 30, 2023, Caterpillar’s consolidated net worth was $18.30 billion, which was above the $9.00 billion required under the Credit Facility. The consolidated net worth is defined in the Credit Facility as the consolidated shareholders’ equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).

At June 30, 2023, Cat Financial’s covenant interest coverage ratio was 1.96 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 calendar quarter for the rolling four quarter period then most recently ended, required by the Credit Facility.

In addition, at June 30, 2023, Cat Financial’s six-month covenant leverage ratio was 7.02 to 1. This was below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31, required by the Credit Facility.

In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of banks may terminate the commitments allocated to the party that does not meet its covenants. Additionally, in such event, certain of Cat Financial’s other lenders under other loan agreements where similar financial covenants or cross default provisions are applicable may, at their election, choose to pursue remedies under those loan agreements, including accelerating the repayment of outstanding borrowings. At June 30, 2023, there were no borrowings under the Credit Facility.

Our total credit commitments and available credit as of June 30, 2023 were:

			June 30, 2023
(Millions of dollars)			Consolidated						Machinery, Energy & Transportation						Financial Products
Credit lines available:
Global credit facilities			$	10,500					$	2,750					$	7,750
Other external			4,140						571						3,569
Total credit lines available			14,640						3,321						11,319
Less: Commercial paper outstanding			(5,045)						—						(5,045)
Less: Utilized credit			(1,031)						—						(1,031)
Available credit			$	8,564					$	3,321					$	5,243

The other external consolidated credit lines with banks as of June 30, 2023 totaled $4.14 billion. These committed and uncommitted credit lines, which may be eligible for renewal at various future dates or have no specified expiration date, are used primarily by our subsidiaries for local funding requirements. Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines.

We receive debt ratings from the major credit rating agencies. In May 2023, Fitch upgraded our debt rating to "high-A", while Moody’s and S&P maintain a “mid-A” debt rating. A downgrade of our credit ratings by any of the major credit rating agencies could result in increased borrowing costs and could make access to certain credit markets more difficult. In the event economic conditions deteriorate such that access to debt markets becomes unavailable, ME&T’s operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our committed credit facilities. Our Financial Products’ operations would rely on cash flow from its existing portfolio, existing cash balances, access to our committed credit facilities and other credit line facilities of Cat Financial, and potential borrowings from Caterpillar. In addition, we maintain a support agreement with Cat Financial, which requires Caterpillar to remain the sole owner of Cat Financial and may, under certain circumstances, require Caterpillar to make payments to Cat Financial should Cat Financial fail to maintain certain financial ratios.

We facilitate voluntary supplier finance programs (the “Programs”) through participating financial institutions. We account for the payments made under the Programs, the same as our other accounts payable, as a reduction to our cash flows from operations. We do not believe that changes in the availability of the Programs will have a significant impact on our liquidity. Additional information related to the Programs is included in Note 2 - "New accounting guidance" of Part I, Item 1 "Financial Statements".

Machinery, Energy & Transportation

Net cash provided by operating activities was $4.67 billion in the first six months of 2023, compared with net cash provided of $1.29 billion for the same period in 2022. The increase was primarily due to higher profit before taxes adjusted for non-cash items, including the loss on divestiture of the company's Longwall business and lower working capital requirements. Within working capital, changes in inventories, accrued expenses and receivables favorably impacted cash flow, but were partially offset by changes in accounts payable and customer advances.

Net cash used by investing activities in the first six months of 2023 was $1.19 billion, compared with net cash used of $1.24 billion in the first six months of 2022. The decrease was due to lower investments in securities, net of proceeds from sale of securities, partially offset by an increase in capital spend.

Net cash used for financing activities during the first six months of 2023 was $3.19 billion, compared with net cash used of $3.26 billion in the same period of 2022. The change was primarily due to lower share repurchases in the first six months of 2023 along with favorable impacts from borrowing activity, partially offset by increased dividends.

While our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our long-term cash deployment strategy is focused on the following priorities. Our top priority is to maintain a strong financial position in support of a mid-A rating. Next, we intend to fund operational requirements and commitments. Then, we intend to fund priorities that profitably grow the company and return capital to shareholders through dividend growth and share repurchases. Additional information on cash deployment is as follows:

Strong financial position – Our top priority is to maintain a strong financial position in support of a mid-A rating. We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins which align with our cash deployment actions and the various methodologies used by the major credit rating agencies.

Operational excellence and commitments – Capital expenditures were $685 million during the first six months of 2023, compared to $594 million for the same period in 2022. We expect ME&T’s capital expenditures in 2023 to be about $1.5 billion. We made $264 million of contributions to our pension and other postretirement benefit plans during the first six months of 2023. We currently anticipate full-year 2023 contributions of approximately $372 million. In comparison, we made $255 million of contributions to our pension and other postretirement benefit plans during the first six months of 2022.

Fund strategic growth initiatives and return capital to shareholders – We intend to utilize our liquidity and debt capacity to fund targeted investments that drive long-term profitable growth focused in the areas of expanded offerings, services and sustainability, including acquisitions.

As part of our capital allocation strategy, ME&T free cash flow is a liquidity measure we use to determine the cash generated and available for financing activities including debt repayments, dividends and share repurchases. We define ME&T free cash flow as cash from ME&T operations less capital expenditures, excluding discretionary pension and other postretirement benefit plan contributions and cash payments related to settlements with the U.S. Internal Revenue Service. A goal of our capital allocation strategy is to return substantially all ME&T free cash flow to shareholders over time in the form of dividends and share repurchases, while maintaining a mid-A rating.

Our share repurchase plans are subject to the company’s cash deployment priorities and are evaluated on an ongoing basis considering the financial condition of the company and the economic outlook, corporate cash flow, the company’s liquidity needs, and the health and stability of global credit markets. The timing and amount of future repurchases may vary depending on market conditions and investing priorities. In May 2022, the Board approved a share repurchase authorization (the 2022 Authorization) of up to $15.0 billion of Caterpillar common stock effective August 1, 2022, with no expiration. In the first six months of 2023, we repurchased $1.83 billion of Caterpillar common stock, with $10.97 billion remaining under the 2022 Authorization as of June 30, 2023. Our basic shares outstanding as of June 30, 2023 were approximately 510 million.

Each quarter, our Board of Directors reviews the company’s dividend for the applicable quarter. The Board evaluates the financial condition of the company and considers the economic outlook, corporate cash flow, the company’s liquidity needs, and the health and stability of global credit markets to determine whether to maintain or change the quarterly dividend. In June 2023, the Board of Directors approved an 8 percent increase in the quarterly dividend to $1.30 per share, and we continue to expect our strong financial position to support the dividend. Dividends paid totaled $1.24 billion in the first six months of 2023.

Financial Products

Financial Products operating cash flow was $542 million in the first six months of 2023, compared with $735 million for the same period in 2022. Net cash used for investing activities was $1.01 billion for the first six months of 2023, compared with net cash used of $125 million for the same period in 2022. The change was primarily due to portfolio related activity. Net cash provided by financing activities was $613 million in the first six months of 2023 compared with net cash used of $630 million for the same period in 2022. The change was primarily due to higher portfolio funding requirements.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Part I, Item 1. Note 2 - “New accounting guidance”.

CRITICAL ACCOUNTING ESTIMATES

For a discussion of the company’s critical accounting estimates, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K. There have been no significant changes to our critical accounting estimates since our 2022 Annual Report on Form 10-K.

OTHER MATTERS

Information related to legal proceedings appears in Note 14—Environmental and Legal Matters of Part II, Item 8 “Financial Statements and Supplementary Data.”

Order Backlog

At the end of the second quarter of 2023, the dollar amount of backlog believed to be firm was approximately $30.7 billion, which was about flat to the first quarter of 2023. Of the total backlog at June 30, 2023, approximately $5.9 billion was not expected to be filled in the following twelve months.

NON-GAAP FINANCIAL MEASURES

We provide the following definitions for the non-GAAP financial measures used in this report. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.

We believe it is important to separately quantify the profit impact of three significant items in order for our results to be meaningful to our readers. These items consist of (i) restructuring costs related to the divestiture of the company's Longwall business, (ii) other restructuring costs and (iii) certain deferred tax valuation allowance adjustments. We do not consider these items indicative of earnings from ongoing business activities and believe the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing our period-over-period results. In addition, we provide a calculation of ME&T free cash flow as we believe it is an important measure for investors to determine the cash generation available for financing activities including debt repayments, dividends and share repurchases.

Reconciliations of adjusted results to the most directly comparable GAAP measures are as follows:

(Dollars in millions except per share data)						Operating Profit						Operating Profit Margin						Profit Before Taxes						Provision (Benefit) for Income Taxes						Effective Tax Rate						Profit						Profit per Share
Three Months Ended June 30, 2023 - U.S. GAAP						$	3,652					21.1		%				$	3,652					$	752					20.6		%				$	2,922					$	5.67
Restructuring costs						31						0.2		%				31						6						20.0		%				25						0.05
Deferred tax valuation allowance adjustments						—						—		%				—						88						—		%				(88)						(0.17)
Three Months Ended June 30, 2023 - Adjusted						$	3,683					21.3		%				$	3,683					$	846					23.0		%				$	2,859					$	5.55
Three Months Ended June 30, 2022 - U.S. GAAP						$	1,944					13.6		%				$	2,096					$	427					20.4		%				$	1,673					$	3.13
Restructuring costs						28						0.2		%				28						2						10.0		%				26						0.05
Three Months Ended June 30, 2022 - Adjusted						$	1,972					13.8		%				$	2,124					$	429					20.2		%				$	1,699					$	3.18
Six Months Ended June 30, 2023- U.S. GAAP						$	6,383					19.2		%				$	6,286					$	1,460					23.2		%				$	4,865					$	9.41
Restructuring costs - Longwall divestiture						586						1.8		%				586						—						—		%				586						1.13
Other restructuring costs						56						0.2		%				56						11						20.0		%				45						0.09
Deferred tax valuation allowance adjustments						—						—		%				—						88						—		%				(88)						(0.17)
Six Months Ended June 30, 2023 - Adjusted						$	7,025					21.2		%				$	6,928					$	1,559					22.5		%				$	5,408					$	10.46
Six Months Ended June 30, 2022 - U.S. GAAP						$	3,799					13.6		%				$	4,095					$	896					21.9		%				$	3,210					$	5.99
Restructuring costs						41						0.2		%				41						4						10.0		%				37						0.07
Six Months Ended June 30, 2022 - Adjusted						$	3,840					13.8		%				$	4,136					$	900					21.8		%				$	3,247					$	6.06

Reconciliations of ME&T free cash flow to the most directly comparable GAAP measure, net cash provided by operating activities are as follows:

(Millions of dollars)						Six Months Ended June 30
												2023						2022
ME&T net cash provided by operating activities 1												$	4,667					$	1,289
ME&T capital expenditures												(685)						(594)
ME&T free cash flow												$	3,982					$	695
1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 74 - 75.

Supplemental Consolidating Data

We are providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows:

Consolidated – Caterpillar Inc. and its subsidiaries.

Machinery, Energy & Transportation – We define ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of our products.

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

Consolidating Adjustments – Eliminations of transactions between ME&T and Financial Products.

The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We believe this presentation will assist readers in understanding our business.

Pages 68 to 75 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information. Certain amounts for prior periods have been reclassified to conform to the current period presentation.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended June 30, 2023

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation			$	16,545					$	16,545					$	—					$	—
Revenues of Financial Products			773						—						955						(182)			1
Total sales and revenues			17,318						16,545						955						(182)
Operating costs:
Cost of goods sold			11,065						11,068						—						(3)			2
Selling, general and administrative expenses			1,528						1,389						143						(4)			2
Research and development expenses			528						528						—						—
Interest expense of Financial Products			245						—						245						—
Other operating (income) expenses			300						10						310						(20)			2
Total operating costs			13,666						12,995						698						(27)
Operating profit			3,652						3,550						257						(155)
Interest expense excluding Financial Products			127						127						—						—
Other income (expense)			127						(10)						(18)						155			3
Consolidated profit before taxes			3,652						3,413						239						—
Provision (benefit) for income taxes			752						691						61						—
Profit of consolidated companies			2,900						2,722						178						—
Equity in profit (loss) of unconsolidated affiliated companies			24						24						—						—
Profit of consolidated and affiliated companies			2,924						2,746						178						—
Less: Profit (loss) attributable to noncontrolling interests			2						(1)						3						—
Profit 4			$	2,922					$	2,747					$	175					$	—

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Six Months Ended June 30, 2023

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation			$	31,644					$	31,644					$	—					$	—
Revenues of Financial Products			1,536						—						1,890						(354)			1
Total sales and revenues			33,180						31,644						1,890						(354)
Operating costs:
Cost of goods sold			21,168						21,172						—						(4)			2
Selling, general and administrative expenses			2,991						2,709						301						(19)			2
Research and development expenses			1,000						1,000						—						—
Interest expense of Financial Products			462						—						462						—
Other operating (income) expenses			1,176						599						613						(36)			2
Total operating costs			26,797						25,480						1,376						(59)
Operating profit			6,383						6,164						514						(295)
Interest expense excluding Financial Products			256						256						—						—
Other income (expense)			159						(24)						(37)						220			3
Consolidated profit before taxes			6,286						5,884						477						(75)
Provision (benefit) for income taxes			1,460						1,339						121						—
Profit of consolidated companies			4,826						4,545						356						(75)
Equity in profit (loss) of unconsolidated affiliated companies			40						43						—						(3)			4
Profit of consolidated and affiliated companies			4,866						4,588						356						(78)
Less: Profit (loss) attributable to noncontrolling interests			1						(1)						5						(3)			5
Profit 6			$	4,865					$	4,589					$	351					$	(75)

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.

5Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

6Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended June 30, 2022

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation			$	13,539					$	13,539					$	—					$	—
Revenues of Financial Products			708						—						828						(120)			1
Total sales and revenues			14,247						13,539						828						(120)
Operating costs:
Cost of goods sold			9,975						9,978						—						(3)			2
Selling, general and administrative expenses			1,425						1,261						167						(3)			2
Research and development expenses			480						480						—						—
Interest expense of Financial Products			120						—						120						—
Other operating (income) expenses			303						16						307						(20)			2
Total operating costs			12,303						11,735						594						(26)
Operating profit			1,944						1,804						234						(94)
Interest expense excluding Financial Products			108						108						—						—
Other income (expense)			260						180						(14)						94			3
Consolidated profit before taxes			2,096						1,876						220						—
Provision (benefit) for income taxes			427						374						53						—
Profit of consolidated companies			1,669						1,502						167						—
Equity in profit (loss) of unconsolidated affiliated companies			4						7						—						(3)			4
Profit of consolidated and affiliated companies			1,673						1,509						167						(3)
Less: Profit (loss) attributable to noncontrolling interests			—						—						3						(3)			5
Profit 6			$	1,673					$	1,509					$	164					$	—

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.

5Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

6Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Six Months Ended June 30, 2022

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation			$	26,425					$	26,425					$	—					$	—
Revenues of Financial Products			1,411						—						1,641						(230)			1
Total sales and revenues			27,836						26,425						1,641						(230)
Operating costs:
Cost of goods sold			19,534						19,538						—						(4)			2
Selling, general and administrative expenses			2,771						2,443						339						(11)			2
Research and development expenses			937						937						—						—
Interest expense of Financial Products			226						—						226						—
Other operating (income) expenses			569						(12)						621						(40)			2
Total operating costs			24,037						22,906						1,186						(55)
Operating profit			3,799						3,519						455						(175)
Interest expense excluding Financial Products			217						217						—						—
Other income (expense)			513						337						1						175			3
Consolidated profit before taxes			4,095						3,639						456						—
Provision (benefit) for income taxes			896						786						110						—
Profit of consolidated companies			3,199						2,853						346						—
Equity in profit (loss) of unconsolidated affiliated companies			11						15						—						(4)			4
Profit of consolidated and affiliated companies			3,210						2,868						346						(4)
Less: Profit (loss) attributable to noncontrolling interests			—						—						4						(4)			5
Profit 6			$	3,210					$	2,868					$	342					$	—

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.

5Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

6Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Financial Position

At June 30, 2023

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Assets
Current assets:
Cash and cash equivalents			$	7,387					$	6,323					$	1,064					$	—
Receivables – trade and other			9,416						3,467						591						5,358			1,2
Receivables – finance			9,288						—						14,850						(5,562)			2
Prepaid expenses and other current assets			3,163						2,936						308						(81)			3
Inventories			17,746						17,746						—						—
Total current assets			47,000						30,472						16,813						(285)
Property, plant and equipment – net			12,124						8,102						4,022						—
Long-term receivables – trade and other			1,161						523						155						483			1,2
Long-term receivables – finance			12,022						—						12,544						(522)			2
Noncurrent deferred and refundable income taxes			2,607						3,122						116						(631)			4
Intangible assets			630						630						—						—
Goodwill			5,293						5,293						—						—
Other assets			4,590						3,802						1,966						(1,178)			5
Total assets			$	85,427					$	51,944					$	35,616					$	(2,133)
Liabilities
Current liabilities:
Short-term borrowings			$	5,548					$	—					$	5,548					$	—
Accounts payable			8,443						8,364						298						(219)			6,7
Accrued expenses			4,493						4,003						490						—			7
Accrued wages, salaries and employee benefits			1,755						1,718						37						—
Customer advances			2,137						2,121						1						15			7
Dividends payable			663						663						—						—
Other current liabilities			3,109						2,484						729						(104)			4,8
Long-term debt due within one year			9,166						1,043						8,123						—
Total current liabilities			35,314						20,396						15,226						(308)
Long-term debt due after one year			22,985						8,574						14,450						(39)			9
Liability for postemployment benefits			4,084						4,084						—						—
Other liabilities			4,788						3,855						1,617						(684)			4
Total liabilities			67,171						36,909						31,293						(1,031)
Commitments and contingencies
Shareholders’ equity
Common stock			6,478						6,478						905						(905)			10
Treasury stock			(33,391)						(33,391)						—						—
Profit employed in the business			47,094						42,739						4,344						11			10
Accumulated other comprehensive income (loss)			(1,946)						(815)						(1,131)						—
Noncontrolling interests			21						24						205						(208)			10
Total shareholders’ equity			18,256						15,035						4,323						(1,102)
Total liabilities and shareholders’ equity			$	85,427					$	51,944					$	35,616					$	(2,133)

1 Elimination of receivables between ME&T and Financial Products.

2 Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.

3 Elimination of ME&T’s insurance premiums that are prepaid to Financial Products.

4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.

5 Elimination of other intercompany assets between ME&T and Financial Products.

6 Elimination of payables between ME&T and Financial Products.

7 Reclassification of Financial Products' payables to accrued expenses or customer advances.

8 Elimination of prepaid insurance in Financial Products’ other liabilities.

9 Elimination of debt between ME&T and Financial Products.

10 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries.

Caterpillar Inc.

Supplemental Data for Financial Position

At December 31, 2022

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Assets
Current assets:
Cash and cash equivalents			$	7,004					$	6,042					$	962					$	—
Receivables – trade and other			8,856						3,710						519						4,627			1,2
Receivables – finance			9,013						—						13,902						(4,889)			2
Prepaid expenses and other current assets			2,642						2,488						290						(136)			3
Inventories			16,270						16,270						—						—
Total current assets			43,785						28,510						15,673						(398)
Property, plant and equipment – net			12,028						8,186						3,842						—
Long-term receivables – trade and other			1,265						418						339						508			1,2
Long-term receivables – finance			12,013						—						12,552						(539)			2
Noncurrent deferred and refundable income taxes			2,213						2,755						115						(657)			4
Intangible assets			758						758						—						—
Goodwill			5,288						5,288						—						—
Other assets			4,593						3,882						1,892						(1,181)			5
Total assets			$	81,943					$	49,797					$	34,413					$	(2,267)
Liabilities
Current liabilities:
Short-term borrowings			$	5,957					$	3					$	5,954					$	—
Accounts payable			8,689						8,657						294						(262)			6
Accrued expenses			4,080						3,687						393						—
Accrued wages, salaries and employee benefits			2,313						2,264						49						—
Customer advances			1,860						1,860						—						—
Dividends payable			620						620						—						—
Other current liabilities			2,690						2,215						635						(160)			4,7
Long-term debt due within one year			5,322						120						5,202						—
Total current liabilities			31,531						19,426						12,527						(422)
Long-term debt due after one year			25,714						9,529						16,216						(31)			8
Liability for postemployment benefits			4,203						4,203						—						—
Other liabilities			4,604						3,677						1,638						(711)			4
Total liabilities			66,052						36,835						30,381						(1,164)
Commitments and contingencies
Shareholders’ equity
Common stock			6,560						6,560						905						(905)			9
Treasury stock			(31,748)						(31,748)						—						—
Profit employed in the business			43,514						39,435						4,068						11			9
Accumulated other comprehensive income (loss)			(2,457)						(1,310)						(1,147)						—
Noncontrolling interests			22						25						206						(209)			9
Total shareholders’ equity			15,891						12,962						4,032						(1,103)
Total liabilities and shareholders’ equity			$	81,943					$	49,797					$	34,413					$	(2,267)

1 Elimination of receivables between ME&T and Financial Products.

2 Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.

3 Elimination of ME&T’s insurance premiums that are prepaid to Financial Products.

4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.

5 Elimination of other intercompany assets between ME&T and Financial Products.

6 Elimination of payables between ME&T and Financial Products.

7 Elimination of prepaid insurance in Financial Products' other liabilities.

8 Elimination of debt between ME&T and Financial Products.

9 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the Six Months Ended June 30, 2023

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies			$	4,866					$	4,588					$	356					$	(78)		1,5
Adjustments for non-cash items:
Depreciation and amortization			1,074						690						384						—
Provision (benefit) for deferred income taxes			(355)						(338)						(17)						—
Loss on divestiture			572						572						—						—
Other			106						198						(368)						276			2
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other			(465)						132						57						(654)			2,3
Inventories			(1,560)						(1,558)						—						(2)			2
Accounts payable			34						(28)						2						60			2
Accrued expenses			381						318						63						—
Accrued wages, salaries and employee benefits			(562)						(550)						(12)						—
Customer advances			284						283						1						—
Other assets – net			81						149						5						(73)			2
Other liabilities – net			366						211						71						84			2
Net cash provided by (used for) operating activities			4,822						4,667						542						(387)
Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others			(683)						(678)						(11)						6			2
Expenditures for equipment leased to others			(774)						(7)						(772)						5			2
Proceeds from disposals of leased assets and property, plant and equipment			368						27						350						(9)			2
Additions to finance receivables			(6,973)						—						(7,957)						984			3
Collections of finance receivables			6,759						—						7,516						(757)			3
Net intercompany purchased receivables			—						—						(83)						83			3
Proceeds from sale of finance receivables			29						—						29						—
Net intercompany borrowings			—						—						4						(4)			4
Investments and acquisitions (net of cash acquired)			(20)						(20)						—						—
Proceeds from sale of businesses and investments (net of cash sold)			(14)						(14)						—						—
Proceeds from sale of securities			463						332						131						—
Investments in securities			(1,078)						(866)						(212)						—
Other – net			41						41						—						—
Net cash provided by (used for) investing activities			(1,882)						(1,185)						(1,005)						308
Cash flow from financing activities:
Dividends paid			(1,238)						(1,238)						(75)						75			5
Common stock issued, including treasury shares reissued			(22)						(22)						—						—
Common shares repurchased			(1,829)						(1,829)						—						—
Net intercompany borrowings			—						(4)						—						4			4
Proceeds from debt issued (original maturities greater than three months)			3,299						—						3,299						—
Payments on debt (original maturities greater than three months)			(2,303)						(95)						(2,208)						—
Short-term borrowings – net (original maturities three months or less)			(406)						(3)						(403)						—
Net cash provided by (used for) financing activities			(2,499)						(3,191)						613						79
Effect of exchange rate changes on cash			(60)						(12)						(48)						—
Increase (decrease) in cash, cash equivalents and restricted cash			381						279						102						—
Cash, cash equivalents and restricted cash at beginning of period			7,013						6,049						964						—
Cash, cash equivalents and restricted cash at end of period			$	7,394					$	6,328					$	1,066					$	—

1 Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

2 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

3 Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.

4 Elimination of net proceeds and payments to/from ME&T and Financial Products.

5 Elimination of dividend activity between Financial Products and ME&T.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the Six Months Ended June 30, 2022

(Unaudited)

(Millions of dollars)

									Supplemental Consolidating Data
			Consolidated						Machinery, Energy & Transportation						Financial Products						Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies			$	3,210					$	2,868					$	346					$	(4)		1
Adjustments for non-cash items:
Depreciation and amortization			1,110						715						395						—
Provision (benefit) for deferred income taxes			(283)						(232)						(51)						—
Other			49						(54)						(93)						196			2
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other			283						(32)						12						303			2,3
Inventories			(2,003)						(2,003)						—						—			2
Accounts payable			427						396						11						20			2
Accrued expenses			(80)						(89)						9						—
Accrued wages, salaries and employee benefits			(445)						(428)						(17)						—
Customer advances			514						515						(1)						—
Other assets – net			86						(44)						(25)						155			2
Other liabilities – net			(322)						(323)						149						(148)			2
Net cash provided by (used for) operating activities			2,546						1,289						735						522
Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others			(586)						(583)						(5)						2			2
Expenditures for equipment leased to others			(688)						(11)						(683)						6			2
Proceeds from disposals of leased assets and property, plant and equipment			468						43						433						(8)			2
Additions to finance receivables			(6,705)						—						(7,175)						470			3
Collections of finance receivables			6,519						—						6,896						(377)			3
Net intercompany purchased receivables			—						—						615						(615)			3
Proceeds from sale of finance receivables			21						—						21						—
Net intercompany borrowings			—						—						3						(3)			4
Investments and acquisitions (net of cash acquired)			(36)						(36)						—						—
Proceeds from sale of businesses and investments (net of cash sold)			1						1						—						—
Proceeds from sale of securities			1,204						1,014						190						—
Investments in securities			(2,118)						(1,724)						(394)						—
Other – net			32						58						(26)						—
Net cash provided by (used for) investing activities			(1,888)						(1,238)						(125)						(525)
Cash flow from financing activities:
Dividends paid			(1,187)						(1,187)						—						—
Common stock issued, including treasury shares reissued			4						4						—						—
Common shares repurchased			(1,924)						(1,924)						—						—
Net intercompany borrowings			—						(3)						—						3			4
Proceeds from debt issued (original maturities greater than three months)			4,015						—						4,015						—
Payments on debt (original maturities greater than three months)			(4,246)						(13)						(4,233)						—
Short-term borrowings – net (original maturities three months or less)			(553)						(141)						(412)						—
Net cash provided by (used for) financing activities			(3,891)						(3,264)						(630)						3
Effect of exchange rate changes on cash			(7)						—						(7)						—
Increase (decrease) in cash, cash equivalents and restricted cash			(3,240)						(3,213)						(27)						—
Cash, cash equivalents and restricted cash at beginning of period			9,263						8,433						830						—
Cash, cash equivalents and restricted cash at end of period			$	6,023					$	5,220					$	803					$	—

1 Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

2 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

3 Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.

4 Elimination of net proceeds and payments to/from ME&T and Financial Products.

Forward-looking Statements

Certain statements in this Form 10-Q relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “forecast,” “target,” “guide,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers’ needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment’s risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xviii) currency fluctuations; (xix) our or Cat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) catastrophic events, including global pandemics such as the COVID-19 pandemic; and (xxvii) other factors described in more detail under the section entitled "Part I - Item 1A. Risk Factors" of Caterpillar's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as such factors may be updated from time to time in Caterpillar's periodic filings with the Securities and Exchange Commission.