Caterpillar Inc.
11/06/2024 | Press release | Distributed by Public on 11/06/2024 09:41
Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)
cat-20240930
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-768
CATERPILLAR INC.
(Exact name of registrant as specified in its charter)
|
Delaware
|
37-0602744 | |||
| (State or other jurisdiction of incorporation) | (IRS Employer I.D. No.) | |||
| 5205 N. O'Connor Boulevard, | Suite 100, | Irving, | Texas | 75039 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (972) 891-7700
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock ($1.00 par value) | CAT | New York Stock Exchange |
| 5.3% Debentures due September 15, 2035 | CAT35 | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At September 30, 2024, 482,802,488 shares of common stock of the registrant were outstanding.
Table of Contents
Table of Contents
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Part I. Financial Information
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Item 1.
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Financial Statements
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3
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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47
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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77
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Item 4.
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Controls and Procedures
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77
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Part II. Other Information
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Item 1.
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Legal Proceedings
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78
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Item 1A.
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Risk Factors
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78
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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78
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| Item 3. | Defaults Upon Senior Securities | * |
| Item 4. | Mine Safety Disclosures | * |
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Item 5.
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Other Information
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76 |
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Item 6.
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Exhibits
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79
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* Item omitted because no answer is called for or item is not applicable.
2
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Caterpillar Inc.
Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)
| Three Months Ended September 30, | ||||
| 2024 | 2023 | |||
| Sales and revenues: | ||||
| Sales of Machinery, Energy & Transportation | $ | 15,231 | $ | 15,988 |
| Revenues of Financial Products | 875 | 822 | ||
| Total sales and revenues | 16,106 | 16,810 | ||
| Operating costs: | ||||
| Cost of goods sold | 10,066 | 10,583 | ||
| Selling, general and administrative expenses | 1,669 | 1,624 | ||
| Research and development expenses | 533 | 554 | ||
| Interest expense of Financial Products | 336 | 280 | ||
| Other operating (income) expenses | 355 | 320 | ||
| Total operating costs | 12,959 | 13,361 | ||
| Operating profit | 3,147 | 3,449 | ||
| Interest expense excluding Financial Products | 125 | 129 | ||
| Other income (expense) | 76 | 195 | ||
| Consolidated profit before taxes | 3,098 | 3,515 | ||
| Provision (benefit) for income taxes | 642 | 734 | ||
| Profit of consolidated companies | 2,456 | 2,781 | ||
| Equity in profit (loss) of unconsolidated affiliated companies | 7 | 12 | ||
| Profit of consolidated and affiliated companies | 2,463 | 2,793 | ||
| Less: Profit (loss) attributable to noncontrolling interests | (1) | (1) | ||
|
Profit 1
|
$ | 2,464 | $ | 2,794 |
| Profit per common share | $ | 5.09 | $ | 5.48 |
|
Profit per common share - diluted 2
|
$ | 5.06 | $ | 5.45 |
| Weighted-average common shares outstanding (millions) | ||||
| - Basic | 484.2 | 509.8 | ||
|
- Diluted2
|
486.7 | 512.6 |
1 Profit attributable to common shareholders.
2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.
See accompanying notes to Consolidated Financial Statements.
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Caterpillar Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
(Dollars in millions)
| Three Months Ended September 30, | ||||
| 2024 | 2023 | |||
| Profit of consolidated and affiliated companies | $ | 2,463 | $ | 2,793 |
| Other comprehensive income (loss), net of tax (Note 13): | ||||
| Foreign currency translation: | 397 | (205) | ||
| Pension and other postretirement benefits: | (3) | (3) | ||
| Derivative financial instruments: | 58 | (62) | ||
| Available-for-sale securities: | 61 | (16) | ||
| Total other comprehensive income (loss), net of tax | 513 | (286) | ||
| Comprehensive income | 2,976 | 2,507 | ||
| Less: comprehensive income (loss) attributable to the noncontrolling interests | (1) | (1) | ||
| Comprehensive income attributable to shareholders | $ | 2,977 | $ | 2,508 |
See accompanying notes to Consolidated Financial Statements.
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Caterpillar Inc.
Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)
| Nine Months Ended September 30, | ||||
| 2024 | 2023 | |||
| Sales and revenues: | ||||
| Sales of Machinery, Energy & Transportation | $ | 46,031 | $ | 47,632 |
| Revenues of Financial Products | 2,563 | 2,358 | ||
| Total sales and revenues | 48,594 | 49,990 | ||
| Operating costs: | ||||
| Cost of goods sold | 29,878 | 31,751 | ||
| Selling, general and administrative expenses | 4,898 | 4,615 | ||
| Research and development expenses | 1,588 | 1,554 | ||
| Interest expense of Financial Products | 948 | 742 | ||
| Other operating (income) expenses | 1,134 | 1,496 | ||
| Total operating costs | 38,446 | 40,158 | ||
| Operating profit | 10,148 | 9,832 | ||
| Interest expense excluding Financial Products | 405 | 385 | ||
| Other income (expense) | 387 | 354 | ||
| Consolidated profit before taxes | 10,130 | 9,801 | ||
| Provision (benefit) for income taxes | 2,166 | 2,194 | ||
| Profit of consolidated companies | 7,964 | 7,607 | ||
| Equity in profit (loss) of unconsolidated affiliated companies | 34 | 52 | ||
| Profit of consolidated and affiliated companies | 7,998 | 7,659 | ||
| Less: Profit (loss) attributable to noncontrolling interests | (3) | - | ||
|
Profit 1
|
$ | 8,001 | $ | 7,659 |
| Profit per common share | $ | 16.36 | $ | 14.93 |
|
Profit per common share - diluted 2
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$ | 16.27 | $ | 14.85 |
| Weighted-average common shares outstanding (millions) | ||||
| - Basic | 489.0 | 513.0 | ||
|
- Diluted 2
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491.7 | 515.7 |
1 Profit attributable to common shareholders.
2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.
See accompanying notes to Consolidated Financial Statements.
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Caterpillar Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
(Dollars in millions)
| Nine Months Ended September 30, | ||||
| 2024 | 2023 | |||
| Profit of consolidated and affiliated companies | $ | 7,998 | $ | 7,659 |
| Other comprehensive income (loss), net of tax (Note 13): | ||||
| Foreign currency translation: | 69 | 260 | ||
| Pension and other postretirement benefits: | (9) | (8) | ||
| Derivative financial instruments: | (4) | (19) | ||
| Available-for-sale securities: | 47 | (8) | ||
| Total other comprehensive income (loss), net of tax | 103 | 225 | ||
| Comprehensive income | 8,101 | 7,884 | ||
| Less: comprehensive income (loss) attributable to the noncontrolling interests | (3) | - | ||
| Comprehensive income attributable to shareholders | $ | 8,104 | $ | 7,884 |
See accompanying notes to Consolidated Financial Statements.
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Caterpillar Inc.
Consolidated Statement of Financial Position
(Unaudited)
(Dollars in millions)
|
September 30, 2024 |
December 31, 2023 |
|||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 5,638 | $ | 6,978 |
| Receivables - trade and other | 9,086 | 9,310 | ||
| Receivables - finance | 9,816 | 9,510 | ||
| Prepaid expenses and other current assets | 3,094 | 4,586 | ||
| Inventories | 17,312 | 16,565 | ||
| Total current assets | 44,946 | 46,949 | ||
| Property, plant and equipment - net | 12,837 | 12,680 | ||
| Long-term receivables - trade and other | 1,346 | 1,238 | ||
| Long-term receivables - finance | 13,263 | 12,664 | ||
| Noncurrent deferred and refundable income taxes | 3,050 | 2,816 | ||
| Intangible assets | 448 | 564 | ||
| Goodwill | 5,317 | 5,308 | ||
| Other assets | 5,066 | 5,257 | ||
| Total assets | $ | 86,273 | $ | 87,476 |
| Liabilities | ||||
| Current liabilities: | ||||
| Short-term borrowings: | ||||
| Financial Products | $ | 3,725 | $ | 4,643 |
| Accounts payable | 7,705 | 7,906 | ||
| Accrued expenses | 4,980 | 4,958 | ||
| Accrued wages, salaries and employee benefits | 2,078 | 2,757 | ||
| Customer advances | 2,404 | 1,929 | ||
| Dividends payable | - | 649 | ||
| Other current liabilities | 2,934 | 3,123 | ||
| Long-term debt due within one year: | ||||
| Machinery, Energy & Transportation | 46 | 1,044 | ||
| Financial Products | 8,346 | 7,719 | ||
| Total current liabilities | 32,218 | 34,728 | ||
| Long-term debt due after one year: | ||||
| Machinery, Energy & Transportation | 8,634 | 8,579 | ||
| Financial Products | 17,150 | 15,893 | ||
| Liability for postemployment benefits | 4,029 | 4,098 | ||
| Other liabilities | 4,839 | 4,675 | ||
| Total liabilities | 66,870 | 67,973 | ||
| Commitments and contingencies (Notes 11 and 14) | ||||
| Shareholders' equity | ||||
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Common stock of $1.00 par value:
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||||
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Authorized shares: 2,000,000,000
Issued shares: (9/30/24 and 12/31/23 - 814,894,624) at paid-in amount
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5,584 | 6,403 | ||
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Treasury stock: (9/30/24 - 332,092,136 shares; 12/31/23 - 315,517,355 shares) at cost
|
(42,390) | (36,339) | ||
| Profit employed in the business | 57,920 | 51,250 | ||
| Accumulated other comprehensive income (loss) | (1,717) | (1,820) | ||
| Noncontrolling interests | 6 | 9 | ||
| Total shareholders' equity | 19,403 | 19,503 | ||
| Total liabilities and shareholders' equity | $ | 86,273 | $ | 87,476 |
See accompanying notes to Consolidated Financial Statements.
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Caterpillar Inc.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
(Dollars in millions)
|
Common stock |
Treasury stock |
Profit employed in the business |
Accumulated other comprehensive income (loss) |
Noncontrolling interests |
Total | |||||||
| Three Months Ended September 30, 2023 | ||||||||||||
| Balance at June 30, 2023 | $ | 6,478 | $ | (33,391) | $ | 47,094 | $ | (1,946) | $ | 21 | $ | 18,256 |
| Profit (loss) of consolidated and affiliated companies | - | - | 2,794 | - | (1) | 2,793 | ||||||
| Foreign currency translation, net of tax | - | - | - | (205) | - | (205) | ||||||
| Pension and other postretirement benefits, net of tax | - | - | - | (3) | - | (3) | ||||||
| Derivative financial instruments, net of tax | - | - | - | (62) | - | (62) | ||||||
| Available-for-sale securities, net of tax | - | - | - | (16) | - | (16) | ||||||
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Common shares issued from treasury stock for stock-based compensation: 824,973
|
- | 59 | - | - | - | 59 | ||||||
| Stock-based compensation expense | 60 | - | - | - | - | 60 | ||||||
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Common shares repurchased: 1,883,487 1
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- | (530) | - | - | - | (530) | ||||||
| Outstanding authorized accelerated share repurchase | 150 | - | - | - | - | 150 | ||||||
| Other | 10 | (3) | - | - | (2) | 5 | ||||||
| Balance at September 30, 2023 | $ | 6,698 | $ | (33,865) | $ | 49,888 | $ | (2,232) | $ | 18 | $ | 20,507 |
| Three Months Ended September 30, 2024 | ||||||||||||
| Balance at June 30, 2024 | $ | 5,517 | $ | (41,612) | $ | 55,455 | $ | (2,230) | $ | 6 | $ | 17,136 |
| Profit (loss) of consolidated and affiliated companies | - | - | 2,464 | - | (1) | 2,463 | ||||||
| Foreign currency translation, net of tax | - | - | - | 397 | - | 397 | ||||||
| Pension and other postretirement benefits, net of tax | - | - | - | (3) | - | (3) | ||||||
| Derivative financial instruments, net of tax | - | - | - | 58 | - | 58 | ||||||
| Available-for-sale securities, net of tax | - | - | - | 61 | - | 61 | ||||||
| Dividends declared | - | - | 1 | - | - | 1 | ||||||
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Common shares issued from treasury stock for stock-based compensation: 202,087
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(4) | 10 | - | - | - | 6 | ||||||
| Stock-based compensation expense | 52 | - | - | - | - | 52 | ||||||
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Common shares repurchased: 2,297,715 1
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- | (782) | - | - | - | (782) | ||||||
| Other | 19 | (6) | - | - | 1 | 14 | ||||||
| Balance at September 30, 2024 | $ | 5,584 | $ | (42,390) | $ | 57,920 | $ | (1,717) | $ | 6 | $ | 19,403 |
1See Note 12 for additional information.
See accompanying notes to Consolidated Financial Statements.
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Caterpillar Inc.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
(Dollars in millions)
|
Common stock |
Treasury stock |
Profit employed in the business |
Accumulated other comprehensive income (loss) |
Noncontrolling interests |
Total | |||||||
| Nine Months Ended September 30, 2023 | ||||||||||||
| Balance at December 31, 2022 | $ | 6,560 | $ | (31,748) | $ | 43,514 | $ | (2,457) | $ | 22 | $ | 15,891 |
| Profit (loss) of consolidated and affiliated companies | - | - | 7,659 | - | - | 7,659 | ||||||
| Foreign currency translation, net of tax | - | - | - | 260 | - | 260 | ||||||
| Pension and other postretirement benefits, net of tax | - | - | - | (8) | - | (8) | ||||||
| Derivative financial instruments, net of tax | - | - | - | (19) | - | (19) | ||||||
| Available-for-sale securities, net of tax | - | - | - | (8) | - | (8) | ||||||
|
Dividends declared 1
|
- | - | (1,285) | - | - | (1,285) | ||||||
|
Common shares issued from treasury stock for stock-based compensation: 2,238,728
|
(71) | 108 | - | - | - | 37 | ||||||
| Stock-based compensation expense | 178 | - | - | - | - | 178 | ||||||
|
Common shares repurchased: 9,499,655 2
|
- | (2,209) | - | - | - | (2,209) | ||||||
| Other | 31 | (16) | - | - | (4) | 11 | ||||||
| Balance at September 30, 2023 | $ | 6,698 | $ | (33,865) | $ | 49,888 | $ | (2,232) | $ | 18 | $ | 20,507 |
| Nine Months Ended September 30, 2024 | ||||||||||||
| Balance at December 31, 2023 | $ | 6,403 | $ | (36,339) | $ | 51,250 | $ | (1,820) | $ | 9 | $ | 19,503 |
| Profit (loss) of consolidated and affiliated companies | - | - | 8,001 | - | (3) | 7,998 | ||||||
| Foreign currency translation, net of tax | - | - | - | 69 | - | 69 | ||||||
| Pension and other postretirement benefits, net of tax | - | - | - | (9) | - | (9) | ||||||
| Derivative financial instruments, net of tax | - | - | - | (4) | - | (4) | ||||||
| Available-for-sale securities, net of tax | - | - | - | 47 | - | 47 | ||||||
|
Dividends declared 1
|
- | - | (1,331) | - | - | (1,331) | ||||||
|
Common shares issued from treasury stock for stock-based compensation: 1,629,444
|
(45) | 59 | - | - | - | 14 | ||||||
| Stock-based compensation expense | 171 | - | - | - | - | 171 | ||||||
|
Common shares repurchased: 18,204,225 2
|
- | (6,057) | - | - | - | (6,057) | ||||||
| Outstanding authorized accelerated share repurchases | (1,000) | - | - | - | - | (1,000) | ||||||
| Other | 55 | (53) | - | - | - | 2 | ||||||
| Balance at September 30, 2024 | $ | 5,584 | $ | (42,390) | $ | 57,920 | $ | (1,717) | $ | 6 | $ | 19,403 |
1Dividends per share of common stock of $2.71 and $2.50 were declared in the nine months ended September 30, 2024 and 2023, respectively.
2See Note 12 for additional information.
See accompanying notes to Consolidated Financial Statements.
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Caterpillar Inc.
Consolidated Statement of Cash Flow
(Unaudited)
(Dollars in Millions)
| Nine Months Ended September 30, | ||||
| 2024 | 2023 | |||
| Cash flow from operating activities: | ||||
| Profit of consolidated and affiliated companies | $ | 7,998 | $ | 7,659 |
| Adjustments to reconcile profit to net cash provided by operating activities: | ||||
| Depreciation and amortization | 1,598 | 1,599 | ||
| Provision (benefit) for deferred income taxes | (329) | (448) | ||
| (Gain) loss on divestiture | 164 | 572 | ||
| Other | 221 | 205 | ||
| Changes in assets and liabilities, net of acquisitions and divestitures: | ||||
| Receivables - trade and other | (30) | (319) | ||
| Inventories | (781) | (1,424) | ||
| Accounts payable | (96) | (532) | ||
| Accrued expenses | 9 | 588 | ||
| Accrued wages, salaries and employee benefits | (671) | - | ||
| Customer advances | 476 | 516 | ||
| Other assets - net | 120 | 128 | ||
| Other liabilities - net | (37) | 338 | ||
| Net cash provided by (used for) operating activities | 8,642 | 8,882 | ||
| Cash flow from investing activities: | ||||
| Capital expenditures - excluding equipment leased to others | (1,285) | (1,061) | ||
| Expenditures for equipment leased to others | (893) | (1,177) | ||
| Proceeds from disposals of leased assets and property, plant and equipment | 541 | 563 | ||
| Additions to finance receivables | (11,457) | (11,082) | ||
| Collections of finance receivables | 10,234 | 10,391 | ||
| Proceeds from sale of finance receivables | 69 | 40 | ||
| Investments and acquisitions (net of cash acquired) | (32) | (67) | ||
| Proceeds from sale of businesses and investments (net of cash sold) | (67) | (14) | ||
| Proceeds from maturities and sale of securities | 2,841 | 747 | ||
| Investments in securities | (892) | (3,689) | ||
| Other - net | 137 | 32 | ||
| Net cash provided by (used for) investing activities | (804) | (5,317) | ||
| Cash flow from financing activities: | ||||
| Dividends paid | (1,966) | (1,901) | ||
| Common stock issued, including treasury shares reissued | 15 | 36 | ||
| Payments to purchase common stock | (7,057) | (2,209) | ||
| Proceeds from debt issued (original maturities greater than three months): | ||||
| Financial Products | 7,579 | 6,360 | ||
| Payments on debt (original maturities greater than three months): | ||||
| Machinery, Energy & Transportation | (1,021) | (99) | ||
| Financial Products | (5,841) | (4,360) | ||
| Short-term borrowings - net (original maturities three months or less) | (848) | (1,726) | ||
| Net cash provided by (used for) financing activities | (9,139) | (3,899) | ||
| Effect of exchange rate changes on cash | (39) | (119) | ||
| Increase (decrease) in cash, cash equivalents and restricted cash | (1,340) | (453) | ||
| Cash, cash equivalents and restricted cash at beginning of period | 6,985 | 7,013 | ||
| Cash, cash equivalents and restricted cash at end of period | $ | 5,645 | $ | 6,560 |
Cash equivalents primarily represent short-term, highly liquid investments with original maturities of generally three months or less.
See accompanying notes to Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. A. Nature of operations
Information in our financial statements and related commentary are presented in the following categories:
Machinery, Energy & Transportation(ME&T) - We define ME&T as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T's information relates to the design, manufacturing and marketing of our products.
Financial Products- We define Financial Products as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.
B. Basis of presentation
In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated results of operations for the three and nine months ended September 30, 2024 and 2023, (b) the consolidated comprehensive income for the three and nine months ended September 30, 2024 and 2023, (c) the consolidated financial position at September 30, 2024 and December 31, 2023, (d) the consolidated changes in shareholders' equity for the three and nine months ended September 30, 2024 and 2023 and (e) the consolidated cash flow for the nine months ended September 30, 2024 and 2023. The financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).
Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our company's annual report on Form 10-K for the year ended December 31, 2023 (2023 Form 10-K).
The December 31, 2023 financial position data included herein is derived from the audited consolidated financial statements included in the 2023 Form 10-K but does not include all disclosures required by U.S. GAAP. Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.
Cat Financial has end-user customers and dealers that are variable interest entities (VIEs) of which we are not the primary beneficiary. Our maximum exposure to loss from our involvement with these VIEs is limited to the credit risk inherently present in the financial support that we have provided. Credit risk was evaluated and reflected in our financial statements as part of our overall portfolio of finance receivables and related allowance for credit losses. See Note 11 for further discussions on a consolidated VIE.
2. New accounting guidance
A. Adoption of new accounting standards
We consider the applicability and impact of all ASUs. We adopted the following ASUs effective January 1, 2024, none of which had a material impact on our financial statements:
| ASU | Description |
| 2022-03 | Fair value measurement - Equity securities subject to contractual sale restrictions |
| 2023-01 | Leases - Common control arrangements |
| 2023-02 | Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method |
B. Accounting standards issued but not yet adopted
Segment reporting(ASU 2023-07) - In November 2023, the Financial Accounting Standards Board (FASB) issued accounting guidance that requires incremental disclosures related to reportable segments which includes significant
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segment expense categories and amounts for each reportable segment. The expanded annual disclosures are effective for our year ending December 31, 2024, and the expanded interim disclosures are effective in 2025 and will be applied retrospectively to all prior periods presented.
Income tax reporting(ASU 2023-09) - In December 2023, the FASB issued accounting guidance to expand the annual disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. This guidance is effective January 1, 2025, with early adoption permitted. This guidance can be applied prospectively or retrospectively. We are in the process of evaluating the effect of this new guidance on the related disclosures.
All other ASUs issued but not yet adopted were assessed and determined that they either were not applicable or were not expected to have a material impact on our financial statements.
3. Sales and revenue contract information
Trade receivables represent amounts due from dealers and end users for the sale of our products, and include amounts due from wholesale inventory financing provided by Cat Financial for a dealer's purchase of inventory. We recognize trade receivables from dealers and end users in Receivables - trade and other and Long-term receivables - trade and other in the Consolidated Statement of Financial Position. Trade receivables from dealers and end users were $7,798 million, $7,923 million and $7,551 million as of September 30, 2024, December 31, 2023 and December 31, 2022, respectively. Long-term trade receivables from dealers and end users were $635 million, $589 million and $506 million as of September 30, 2024, December 31, 2023 and December 31, 2022, respectively.
For certain contracts, we invoice for payment when contractual milestones are achieved. We recognize a contract asset when a sale is recognized before achieving the contractual milestones for invoicing. We reduce the contract asset when we invoice for payment and recognize a corresponding trade receivable. Contract assets are included in Prepaid expenses and other current assets in the Consolidated Statement of Financial Position. Contract assets were $218 million, $246 million and $247 million as of September 30, 2024, December 31, 2023 and December 31, 2022, respectively.
We invoice in advance of recognizing the sale of certain products. We recognize advanced customer payments as a contract liability in Customer advances and Other liabilities in the Consolidated Statement of Financial Position. Contract liabilities were $2,868 million, $2,389 million and $2,314 million as of September 30, 2024, December 31, 2023 and December 31, 2022, respectively. We reduce the contract liability when revenue is recognized. During the three and nine months ended September 30, 2024, we recognized $222 million and $1,395 million, respectively, of revenue that was recorded as a contract liability at the beginning of 2024. During the three and nine months ended September 30, 2023, we recognized $197 million and $1,333 million, respectively.
As of September 30, 2024, we have entered into contracts with dealers and end users for which sales have not been recognized as we have not satisfied our performance obligations and transferred control of the products. The dollar amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $14.1 billion, with about one-half of the amount expected to be completed and revenue recognized in the twelve months following September 30, 2024. We have elected the practical expedient not to disclose unsatisfied performance obligations with an original contract duration of one year or less. Contracts with an original duration of one year or less are primarily sales to dealers for machinery, engines and replacement parts.
See Note 16 for further disaggregated sales and revenues information.
4. Stock-based compensation
Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant date fair value of the award. Our stock-based compensation consists of stock options, restricted stock units (RSUs) and performance-based restricted stock units (PRSUs).
We recognized pretax stock-based compensation expense of $52 million and $171 million for the three and nine months ended September 30, 2024, respectively, and $60 million and $178 million for the three and nine months ended September 30, 2023, respectively.
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The following table illustrates the type and fair value of the stock-based compensation awards granted during the nine months ended September 30, 2024 and 2023, respectively:
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||||
| Shares Granted | Weighted-Average Fair Value Per Share | Weighted-Average Grant Date Stock Price | Shares Granted | Weighted-Average Fair Value Per Share | Weighted-Average Grant Date Stock Price | |||||
| Stock options | 296,295 | $ | 104.27 | $ | 338.65 | 777,275 | $ | 75.79 | $ | 253.98 |
| RSUs | 379,621 | $ | 338.65 | $ | 338.65 | 379,426 | $ | 253.98 | $ | 253.98 |
| PRSUs | 169,120 | $ | 408.64 | $ | 338.65 | 221,869 | $ | 253.98 | $ | 253.98 |
The fair value of our stock options was estimated using the Black-Scholes option-pricing model. The following table provides the assumptions used in determining the fair value of the stock-options granted in the nine months ended September 30, 2024 and 2023, respectively:
| Grant Year | ||
| 2024 | 2023 | |
| Weighted-average dividend yield | 2.40% | 2.60% |
| Weighted-average volatility | 30.7% | 31.0% |
| Range of volatilities |
26.3% - 32.3%
|
28.5% - 35.5%
|
| Range of risk-free interest rates |
4.28% - 5.03%
|
3.92% - 5.03%
|
| Weighted-average expected lives | 7 years | 7 years |
The PRSUs granted in 2024 contain a market condition and a Monte Carlo simulation was utilized to estimate the fair value of the awards. The following table provides the assumptions used in determining the fair value of the PRSUs granted in the nine months ended September 30, 2024:
| Grant Year | |
| 2024 | |
| Expected volatility of the Company's stock | 29.8% |
| Risk-free interest rate | 4.38% |
As of September 30, 2024, the total remaining unrecognized compensation expense related to nonvested stock-based compensation awards was $173 million, which will be amortized over the weighted-average remaining requisite service periods of approximately 1.9 years.
5. Derivative financial instruments and risk management
Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates, commodity prices, and certain deferred compensation plan liabilities. Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate, commodity price and certain deferred compensation plan liability exposures. Our policy specifies that derivatives are not to be used for speculative purposes. Derivatives that we use are primarily foreign currency forward, option and cross currency contracts, interest rate contracts, commodity forward and option contracts and total return swap contracts. Our derivative activities are subject to the management, direction and control of our senior financial officers. We present at least annually to the Audit Committee of the Board of Directors on our risk management practices, including our use of financial derivative instruments.
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We recognize all derivatives at their fair value on the Consolidated Statement of Financial Position. On the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flow (cash flow hedge) or (3) an undesignated instrument. We record in current earnings changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk. We record in AOCI changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge, to the extent effective, on the Consolidated Statement of Financial Position until we reclassify them to earnings in the same period or periods during which the hedged transaction affects earnings. We report changes in the fair value of undesignated derivative instruments in current earnings. We classify cash flows from designated derivative financial instruments within the same category as the item being hedged on the Consolidated Statement of Cash Flow. We include cash flows from undesignated derivative financial instruments in the investing category on the Consolidated Statement of Cash Flow.
We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value hedges to specific assets and liabilities on the Consolidated Statement of Financial Position and linking cash flow hedges to specific forecasted transactions or variability of cash flow.
We also formally assess, both at the hedge's inception and on an ongoing basis, whether the designated derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items. When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, we discontinue hedge accounting prospectively, in accordance with the derecognition criteria for hedge accounting.
Foreign Currency Exchange Rate Risk
Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costs incurred in foreign currencies. Movements in foreign currency rates also affect our competitive position as these changes may affect business practices and/or pricing strategies of non-U.S.-based competitors. Additionally, we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.
Our ME&T operations purchase, manufacture and sell products in many locations around the world. As we have a diversified revenue and cost base, we manage our future foreign currency cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to approximately five years. As of September 30, 2024, the maximum term of these outstanding contracts at inception was approximately 60 months.
We generally designate as cash flow hedges at inception of the contract any foreign currency forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current quarter-end. We perform designation on a specific exposure basis to support hedge accounting. The remainder of ME&T foreign currency contracts are undesignated.
In managing foreign currency risk for our Financial Products operations, our objective is to minimize earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions and future transactions denominated in foreign currencies. Our policy allows the use of foreign currency forward, option and cross currency contracts to offset the risk of currency mismatch between our assets and liabilities and exchange rate risk associated with future transactions denominated in foreign currencies. Our foreign currency forward and option contracts are primarily undesignated. We designate fixed-to-fixed cross currency contracts as cash flow hedges to protect against movements in exchange rates on foreign currency fixed-rate assets and liabilities.
Interest Rate Risk
Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate contracts to manage our exposure to interest rate changes.
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Our ME&T operations generally use fixed-rate debt as a source of funding. Our objective is to minimize the cost of borrowed funds. Our policy allows us to enter into fixed-to-floating interest rate contracts and forward rate agreements to meet that objective. We designate fixed-to-floating interest rate contracts as fair value hedges at inception of the contract, and we designate certain forward rate agreements as cash flow hedges at inception of the contract.
Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating rate and duration) of Cat Financial's debt portfolio with the interest rate profile of our receivables portfolio within predetermined ranges on an ongoing basis. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the receivables portfolio. This matched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.
Our policy allows us to use fixed-to-floating, floating-to-fixed and floating-to-floating interest rate contracts to meet the match-funding objective. We designate fixed-to-floating interest rate contracts as fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest rate. We designate most floating-to-fixed interest rate contracts as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.
We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate contracts at both ME&T and Financial Products. We amortize the gains or losses associated with these contracts at the time of liquidation into earnings over the original term of the previously designated hedged item.
Commodity Price Risk
Commodity price movements create a degree of risk by affecting the price we must pay for certain raw materials. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased materials.
Our ME&T operations purchase base and precious metals embedded in the components we purchase from suppliers. Our suppliers pass on to us price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.
Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five-year horizon. All such commodity forward and option contracts are undesignated.
Deferred Compensation Plan Liability Risk
We are also exposed to variability in compensation expense related to certain non-qualified deferred compensation obligations to employees. We utilize total return swaps to economically hedge this exposure to offset the related compensation expense. All such total return swap contracts are undesignated.
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The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position were as follows:
| (Millions of dollars) | Fair Value | |||||||
| September 30, 2024 | December 31, 2023 | |||||||
|
Assets 1
|
Liabilities 2
|
Assets 1
|
Liabilities 2
|
|||||
| Designated derivatives | ||||||||
| Foreign exchange contracts | $ | 367 | $ | (171) | $ | 389 | $ | (155) |
| Interest rate contracts | 54 | (131) | 58 | (209) | ||||
| Total | $ | 421 | $ | (302) | $ | 447 | $ | (364) |
| Undesignated derivatives | ||||||||
| Foreign exchange contracts | $ | 47 | $ | (82) | $ | 55 | $ | (82) |
| Commodity contracts | 13 | (6) | 18 | (9) | ||||
| Total return swap contracts | 16 | - | - | - | ||||
| Total | $ | 76 | $ | (88) | $ | 73 | $ | (91) |
|
1Assets are classified as Receivables - trade and other or Long-term receivables - trade and other.
|
||||||||
|
2Liabilities are classified as Accrued expenses or Other liabilities.
|
||||||||
The total notional amounts of the derivative instruments as of September 30, 2024 and December 31, 2023 were $26.1 billion and $25.6 billion, respectively. The notional amounts of the derivative financial instruments do not represent amounts exchanged by the parties. We calculate the amounts exchanged by the parties by referencing the notional amounts and by other terms of the derivatives, such as foreign currency exchange rates, interest rates, commodity prices or certain deferred compensation plan liabilities.
Gains (Losses) on derivative instruments are categorized as follows:
| (Millions of dollars) | Three Months Ended September 30, | |||||||||||
| Fair Value / Undesignated Hedges | Cash Flow Hedges | |||||||||||
|
Gains (Losses) Recognized on the Consolidated Statement of Results of Operations1
|
Gains (Losses) Recognized in AOCI |
Gains (Losses) Reclassified from AOCI2
|
||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||
| Foreign exchange contracts | $ | (35) | $ | 19 | $ | 26 | $ | 10 | $ | (70) | $ | 80 |
| Interest rate contracts | (41) | (34) | (9) | 3 | 9 | 14 | ||||||
| Commodity contracts | 1 | 14 | - | - | - | - | ||||||
| Total return swap contracts | 40 | - | - | - | - | - | ||||||
| Total | $ | (35) | $ | (1) | $ | 17 | $ | 13 | $ | (61) | $ | 94 |
|
1Foreign exchange contract, Commodity contract and Total return swap contract gains (losses) are included in Other income (expense). Interest rate contract gains (losses) are included in Interest expense of Financial Products and Interest expense excluding Financial Products.
|
||||||||||||
|
2Foreign exchange contract gains (losses) are primarily included in Other income (expense). Interest rate contract gains (losses) are primarily included in Interest expense of Financial Products.
|
||||||||||||
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| (Millions of dollars) | Nine Months Ended September 30, | |||||||||||
| Fair Value / Undesignated Hedges | Cash Flow Hedges | |||||||||||
|
Gains (Losses) Recognized on the Consolidated Statement of Results of Operations 1
|
Gains (Losses) Recognized in AOCI |
Gains (Losses) Reclassified from AOCI 2
|
||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||
| Foreign exchange contracts | $ | 58 | $ | 22 | $ | 108 | $ | 42 | $ | 77 | $ | 43 |
| Interest rate contracts | (115) | (95) | 6 | 15 | 38 | 41 | ||||||
| Commodity contracts | 2 | 2 | - | - | - | - | ||||||
| Total return swap contracts | 58 | - | - | - | - | - | ||||||
| Total | $ | 3 | $ | (71) | $ | 114 | $ | 57 | $ | 115 | $ | 84 |
|
1Foreign exchange contract, Commodity contract and Total return swap contract gains (losses) are included in Other income (expense). Interest rate contract gains (losses) are included in Interest expense of Financial Products and Interest expense excluding Financial Products.
|
||||||||||||
|
2Foreign exchange contract gains (losses) are primarily included in Other income (expense). Interest rate contract gains (losses) are primarily included in Interest expense of Financial Products.
|
||||||||||||
The following amounts were recorded on the Consolidated Statement of Financial Position related to cumulative basis adjustments for fair value hedges:
| (Millions of dollars) | Carrying Value of the Hedged Liabilities | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities | ||||||
| September 30, 2024 | December 31, 2023 | September 30, 2024 | December 31, 2023 | |||||
| Long-term debt due within one year | $ | 948 | $ | 982 | $ | (2) | $ | (23) |
| Long-term debt due after one year | 5,031 | 4,245 | (65) | (156) | ||||
| Total | $ | 5,979 | $ | 5,227 | $ | (67) | $ | (179) |
We enter into International Swaps and Derivatives Association (ISDA) master netting agreements within ME&T and Financial Products that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements may also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event.
Collateral is typically not required of the counterparties or of our company under the master netting agreements. As of September 30, 2024 and December 31, 2023, no cash collateral was received or pledged under the master netting agreements.
The effect of the net settlement provisions of the master netting agreements on our derivative balances upon an event of default or termination event was as follows:
| (Millions of dollars) | September 30, 2024 | December 31, 2023 | ||||||
| Assets | Liabilities | Assets | Liabilities | |||||
| Gross Amounts Recognized | $ | 497 | $ | (390) | $ | 520 | $ | (455) |
| Financial Instruments Not Offset | (182) | 182 | (202) | 202 | ||||
| Net Amount | $ | 315 | $ | (208) | $ | 318 | $ | (253) |
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6. Inventories
Inventories (principally using the last-in, first-out (LIFO) method) were comprised of the following:
| (Millions of dollars) |
September 30, 2024 |
December 31, 2023 |
||
| Raw materials | $ | 6,787 | $ | 6,492 |
| Work-in-process | 1,500 | 1,411 | ||
| Finished goods | 8,652 | 8,308 | ||
| Supplies | 373 | 354 | ||
| Total inventories | $ | 17,312 | $ | 16,565 |
7. Intangible assets and goodwill
A. Intangible assets
Intangible assets were comprised of the following:
| September 30, 2024 | ||||||
| (Millions of dollars) |
Gross Carrying Amount |
Accumulated Amortization |
Net | |||
| Customer relationships | $ | 2,233 | $ | (1,923) | $ | 310 |
| Intellectual property | 499 | (397) | 102 | |||
| Other | 117 | (81) | 36 | |||
| Total finite-lived intangible assets | $ | 2,849 | $ | (2,401) | $ | 448 |
| December 31, 2023 | ||||||
|
Gross Carrying Amount |
Accumulated Amortization |
Net | ||||
| Customer relationships | $ | 2,232 | $ | (1,814) | $ | 418 |
| Intellectual property | 484 | (380) | 104 | |||
| Other | 117 | (75) | 42 | |||
| Total finite-lived intangible assets | $ | 2,833 | $ | (2,269) | $ | 564 |
Amortization expense for the three and nine months ended September 30, 2024 was $44 million and $131 million, respectively. Amortization expense for the three and nine months ended September 30, 2023 was $44 million and $174 million, respectively. Amortization expense related to intangible assets is expected to be:
| (Millions of dollars) | |||||
| Remaining Three Months of 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter |
| $44 | $167 | $97 | $34 | $26 | $80 |
B. Goodwill
No goodwill was impaired during the nine months ended September 30, 2024 or 2023.
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The changes in carrying amount of goodwill by reportable segment for the nine months ended September 30, 2024 were as follows:
| (Millions of dollars) |
December 31, 2023 |
Other Adjustments 1
|
September 30, 2024 |
|||
| Construction Industries | ||||||
| Goodwill | $ | 277 | $ | (1) | $ | 276 |
| Impairments | (22) | - | (22) | |||
| Net goodwill | 255 | (1) | 254 | |||
| Resource Industries | ||||||
| Goodwill | 4,151 | 7 | 4,158 | |||
| Impairments | (1,175) | - | (1,175) | |||
| Net goodwill | 2,976 | 7 | 2,983 | |||
| Energy & Transportation | ||||||
| Goodwill | 2,959 | 4 | 2,963 | |||
| Impairments | (925) | - | (925) | |||
| Net goodwill | 2,034 | 4 | 2,038 | |||
|
All Other 2
|
||||||
| Goodwill | 43 | (1) | 42 | |||
| Consolidated total | ||||||
| Goodwill | 7,430 | 9 | 7,439 | |||
| Impairments | (2,122) | - | (2,122) | |||
| Net goodwill | $ | 5,308 | $ | 9 | $ | 5,317 |
1Other adjustments are comprised primarily of foreign currency translation.
2 Includes All Other Segment (See Note 16).
8. Investments in debt and equity securities
We have investments in certain debt and equity securities, which we record at fair value and primarily include in Other assets in the Consolidated Statement of Financial Position.
We classify debt securities primarily as available-for-sale. We include the unrealized gains and losses arising from the revaluation of available-for-sale debt securities, net of applicable deferred income taxes, in equity (AOCI in the Consolidated Statement of Financial Position). We include the unrealized gains and losses arising from the revaluation of the equity securities in Other income (expense) in the Consolidated Statement of Results of Operations. We generally determine realized gains and losses on sales of investments using the specific identification method for available-for-sale debt and equity securities and include them in Other income (expense) in the Consolidated Statement of Results of Operations.
The cost basis and fair value of available-for-sale debt securities with unrealized gains and losses included in equity (AOCI in the Consolidated Statement of Financial Position) were as follows:
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Table of Contents
|
Available-for-sale debt securities
|
September 30, 2024 | December 31, 2023 | ||||||||||
| (Millions of dollars) |
Cost
Basis
|
Unrealized Pretax Net Gains
(Losses)
|
Fair
Value
|
Cost
Basis
|
Unrealized Pretax Net Gains
(Losses)
|
Fair
Value
|
||||||
| Government debt securities | ||||||||||||
| U.S. treasury bonds | $ | 13 | $ | - | $ | 13 | $ | 10 | $ | - | $ | 10 |
| Other U.S. and non-U.S. government bonds | 69 | - | 69 | 62 | (2) | 60 | ||||||
| Corporate debt securities | ||||||||||||
| Corporate bonds and other debt securities | 2,946 | 4 | 2,950 | 3,031 | (36) | 2,995 | ||||||
| Asset-backed securities | 221 | (1) | 220 | 195 | (3) | 192 | ||||||
| Mortgage-backed debt securities | ||||||||||||
| U.S. governmental agency | 458 | (14) | 444 | 433 | (23) | 410 | ||||||
| Residential | 2 | - | 2 | 3 | (1) | 2 | ||||||
| Commercial | 133 | (5) | 128 | 137 | (9) | 128 | ||||||
| Total available-for-sale debt securities | $ | 3,842 | $ | (16) | $ | 3,826 | $ | 3,871 | $ | (74) | $ | 3,797 |
| Available-for-sale debt securities in an unrealized loss position: | ||||||||||||
| September 30, 2024 | ||||||||||||
|
Less than 12 months 1
|
12 months or more 1
|
Total | ||||||||||
| (Millions of dollars) |
Fair
Value
|
Unrealized Losses |
Fair
Value
|
Unrealized Losses |
Fair
Value
|
Unrealized Losses |
||||||
| Government debt securities | ||||||||||||
| Other U.S. and non-U.S. government bonds | $ | - | $ | - | $ | 19 | $ | 2 | $ | 19 | $ | 2 |
| Corporate debt securities | ||||||||||||
| Corporate bonds | 159 | - | 829 | 24 | 988 | 24 | ||||||
| Asset-backed securities | 8 | - | 37 | 2 | 45 | 2 | ||||||
| Mortgage-backed debt securities | ||||||||||||
| U.S. governmental agency | - | - | 278 | 19 | 278 | 19 | ||||||
| Commercial | - | - | 113 | 5 | 113 | 5 | ||||||
| Total | $ | 167 | $ | - | $ | 1,276 | $ | 52 | $ | 1,443 | $ | 52 |
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| December 31, 2023 | ||||||||||||
|
Less than 12 months 1
|
12 months or more 1
|
Total | ||||||||||
| (Millions of dollars) |
Fair
Value
|
Unrealized Losses |
Fair
Value
|
Unrealized Losses |
Fair
Value
|
Unrealized Losses |
||||||
| Government debt securities | ||||||||||||
| Other U.S. and non-U.S. government bonds | $ | - | $ | - | $ | 25 | $ | 3 | $ | 25 | $ | 3 |
| Corporate debt securities | ||||||||||||
| Corporate bonds | 765 | - | 1,011 | 45 | 1,776 | 45 | ||||||
| Asset-backed securities | 9 | - | 97 | 3 | 106 | 3 | ||||||
| Mortgage-backed debt securities | ||||||||||||
| U.S. governmental agency | 33 | - | 287 | 25 | 320 | 25 | ||||||
| Commercial | 2 | - | 121 | 9 | 123 | 9 | ||||||
| Total | $ | 809 | $ | - | $ | 1,541 | $ | 85 | $ | 2,350 | $ | 85 |
|
1Indicates the length of time that individual securities have been in a continuous unrealized loss position.
|
||||||||||||
The unrealized losses on our investments in government debt securities, corporate debt securities, and mortgage-backed debt securities relate to changes in underlying interest rates and credit spreads since time of purchase. We do not intend to sell the investments, and it is not likely that we will be required to sell the investments before recovery of their respective amortized cost basis. In addition, we did not expect credit-related losses on these investments as of September 30, 2024.
The cost basis and fair value of available-for-sale debt securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.
| September 30, 2024 | ||||
| (Millions of dollars) | Cost Basis | Fair Value | ||
| Due in one year or less | $ | 1,260 | $ | 1,260 |
| Due after one year through five years | 1,588 | 1,586 | ||
| Due after five years through ten years | 288 | 293 | ||
| Due after ten years | 113 | 113 | ||
| U.S. governmental agency mortgage-backed securities | 458 | 444 | ||
| Residential mortgage-backed securities | 2 | 2 | ||
| Commercial mortgage-backed securities | 133 | 128 | ||
| Total debt securities - available-for-sale | $ | 3,842 | $ | 3,826 |
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Table of Contents
| Sales of available-for-sale debt securities: | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Millions of dollars) | 2024 | 2023 | 2024 | 2023 | ||||
| Proceeds from the sale of available-for-sale securities | $ | 257 | $ | 271 | $ | 917 | $ | 710 |
| Gross gains from the sale of available-for-sale securities | $ | - | $ | - | $ | - | $ | - |
| Gross losses from the sale of available-for-sale securities | $ | - | $ | 1 | $ | 2 | $ | 1 |
In addition, we had $1,900 million of investments in time deposits classified as held-to-maturity debt securities as of December 31, 2023. We did not have any investments classified as held-to-maturity debt securities as of September 30, 2024. These investments matured within one year and were included in Prepaid expenses and other current assets in the Consolidated Statement of Financial Position. We record held-to-maturity debt securities at amortized cost, which approximates fair value.
For the three months ended September 30, 2024 and 2023, the net unrealized gains (losses) for equity securities held at September 30, 2024 and 2023 were $18 million and $(11) million, respectively. For the nine months ended September 30, 2024 and 2023, the net unrealized gains (losses) for equity securities held at September 30, 2024 and 2023 were $32 million and $(25) million, respectively.
9. Postretirement benefits
A. Pension and postretirement benefit costs
|
U.S. Pension
Benefits
|
Non-U.S. Pension
Benefits
|
Other
Postretirement
Benefits
|
||||||||||
| September 30, | September 30, | September 30, | ||||||||||
| (Millions of dollars) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||
| For the three months ended: | ||||||||||||
| Components of net periodic benefit cost: | ||||||||||||
| Service cost | $ | - | $ | - | $ | 12 | $ | 10 | $ | 16 | $ | 16 |
| Interest cost | 156 | 164 | 30 | 30 | 33 | 36 | ||||||
| Expected return on plan assets | (174) | (173) | (43) | (40) | (2) | (2) | ||||||
| Amortization of prior service cost (credit) | - | - | - | - | (3) | (3) | ||||||
|
Net periodic benefit cost (benefit) 1
|
$ | (18) | $ | (9) | $ | (1) | $ | - | $ | 44 | $ | 47 |
| For the nine months ended: | ||||||||||||
| Components of net periodic benefit cost: | ||||||||||||
| Service cost | $ | - | $ | - | $ | 34 | $ | 30 | $ | 50 | $ | 50 |
| Interest cost | 469 | 492 | 91 | 91 | 99 | 108 | ||||||
| Expected return on plan assets | (524) | (517) | (127) | (120) | (6) | (8) | ||||||
| Amortization of prior service cost (credit) | - | - | - | - | (10) | (9) | ||||||
|
Net periodic benefit cost (benefit) 1
|
$ | (55) | $ | (25) | $ | (2) | $ | 1 | $ | 133 | $ | 141 |
1 The service cost component is included in Operating costs. All other components are included in Other income (expense).
We made $49 million and $221 million of contributions to our pension and other postretirement plans during the three and nine months ended September 30, 2024, respectively. We currently anticipate full-year 2024 contributions of approximately $273 million.
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B. Defined contribution benefit costs
Total company costs related to our defined contribution plans, which are included in Operating costs in the Consolidated Statement of Results of Operations, were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Millions of dollars) | 2024 | 2023 | 2024 | 2023 | ||||
|
U.S. Plans 1
|
$ | 168 | $ | 120 | $ | 506 | $ | 405 |
| Non-U.S. Plans | 32 | 27 | 94 | 85 | ||||
| $ | 200 | $ | 147 | $ | 600 | $ | 490 | |
1 Includes costs related to our non-qualified deferred compensation plans. We utilize total return swaps to economically hedge this exposure to offset the related costs. See Note 5 for additional information.
10. Leases
Revenues from finance and operating leases, primarily included in Revenues of Financial Productson the Consolidated Statement of Results of Operations, were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Millions of dollars) | 2024 | 2023 | 2024 | 2023 | ||||
| Finance lease revenue | $ | 110 | $ | 106 | $ | 325 | $ | 315 |
| Operating lease revenue | 303 | 286 | 909 | 836 | ||||
| Total | $ | 413 | $ | 392 | $ | 1,234 | $ | 1,151 |
We present revenues net of sales and other related taxes.
11. Guarantees and product warranty
We have provided various guarantees that have varying terms and limit potential payment. Under the guarantees, non-performance by the third-parties could require Caterpillar to satisfy the contractual obligation by providing goods, services or financial compensation. The maximum potential amount of future payments (undiscounted and without reduction for any amounts possibly recoverable) that we could be required to make under the guarantees was $406 million and $353 million at September 30, 2024 and December 31, 2023, respectively.
We have dealer performance guarantees and third-party performance guarantees that do not limit potential payment to end users related to indemnities and other commercial contractual obligations. In addition, we have entered into contracts involving industry standard indemnifications that do not limit potential payment. For these unlimited guarantees, we are unable to estimate a maximum potential amount of future payments that could result from claims made.
No significant loss has been experienced or is anticipated under any of these guarantees.
Cat Financial provides guarantees to purchase certain loans of Caterpillar dealers from a special-purpose corporation (SPC) that qualifies as a variable interest entity. Cat Financial receives a fee for providing this guarantee. The purpose of the SPC is to provide short-term working capital loans to Caterpillar dealers. This SPC issues commercial paper and uses the proceeds to fund its loan program. Cat Financial is the primary beneficiary of the SPC as its guarantees result in Cat Financial having both the power to direct the activities that most significantly impact the SPC's economic performance and the obligation to absorb losses, and therefore Cat Financial has consolidated the financial statements of the SPC. As of September 30, 2024 and December 31, 2023, the SPC's assets of $1.31 billion and $1.35 billion, respectively, were primarily comprised of loans to dealers, and the SPC's liabilities of $1.31 billion and $1.35 billion, respectively, were primarily comprised of commercial paper. The assets of the SPC are not available to pay Cat
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Financial's creditors. Cat Financial may be obligated to perform under the guarantee if the SPC experiences losses. No loss has been experienced or is anticipated under this loan purchase agreement.
We determine our product warranty liability by applying historical claim rate experience to the current field population and dealer inventory. Generally, we base historical claim rates on actual warranty experience for each product by machine model/engine size by customer or dealer location (inside or outside North America). We develop specific rates for each product shipment month and update them monthly based on actual warranty claim experience.
The reconciliation of the change in our product warranty liability balances for the nine months ended September 30 was as follows:
| Nine Months Ended September 30, | ||||
| (Millions of dollars) | 2024 | 2023 | ||
| Warranty liability, beginning of period | $ | 1,894 | $ | 1,761 |
| Reduction in liability (payments) | (603) | (617) | ||
| Increase in liability (new warranties) | 478 | 724 | ||
| Warranty liability, end of period | $ | 1,769 | $ | 1,868 |
12. Profit per share
| Computations of profit per share: | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| (Dollars in millions except per share data) | 2024 | 2023 | 2024 | 2023 | ||||
|
Profit for the period (A) 1
|
$ | 2,464 | $ | 2,794 | $ | 8,001 | $ | 7,659 |
| Determination of shares (in millions): | ||||||||
| Weighted-average number of common shares outstanding (B) | 484.2 | 509.8 | 489.0 | 513.0 | ||||
| Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price | 2.5 | 2.8 | 2.7 | 2.7 | ||||
|
Average common shares outstanding for fully diluted computation (C) 2
|
486.7 | 512.6 | 491.7 | 515.7 | ||||
| Profit per share of common stock: | ||||||||
| Assuming no dilution (A/B) | $ | 5.09 | $ | 5.48 | $ | 16.36 | $ | 14.93 |
|
Assuming full dilution (A/C) 2
|
$ | 5.06 | $ | 5.45 | $ | 16.27 | $ | 14.85 |
| Shares outstanding as of September 30, (in millions) | 482.8 | 509.1 | ||||||
|
1 Profit attributable to common shareholders.
|
||||||||
|
2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.
|
||||||||
For the three and nine months ended September 30, 2024, we excluded 0.3 million and 0.2 million of outstanding stock options, respectively, from the computation of diluted earnings per share because the effect would have been antidilutive. For the three and nine months ended September 30, 2023, we excluded 0.8 million and 2.1 million of outstanding stock options, respectively, from the computation of diluted earnings per share because the effect would have been antidilutive.
For the three and nine months ended September 30, 2024, we repurchased 2.3 million and 18.2 million shares of Caterpillar common stock, respectively, at an aggregate cost of $0.8 billion and $6.1 billion, respectively. For the three and nine months ended September 30, 2023, we repurchased 1.9 million and 9.5 million shares of Caterpillar common stock, respectively, at an aggregate cost of $0.5 billion and $2.2 billion, respectively. We made these purchases through the combination of accelerated share repurchase (ASR) agreements with third-party financial institutions and open market transactions in 2024 and 2023.
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In the first quarter of 2024, we entered into ASR agreements to repurchase an aggregate of $3.50 billion of common stock. We advanced the $3.50 billion and received approximately 7.6 million shares of Caterpillar common stock with a value of $2.45 billion. In the second quarter of 2024, we entered into ASR agreements to repurchase an aggregate of $1.00 billion of common stock. We advanced the $1.00 billion and received approximately 2.2 million shares of Caterpillar common stock with a value of $750 million. These ASR agreements will last into the fourth quarter of 2024. The final number of shares to ultimately be purchased will be based on the average of the daily volume-weighted average prices of our common stock during the term of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. The remaining $1.30 billion was evaluated as unsettled forward contracts and was classified as a reduction to Common stock within the Consolidated Statement of Financial Position.
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13. Accumulated other comprehensive income (loss)
We present comprehensive income and its components in the Consolidated Statement of Comprehensive Income. Changes in the balances for each component of AOCI were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Millions of dollars) | 2024 | 2023 | 2024 | 2023 | ||||
| Foreign currency translation: | ||||||||
| Beginning balance | $ | (2,110) | $ | (1,863) | $ | (1,782) | $ | (2,328) |
| Gains (losses) on foreign currency translation | 377 | (194) | 36 | (235) | ||||
| Less: Tax provision /(benefit) | (20) | 10 | (5) | (2) | ||||
| Net gains (losses) on foreign currency translation | 397 | (204) | 41 | (233) | ||||
| (Gains) losses reclassified to earnings | - | (1) | 28 | 493 | ||||
| Less: Tax provision /(benefit) | - | - | - | - | ||||
| Net (gains) losses reclassified to earnings | - | (1) | 28 | 493 | ||||
| Other comprehensive income (loss), net of tax | 397 | (205) | 69 | 260 | ||||
| Ending balance | $ | (1,713) | $ | (2,068) | $ | (1,713) | $ | (2,068) |
| Pension and other postretirement benefits | ||||||||
| Beginning balance | $ | (55) | $ | (44) | $ | (49) | $ | (39) |
| Current year prior service credit (cost) | - | - | - | - | ||||
| Less: Tax provision /(benefit) | - | - | - | - | ||||
| Net current year prior service credit (cost) | - | - | - | - | ||||
| Amortization of prior service (credit) cost | (3) | (3) | (10) | (9) | ||||
| Less: Tax provision /(benefit) | - | - | (1) | (1) | ||||
| Net amortization of prior service (credit) cost | (3) | (3) | (9) | (8) | ||||
| Other comprehensive income (loss), net of tax | (3) | (3) | (9) | (8) | ||||
| Ending balance | $ | (58) | $ | (47) | $ | (58) | $ | (47) |
| Derivative financial instruments | ||||||||
| Beginning balance | $ | 5 | $ | 71 | $ | 67 | $ | 28 |
| Gains (losses) deferred | 17 | 13 | 114 | 57 | ||||
| Less: Tax provision /(benefit) | 10 | 5 | 37 | 14 | ||||
| Net gains (losses) deferred | 7 | 8 | 77 | 43 | ||||
| (Gains) losses reclassified to earnings | 61 | (94) | (115) | (84) | ||||
| Less: Tax provision /(benefit) | 10 | (24) | (34) | (22) | ||||
| Net (gains) losses reclassified to earnings | 51 | (70) | (81) | (62) | ||||
| Other comprehensive income (loss), net of tax | 58 | (62) | (4) | (19) | ||||
| Ending balance | $ | 63 | $ | 9 | $ | 63 | $ | 9 |
| Available-for-sale securities | ||||||||
| Beginning balance | $ | (70) | $ | (110) | $ | (56) | $ | (118) |
| Gains (losses) deferred | 74 | (22) | 56 | (12) | ||||
| Less: Tax provision /(benefit) | 13 | (5) | 11 | (3) | ||||
| Net gains (losses) deferred | 61 | (17) | 45 | (9) | ||||
| (Gains) losses reclassified to earnings | - | 1 | 2 | 1 | ||||
| Less: Tax provision /(benefit) | - | - | - | - | ||||
| Net (gains) losses reclassified to earnings | - | 1 | 2 | 1 | ||||
| Other comprehensive income (loss), net of tax | 61 | (16) | 47 | (8) | ||||
| Ending balance | $ | (9) | $ | (126) | $ | (9) | $ | (126) |
|
Total AOCI Ending Balance at September 30,
|
$ | (1,717) | $ | (2,232) | $ | (1,717) | $ | (2,232) |
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14. Environmental and legal matters
The Company is regulated by federal, state and international environmental laws governing its use, transport and disposal of substances and control of emissions. In addition to governing our manufacturing and other operations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines. We have made, and will continue to make, significant research and development and capital expenditures to comply with these emissions standards.
We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws. When it is probable we will pay remedial costs at a site, and those costs can be reasonably estimated, we accrue the investigation, remediation, and operating and maintenance costs against our earnings. We accrue costs based on consideration of currently available data and information with respect to each individual site, including available technologies, current applicable laws and regulations, and prior remediation experience. Where no amount within a range of estimates is more likely, we accrue the minimum. Where multiple potentially responsible parties are involved, we consider our proportionate share of the probable costs. In formulating the estimate of probable costs, we do not consider amounts expected to be recovered from insurance companies or others. We reassess these accrued amounts on a quarterly basis. The amount recorded for environmental remediation is not material and is included in Accrued expenses. We believe there is no more than a remote chance that a material amount for remedial activities at any individual site, or at all the sites in the aggregate, will be required.
In addition, we are involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of these unresolved actions involve disputes related to product design, manufacture and performance liability (including claimed asbestos exposure), contracts, employment issues, environmental matters, intellectual property rights, taxes (other than income taxes) and securities laws. The aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal actions is not material. In some cases, we cannot reasonably estimate a range of loss because there is insufficient information regarding the matter. However, we believe there is no more than a remote chance that any liability arising from these matters would be material. Although it is not possible to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will not individually or in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.
Our operations in Brazil are subject to highly complex labor, tax, customs and other laws. While we believe that we are in compliance with such laws, we are periodically engaged in litigation regarding the application of these laws, including certain tax and customs disputes with federal, state and municipal authorities in Brazil relating to export activities associated with Caterpillar Brasil Ltda. The Company is unable to predict the outcome or reasonably estimate any potential losses; however, we currently believe that any matters raised will not have a material adverse effect on the Company's consolidated results of operations, financial position or liquidity.
15. Income taxes
The effective tax rate for the three months ended September 30, 2024 was 20.7 percent compared to 20.9 percent for the three months ended September 30, 2023. The effective tax rate for the nine months ended September 30, 2024 was 21.4 percent compared to 22.4 percent for the nine months ended September 30, 2023.
16. Segment information
A. Basis for segment information
Our Executive Office is comprised of a Chief Executive Officer (CEO), Chief Operating Officer (COO), four Group Presidents, a Chief Financial Officer (CFO), a Chief Legal Officer and General Counsel and a Chief Human Resources Officer. The COO, Group Presidents and CFO are accountable for a related set of end-to-end businesses that they manage. The Chief Legal Officer and General Counsel leads the Law, Security and Public Policy Division. The Chief Human Resources Officer leads the Human Resources Organization. The CEO allocates resources and manages performance at the COO/Group President/CFO level. As such, the CEO serves as our Chief Operating Decision Maker, and operating segments are primarily based on the COO/Group President/CFO reporting structure.
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Three of our operating segments, Construction Industries, Resource Industries and Energy & Transportation are led by Group Presidents. One operating segment, Financial Products, is led by the CFO who also has responsibility for Corporate Services. Corporate Services is a cost center primarily responsible for the performance of certain support functions globally and to provide centralized services; it does not meet the definition of an operating segment. One Group President leads one smaller operating segment that is included in the All Other Segment. The Law, Security and Public Policy Division and the Human Resources Organization are cost centers and do not meet the definition of an operating segment.
B. Description of segments
We have five operating segments, of which four are reportable segments. Following is a brief description of our reportable segments and the business activities included in the All Other Segment:
Construction Industries: A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes asphalt pavers; backhoe loaders; cold planers; compactors; compact track loaders; forestry machines; material handlers; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; track-type loaders; track-type tractors (small, medium); track excavators (mini, small, medium, large); wheel excavators; wheel loaders (compact, small, medium); and related parts and work tools. Inter-segment sales are a source of revenue for this segment.
Resource Industries: A segment primarily responsible for supporting customers using machinery in mining, heavy construction and quarry and aggregates. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors; large mining trucks; hard rock vehicles; electric rope shovels; draglines; hydraulic shovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers; wheel dozers; landfill compactors; soil compactors; wide-body trucks; select work tools; machinery components; electronics and control systems and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics, autonomous machine capabilities, safety services and mining performance solutions. Resource Industries also manages areas that provide services to other parts of the company, including strategic procurement, lean center of excellence, integrated manufacturing, research and development for hydraulic systems, automation, electronics and software for Caterpillar machines and engines. Inter-segment sales are a source of revenue for this segment.
Energy & Transportation: A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses as well as product support of on-highway engines. Responsibilities include business strategy, product design, product management, development and testing, manufacturing, marketing and sales and product support. The product and services portfolio includes turbines, centrifugal gas compressors, and turbine-related services; reciprocating engine-powered generator sets; integrated systems and solutions used in the electric power generation industry; reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries; reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machines; electrified powertrain and zero-emission power sources and service solutions development; and diesel-electric locomotives and components and other rail-related products and services, including remanufacturing and leasing. Responsibilities also include the remanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies. Inter-segment sales are a source of revenue for this segment.
Financial Products Segment: Provides financing alternatives to customers and dealers around the world for Caterpillar products and services, as well as financing for power generation facilities that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, revolving charge accounts, installment sale contracts, repair/rebuild financing, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage and maintenance plans for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of Caterpillar equipment. The segment also earns revenues from ME&T, but the related costs are not allocated to operating segments. Financial Products' segment profit is determined on a pretax basis and includes other income/expense items.
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All Other Segment: Primarily includes activities such as: business strategy; product management and development; manufacturing and sourcing of wear and maintenance components primarily for Cat® products; parts distribution; integrated logistics solutions; distribution services responsible for dealer development and administration, including a wholly owned dealer in Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience. Results for the All Other Segment are included as a reconciling item between reportable segments and consolidated external reporting.
C. Segment measurement and reconciliations
There are several methodology differences between our segment reporting and our external reporting. The following is a list of the more significant methodology differences:
•ME&T segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles, accounts payable and customer advances. We generally manage at the corporate level liabilities other than accounts payable and customer advances, and we do not include these in segment operations. Financial Products Segment assets generally include all categories of assets.
•We value segment inventories and cost of sales using a current cost methodology.
•We amortize goodwill allocated to segments using a fixed amount based on a 20-year useful life. This methodology difference only impacts segment assets. We do not include goodwill amortization expense in segment profit. In addition, we have allocated to segments only a portion of goodwill for certain acquisitions made in 2011 or later.
•We generally manage currency exposures for ME&T at the corporate level and do not include in segment profit the effects of changes in exchange rates on results of operations within the year. We report the net difference created in the translation of revenues and costs between exchange rates used for U.S. GAAP reporting and exchange rates used for segment reporting as a methodology difference.
•We do not include stock-based compensation expense in segment profit.
•Postretirement benefit expenses are split; segments are generally responsible for service costs, with the remaining elements of net periodic benefit cost included as a methodology difference.
•We determine ME&T segment profit on a pretax basis and exclude interest expense and most other income/expense items. We determine Financial Products Segment profit on a pretax basis and include other income/expense items.
Reconciling items are created based on accounting differences between segment reporting and our consolidated external reporting. Please refer to pages 32 to 33 for financial information regarding significant reconciling items. Most of our reconciling items are self-explanatory given the above explanations. For the reconciliation of profit, we have grouped the reconciling items as follows:
•Corporate costs: These costs are related to corporate requirements primarily for compliance and legal functions for the benefit of the entire organization.
•Restructuring income/costs: May include costs for employee separation, long-lived asset impairments, contract terminations and (gains)/losses on divestitures. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold. See Note 20 for more information.
•Methodology differences: See previous discussion of significant accounting differences between segment reporting and consolidated external reporting.
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•Timing: Timing differences in the recognition of costs between segment reporting and consolidated external reporting. For example, we report certain costs on the cash basis for segment reporting and the accrual basis for consolidated external reporting.
For the three and nine months ended September 30, 2024 and 2023, sales and revenues by geographic region reconciled to consolidated sales and revenues were as follows:
| Sales and Revenues by Geographic Region | ||||||||||||||
| (Millions of dollars) |
North
America |
Latin
America |
EAME |
Asia/
Pacific |
External Sales and Revenues | Intersegment Sales and Revenues | Total Sales and Revenues | |||||||
| Three Months Ended September 30, 2024 | ||||||||||||||
| Construction Industries | $ | 3,629 | $ | 658 | $ | 1,150 | $ | 875 | $ | 6,312 | $ | 33 | $ | 6,345 |
| Resource Industries | 1,131 | 498 | 442 | 863 | 2,934 | 94 | 3,028 | |||||||
| Energy & Transportation | 3,214 | 449 | 1,486 | 856 | 6,005 | 1,182 | 7,187 | |||||||
| Financial Products Segment | 695 | 97 | 130 | 112 | 1,034 |
1
|
- | 1,034 | ||||||
| Total sales and revenues from reportable segments | 8,669 | 1,702 | 3,208 | 2,706 | 16,285 | 1,309 | 17,594 | |||||||
| All Other Segment | 12 | - | 3 | 14 | 29 | 63 | 92 | |||||||
| Corporate Items and Eliminations | (136) | (24) | (12) | (36) | (208) | (1,372) | (1,580) | |||||||
| Total Sales and Revenues | $ | 8,545 | $ | 1,678 | $ | 3,199 | $ | 2,684 | $ | 16,106 | $ | - | $ | 16,106 |
| Three Months Ended September 30, 2023 | ||||||||||||||
| Construction Industries | $ | 4,078 | $ | 555 | $ | 1,351 | $ | 997 | $ | 6,981 | $ | 18 | $ | 6,999 |
| Resource Industries | 1,366 | 499 | 508 | 886 | 3,259 | 92 | 3,351 | |||||||
| Energy & Transportation | 2,966 | 460 | 1,428 | 901 | 5,755 | 1,104 | 6,859 | |||||||
| Financial Products Segment | 627 | 110 | 132 | 110 | 979 |
1
|
- | 979 | ||||||
| Total sales and revenues from reportable segments | 9,037 | 1,624 | 3,419 | 2,894 | 16,974 | 1,214 | 18,188 | |||||||
| All Other Segment | 16 | (1) | 5 | 10 | 30 | 76 | 106 | |||||||
| Corporate Items and Eliminations | (126) | (20) | (22) | (26) | (194) | (1,290) | (1,484) | |||||||
| Total Sales and Revenues | $ | 8,927 | $ | 1,603 | $ | 3,402 | $ | 2,878 | $ | 16,810 | $ | - | $ | 16,810 |
1Includes revenues from Construction Industries, Resource Industries, Energy & Transportation and All Other Segment of $190 million and $181 million in the three months ended September 30, 2024 and 2023, respectively.
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| Sales and Revenues by Geographic Region | ||||||||||||||
| (Millions of dollars) |
North
America |
Latin
America |
EAME |
Asia/
Pacific |
External Sales and Revenues | Intersegment Sales and Revenues | Total Sales and Revenues | |||||||
| Nine Months Ended September 30, 2024 | ||||||||||||||
| Construction Industries | $ | 11,419 | $ | 1,930 | $ | 3,193 | $ | 2,843 | $ | 19,385 | $ | 67 | $ | 19,452 |
| Resource Industries | 3,601 | 1,498 | 1,349 | 2,704 | 9,152 | 275 | 9,427 | |||||||
| Energy & Transportation | 9,473 | 1,296 | 4,201 | 2,602 | 17,572 | 3,633 | 21,205 | |||||||
| Financial Products Segment | 2,022 | 299 | 377 | 331 | 3,029 |
1
|
- | 3,029 | ||||||
| Total sales and revenues from reportable segments | 26,515 | 5,023 | 9,120 | 8,480 | 49,138 | 3,975 | 53,113 | |||||||
| All Other Segment | 43 | (1) | 11 | 39 | 92 | 217 | 309 | |||||||
| Corporate Items and Eliminations | (397) | (66) | (83) | (90) | (636) | (4,192) | (4,828) | |||||||
| Total Sales and Revenues | $ | 26,161 | $ | 4,956 | $ | 9,048 | $ | 8,429 | $ | 48,594 | $ | - | $ | 48,594 |
| Nine Months Ended September 30, 2023 | ||||||||||||||
| Construction Industries | $ | 11,654 | $ | 1,720 | $ | 4,125 | $ | 3,307 | $ | 20,806 | $ | 93 | $ | 20,899 |
| Resource Industries | 4,016 | 1,511 | 1,624 | 2,940 | 10,091 | 250 | 10,341 | |||||||
| Energy & Transportation | 8,658 | 1,299 | 4,291 | 2,519 | 16,767 | 3,565 | 20,332 | |||||||
| Financial Products Segment | 1,795 | 316 | 364 | 329 | 2,804 |
1
|
- | 2,804 | ||||||
| Total sales and revenues from reportable segments | 26,123 | 4,846 | 10,404 | 9,095 | 50,468 | 3,908 | 54,376 | |||||||
| All Other Segment | 50 | (1) | 13 | 37 | 99 | 234 | 333 | |||||||
| Corporate Items and Eliminations | (374) | (61) | (64) | (78) | (577) | (4,142) | (4,719) | |||||||
| Total Sales and Revenues | $ | 25,799 | $ | 4,784 | $ | 10,353 | $ | 9,054 | $ | 49,990 | $ | - | $ | 49,990 |
1Includes revenues from Construction Industries, Resource Industries, Energy & Transportation and All Other Segment of $547 million and $515 million in the nine months ended September 30, 2024 and 2023, respectively.
For the three and nine months ended September 30, 2024 and 2023, Energy & Transportation segment sales by end user application were as follows:
| Energy & Transportation External Sales | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Millions of dollars) | 2024 | 2023 | 2024 | 2023 | ||||
| Oil and gas | $ | 1,656 | $ | 1,667 | $ | 5,053 | $ | 4,741 |
| Power generation | 2,011 | 1,598 | 5,514 | 4,527 | ||||
| Industrial | 1,028 | 1,220 | 3,062 | 3,793 | ||||
| Transportation | 1,310 | 1,270 | 3,943 | 3,706 | ||||
| Energy & Transportation External Sales | $ | 6,005 | $ | 5,755 | $ | 17,572 | $ | 16,767 |
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| Reconciliation of Consolidated profit before taxes: | ||||||||
| (Millions of dollars) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Profit from reportable segments: | ||||||||
| Construction Industries | $ | 1,486 | $ | 1,847 | $ | 4,991 | $ | 5,440 |
| Resource Industries | 619 | 730 | 2,067 | 2,234 | ||||
| Energy & Transportation | 1,433 | 1,181 | 4,259 | 3,507 | ||||
| Financial Products Segment | 246 | 203 | 766 | 675 | ||||
| Total profit from reportable segments | 3,784 | 3,961 | 12,083 | 11,856 | ||||
| Profit (loss) from All Other Segment | (13) | 21 | 32 | 42 | ||||
| Cost centers | (5) | 10 | 7 | 53 | ||||
| Corporate costs | (205) | (265) | (682) | (714) | ||||
| Timing | (3) | 22 | 12 | (89) | ||||
| Restructuring income (costs) | (70) | (46) | (322) | (688) | ||||
| Methodology differences: | ||||||||
| Inventory/cost of sales | 13 | (2) | 16 | 137 | ||||
| Postretirement benefit expense | (51) | (13) | (106) | (84) | ||||
| Stock-based compensation expense | (52) | (60) | (171) | (178) | ||||
| Financing costs | (42) | (13) | (111) | (115) | ||||
| Currency | (79) | 78 | 29 | 106 | ||||
| Other income/expense methodology differences | (166) | (164) | (584) | (468) | ||||
| Other methodology differences | (13) | (14) | (73) | (57) | ||||
| Total consolidated profit before taxes | $ | 3,098 | $ | 3,515 | $ | 10,130 | $ | 9,801 |
| Reconciliation of Assets: | ||||
| (Millions of dollars) | September 30, 2024 | December 31, 2023 | ||
| Assets from reportable segments: | ||||
| Construction Industries | $ | 5,490 | $ | 5,384 |
| Resource Industries | 5,438 | 5,742 | ||
| Energy & Transportation | 10,946 | 10,555 | ||
| Financial Products Segment | 37,183 | 35,685 | ||
| Total assets from reportable segments | 59,057 | 57,366 | ||
| Assets from All Other Segment | 1,952 | 1,890 | ||
| Items not included in segment assets: | ||||
| Cash and cash equivalents | 4,760 | 6,106 | ||
| Deferred income taxes | 2,938 | 2,668 | ||
| Goodwill and intangible assets | 4,560 | 4,452 | ||
| Property, plant and equipment - net and other assets | 4,853 | 6,548 | ||
| Inventory methodology differences | (3,437) | (3,169) | ||
| Liabilities included in segment assets | 12,157 | 11,781 | ||
| Other | (567) | (166) | ||
| Total assets | $ | 86,273 | $ | 87,476 |
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| Reconciliation of Depreciation and amortization: | ||||||||
| (Millions of dollars) | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Depreciation and amortization from reportable segments: | ||||||||
| Construction Industries | $ | 60 | $ | 54 | $ | 173 | $ | 162 |
| Resource Industries | 66 | 66 | 192 | 235 | ||||
| Energy & Transportation | 146 | 139 | 426 | 401 | ||||
| Financial Products Segment | 184 | 186 | 554 | 545 | ||||
| Total depreciation and amortization from reportable segments | 456 | 445 | 1,345 | 1,343 | ||||
| Items not included in segment depreciation and amortization: | ||||||||
| All Other Segment | 63 | 59 | 186 | 176 | ||||
| Cost centers | 25 | 23 | 72 | 65 | ||||
| Other | (1) | (2) | (5) | 15 | ||||
| Total depreciation and amortization | $ | 543 | $ | 525 | $ | 1,598 | $ | 1,599 |
| Reconciliation of Capital expenditures: | ||||||||
| (Millions of dollars) | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Capital expenditures from reportable segments: | ||||||||
| Construction Industries | $ | 66 | $ | 105 | $ | 179 | $ | 188 |
| Resource Industries | 64 | 62 | 150 | 132 | ||||
| Energy & Transportation | 292 | 249 | 671 | 595 | ||||
| Financial Products Segment | 264 | 342 | 818 | 1,031 | ||||
| Total capital expenditures from reportable segments | 686 | 758 | 1,818 | 1,946 | ||||
| Items not included in segment capital expenditures: | ||||||||
| All Other Segment | 63 | 67 | 149 | 142 | ||||
| Cost centers | 60 | 27 | 114 | 71 | ||||
| Timing | (71) | - | 137 | 185 | ||||
| Other | (15) | (71) | (40) | (106) | ||||
| Total capital expenditures | $ | 723 | $ | 781 | $ | 2,178 | $ | 2,238 |
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17. Cat Financial financing activities
Allowance for credit losses
Portfolio segments
A portfolio segment is the level at which Cat Financial develops a systematic methodology for determining its allowance for credit losses. Cat Financial's portfolio segments and related methods for estimating expected credit losses are as follows:
Customer
Cat Financial provides loans and finance leases to end-user customers primarily for the purpose of financing new and used Caterpillar machinery, engines and equipment for commercial use. Cat Financial also provides financing for power generation facilities that, in most cases, incorporate Caterpillar products. The average original term of Cat Financial's customer finance receivable portfolio was approximately 51 months with an average remaining term of approximately 27 months as of September 30, 2024.
Cat Financial typically maintains a security interest in financed equipment and generally requires physical damage insurance coverage on the financed equipment, both of which provide Cat Financial with certain rights and protections. If Cat Financial's collection efforts fail to bring a defaulted account current, Cat Financial generally can repossess the financed equipment, after satisfying local legal requirements, and sell it within the Caterpillar dealer network or through third-party auctions.
Cat Financial estimates the allowance for credit losses related to its customer finance receivables based on loss forecast models utilizing probabilities of default and the estimated loss given default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific economic factors.
During the three and nine months ended September 30, 2024, Cat Financial's forecasts reflected a continuation of the trend of historically low unemployment rates as well as low delinquencies within their portfolio. However, industry delinquencies show an increasing trend as the central bank actions aimed at reducing inflation have weakened global economic growth. The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.
Dealer
Cat Financial provides financing to Caterpillar dealers in the form of wholesale financing plans. Cat Financial's wholesale financing plans provide assistance to dealers by financing their mostly new Caterpillar equipment inventory and rental fleets on a secured and unsecured basis. In addition, Cat Financial provides a variety of secured and unsecured loans to Caterpillar dealers.
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Cat Financial estimates the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.
In general, Cat Financial's Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to its close working relationships with the dealers and their financial strength. Therefore, Cat Financial made no adjustments to historical loss rates during the three and nine months ended September 30, 2024.
Classes of finance receivables
Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk. Cat Financial's classes, which align with management reporting for credit losses, are as follows:
•North America- Finance receivables originated in the United States and Canada.
•EAME- Finance receivables originated in Europe, Africa, the Middle East and Eurasia.
•Asia/Pacific- Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.
•Mining - Finance receivables related to large mining customers worldwide.
•Latin America - Finance receivables originated in Mexico and Central and South American countries.
•Power - Finance receivables originated worldwide related to Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.
Receivable balances, including accrued interest, are written off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). Generally, the amount of the write-off is determined by comparing the fair value of the collateral, less cost to sell, to the amortized cost of the receivable. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.
An analysis of Cat Financial's allowance for credit losses was as follows:
| (Millions of dollars) | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | ||||||||||
| Customer | Dealer | Total | Customer | Dealer | Total | |||||||
| Beginning balance | $ | 246 | $ | 4 | $ | 250 | $ | 265 | $ | 50 | $ | 315 |
| Write-offs | (42) | - | (42) | (22) | - | (22) | ||||||
| Recoveries | 15 | - | 15 | 13 | - | 13 | ||||||
|
Provision for credit losses 1
|
25 | - | 25 | 31 | 1 | 32 | ||||||
| Other | 2 | - | 2 | (3) | - | (3) | ||||||
| Ending balance | $ | 246 | $ | 4 | $ | 250 | $ | 284 | $ | 51 | $ | 335 |
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||||||
| Customer | Dealer | Total | Customer | Dealer | Total | |||||||
| Beginning balance | $ | 276 | $ | 51 | $ | 327 | $ | 277 | $ | 65 | $ | 342 |
| Write-offs | (98) | (47) | (145) | (63) | - | (63) | ||||||
| Recoveries | 45 | - | 45 | 36 | - | 36 | ||||||
|
Provision for credit losses 1
|
49 | - | 49 | 35 | (14) | 21 | ||||||
| Other | (26) | - | (26) | (1) | - | (1) | ||||||
| Ending balance | $ | 246 | $ | 4 | $ | 250 | $ | 284 | $ | 51 | $ | 335 |
| Finance Receivables | $ | 21,551 | $ | 1,716 | $ | 23,267 | $ | 19,768 | $ | 2,060 | $ | 21,828 |
|
1Excludes provision for credit losses on unfunded commitments and other miscellaneous receivables.
|
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Gross write-offs by origination year for Cat Financial's Customer portfolio segment were as follows:
| (Millions of dollars) | Three Months Ended September 30, 2024 | |||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior |
Revolving Finance Receivables |
Total | |||||||||
| North America | $ | - | $ | 5 | $ | 4 | $ | 2 | $ | 1 | $ | - | $ | 2 | $ | 14 |
| EAME | - | - | 1 | 1 | 1 | - | - | 3 | ||||||||
| Asia/Pacific | - | 2 | 1 | - | - | 1 | - | 4 | ||||||||
| Mining | 8 | 3 | 3 | - | - | - | - | 14 | ||||||||
| Latin America | - | 2 | 2 | 1 | 2 | - | - | 7 | ||||||||
| Total | $ | 8 | $ | 12 | $ | 11 | $ | 4 | $ | 4 | $ | 1 | $ | 2 | $ | 42 |
| Three Months Ended September 30, 2023 | ||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior |
Revolving Finance Receivables |
Total | |||||||||
| North America | $ | 1 | $ | 2 | $ | 2 | $ | 1 | $ | 1 | $ | - | $ | 2 | $ | 9 |
| EAME | - | 1 | 1 | 1 | - | - | - | 3 | ||||||||
| Asia/Pacific | - | 2 | 3 | 1 | - | - | - | 6 | ||||||||
| Latin America | - | 1 | 1 | 1 | - | 1 | - | 4 | ||||||||
| Total | $ | 1 | $ | 6 | $ | 7 | $ | 4 | $ | 1 | $ | 1 | $ | 2 | $ | 22 |
| Nine Months Ended September 30, 2024 | ||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior |
Revolving Finance Receivables |
Total | |||||||||
| North America | $ | - | $ | 13 | $ | 10 | $ | 5 | $ | 2 | $ | 1 | $ | 8 | $ | 39 |
| EAME | - | 2 | 3 | 3 | 2 | - | - | 10 | ||||||||
| Asia/Pacific | - | 4 | 4 | 3 | 1 | 1 | - | 13 | ||||||||
| Mining | 8 | 3 | 3 | - | - | - | - | 14 | ||||||||
| Latin America | - | 2 | 5 | 4 | 3 | 8 | - | 22 | ||||||||
| Total | $ | 8 | $ | 24 | $ | 25 | $ | 15 | $ | 8 | $ | 10 | $ | 8 | $ | 98 |
| Nine Months Ended September 30, 2023 | ||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior |
Revolving Finance Receivables |
Total | |||||||||
| North America | $ | 1 | $ | 7 | $ | 7 | $ | 2 | $ | 2 | $ | 1 | $ | 9 | $ | 29 |
| EAME | - | 2 | 3 | 3 | - | 1 | - | 9 | ||||||||
| Asia/Pacific | - | 3 | 6 | 4 | 1 | - | - | 14 | ||||||||
| Latin America | - | 3 | 3 | 3 | 1 | 1 | - | 11 | ||||||||
| Total | $ | 1 | $ | 15 | $ | 19 | $ | 12 | $ | 4 | $ | 3 | $ | 9 | $ | 63 |
For the three months ended September 30, 2024, there were no gross write-offs in Cat Financial's Dealer portfolio segment. For the nine months ended September 30, 2024 there were $47 million of gross write-offs in Cat Financial's Dealer portfolio segment, all of which were in Latin America and originated prior to 2019.
Credit quality of finance receivables
At origination, Cat Financial evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, Cat Financial monitors credit quality based on past-due status as there is a meaningful correlation between the past-due status of customers and the risk of loss. In determining past-due status, Cat Financial considers the entire finance receivable past due when any installment is over 30 days past due.
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Customer
The aging category of Cat Financial's amortized cost of finance receivables in the Customer portfolio segment by origination year were as follows:
| (Millions of dollars) | September 30, 2024 | |||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior |
Revolving Finance Receivables |
Total Finance Receivables | |||||||||
| North America | ||||||||||||||||
| Current | $ | 3,959 | $ | 3,389 | $ | 1,821 | $ | 1,210 | $ | 347 | $ | 63 | $ | 360 | $ | 11,149 |
| 31-60 days past due | 24 | 43 | 36 | 23 | 8 | 2 | 3 | 139 | ||||||||
| 61-90 days past due | 6 | 13 | 10 | 5 | 2 | 1 | 1 | 38 | ||||||||
| 91+ days past due | 6 | 31 | 27 | 16 | 7 | 3 | 1 | 91 | ||||||||
| EAME | ||||||||||||||||
| Current | 990 | 1,040 | 646 | 351 | 130 | 103 | - | 3,260 | ||||||||
| 31-60 days past due | 7 | 16 | 12 | 6 | 2 | - | - | 43 | ||||||||
| 61-90 days past due | 2 | 7 | 3 | 2 | 1 | - | - | 15 | ||||||||
| 91+ days past due | 4 | 21 | 12 | 17 | 6 | 2 | - | 62 | ||||||||
| Asia/Pacific | ||||||||||||||||
| Current | 764 | 663 | 345 | 128 | 23 | 5 | 1 | 1,929 | ||||||||
| 31-60 days past due | 6 | 9 | 7 | 3 | 1 | - | - | 26 | ||||||||
| 61-90 days past due | 1 | 3 | 3 | 2 | - | - | - | 9 | ||||||||
| 91+ days past due | 1 | 2 | 3 | 2 | 1 | - | - | 9 | ||||||||
| Mining | ||||||||||||||||
| Current | 764 | 843 | 509 | 248 | 83 | 46 | 24 | 2,517 | ||||||||
| 31-60 days past due | - | - | - | - | - | - | - | - | ||||||||
| 61-90 days past due | 9 | 7 | 6 | 1 | - | - | - | 23 | ||||||||
| 91+ days past due | - | 1 | 1 | 1 | - | 5 | - | 8 | ||||||||
| Latin America | ||||||||||||||||
| Current | 680 | 468 | 290 | 89 | 14 | 6 | - | 1,547 | ||||||||
| 31-60 days past due | 3 | 7 | 6 | 2 | - | - | - | 18 | ||||||||
| 61-90 days past due | - | 2 | 2 | 1 | - | 1 | - | 6 | ||||||||
| 91+ days past due | 1 | 5 | 8 | 4 | 2 | 1 | - | 21 | ||||||||
| Power | ||||||||||||||||
| Current | 68 | 183 | 45 | 48 | 66 | 67 | 161 | 638 | ||||||||
| 31-60 days past due | - | - | - | - | - | - | - | - | ||||||||
| 61-90 days past due | - | - | - | - | - | - | - | - | ||||||||
| 91+ days past due | - | - | - | - | - | 3 | - | 3 | ||||||||
| Totals by Aging Category | ||||||||||||||||
| Current | $ | 7,225 | $ | 6,586 | $ | 3,656 | $ | 2,074 | $ | 663 | $ | 290 | $ | 546 | $ | 21,040 |
| 31-60 days past due | 40 | 75 | 61 | 34 | 11 | 2 | 3 | 226 | ||||||||
| 61-90 days past due | 18 | 32 | 24 | 11 | 3 | 2 | 1 | 91 | ||||||||
| 91+ days past due | 12 | 60 | 51 | 40 | 16 | 14 | 1 | 194 | ||||||||
| Total Customer | $ | 7,295 | $ | 6,753 | $ | 3,792 | $ | 2,159 | $ | 693 | $ | 308 | $ | 551 | $ | 21,551 |
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| (Millions of dollars) | December 31, 2023 | |||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior |
Revolving Finance Receivables |
Total Finance Receivables | |||||||||
| North America | ||||||||||||||||
| Current | $ | 4,430 | $ | 2,628 | $ | 2,000 | $ | 745 | $ | 220 | $ | 32 | $ | 312 | $ | 10,367 |
| 31-60 days past due | 28 | 31 | 24 | 14 | 7 | 1 | 4 | 109 | ||||||||
| 61-90 days past due | 10 | 11 | 8 | 4 | 1 | - | 2 | 36 | ||||||||
| 91+ days past due | 12 | 23 | 18 | 9 | 4 | 1 | 2 | 69 | ||||||||
| EAME | ||||||||||||||||
| Current | 1,336 | 895 | 588 | 258 | 111 | 105 | - | 3,293 | ||||||||
| 31-60 days past due | 10 | 9 | 7 | 3 | 1 | - | - | 30 | ||||||||
| 61-90 days past due | 4 | 3 | 3 | 1 | 1 | - | - | 12 | ||||||||
| 91+ days past due | 7 | 17 | 15 | 8 | 3 | 1 | - | 51 | ||||||||
| Asia/Pacific | ||||||||||||||||
| Current | 943 | 594 | 293 | 73 | 16 | 4 | - | 1,923 | ||||||||
| 31-60 days past due | 5 | 6 | 7 | 2 | - | - | - | 20 | ||||||||
| 61-90 days past due | 2 | 3 | 3 | 2 | - | - | - | 10 | ||||||||
| 91+ days past due | 1 | 5 | 3 | 3 | 1 | - | - | 13 | ||||||||
| Mining | ||||||||||||||||
| Current | 1,039 | 686 | 381 | 121 | 68 | 27 | 66 | 2,388 | ||||||||
| 31-60 days past due | - | - | - | - | - | - | - | - | ||||||||
| 61-90 days past due | - | - | - | - | 1 | 1 | - | 2 | ||||||||
| 91+ days past due | - | - | 1 | - | - | 1 | - | 2 | ||||||||
| Latin America | ||||||||||||||||
| Current | 750 | 520 | 219 | 59 | 23 | 6 | - | 1,577 | ||||||||
| 31-60 days past due | 9 | 10 | 6 | 1 | - | - | - | 26 | ||||||||
| 61-90 days past due | 2 | 4 | 1 | - | - | - | - | 7 | ||||||||
| 91+ days past due | 2 | 10 | 8 | 5 | 8 | 11 | - | 44 | ||||||||
| Power | ||||||||||||||||
| Current | 152 | 49 | 64 | 75 | 28 | 59 | 162 | 589 | ||||||||
| 31-60 days past due | - | - | - | - | - | - | - | - | ||||||||
| 61-90 days past due | - | - | - | - | - | - | - | - | ||||||||
| 91+ days past due | - | - | - | - | - | 3 | - | 3 | ||||||||
| Totals by Aging Category | ||||||||||||||||
| Current | $ | 8,650 | $ | 5,372 | $ | 3,545 | $ | 1,331 | $ | 466 | $ | 233 | $ | 540 | $ | 20,137 |
| 31-60 days past due | 52 | 56 | 44 | 20 | 8 | 1 | 4 | 185 | ||||||||
| 61-90 days past due | 18 | 21 | 15 | 7 | 3 | 1 | 2 | 67 | ||||||||
| 91+ days past due | 22 | 55 | 45 | 25 | 16 | 17 | 2 | 182 | ||||||||
| Total Customer | $ | 8,742 | $ | 5,504 | $ | 3,649 | $ | 1,383 | $ | 493 | $ | 252 | $ | 548 | $ | 20,571 |
Finance receivables in Cat Financial's Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other equipment. For those contracts where the borrower is experiencing financial difficulty, repayment of the outstanding amounts is generally expected to be provided through the operation or repossession and sale of the equipment.
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Dealer
As of September 30, 2024, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current. As of December 31, 2023, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $44 million that was 91+ days past due in Latin America, all of which originated prior to 2019.
Non-accrual finance receivables
Recognition of income is suspended and the finance receivable is placed on non-accrual status when management determines that collection of future income is not probable. Contracts on non-accrual status are generally more than 120 days past due. Recognition is resumed and previously suspended income is recognized when collection is considered probable. Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms. Interest earned but uncollected prior to the receivable being placed on non-accrual status is written off through Provision for credit losses when, in the judgment of management, it is considered uncollectible.
In Cat Financial's Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:
| (Millions of dollars) | September 30, 2024 | December 31, 2023 | ||||||
| Amortized Cost | Amortized Cost | |||||||
|
Non-accrual With an Allowance |
91+ Still Accruing |
Non-accrual With an Allowance |
91+ Still Accruing |
|||||
| North America | $ | 78 | $ | 15 | $ | 52 | $ | 20 |
| EAME | 62 | 3 | 34 | 18 | ||||
| Asia/Pacific | 7 | 4 | 8 | 5 | ||||
| Mining | 31 | - | 2 | - | ||||
| Latin America | 25 | - | 48 | 1 | ||||
| Power | 3 | - | 8 | - | ||||
| Total | $ | 206 | $ | 22 | $ | 152 | $ | 44 |
There were no finance receivables in Cat Financial's Dealer portfolio segment on non-accrual status as of September 30, 2024. There were $44 million in finance receivables in Cat Financial's Dealer portfolio segment on non-accrual status as of December 31, 2023, all of which was in Latin America.
Modifications
Cat Financial periodically modifies the terms of their finance receivable agreements. Typically, the types of modifications granted are payment deferrals, interest-only payment periods and/or term extensions. Many modifications Cat Financial grants are for commercial reasons or for borrowers experiencing some form of short-term financial stress and may result in insignificant payment delays. Cat Financial does not consider these borrowers to be experiencing financial difficulty. Modifications for borrowers Cat Financial does consider to be experiencing financial difficulty typically result in payment deferrals and/or reduced payments for a period of four months or longer, term extension of six months or longer or a combination of both.
During the three and nine months ended September 30, 2024 and 2023, there were no finance receivable modifications granted to borrowers experiencing financial difficulty in Cat Financial's Dealer portfolio segment. The amortized cost basis of finance receivables modified for borrowers experiencing financial difficulty in the Customer portfolio segment during the three months ended September 30, 2024 and 2023, was $6 million and $13 million, respectively. Total modifications with borrowers experiencing financial difficulty represented 0.03 percent and 0.06 percent of Cat Financial's Customer portfolio for the same periods, respectively. The amortized cost basis of finance receivables modified for borrowers experiencing financial difficulty in the Customer portfolio segment during the nine months
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ended September 30, 2024 and 2023, was $12 million and $38 million, respectively. Total modifications with borrowers experiencing financial difficulty represented 0.05 percent and 0.17 percent of Cat Financial's Customer portfolio for the same periods, respectively.
For the three months ended September 30, 2024 and 2023, the financial effects of term extensions for borrowers experiencing financial difficulty added a weighted average of 5 and 8 months, respectively, to the terms of modified contracts. For the ninemonths ended September 30, 2024 and 2023, the financial effects of term extensions for borrowers experiencing financial difficulty added a weighted average of 8 and 17 months, respectively, to the terms of modified contracts. For the three months ended September 30, 2024 and 2023, the financial effects of payment delays for borrowers experiencing financial difficulty resulted in weighted average payment deferrals and/or interest only payment periods of 4 and 6 months, respectively. Forthe nine months ended September 30, 2024 and 2023, the financial effects of payment delays for borrowers experiencing financial difficulty resulted in weighted average payment deferrals and/or interest only payment periods of 6 and 7 months, respectively.
After Cat Financial modifies a finance receivable, they continue to track its performance under its most recent modified terms. As of September 30, 2024 and 2023, defaults of loans modified in the prior twelve months were not significant.
The effect of most modifications made to finance receivables for borrowers experiencing financial difficulty is already included in the allowance for credit losses based on the methodologies used to estimate the allowance; therefore, a change to the allowance for credit losses is generally not recorded upon modification. On rare occasions when principal forgiveness is provided, the amount forgiven is written off against the allowance for credit losses.
18. Fair value disclosures
A. Fair value measurements
The guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy:
•Level 1- Quoted prices for identical instruments in active markets.
•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
•Level 3- Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.
When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1. In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon valuations in which one or more significant inputs are unobservable, including internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.
We classify fair value measurements according to the lowest level input or value-driver that is significant to the valuation. We may therefore classify a measurement within Level 3 even though there may be significant inputs that are readily observable.
Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty or Caterpillar) will not be fulfilled. For financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (certain Level 2 and Level 3), our fair value calculations have been adjusted accordingly.
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Investments in debt and equity securities
We have investments in certain debt and equity securities that are recorded at fair value. Fair values for our U.S. treasury bonds and large capitalization value and smaller company growth equity securities are based upon valuations for identical instruments in active markets. Fair values for other government debt securities, corporate debt securities and mortgage-backed debt securities are based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.
We also have investments in time deposits classified as held-to-maturity debt securities. The fair value of these investments is based upon valuations observed in less active markets than Level 1. These investments have a maturity of less than one year and are recorded at amortized costs, which approximate fair value.
In addition, Insurance Services has an equity investment in a real estate investment trust (REIT) which is recorded at fair value based on the net asset value (NAV) of the investment and is not classified within the fair value hierarchy.
See Note 8 for additional information on our investments in debt and equity securities.
Derivative financial instruments
The fair value of interest rate contracts is primarily based on a standard industry accepted valuation model that utilizes the appropriate market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows. The fair value of foreign currency and commodity forward, option and cross currency contracts is based on standard industry accepted valuation models that discount cash flows resulting from the differential between the contract price and the market-based forward rate. The fair value of total return swap contracts is primarily based on valuing the underlying securities or funds using pricing by industry providers and the average Secured Overnight Financing Rate (SOFR) plus a spread.
See Note 5 for additional information.
Assets and liabilities measured on a recurring basis at fair value included in our Consolidated Statement of Financial Position as of September 30, 2024 and December 31, 2023 were as follows:
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| September 30, 2024 | ||||||||||
|
(Millions of dollars)
|
Level 1 | Level 2 | Level 3 | Measured at NAV |
Total Assets / Liabilities, at Fair Value |
|||||
| Assets | ||||||||||
| Debt securities | ||||||||||
| Government debt securities | ||||||||||
| U.S. treasury bonds | $ | 13 | $ | - | $ | - | $ | - | $ | 13 |
| Other U.S. and non-U.S. government bonds | - | 69 | - | - | 69 | |||||
| Corporate debt securities | ||||||||||
| Corporate bonds and other debt securities | - | 2,950 | - | - | 2,950 | |||||
| Asset-backed securities | - | 220 | - | - | 220 | |||||
| Mortgage-backed debt securities | ||||||||||
| U.S. governmental agency | - | 444 | - | - | 444 | |||||
| Residential | - | 2 | - | - | 2 | |||||
| Commercial | - | 128 | - | - | 128 | |||||
| Total debt securities | 13 | 3,813 | - | - | 3,826 | |||||
| Equity securities | ||||||||||
| Large capitalization value | 266 | - | - | - | 266 | |||||
| Smaller company growth | 39 | - | - | - | 39 | |||||
| REIT | - | - | - | 168 | 168 | |||||
| Total equity securities | 305 | - | - | 168 | 473 | |||||
| Derivative financial instruments - assets | ||||||||||
| Foreign currency contracts - net | - | 161 | - | - | 161 | |||||
| Commodity contracts - net | - | 7 | - | - | 7 | |||||
| Total return swap contracts - net | - | 16 | - | - | 16 | |||||
| Total assets | $ | 318 | $ | 3,997 | $ | - | $ | 168 | $ | 4,483 |
| Liabilities | ||||||||||
| Derivative financial instruments - liabilities | ||||||||||
| Interest rate contracts - net | $ | - | $ | 77 | $ | - | $ | - | $ | 77 |
| Total liabilities | $ | - | $ | 77 | $ | - | $ | - | $ | 77 |
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| December 31, 2023 | ||||||||||
|
(Millions of dollars)
|
Level 1 | Level 2 | Level 3 | Measured at NAV |
Total Assets / Liabilities, at Fair Value |
|||||
| Assets | ||||||||||
| Debt securities | ||||||||||
| Government debt securities | ||||||||||
| U.S. treasury bonds | $ | 10 | $ | - | $ | - | $ | - | $ | 10 |
| Other U.S. and non-U.S. government bonds | - | 60 | - | - | 60 | |||||
| Corporate debt securities | ||||||||||
| Corporate bonds and other debt securities | - | 2,995 | - | - | 2,995 | |||||
| Asset-backed securities | - | 192 | - | - | 192 | |||||
| Mortgage-backed debt securities | ||||||||||
| U.S. governmental agency | - | 410 | - | - | 410 | |||||
| Residential | - | 2 | - | - | 2 | |||||
| Commercial | - | 128 | - | - | 128 | |||||
| Total debt securities | 10 | 3,787 | - | - | 3,797 | |||||
| Equity securities | ||||||||||
| Large capitalization value | 223 | - | - | - | 223 | |||||
| Smaller company growth | 35 | - | - | - | 35 | |||||
| REIT | - | - | - | 180 | 180 | |||||
| Total equity securities | 258 | - | - | 180 | 438 | |||||
| Derivative financial instruments - assets | ||||||||||
| Foreign currency contracts - net | - | 207 | - | - | 207 | |||||
| Commodity contracts - net | - | 9 | - | - | 9 | |||||
| Total Assets | $ | 268 | $ | 4,003 | $ | - | $ | 180 | $ | 4,451 |
| Liabilities | ||||||||||
| Derivative financial instruments - liabilities | ||||||||||
| Interest rate contracts - net | $ | - | $ | 151 | $ | - | $ | - | $ | 151 |
| Total liabilities | $ | - | $ | 151 | $ | - | $ | - | $ | 151 |
In addition to the amounts above, certain Cat Financial loans are subject to measurement at fair value on a nonrecurring basis and are classified as Level 3 measurements. A loan is measured at fair value when management determines that collection of contractual amounts due is not probable and the loan is individually evaluated. In these cases, an allowance for credit losses may be established based either on the present value of expected future cash flows discounted at the receivables' effective interest rate, the fair value of the collateral for collateral-dependent receivables, or the observable market price of the receivable. In determining collateral value, Cat Financial estimates the current fair market value of the collateral less selling costs. Cat Financial had loans carried at fair value of $59 million and $55 million as of September 30, 2024 and December 31, 2023, respectively.
B. Fair values of financial instruments
In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair value measurements section above, we use the following methods and assumptions to estimate the fair value of our financial instruments:
Cash and cash equivalents
Carrying amount approximates fair value. We classify cash and cash equivalents as Level 1. See Consolidated Statement of Financial Position.
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Restricted cash and short-term investments
Carrying amount approximates fair value. We include restricted cash and short-term investments in Prepaid expenses and other current assets in the Consolidated Statement of Financial Position. We classify these instruments as Level 1 except for time deposits which are Level 2, and certain corporate debt securities which are Level 3. See Note 8 for additional information.
Finance receivables
We estimate fair value by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.
Wholesale inventory receivables
We estimate fair value by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.
Short-term borrowings
Carrying amount approximates fair value. We classify short-term borrowings as Level 1. See Consolidated Statement of Financial Position.
Long-term debt
We estimate fair value for fixed and floating rate debt based on quoted market prices.
Our financial instruments not carried at fair value were as follows:
| September 30, 2024 | December 31, 2023 | |||||||||
| (Millions of dollars) |
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
Fair Value Levels | Reference | ||||
| Assets | ||||||||||
|
Finance receivables - net (excluding finance leases 1 )
|
$ | 16,194 | $ | 15,899 | $ | 15,386 | $ | 15,017 | 3 | Note 17 |
|
Wholesale inventory receivables - net (excluding finance leases 1)
|
1,521 | 1,482 | 1,415 | 1,368 | 3 | |||||
| Liabilities | ||||||||||
|
Long-term debt (including amounts due within one year)
|
||||||||||
| Machinery, Energy & Transportation | 8,680 | 8,569 | 9,623 | 9,550 | 2 | |||||
| Financial Products | 25,496 | 25,472 | 23,612 | 23,299 | 2 |
1 Represents finance leases and failed sale leasebacks of $7,018 million and $6,953 million at September 30, 2024 and December 31, 2023, respectively.
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19. Other income (expense)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Millions of dollars) | 2024 | 2023 | 2024 | 2023 | ||||
| Investment and interest income | $ | 108 | $ | 135 | $ | 362 | $ | 324 |
|
Foreign exchange gains (losses) 1
|
(123) | 17 | (64) | (15) | ||||
| License fee income | 36 | 37 | 107 | 111 | ||||
| Net periodic pension and OPEB income (cost), excluding service cost | 3 | (12) | 8 | (37) | ||||
| Gains (losses) on securities | 18 | 6 | 30 | (15) | ||||
| Miscellaneous income (loss) | 34 | 12 | (56) | (14) | ||||
| Total | $ | 76 | $ | 195 | $ | 387 | $ | 354 |
1 Includes gains (losses) from foreign exchange derivative contracts. See Note 5 for further details.
20. Restructuring income/costs
Our accounting for employee separations is dependent upon how the particular program is designed. For voluntary programs, we recognize eligible separation costs at the time of employee acceptance unless the acceptance requires explicit approval by the company. For involuntary programs, we recognize eligible costs when management has approved the program, the affected employees have been properly notified and the costs are estimable.
Restructuring costs for the three and nine months ended September 30, 2024 and 2023 were as follows:
| (Millions of dollars) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| 2024 | 2023 | 2024 | 2023 | |||||
|
Employee separations 1
|
$ | 17 | $ | 10 | $ | 49 | $ | 32 |
|
Divestitures 1
|
- | - | 164 | 586 | ||||
|
Contract terminations 1
|
6 | - | 7 | - | ||||
|
Long-lived asset impairments 1
|
- | 2 | 7 | 4 | ||||
|
Other 2
|
47 | 34 | 95 | 66 | ||||
| Total restructuring (income) costs | $ | 70 | $ | 46 | $ | 322 | $ | 688 |
|
1Recognized in Other operating (income) expenses.
|
||||||||
|
2Represents costs related to our restructuring programs, primarily for inventory write-downs, project management, equipment relocation and accelerated depreciation, all of which are primarily included in Cost of goods sold.
|
||||||||
The restructuring costs for the nine months ended September 30, 2024 were primarily related to the divestitures of certain non-US entities. The restructuring costs for the nine months ended September 30, 2023 were primarily related to the divestiture of the company's Longwall business within Resource Industries. The divestiture closed on February 1, 2023 and resulted in a pre-tax loss of approximately $586 million, primarily a non-cash item driven by the release of $494 million of accumulated foreign currency translation.
In 2024 and 2023, all restructuring costs are excluded from segment profit.
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21. Supplier finance programs
We facilitate voluntary supplier finance programs (the "Programs") through participating financial institutions. The Programs are available to a wide range of suppliers and allow them the option to manage their cash flow. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the Programs. The range of payment terms, typically 60-90 days, we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the Programs. The amount of obligations outstanding that are confirmed as valid to the participating financial institutions for suppliers who voluntarily participate in the Programs, included in Accounts payable in the Consolidated Statement of Financial Position, were $818 million and $803 million at September 30, 2024 and December 31, 2023, respectively.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide information that will assist the reader in understanding the company's Consolidated Financial Statements, the changes in certain key items in those financial statements between select periods and the primary factors that accounted for those changes. In addition, we discuss how certain accounting principles, policies and critical estimates affect our Consolidated Financial Statements. Our discussion also contains certain forward-looking statements related to future events and expectations as well as a discussion of the many factors that we believe may have an impact on our business on an ongoing basis. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the company's business under Part I, Item 1A. Risk Factors of the 2023 Form 10-K.
Highlights for the third quarter of 2024 include:
•Total sales and revenues for the third quarter of 2024 were $16.106 billion, a decrease of $704 million, or 4 percent, compared with $16.810 billion in the third quarter of 2023. In the three primary segments, sales were lower in Construction Industriesand Resource Industriesand higher in Energy & Transportation.
•Operating profit margin was 19.5 percent for the third quarter of 2024, compared with 20.5 percent for the third quarter of 2023. Adjusted operating profit marginwas 20.0 percent for the third quarter of 2024, compared with 20.8 percent for the third quarter of 2023.
•Third-quarter 2024 profit per share was $5.06, and excluding the items in the table below, adjusted profit per sharewas $5.17. Third-quarter 2023 profit per share was $5.45, and excluding the items in the table below, adjusted profit per share was $5.52.
•Caterpillar ended the third quarter of 2024 with $5.6 billion of enterprise cash.
Highlights for the nine months ended September 30, 2024 include:
•Total sales and revenues were $48.594 billion for the nine months ended September 30, 2024, a decrease of $1.396 billion, or 3 percent, compared with $49.990 billion for the nine months ended September 30, 2023.
•Operating profit margin was 20.9 percent for the nine months ended September 30, 2024, compared with 19.7 percent for the nine months ended September 30, 2023. Adjusted operating profit margin was 21.5 percent for the nine months ended September 30, 2024, compared with 21.0 percent for the nine months ended September 30, 2023.
•Profit per share for the nine months ended September 30, 2024, was $16.27, and excluding the items in the table below, adjusted profit per share was $16.75. Profit per share for the nine months ended September 30, 2023, was $14.85, and excluding the items in the table below, adjusted profit per share was $15.98.
•Enterprise operating cash flow was $8.6 billion for the nine months ended September 30, 2024.
•In order for our results to be more meaningful to our readers, we have separately quantified the impact of several significant items. A detailed reconciliation of GAAP to non-GAAP financial measures is included on pages 66-68.
| Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||||||||
| (Dollars in millions except per share data) | Profit Before Taxes |
Profit Per Share |
Profit Before Taxes |
Profit Per Share |
Profit Before Taxes |
Profit Per Share |
Profit Before Taxes |
Profit Per Share |
||||||||
| Profit | $ | 3,098 | $ | 5.06 | $ | 3,515 | $ | 5.45 | $ | 10,130 | $ | 16.27 | $ | 9,801 | $ | 14.85 |
|
Restructuring (income) costs- divestitures of certain non-U.S. entities
|
- | - | - | - | 164 | 0.22 | - | - | ||||||||
| Other restructuring (income) costs | 70 | 0.11 | 46 | 0.07 | 158 | 0.26 | 102 | 0.17 | ||||||||
|
Restructuring costs - Longwall divestiture
|
- | - | - | - | - | - | 586 | 1.13 | ||||||||
| Deferred tax valuation allowance adjustments | - | - | - | - | - | - | - | (0.17) | ||||||||
| Adjusted profit | $ | 3,168 | $ | 5.17 | $ | 3,561 | $ | 5.52 | $ | 10,452 | $ | 16.75 | $ | 10,489 | $ | 15.98 |
Overview
Total sales and revenues for the third quarter of 2024 were $16.106 billion, a decrease of $704 million, or 4 percent, compared with $16.810 billion in the third quarter of 2023. The decrease was primarily due to lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users. In addition, changes in dealer inventorieshad an unfavorable impact to sales volume. Dealer inventory increased less during the third quarter of 2024 than during the third quarter of 2023.
Third-quarter 2024 profit per share was $5.06, compared with $5.45 profit per share in the third quarter of 2023. In the third quarters of 2024 and 2023, profit per share included restructuring costs. Profit for the third quarter of 2024 was $2.464 billion, a decrease of $330 million, or 12 percent, compared with $2.794 billion for the third quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume, partially offset by favorable price realization.
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Trends and Economic Conditions
Outlook for Key End Markets
Our results continue to reflect the benefit of the diversity of our end markets.
In Construction Industries, we expect lower sales of equipment to end users in the fourth quarter of 2024 as compared to the fourth quarter of 2023, but remain positive about the longer-term demand outlook. In North America, we anticipate lower sales of equipment to end users in the fourth quarter of 2024 primarily due to lower rental fleet loading, consistent with the trend in the second and third quarters of 2024. However, dealer rental revenue continues to grow. In addition, government-related infrastructure projects are expected to remain healthy, supported by funding yet to be spent from the Infrastructure Investment and Jobs Act (IIJA). In Asia Pacific, outside of China, we expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level in the excavator industry above 10-tons. In EAME, we anticipate that weak economic conditions in Europe will continue, to be partially offset by continued healthy construction demand in the Middle East. Construction activity in Latin Americaremains healthy, and we are expecting modest growth to continue. In addition, we anticipate the ongoing benefit of our servicesinitiatives will positively impact Construction Industries.
In Resource Industries, for both mining and heavy construction and quarry and aggregates, we continue to anticipate lower machine sales volume in the fourth quarter of 2024 as compared to a strong performance in the fourth quarter of 2023. However, we expect the year-over-year rate of decline for sales of equipment to end users to moderate in the fourth quarter of 2024 as compared to previous quarters. We expect higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to have strong customer acceptance. Customers continue to display capital discipline, however, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth.
In Energy & Transportation, Power Generation demand is expected to remain strong, and we expect robust growth for reciprocating engines and for turbines and turbine-related services in the fourth quarter of 2024 and for the full-year as compared to 2023. Overall strength in Power Generation continues to be driven by data center growth related to cloud computing and generative artificial intelligence (AI), and we expect this trend to continue. For Oil & Gas, in total, we expect a stronger year overall in 2024 as compared to 2023. For turbines and turbine-related services used in Oil & Gas applications, we expect a strong fourth quarter of 2024, but sales are expected to be lower than the fourth quarter of 2023 due to the timing of deliveries. We expect the increase in sales for turbines and turbine-related services used in Power Generation will mostly offset the decrease in sales for turbines and turbine-related services used in Oil & Gas. Overall, we expect roughly flat sales in turbines and turbine-related services in the fourth quarter of 2024 as compared to the fourth quarter of 2023. Turbines and turbine-related services has a strong backlog as well as healthy order and inquiry activity, and we continue to expect growth for turbines and turbine-related services in Oil & Gas in 2024 as compared to 2023. After a strong 2023, we expect reciprocating engine sales for Oil & Gas to be slightly down in 2024, primarily due to ongoing softness in well servicing. We still expect gas compression for reciprocating engines used in Oil & Gas to be up in 2024 as compared to 2023, however, we expect it to soften in the near-term as equipment lead times have normalized. Industrial demand is expected to remain at a relatively low level in 2024 as compared to 2023. In Transportation, we anticipate growth in 2024 for both rail services and marine applications.
Fourth-Quarter 2024 Company Trends and Expectations
In the fourth quarter of 2024, we expect slightly lower total sales and revenues as compared to the fourth quarter of 2023, impacted by lower machine sales of equipment to end users. Machine dealer inventory is expected to decrease less during the fourth quarter of 2024 as compared to the $1.4 billion decrease during the fourth quarter of 2023. We expect machine dealer inventory at the end of 2024 to be around the same level as the end of 2023. Price realization for machines is expected to trend lower with the normalizing pricing environment, partially offset by favorable price realization in Energy & Transportation. Services revenues increased in the third quarter of 2024, and the ongoing benefit of our services initiatives are expected to positively impact sales in the fourth quarter of 2024.
In the fourth quarter of 2024 as compared to the fourth quarter of 2023, we expect favorable manufacturing costsand lower selling, general and administrative (SG&A) and research and development (R&D) expenses to be more than offset by the profit impact of lower sales volume. Lower SG&A/R&D expenses are expected to be primarily driven by lower short-term incentive compensation in the fourth quarter of 2024 as compared to the fourth quarter of 2023.
For the three primary segments, as compared to the fourth quarter of 2023, we expect lower Construction Industries' sales in the fourth quarter of 2024 driven by lower sales of equipment to end users and unfavorable price realization. Resource Industries' sales in the fourth quarter of 2024 are expected to be slightly lower driven by lower sales of equipment to end users as compared to a strong fourth quarter of 2023. In Energy & Transportation, we expect sales to be slightly higher supported by strength in Power Generation.
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In the fourth quarter of 2024 as compared to the fourth quarter of 2023, within Construction Industries, we expect unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate an unfavorable profit impact from lower sales volume and higher SG&A/R&D expenses as we continue to invest in strategic initiatives for future long-term profitable growth, such as services growth and technology, including autonomy, alternative fuels, connectivity and digital and electrification, to be partially offset by favorable manufacturing costs. In Energy & Transportation, we expect favorable price realization.
Full-Year 2024 Company Trends and Expectations
For 2024, we expect continued services growth. We also expect restructuring costs to be approximately $400 million and expect capital expenditures to be around $2.0 billion. We expect the annual effective tax rate, excluding discrete items, to be 22.5 percent.
Global Business Conditions
We continue to monitor a variety of external factors around the world, such as supply chain disruptions, inflationary cost and labor pressures. Areas of particular focus include transportation, certain components and raw materials. We continue to work to minimize supply chain challenges that may impact our ability to meet customer demand. We continue to assess the environment to determine if additional actions need to be taken.
Risk Factors
Risk factors are disclosed within Item 1A. Risk Factors of the 2023 Form 10-K.
Notes:
•Glossary of terms is included on pages 60-62; first occurrence of terms shown in bold italics.
•Information on non-GAAP financial measures is included on pages 66-68.
•Certain amounts may not add due to rounding.
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Consolidated Results of Operations
THREE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2023
CONSOLIDATED SALES AND REVENUES
The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the third quarter of 2023 (at left) and the third quarter of 2024 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees.
Total sales and revenues for the third quarter of 2024 were $16.106 billion, a decrease of $704 million, or 4 percent, compared with $16.810 billion in the third quarter of 2023. The decrease was primarily due to lower sales volume of $759 million. The decrease in sales volume was mainly driven by lower sales of equipment to end users. In addition, changes in dealer inventorieshad an unfavorable impact to sales volume. Dealer inventory increased less during the third quarter of 2024 than during the third quarter of 2023.
In the three primary segments, sales were lower in Construction Industries and Resource Industries and higher in Energy & Transportation.
North America sales decreased 5 percent primarily due to lower sales volume, partially offset by favorable price realization. The decrease in sales volume was primarily driven by lower sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased less during the third quarter of 2024 than during the third quarter of 2023.
Sales increased 6 percent in Latin America mainly due to higher sales volume, partially offset by unfavorable currencyimpacts, primarily related to the Brazilian real. The increase in sales volume was primarily driven by the impact from changes in dealer inventories. Dealer inventory increased during the third quarter of 2024, compared with a decrease during the third quarter of 2023.
EAME sales decreased 6 percent primarily due to lower sales volume. The decrease in sales volume was primarily driven by lower sales of equipment to end users.
Asia/Pacific sales decreased 7 percent due to lower sales volume. The decrease in sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased during the third quarter of 2024, compared with an increase during the third quarter of 2023.
Total dealer inventory increased $400 million during the third quarter of 2024, compared with an increase of $600 million during the third quarter of 2023. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers' demand expectations take into account seasonal changes, macroeconomic conditions, machine rentals and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers.
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| Sales and Revenues by Segment | ||||||||||||||||
| (Millions of dollars) | Third Quarter 2023 |
Sales Volume |
Price Realization |
Currency | Inter-Segment / Other | Third Quarter 2024 |
$ Change |
% Change |
||||||||
| Construction Industries | $ | 6,999 | $ | (458) | $ | (147) | $ | (64) | $ | 15 | $ | 6,345 | $ | (654) | (9 | %) |
| Resource Industries | 3,351 | (352) | 38 | (11) | 2 | 3,028 | (323) | (10 | %) | |||||||
| Energy & Transportation | 6,859 | 57 | 213 | (20) | 78 | 7,187 | 328 | 5 | % | |||||||
| All Other Segment | 106 | (2) | 1 | - | (13) | 92 | (14) | (13 | %) | |||||||
| Corporate Items and Eliminations | (1,327) | (4) | (1) | (7) | (82) | (1,421) | (94) | |||||||||
|
Machinery, Energy & TransportationSales
|
15,988 | (759) | 104 | (102) | - | 15,231 | (757) | (5 | %) | |||||||
| Financial Products Segment | 979 | - | - | - | 55 | 1,034 | 55 | 6 | % | |||||||
| Corporate Items and Eliminations | (157) | - | - | - | (2) | (159) | (2) | |||||||||
|
Financial Products Revenues
|
822 | - | - | - | 53 | 875 | 53 | 6 | % | |||||||
| Consolidated Sales and Revenues | $ | 16,810 | $ | (759) | $ | 104 | $ | (102) | $ | 53 | $ | 16,106 | $ | (704) | (4 | %) |
| Sales and Revenues by Geographic Region |
| North America | Latin America | EAME | Asia/Pacific | External Sales and Revenues | Inter-Segment | Total Sales and Revenues | ||||||||||||||||||||||
| (Millions of dollars) | $ | % Chg | $ | % Chg | $ | % Chg | $ | % Chg | $ | % Chg | $ | % Chg | $ | % Chg | ||||||||||||||
| Third Quarter 2024 | ||||||||||||||||||||||||||||
| Construction Industries | $ | 3,629 | (11 | %) | $ | 658 | 19 | % | $ | 1,150 | (15 | %) | $ | 875 | (12 | %) | $ | 6,312 | (10 | %) | $ | 33 | 83 | % | $ | 6,345 | (9 | %) |
| Resource Industries | 1,131 | (17 | %) | 498 | - | % | 442 | (13 | %) | 863 | (3 | %) | 2,934 | (10 | %) | 94 | 2 | % | 3,028 | (10 | %) | |||||||
| Energy & Transportation | 3,214 | 8 | % | 449 | (2 | %) | 1,486 | 4 | % | 856 | (5 | %) | 6,005 | 4 | % | 1,182 | 7 | % | 7,187 | 5 | % | |||||||
| All Other Segment | 12 | (25 | %) | - | 100 | % | 3 | (40 | %) | 14 | 40 | % | 29 | (3 | %) | 63 | (17 | %) | 92 | (13 | %) | |||||||
| Corporate Items and Eliminations | (43) | (3) | 9 | (12) | (49) | (1,372) | (1,421) | |||||||||||||||||||||
| Machinery, Energy & Transportation Sales | 7,943 | (5 | %) | 1,602 | 6 | % | 3,090 | (6 | %) | 2,596 | (7 | %) | 15,231 | (5 | %) | - | - | % | 15,231 | (5 | %) | |||||||
| Financial Products Segment | 695 | 11 | % | 97 | (12 | %) | 130 | (2 | %) | 112 | 2 | % | 1,034 |
1
|
6 | % | - | - | % | 1,034 | 6 | % | ||||||
| Corporate Items and Eliminations | (93) | (21) | (21) | (24) | (159) | - | (159) | |||||||||||||||||||||
| Financial Products Revenues | 602 | 12 | % | 76 | (15 | %) | 109 | (1 | %) | 88 | 1 | % | 875 | 6 | % | - | - | % | 875 | 6 | % | |||||||
| Consolidated Sales and Revenues | $ | 8,545 | (4 | %) | $ | 1,678 | 5 | % | $ | 3,199 | (6 | %) | $ | 2,684 | (7 | %) | $ | 16,106 | (4 | %) | $ | - | - | % | $ | 16,106 | (4 | %) |
| Third Quarter 2023 | ||||||||||||||||||||||||||||
| Construction Industries | $ | 4,078 | $ | 555 | $ | 1,351 | $ | 997 | $ | 6,981 | $ | 18 | $ | 6,999 | ||||||||||||||
| Resource Industries | 1,366 | 499 | 508 | 886 | 3,259 | 92 | 3,351 | |||||||||||||||||||||
| Energy & Transportation | 2,966 | 460 | 1,428 | 901 | 5,755 | 1,104 | 6,859 | |||||||||||||||||||||
| All Other Segment | 16 | (1) | 5 | 10 | 30 | 76 | 106 | |||||||||||||||||||||
| Corporate Items and Eliminations | (35) | 1 | - | (3) | (37) | (1,290) | (1,327) | |||||||||||||||||||||
| Machinery, Energy & Transportation Sales | 8,391 | 1,514 | 3,292 | 2,791 | 15,988 | - | 15,988 | |||||||||||||||||||||
| Financial Products Segment | 627 | 110 | 132 | 110 | 979 |
1
|
- | 979 | ||||||||||||||||||||
| Corporate Items and Eliminations | (91) | (21) | (22) | (23) | (157) | - | (157) | |||||||||||||||||||||
| Financial Products Revenues | 536 | 89 | 110 | 87 | 822 | - | 822 | |||||||||||||||||||||
| Consolidated Sales and Revenues | $ | 8,927 | $ | 1,603 | $ | 3,402 | $ | 2,878 | $ | 16,810 | $ | - | $ | 16,810 |
1Includes revenues from Machinery, Energy & Transportation of $190 million and $181 million in the third quarter of 2024 and 2023, respectively.
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CONSOLIDATED OPERATING PROFIT
The chart above graphically illustrates reasons for the change in consolidated operating profit between the third quarter of 2023 (at left) and the third quarter of 2024 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees. The bar titled Other includes consolidating adjustmentsand Machinery, Energy & Transportation's other operating (income) expenses.
Operating profit for the third quarter of 2024 was $3.147 billion, a decrease of $302 million, or 9 percent, compared with $3.449 billion in the third quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume of $372 million, partially offset by favorable price realization of $104 million.
Operating profit margin was 19.5 percent for the third quarter of 2024, compared with 20.5 percent for the third quarter of 2023.
| Profit (Loss) by Segment | ||||||||
| (Millions of dollars) | Third Quarter 2024 | Third Quarter 2023 |
$ Change |
%
Change
|
||||
| Construction Industries | $ | 1,486 | $ | 1,847 | $ | (361) | (20 | %) |
| Resource Industries | 619 | 730 | (111) | (15 | %) | |||
| Energy & Transportation | 1,433 | 1,181 | 252 | 21 | % | |||
| All Other Segment | (13) | 21 | (34) | (162 | %) | |||
| Corporate Items and Eliminations | (427) | (386) | (41) | |||||
| Machinery, Energy & Transportation | 3,098 | 3,393 | (295) | (9 | %) | |||
| Financial Products Segment | 246 | 203 | 43 | 21 | % | |||
| Corporate Items and Eliminations | (30) | 18 | (48) | |||||
| Financial Products | 216 | 221 | (5) | (2 | %) | |||
| Consolidating Adjustments | (167) | (165) | (2) | |||||
| Consolidated Operating Profit | $ | 3,147 | $ | 3,449 | $ | (302) | (9 | %) |
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Other Profit/Loss and Tax Items
▪Interest expense excluding Financial Products in the third quarter of 2024 was $125 million, compared with $129 million in the third quarter of 2023. The decrease was due to lower average debt outstanding, partially offset by higher average borrowing rates.
▪Other income (expense) in the third quarter of 2024 was income of $76 million, compared with income of $195 million in the third quarter of 2023. The change was primarily driven by unfavorable foreign currency impacts.
▪The effective tax rate for the third quarter of 2024 was 20.7 percent compared to 20.9 percent for the third quarter of 2023. Excluding the discrete items discussed below, the estimated annual tax rate was 22.5 percent for the third quarters of 2024 and 2023.
In the third quarter of 2024, the company recorded discrete tax benefits of $47 million to reflect changes in estimates related to prior years. In addition, a discrete tax benefit of $7 million was recorded in the third quarter of 2024, compared with a $22 million benefit in the third quarter of 2023, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. The company also recorded a $34 million benefit in the third quarter of 2023 due to a decrease from the second-quarter estimated annual tax rate.
Please see a reconciliation of GAAP to non-GAAP financial measures on pages 66-68.
Construction Industries
Construction Industries' total sales were $6.345 billion in the third quarter of 2024, a decrease of $654 million, or 9 percent, compared with $6.999 billion in the third quarter of 2023. The decrease was primarily due to lower sales volume of $458 million and unfavorable price realization of $147 million. The decrease in sales volume was mainly driven by lower sales of equipment to end users.
•In North America, sales decreased primarily due to lower sales volume. Lower sales volume was mainly driven by lower sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased less during the third quarter of 2024 than during the third quarter of 2023.
•Sales increased in Latin America mainly due to higher sales volume, partially offset by unfavorable currency impacts, primarily related to the Brazilian real, and unfavorable price realization. Higher sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory increased during the third quarter of 2024, compared with a decrease during the third quarter of 2023.
•In EAME, sales decreased primarily due to lower sales volume. Lower sales volume was mainly driven by lower sales of equipment to end users.
•Sales decreased in Asia/Pacific mainly due to lower sales volume and unfavorable currency impacts primarily related to the Japanese yen. Lower sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased during the third quarter of 2024, compared with an increase during the third quarter of 2023.
Construction Industries' segment profit was $1.486 billion in the third quarter of 2024, a decrease of $361 million, or 20 percent, compared with $1.847 billion in the third quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume of $276 million and unfavorable price realization of $147 million.
Construction Industries' segment profit as a percent of total sales was 23.4 percent in the third quarter of 2024, compared with 26.4 percent in the third quarter of 2023.
Resource Industries
Resource Industries' total sales were $3.028 billion in the third quarter of 2024, a decrease of $323 million, or 10 percent, compared with $3.351 billion in the third quarter of 2023. The decrease was primarily due to lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users.
Resource Industries' segment profit was $619 million in the third quarter of 2024, a decrease of $111 million, or 15 percent, compared with $730 million in the third quarter of 2023. The decrease was mainly due to the profit impact of lower sales volume.
Resource Industries' segment profit as a percent of total sales was 20.4 percent in the third quarter of 2024, compared with 21.8 percent in the third quarter of 2023.
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Energy & Transportation
| Sales by Application | ||||||||
| (Millions of dollars) | Third Quarter 2024 | Third Quarter 2023 |
$ Change |
%
Change
|
||||
| Oil and Gas | $ | 1,656 | $ | 1,667 | $ | (11) | (1 | %) |
| Power Generation | 2,011 | 1,598 | 413 | 26 | % | |||
| Industrial | 1,028 | 1,220 | (192) | (16 | %) | |||
| Transportation | 1,310 | 1,270 | 40 | 3 | % | |||
| External Sales | 6,005 | 5,755 | 250 | 4 | % | |||
| Inter-segment | 1,182 | 1,104 | 78 | 7 | % | |||
| Total Sales | $ | 7,187 | $ | 6,859 | $ | 328 | 5 | % |
Energy & Transportation's total sales were $7.187 billion in the third quarter of 2024, an increase of $328 million, or 5 percent, compared with $6.859 billion in the third quarter of 2023. The increase in sales was primarily due to favorable price realization of $213 million and higher sales volume of $135 million, including inter-segment sales.
•Oil and Gas - Sales decreased slightly as lower sales of reciprocating engines used in well servicing were primarily offset by higher sales for turbines and turbine-related services.
•Power Generation - Sales increased in large reciprocating engines, primarily data center applications. Turbines and turbine-related services increased as well.
•Industrial - Sales decreased in EAME and North America.
•Transportation - Sales increased in marine applications, partially offset by lower deliveries of international locomotives.
Energy & Transportation's segment profit was $1.433 billion in the third quarter of 2024, an increase of $252 million, or 21 percent, compared with $1.181 billion in the third quarter of 2023. The increase was mainly due to favorable price realization.
Energy & Transportation's segment profit as a percent of total sales was 19.9 percent in the third quarter of 2024, compared with 17.2 percent in the third quarter of 2023.
Financial Products Segment
Financial Products' segment revenues were $1.034 billion in the third quarter of 2024, an increase of $55 million, or 6 percent, compared with $979 million in the third quarter of 2023. The increase was primarily due to a favorable impact from higher average earning assetsof $34 million driven by North America, and a favorable impact from higher average financing rates across all regions of $23 million.
Financial Products' segment profit was $246 million in the third quarter of 2024, an increase of $43 million, or 21 percent, compared with $203 million in the third quarter of 2023. The increase was mainly due to a favorable impact from equity securities of $29 million and lower provision for credit losses at Cat Financial of $16 million.
At the end of the third quarter of 2024, past dues at Cat Financial were 1.74 percent, compared with 1.96 percent at the end of the third quarter of 2023. Write-offs, net of recoveries, were $27 million for the third quarter of 2024, compared with $9 million for the third quarter of 2023. As of September 30, 2024, Cat Financial's allowance for credit losses totaled $255 million, or 0.87 percent of finance receivables, compared with $254 million, or 0.89 percent of finance receivables at June 30, 2024. The allowance for credit losses at year-end 2023 was $331 million, or 1.18 percent of finance receivables.
Corporate Items and Eliminations
Expense for corporate items and eliminations was $457 million in the third quarter of 2024, an increase of $89 million from the third quarter of 2023. Lower corporate costs were more than offset by an unfavorable change in fair value adjustments related to deferred compensation plans, increased expenses due to timing differences, unfavorable impacts of segment reporting methodology differences and higher restructuring costs.
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NINE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2023
CONSOLIDATED SALES AND REVENUES
The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the nine months ended September 30, 2023 (at left) and the nine months ended September 30, 2024 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees.
Total sales and revenues were $48.594 billion for the nine months ended September 30, 2024, a decrease of $1.396 billion, or 3 percent, compared with $49.990 billion for the nine months ended September 30, 2023. The decrease was primarily due to lower sales volume of $2.684 billion, partially offset by favorable price realization of $1.292 billion. The decrease in sales volume was mainly due to lower sales of equipment to end users. In addition, changes in dealer inventories had an unfavorable impact to sales volume. Dealer inventory increased less during the nine months ended September 30, 2024, than during the nine months ended September 30, 2023.
In the three primary segments, sales were lower in Construction Industries and Resource Industries and higher in Energy & Transportation.
North America sales increased 1 percent primarily due to favorable price realization, partially offset by lower sales volume. The decrease in sales volume is mainly driven by the impact from changes in dealer inventories. Dealer inventory increased less during the nine months ended September 30, 2024, than during the nine months ended September 30, 2023.
Sales increased 4 percent in Latin America mainly due to higher sales volume. The increase in sales volume was primarily driven by the impact from changes in dealer inventories. Dealer inventory increased during the nine months ended September 30, 2024, compared with a decrease during the nine months ended September 30, 2023.
EAME sales decreased 13 percent primarily due to lower sales volume. The decrease in sales volume was mainly due to lower sales of equipment to end users.
Asia/Pacific sales decreased 7 percent mainly due to lower sales volume. The decrease in sales volume was primarily driven by the impact from changes in dealer inventories. Dealer inventory decreased during the nine months ended September 30, 2024, compared with an increase during the nine months ended September 30, 2023.
Total dealer inventory increased about $1.7 billion during the nine months ended September 30, 2024, compared with an increase of about $2.9 billion during the nine months ended September 30, 2023. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers' demand expectations take into account seasonal changes, macroeconomic conditions, machine rentals and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers.
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| Sales and Revenues by Segment | ||||||||||||||||
| (Millions of dollars) | Nine Months Ended September 30, 2023 |
Sales Volume |
Price Realization |
Currency | Inter-Segment / Other | Nine Months Ended September 30, 2024 |
$ Change |
% Change |
||||||||
| Construction Industries | $ | 20,899 | $ | (1,510) | $ | 230 | $ | (141) | $ | (26) | $ | 19,452 | $ | (1,447) | (7 | %) |
| Resource Industries | 10,341 | (1,287) | 379 | (31) | 25 | 9,427 | (914) | (9 | %) | |||||||
| Energy & Transportation | 20,332 | 159 | 679 | (33) | 68 | 21,205 | 873 | 4 | % | |||||||
| All Other Segment | 333 | (10) | 4 | (1) | (17) | 309 | (24) | (7 | %) | |||||||
| Corporate Items and Eliminations | (4,273) | (36) | - | (3) | (50) | (4,362) | (89) | |||||||||
| Machinery, Energy & Transportation Sales | 47,632 | (2,684) | 1,292 | (209) | - | 46,031 | (1,601) | (3 | %) | |||||||
| Financial Products Segment | 2,804 | - | - | - | 225 | 3,029 | 225 | 8 | % | |||||||
| Corporate Items and Eliminations | (446) | - | - | - | (20) | (466) | (20) | |||||||||
| Financial Products Revenues | 2,358 | - | - | - | 205 | 2,563 | 205 | 9 | % | |||||||
| Consolidated Sales and Revenues | $ | 49,990 | $ | (2,684) | $ | 1,292 | $ | (209) | $ | 205 | $ | 48,594 | $ | (1,396) | (3 | %) |
| 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 | ||||||||||||||
| Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||
| Construction Industries | $ | 11,419 | (2 | %) | $ | 1,930 | 12 | % | $ | 3,193 | (23 | %) | $ | 2,843 | (14 | %) | $ | 19,385 | (7 | %) | $ | 67 | (28 | %) | $ | 19,452 | (7 | %) |
| Resource Industries | 3,601 | (10 | %) | 1,498 | (1 | %) | 1,349 | (17 | %) | 2,704 | (8 | %) | 9,152 | (9 | %) | 275 | 10 | % | 9,427 | (9 | %) | |||||||
| Energy & Transportation | 9,473 | 9 | % | 1,296 | - | % | 4,201 | (2 | %) | 2,602 | 3 | % | 17,572 | 5 | % | 3,633 | 2 | % | 21,205 | 4 | % | |||||||
| All Other Segment | 43 | (14 | %) | (1) | - | % | 11 | (15 | %) | 39 | 5 | % | 92 | (7 | %) | 217 | (7 | %) | 309 | (7 | %) | |||||||
| Corporate Items and Eliminations | (121) | (6) | (23) | (20) | (170) | (4,192) | (4,362) | |||||||||||||||||||||
| Machinery, Energy & Transportation Sales | 24,415 | 1 | % | 4,717 | 4 | % | 8,731 | (13 | %) | 8,168 | (7 | %) | 46,031 | (3 | %) | - | - | % | 46,031 | (3 | %) | |||||||
| Financial Products Segment | 2,022 | 13 | % | 299 | (5 | %) | 377 | 4 | % | 331 | 1 | % | 3,029 |
1
|
8 | % | - | - | % | 3,029 | 8 | % | ||||||
| Corporate Items and Eliminations | (276) | (60) | (60) | (70) | (466) | - | (466) | |||||||||||||||||||||
| Financial Products Revenues | 1,746 | 14 | % | 239 | (7 | %) | 317 | 5 | % | 261 | (1 | %) | 2,563 | 9 | % | - | - | % | 2,563 | 9 | % | |||||||
| Consolidated Sales and Revenues | $ | 26,161 | 1 | % | $ | 4,956 | 4 | % | $ | 9,048 | (13 | %) | $ | 8,429 | (7 | %) | $ | 48,594 | (3 | %) | $ | - | - | % | $ | 48,594 | (3 | %) |
| Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||
| Construction Industries | $ | 11,654 | $ | 1,720 | $ | 4,125 | $ | 3,307 | $ | 20,806 | $ | 93 | $ | 20,899 | ||||||||||||||
| Resource Industries | 4,016 | 1,511 | 1,624 | 2,940 | 10,091 | 250 | 10,341 | |||||||||||||||||||||
| Energy & Transportation | 8,658 | 1,299 | 4,291 | 2,519 | 16,767 | 3,565 | 20,332 | |||||||||||||||||||||
| All Other Segment | 50 | (1) | 13 | 37 | 99 | 234 | 333 | |||||||||||||||||||||
| Corporate Items and Eliminations | (115) | (1) | (3) | (12) | (131) | (4,142) | (4,273) | |||||||||||||||||||||
| Machinery, Energy & Transportation Sales | 24,263 | 4,528 | 10,050 | 8,791 | 47,632 | - | 47,632 | |||||||||||||||||||||
| Financial Products Segment | 1,795 | 316 | 364 | 329 | 2,804 |
1
|
- | 2,804 | ||||||||||||||||||||
| Corporate Items and Eliminations | (259) | (60) | (61) | (66) | (446) | - | (446) | |||||||||||||||||||||
| Financial Products Revenues | 1,536 | 256 | 303 | 263 | 2,358 | - | 2,358 | |||||||||||||||||||||
| Consolidated Sales and Revenues | $ | 25,799 | $ | 4,784 | $ | 10,353 | $ | 9,054 | $ | 49,990 | $ | - | $ | 49,990 |
1Includes revenues from Machinery, Energy & Transportation of $547 million and $515 million in the nine months ended September 30, 2024 and 2023, respectively.
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CONSOLIDATED OPERATING PROFIT
The chart above graphically illustrates reasons for the change in consolidated operating profit between the nine months ended September 30, 2023 (at left) and the nine months ended September 30, 2024 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees. The bar titled Longwall Divestiture is included in total restructuring costs. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other operating (income) expenses.
Operating profit for the nine months ended September 30, 2024, was $10.148 billion, an increase of $316 million, or 3 percent, compared with $9.832 billion for the nine months ended September 30, 2023. The increase was primarily due to favorable price realization of $1.292 billion, the absence of the impact of the divestiture of the company's Longwall business in 2023 of $586 million and favorable manufacturing costs of $247 million, partially offset by the profit impact of lower sales volume of $1.106 billion, higher SG&A/R&D expenses of $262 million, higher restructuring costs of $220 million and unfavorable currency impacts of $105 million. Favorable manufacturing costs largely reflected lower freight. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives.
For the nine months ended September 30, 2024, restructuring costs increased primarily due to the divestitures of certain non-U.S. entities.
Operating profit margin was 20.9 percent for the nine months ended September 30, 2024, compared with 19.7 percent for the nine months ended September 30, 2023.
| Profit (Loss) by Segment | ||||||||
| (Millions of dollars) | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
$ Change |
%
Change
|
||||
| Construction Industries | $ | 4,991 | $ | 5,440 | $ | (449) | (8 | %) |
| Resource Industries | 2,067 | 2,234 | (167) | (7 | %) | |||
| Energy & Transportation | 4,259 | 3,507 | 752 | 21 | % | |||
| All Other Segment | 32 | 42 | (10) | (24 | %) | |||
| Corporate Items and Eliminations | (1,186) | (1,666) | 480 | |||||
| Machinery, Energy & Transportation | 10,163 | 9,557 | 606 | 6 | % | |||
| Financial Products Segment | 766 | 675 | 91 | 13 | % | |||
| Corporate Items and Eliminations | (298) | 60 | (358) | |||||
| Financial Products | 468 | 735 | (267) | (36 | %) | |||
| Consolidating Adjustments | (483) | (460) | (23) | |||||
| Consolidated Operating Profit | $ | 10,148 | $ | 9,832 | $ | 316 | 3 | % |
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Other Profit/Loss and Tax Items
▪Interest expense excluding Financial Products for the nine months ended September 30, 2024, was $405 million, compared with $385 million for the nine months ended September 30, 2023. The increase was due to higher average borrowing rates.
▪Other income (expense) for the nine months ended September 30, 2024, was income of $387 million, compared with income of $354 million for the nine months ended September 30, 2023. Unfavorable foreign currency impacts were more than offset by favorable impacts from pension and other postemployment benefit (OPEB)plan costs and higher investment and interest income.
▪The effective tax rate for the nine months ended September 30, 2024, was 21.4 percent compared to 22.4 percent for the nine months ended September 30, 2023. Excluding the discrete items discussed below, the estimated annual tax rate was 22.5 percent for the nine months ended September 30, 2024, and September 30, 2023, respectively.
The 2024 estimated annual tax rate excludes the impact of year-to-date losses of $164 million for the divestitures of certain non-U.S. entities with related tax benefits of $54 million. The 2023 estimated annual tax rate excludes the impact of the nondeductible loss of $586 million related to the divestiture of the company's Longwall business. In the nine months ended September 30, 2024, the company recorded discrete tax benefits of $47 million to reflect changes in estimates related to prior years. In addition, a discrete tax benefit of $49 million was recorded in the nine months ended September 30, 2024, compared with $54 million for the nine months ended September 30, 2023, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. In the nine months ended September 30, 2023, the company recorded a discrete tax benefit of $88 million due to a change in the valuation allowance for certain deferred tax assets.
Please see a reconciliation of GAAP to non-GAAP financial measures on pages 66-68.
Construction Industries
Construction Industries' total sales were $19.452 billion for the nine months ended September 30, 2024, a decrease of $1.447 billion, or 7 percent, compared with $20.899 billion for the nine months ended September 30, 2023. The decrease was primarily due to lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users.
•In North America, sales decreased primarily due to lower sales volume, partially offset by favorable price realization. Lower sales volume was mainly driven by lower sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased less during the nine months ended September 30, 2024, than during the nine months ended September 30, 2023.
•Sales increased in Latin America mainly due to higher sales volume, partially offset by unfavorable price realization. Higher sales volume was driven primarily by the impact from changes in dealer inventories. Dealer inventory increased during the nine months ended September 30, 2024, compared with a decrease during the nine months ended September 30, 2023.
•In EAME, sales decreased primarily due to lower sales volume. Lower sales volume was mainly due to lower sales of equipment to end users.
•Sales decreased in Asia/Pacific mainly due to lower sales volume and unfavorable currency impacts primarily related to the Japanese yen. Lower sales volume was mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased during the nine months ended September 30, 2024, compared with an increase during the nine months ended September 30, 2023.
Construction Industries' profit was $4.991 billion for the nine months ended September 30, 2024, a decrease of $449 million, or 8 percent, compared with $5.440 billion for the nine months ended September 30, 2023. The decrease was mainly due to the profit impact of lower sales volume of $842 million and higher SG&A/R&D expenses of $74 million, partially offset by favorable manufacturing costs of $256 million and favorable price realization of $230 million. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives. Favorable manufacturing costs were primarily driven by lower material costs.
Construction Industries' profit as a percent of total sales was 25.7 percent for the nine months ended September 30, 2024, compared with 26.0 percent for the nine months ended September 30, 2023.
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Resource Industries
Resource Industries' total sales were $9.427 billion for the nine months ended September 30, 2024, a decrease of $914 million, or 9 percent, compared with $10.341 billion for the nine months ended September 30, 2023. The decrease was primarily due to lower sales volume of $1.287 billion, partially offset by favorable price realization of $379 million. The decrease in sales volume was mainly due to lower sales of equipment to end users.
Resource Industries' profit was $2.067 billion for the nine months ended September 30, 2024, a decrease of $167 million, or 7 percent, compared with $2.234 billion for the nine months ended September 30, 2023. The decrease was mainly due to the profit impact of lower sales volume of $523 million, partially offset by favorable price realization of $379 million.
Resource Industries' profit as a percent of total sales was 21.9 percent for the nine months ended September 30, 2024, compared with 21.6 percent for the nine months ended September 30, 2023.
Energy & Transportation
| Sales by Application | ||||||||
| (Millions of dollars) | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
$ Change |
% Change |
||||
| Oil and Gas | $ | 5,053 | $ | 4,741 | $ | 312 | 7 | % |
| Power Generation | 5,514 | 4,527 | 987 | 22 | % | |||
| Industrial | 3,062 | 3,793 | (731) | (19 | %) | |||
| Transportation | 3,943 | 3,706 | 237 | 6 | % | |||
| External Sales | 17,572 | 16,767 | 805 | 5 | % | |||
| Inter-Segment | 3,633 | 3,565 | 68 | 2 | % | |||
| Total Sales | $ | 21,205 | $ | 20,332 | $ | 873 | 4 | % |
Energy & Transportation's total sales were $21.205 billion for the nine months ended September 30, 2024, an increase of $873 million, or 4 percent, compared with $20.332 billion for the nine months ended September 30, 2023. Sales increased across all applications except Industrial. The increase in sales was primarily due to favorable price realization of $679 million and higher sales volume of $227 million, including inter-segment sales.
•Oil and Gas - Sales increased for turbines and turbine-related services.
•Power Generation - Sales increased in large reciprocating engines, primarily data center applications. Turbines and turbine-related services increased as well.
•Industrial - Sales decreased in EAME and North America.
•Transportation - Sales increased in marine applications and rail services.
Energy & Transportation's profit was $4.259 billion for the nine months ended September 30, 2024, an increase of $752 million, or 21 percent, compared with $3.507 billion for the nine months ended September 30, 2023. The increase was mainly due to favorable price realization.
Energy & Transportation's profit as a percent of total sales was 20.1 percent for the nine months ended September 30, 2024, compared with 17.2 percent for the nine months ended September 30, 2023.
Financial Products Segment
Financial Products' segment revenues were $3.029 billion for the nine months ended September 30, 2024, an increase of $225 million, or 8 percent, compared with $2.804 billion for the nine months ended September 30, 2023. The increase was primarily due to a favorable impact from higher average financing rates across all regions of $142 million and a favorable impact from higher average earning assets of $98 million, driven by North America.
Financial Products' segment profit was $766 million for the nine months ended September 30, 2024, an increase of $91 million, or 13 percent, compared with $675 million for the nine months ended September 30, 2023. The increase was mainly due to a favorable impact from equity securities of $55 million, a favorable impact from higher average earning assets of $42 million, the absence of prior year unfavorable currency impacts of $34 million and an insurance settlement of $33 million, partially offset by an increase in SG&A expenses of $43 million and an unfavorable impact from returned or repossessed equipment of $36 million.
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Corporate Items and Eliminations
Expense for corporate items and eliminations was $1.484 billion for the nine months ended September 30, 2024, a decrease of $122 million from the nine months ended September 30, 2023, primarily driven by the absence of the impact of the divestiture of the company's Longwall business in 2023, partially offset by unfavorable impacts of segment reporting methodology differences and higher restructuring costs.
For the nine months ended September 30, 2024, restructuring costs increased primarily due to the divestitures of certain non-U.S. entities.
RESTRUCTURING COSTS
In 2024, we expect to incur about $400 million of restructuring costs. We expect that prior restructuring actions will result in an incremental benefit to operating costs, primarily Cost of goods sold and SG&A expenses, of about $40 million in 2024 compared with 2023.
Additional information related to restructuring costs is included in Note 20 - "Restructuring costs" of Part I, Item 1 "Financial Statements."
GLOSSARY OF TERMS
1.Adjusted Operating Profit Margin- Operating profit excluding restructuring income/costs as a percent of sales and revenues.
2.Adjusted Profit Per Share- Profit per share excluding restructuring income/costs and a discrete tax benefit to adjust deferred tax balances.
3.All Other Segment- Primarily includes activities such as: business strategy; product management and development; manufacturing and sourcing of wear and maintenance components primarily for Cat® products; parts distribution; integrated logistics solutions; distribution services responsible for dealer development and administration, including a wholly owned dealer in Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience.
4.Consolidating Adjustments- Elimination of transactions between Machinery, Energy & Transportation and Financial Products.
5.Construction Industries- A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes asphalt pavers; backhoe loaders; cold planers; compactors; compact track loaders; forestry machines; material handlers; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; track-type loaders; track-type tractors (small, medium); track excavators (mini, small, medium, large); wheel excavators; wheel loaders (compact, small, medium); and related parts and work tools.
6.Corporate Items and Eliminations- Includes corporate-level expenses, timing differences (as some expenses are reported in segment profit on a cash basis), methodology differences between segment and consolidated external reporting, certain restructuring costs and inter-segment eliminations.
7.Currency- With respect to sales and revenues, currency represents the translation impact on sales resulting from changes in foreign currency exchange rates versus the U.S. dollar. With respect to operating profit, currency represents the net translation impact on sales and operating costs resulting from changes in foreign currency exchange rates versus the U.S. dollar. Currency only includes the impact on sales and operating profit for the Machinery, Energy & Transportation line of business; currency impacts on Financial Products revenues and operating profit are included in the Financial Products portions of the respective analyses. With respect to other income/expense, currency represents the effects of forward and option contracts entered into by the company to reduce the risk of fluctuations in exchange rates (hedging) and the net effect of changes in foreign currency exchange rates on our foreign currency assets and liabilities for consolidated results (translation).
8.Dealer Inventories- Represents dealer machine and engine inventories, excluding aftermarket parts.
9.EAME- A geographic region including Europe, Africa, the Middle East and Eurasia.
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.
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11.Energy & Transportation- A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses as well as product support of on-highway engines. Responsibilities include business strategy, product design, product management, development and testing, manufacturing, marketing and sales and product support. The product and services portfolio includes turbines, centrifugal gas compressors, and turbine-related services; reciprocating engine-powered generator sets; integrated systems and solutions used in the electric power generation industry; reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries; reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machines; electrified powertrain and zero-emission power sources and service solutions development; and diesel-electric locomotives and components and other rail-related products and services, including remanufacturing and leasing. Responsibilities also include the remanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies.
12.Financial Products- The company defines Financial Products as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.
13.Financial Products Segment- Provides financing alternatives to customers and dealers around the world for Caterpillar products and services, as well as financing for power generation facilities that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, revolving charge accounts, installment sale contracts, repair/rebuild financing, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage and maintenance plans for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of Caterpillar equipment. The segment also earns revenues from Machinery, Energy & Transportation, but the related costs are not allocated to operating segments. Financial Products' segment profit is determined on a pretax basis and includes other income/expense items.
14.Latin America- A geographic region including Central and South American countries and Mexico.
15.Machinery, Energy & Transportation (ME&T) - The company defines ME&T as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T's information relates to the design, manufacturing and marketing of its products.
16.Machinery, Energy & Transportation Other Operating (Income) Expenses- Comprised primarily of gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements and accruals.
17.Manufacturing Costs- Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs. Variable manufacturing costs are defined as having a direct relationship with the volume of production. This includes material costs, direct labor and other costs that vary directly with production volume, such as freight, power to operate machines and supplies that are consumed in the manufacturing process. Period manufacturing costs support production but are defined as generally not having a direct relationship to short-term changes in volume. Examples include machinery and equipment repair, depreciation on manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and operations management.
18.Mark-to-market gains/losses- Represents the net gain or loss of actual results differing from the company's assumptions and the effects of changing assumptions for our defined benefit pension and OPEB plans. These gains and losses are immediately recognized through earnings upon the annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.
19.Pension and Other Postemployment Benefits (OPEB)- The company's defined-benefit pension and postretirement benefit plans.
20.Price Realization- The impact of net price changes excluding currency and new product introductions. Price realization includes geographic mix of sales, which is the impact of changes in the relative weighting of sales prices between geographic regions.
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21.Resource Industries- A segment primarily responsible for supporting customers using machinery in mining, heavy construction and quarry and aggregates. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors; large mining trucks; hard rock vehicles; electric rope shovels; draglines; hydraulic shovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers; wheel dozers; landfill compactors; soil compactors; wide-body trucks; select work tools; machinery components; electronics and control systems and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics, autonomous machine capabilities, safety services and mining performance solutions. Resource Industries also manages areas that provide services to other parts of the company, including strategic procurement, lean center of excellence, integrated manufacturing, research and development for hydraulic systems, automation, electronics and software for Caterpillar machines and engines.
22.Restructuring income/costs- May include costs for employee separation, long-lived asset impairments, contract terminations and (gains)/losses on divestitures. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold.
23.Sales Volume- With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation as well as the incremental sales impact of new product introductions, including emissions-related product updates. With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Energy & Transportation sales with respect to total sales. The impact of sales volume on segment profit includes inter-segment sales.
24.Services- Enterprise services include, but are not limited to, aftermarket parts, Financial Products revenues and other service-related revenues. Machinery, Energy & Transportation segments exclude most Financial Products revenues.
LIQUIDITY AND CAPITAL RESOURCES
Sources of funds
We generate significant capital resources from operating activities, which are the primary source of funding for our ME&T operations. Funding for these businesses is also available from commercial paper and long-term debt issuances. Financial Products' operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. On a consolidated basis, we had positive operating cash flow in the first nine months of 2024 and ended the third quarter with $5.64 billion of cash, a decrease of $1.34 billion from year-end 2023. In addition, ME&T invests in available-for-sale debt securities and bank time deposits that are considered highly liquid and are available for current operations. These ME&T securities were $1.77 billion as of September 30, 2024 and are included in Prepaid expenses and other current assets and Other assets in the Consolidated Statement of Financial Position. We intend to maintain a strong cash and liquidity position.
Consolidated operating cash flow for the first nine months of 2024 was $8.64 billion, down $240 million compared to the same period a year ago. The decrease was primarily due to changes in accrued wages, salaries and benefits, and higher cash taxes paid, partially offset by lower working capital requirements, excluding changes in accrued wages, salaries and benefits. Within working capital, changes in inventory, accounts payable and receivables favorably impacted cash flow in the first nine months of 2024 compared to the prior year period, partially offset by unfavorable changes in accrued expenses.
Total debt as of September 30, 2024 was $37.90 billion, an increase of $23 million from year-end 2023. Debt related to ME&T decreased $886 million in the first nine months of 2024 while debt related to Financial Products increased $966 million.
As of September 30, 2024, we had three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes. Based on management's allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of September 30, 2024 was $2.75 billion. Information on our Credit Facility is as follows:
•In August 2024, we entered into a new 364-day facility. The 364-day facility of $3.15 billion (of which $825 million is available to ME&T) expires in August 2025.
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•In August 2024, we amended and extended the three-year facility (as amended and restated, the "three-year facility"). The three-year facility of $2.73 billion (of which $715 million is available to ME&T) expires in August 2027.
•In August 2024, we amended and extended the five-year facility (as amended and restated, the "five-year facility"). The five-year facility of $4.62 billion (of which $1.21 billion is available to ME&T) expires in August 2029.
At September 30, 2024, Caterpillar's consolidated net worth was $19.46 billion, which was above the $9.00 billion required under the Credit Facility. The consolidated net worth is defined in the Credit Facility as Caterpillar's consolidated shareholders' equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).
At September 30, 2024, Cat Financial's covenant interest coverage ratio was 1.46 to 1. This was above the 1.15 to 1 minimum ratio calculated as (1) profit excluding income taxes, interest expense and net gain (loss) from interest rate derivatives to (2) interest expense calculated at the end of each fiscal quarter for the prior four consecutive fiscal quarter period, required by the Credit Facility.
In addition, at September 30, 2024, Cat Financial's six-month covenant leverage ratio was 6.77 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 September 30, 2024, there were no borrowings under the Credit Facility.
The aforementioned financial covenants are being reported as calculated under the Credit Facility and not pursuant to U.S. GAAP. Please refer to the credit agreements governing the Credit Facility filed as an exhibit to our periodic reports for further information related to the calculation thereof. For risks related to our indebtedness and compliance with these covenants, please refer to the risk factor "Restrictive covenants in our debt agreements could limit our financial and operating flexibility" set forth in Part I, Item 1A of our most recent annual report on Form 10-K.
Our total credit commitments and available credit as of September 30, 2024 were:
| September 30, 2024 | ||||||
| (Millions of dollars) | Consolidated |
Machinery, Energy & Transportation |
Financial Products |
|||
| Credit lines available: | ||||||
| Global credit facilities | $ | 10,500 | $ | 2,750 | $ | 7,750 |
| Other external | 4,253 | 617 | 3,636 | |||
| Total credit lines available | 14,753 | 3,367 | 11,386 | |||
| Less: Commercial paper outstanding | (3,214) | - | (3,214) | |||
| Less: Utilized credit | (781) | - | (781) | |||
| Available credit | $ | 10,758 | $ | 3,367 | $ | 7,391 |
The other external consolidated credit lines with banks as of September 30, 2024 totaled $4.25 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.
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We receive debt ratings from the major credit rating agencies. Fitch maintains a "high-A" debt rating, while Moody's and S&P maintain a "mid-A" debt rating. A downgrade of our credit ratings by any of the major credit rating agencies could result in increased borrowing costs and could make access to certain credit markets more difficult. In the event economic conditions deteriorate such that access to debt markets becomes unavailable, ME&T's operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our committed credit facilities. Our Financial Products' operations would rely on cash flow from its existing portfolio, existing cash balances, access to our committed credit facilities and other credit line facilities of Cat Financial, and potential borrowings from Caterpillar. In addition, we maintain a support agreement with Cat Financial, which requires Caterpillar to remain the sole owner of Cat Financial and may, under certain circumstances, require Caterpillar to make payments to Cat Financial should Cat Financial fail to maintain certain financial ratios.
We facilitate voluntary supplier finance programs (the "Programs") through participating financial institutions. We account for the payments made under the Programs, the same as other accounts payable, as a reduction to our cash flows from operations. We do not believe that changes in the availability of the programs will have a significant impact on our liquidity. Additional information related to the programs is included in Note 21 - "Supplier finance programs" of Part I, Item 1 "Financial Statements."
Machinery, Energy & Transportation
Net cash provided by operating activities was $7.73 billion in the first nine months of 2024, compared with net cash provided of $7.96 billion for the same period in 2023. The decrease was primarily due to lower profit before taxes, adjusted for non-cash items, changes in accrued wages, salaries, and employee benefits, and higher cash taxes paid. These were partially offset by lower working capital requirements, excluding the impact of changes in accrued wages, salaries, and employee benefits. Within working capital, changes in inventory, receivables and accounts payable favorably impacted cash flow in the first nine months of 2024 compared to the prior year period, partially offset by changes in accrued expenses.
Net cash provided by investing activities in the first nine months of 2024 was $1.01 billion, compared with net cash used of $3.89 billion in the first nine months of 2023. The change was due to lower new investments in securities and higher proceeds from maturities and sale of securities, primarily due to time deposit maturities in 2024, as compared to the same period in 2023.
Net cash used for financing activities during the first nine months of 2024 was $10.04 billion, compared with net cash used of $4.18 billion in the same period of 2023. The change was primarily due to higher payments to repurchase shares and debt repayments in the first nine months of 2024 compared to the same period in 2023.
While our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our long-term cash deployment strategy is focused on the following priorities. Our top priority is to maintain a strong financial position in support of a mid-A rating. Next, we intend to fund operational requirements and commitments. Then, we intend to fund priorities that profitably grow the company and return capital to shareholders through dividend growth and share repurchases. Additional information on cash deployment is as follows:
Strong financial position-Our top priority is to maintain a strong financial position in support of a mid-A rating. We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins which align with our cash deployment actions and the various methodologies used by the major credit rating agencies.
Operational excellence and commitments-Capital expenditures were $1.28 billion during the first nine months of 2024, compared to $1.11 billion for the same period in 2023. We expect ME&T's capital expenditures in 2024 to be about $2.0 billion. We made $221 million of contributions to our pension and other postretirement benefit plans during the first nine months of 2024. We currently anticipate full-year 2024 contributions of approximately $273 million. In comparison, we made $320 million of contributions to our pension and other postretirement benefit plans during the first nine months of 2023.
Fund strategic growth initiatives and return capital to shareholders- We intend to utilize our liquidity and debt capacity to fund targeted investments that drive long-term profitable growth focused in the areas of expanded offerings, services and sustainability, including acquisitions.
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As part of our capital allocation strategy, ME&T free cash flow is a liquidity measure we use to determine the cash generated and available for financing activities including debt repayments, dividends and share repurchases. We define ME&T free cash flow as cash from ME&T operations less capital expenditures, excluding discretionary pension and other postretirement benefit plan contributions. A goal of our capital allocation strategy is to return substantially all ME&T free cash flow to shareholders over time in the form of dividends and share repurchases, while maintaining our mid-A rating.
Our share repurchase plans are subject to the company's cash deployment priorities and are evaluated on an ongoing basis considering the financial condition of the company, corporate cash flow, the company's liquidity needs, the economic outlook, and the health and stability of global credit markets. The timing and amount of future repurchases may vary depending on market conditions and investing priorities. In May 2022, the Board approved a share repurchase authorization (the 2022 Authorization) of up to $15.0 billion of Caterpillar common stock effective August 1, 2022, with no expiration. In June 2024, the Board approved an additional share repurchase authorization (the 2024 Authorization) of up to $20.0 billion of Caterpillar common stock, effective June 12, 2024, with no expiration. In the first nine months of 2024, we repurchased $7.06 billion of Caterpillar common stock, with $20.8 billion remaining under the 2022 and 2024 Authorizations as of September 30, 2024. Our basic shares outstanding as of September 30, 2024 were approximately 483 million.
Each quarter, our Board of Directors reviews the company's dividend for the applicable quarter. The Board evaluates the financial condition of the company and considers corporate cash flow, the company's liquidity needs, the economic outlook, and the health and stability of global credit markets to determine whether to maintain or change the quarterly dividend. In October 2024, the Board of Directors approved maintaining our quarterly dividend representing $1.41 per share, and we continue to expect our strong financial position to support the dividend. Dividends paid totaled $1.97 billion in the first nine months of 2024.
Financial Products
Net cash provided by operating activities was $1.02 billion in the first nine months of 2024, compared with $905 million for the same period in 2023. Net cash used for investing activities was $1.90 billion in the first nine months of 2024, compared with $1.25 billion for the same period in 2023. The change was primarily due to portfolio related activity and the divestiture of a non-U.S. entity. Net cash provided by financing activities was $890 million in the first nine months of 2024, compared with $122 million for the same period in 2023. The change was due to a higher net inflow from external borrowings and the absence of dividends paid to Caterpillar.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements, see Note 2 - "New accounting guidance" of Part I, Item 1 "Financial Statements."
CRITICAL ACCOUNTING ESTIMATES
For a discussion of the company's critical accounting estimates, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K. There have been no significant changes to our critical accounting estimates since our 2023 Annual Report on Form 10-K.
OTHER MATTERS
Information related to legal proceedings appears in Note 14 - "Environmental and legal matters" of Part I, Item 1 "Financial Statements."
Retirement Benefits
We recognize mark-to-market gains and lossesimmediately through earnings upon the remeasurement of our pension and OPEB plans. Mark-to-market gains and losses represent the effects of actual results differing from our assumptions and the effects of changing assumptions. We will record the annual mark-to-market adjustment as of the measurement date, December 31, 2024. It is difficult to predict the December 31, 2024 adjustment amount, as it will be dependent primarily on changes in discount rates during 2024, and actual returns on plan assets differing from our expected returns for 2024.
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Order Backlog
At the end of the third quarter of 2024, the dollar amount of backlog believed to be firm was approximately $28.7 billion, about $0.1 billion higher than the second quarter of 2024. The order backlog increased in Energy & Transportation, while Construction Industries and Resource Industries decreased. Of the total backlog at September 30, 2024, approximately $6.8 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 four significant items in order for our results to be meaningful to our readers. These items consist of (i) restructuring income/costsrelated to the divestitures of certain non-U.S. entities in 2024, (ii) other restructuring income/costs, (iii) restructuring costs related to the divestiture of the company's Longwall business in 2023 and (iv) certain deferred tax valuation allowance adjustments in 2023. We do not consider these items indicative of earnings from ongoing business activities and believe the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing our period-over-period results.
Reconciliations of adjusted results to the most directly comparable GAAP measures are as follows:
| (Dollars in millions except per share data) | Operating Profit | Operating Profit Margin | Profit Before Taxes | Provision (Benefit) for Income Taxes | Profit | Profit per Share | ||||||
|
Three Months Ended September 30, 2024 - U.S. GAAP
|
$ | 3,147 | 19.5 | % | $ | 3,098 | $ | 642 | $ | 2,464 | $ | 5.06 |
| Other restructuring (income) costs | 70 | 0.5 | % | 70 | 16 | 54 | 0.11 | |||||
|
Three Months Ended September 30, 2024 - Adjusted
|
$ | 3,217 | 20.0 | % | $ | 3,168 | $ | 658 | $ | 2,518 | $ | 5.17 |
|
Three Months Ended September 30, 2023 - U.S. GAAP
|
$ | 3,449 | 20.5 | % | $ | 3,515 | $ | 734 | $ | 2,794 | $ | 5.45 |
| Other restructuring (income) costs | 46 | 0.3 | % | 46 | 10 | 36 | 0.07 | |||||
|
Three Months Ended September 30, 2023 - Adjusted
|
$ | 3,495 | 20.8 | % | $ | 3,561 | $ | 744 | $ | 2,830 | $ | 5.52 |
|
Nine Months Ended September 30, 2024 - U.S. GAAP
|
$ | 10,148 | 20.9 | % | $ | 10,130 | $ | 2,166 | $ | 8,001 | $ | 16.27 |
| Restructuring (income) costs - divestitures of certain non-U.S. entities | 164 | 0.3 | % | 164 | 54 | 110 | 0.22 | |||||
| Other restructuring (income) costs | 158 | 0.3 | % | 158 | 36 | 122 | 0.26 | |||||
|
Nine Months Ended September 30, 2024 - Adjusted
|
$ | 10,470 | 21.5 | % | $ | 10,452 | $ | 2,256 | $ | 8,233 | $ | 16.75 |
|
Nine Months Ended September 30, 2023 - U.S. GAAP
|
$ | 9,832 | 19.7 | % | $ | 9,801 | $ | 2,194 | $ | 7,659 | $ | 14.85 |
| Restructuring costs - Longwall divestiture | 586 | 1.2 | % | 586 | - | 586 | 1.13 | |||||
| Other restructuring (income) costs | 102 | 0.1 | % | 102 | 21 | 81 | 0.17 | |||||
| Deferred tax valuation allowance adjustments | - | - | % | - | 88 | (88) | (0.17) | |||||
|
Nine Months Ended September 30, 2023 - Adjusted
|
$ | 10,520 | 21.0 | % | $ | 10,489 | $ | 2,303 | $ | 8,238 | $ | 15.98 |
We believe it is important to separately disclose our annual effective tax rate, excluding discrete items for our results to be meaningful to our readers. The annual effective tax rate is discussed using non-GAAP financial measures that exclude the effects of amounts associated with discrete items recorded fully in the quarter they occur. These items consist of (i) restructuring income/costs related to the divestitures of certain non-U.S. entities in 2024, (ii) the impact of changes in estimates related to prior years in 2024, (iii) settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense, (iv) certain deferred tax valuation allowance adjustments in 2023, (v) the decrease in the annual effective tax rate in 2023 and (vi) restructuring costs related to the divestiture of the company's Longwall business in 2023. We believe the non-GAAP measures will provide investors with useful perspective on underlying business results and trends and aids with assessing the company's period-over-period results.
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A reconciliation of our effective tax rate to annual effective tax rate, excluding discrete items is below:
| (Millions of dollars) | Profit Before Taxes | Provision (Benefit) for Income Taxes | Effective Tax Rate | |||
|
Three Months Ended September 30, 2024 - U.S. GAAP
|
$ | 3,098 | $ | 642 | 20.7 | % |
| Changes in estimates related to prior years | - | 47 | ||||
| Excess stock-based compensation | - | 7 | ||||
| Annual effective tax rate, excluding discrete items | $ | 3,098 | $ | 696 | 22.5 | % |
| Changes in estimates related to prior years | - | (47) | ||||
| Excess stock-based compensation | - | (7) | ||||
| Other restructuring (income) costs | 70 | 16 | ||||
|
Three Months Ended September 30, 2024 - Adjusted
|
$ | 3,168 | $ | 658 |
|
Three Months Ended September 30, 2023 - U.S. GAAP
|
$ | 3,515 | $ | 734 | 20.9 | % |
| Decrease in annual effective tax rate | - | 34 | ||||
| Excess stock-based compensation | - | 22 | ||||
| Annual effective tax rate, excluding discrete items | $ | 3,515 | $ | 790 | 22.5 | % |
| Decrease in annual effective tax rate | - | (34) | ||||
| Excess stock-based compensation | - | (22) | ||||
| Other restructuring (income) costs | 46 | 10 | ||||
|
Three Months Ended September 30, 2023 - Adjusted
|
$ | 3,561 | $ | 744 |
|
Nine Months Ended September 30, 2024 - U.S. GAAP
|
$ | 10,130 | $ | 2,166 | 21.4 | % |
| Restructuring (income) costs - divestitures of certain non-U.S. entities | 164 | 54 | ||||
| Changes in estimates related to prior years | - | 47 | ||||
| Excess stock-based compensation | - | 49 | ||||
| Annual effective tax rate, excluding discrete items | $ | 10,294 | $ | 2,316 | 22.5 | % |
| Changes in estimates related to prior years | - | (47) | ||||
| Excess stock-based compensation | - | (49) | ||||
| Other restructuring (income) costs | 158 | 36 | ||||
|
Nine Months Ended September 30, 2024 - Adjusted
|
$ | 10,452 | $ | 2,256 |
|
Nine Months Ended September 30, 2023 - U.S. GAAP
|
$ | 9,801 | $ | 2,194 | 22.4 | % |
| Restructuring costs - Longwall divestiture | 586 | - | ||||
| Deferred tax valuation allowance adjustments | - | 88 | ||||
| Excess stock-based compensation | - | 54 | ||||
| Annual effective tax rate, excluding discrete items | $ | 10,387 | $ | 2,336 | 22.5 | % |
| Excess stock-based compensation | - | (54) | ||||
| Other restructuring (income) costs | 102 | 21 | ||||
|
Nine Months Ended September 30, 2023 - Adjusted
|
$ | 10,489 | $ | 2,303 | ||
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.
67
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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) | Nine Months Ended September 30, | |||
| 2024 | 2023 | |||
|
ME&T net cash provided by operating activities 1
|
$ | 7,726 | $ | 7,955 |
| ME&T capital expenditures | (1,284) | (1,108) | ||
| ME&T free cash flow | $ | 6,442 | $ | 6,847 |
|
1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 75 - 76.
|
||||
Supplemental Consolidating Data
We are providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows:
Consolidated -Caterpillar Inc. and its subsidiaries.
Machinery, Energy & Transportation -We define ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T's information relates to the design, manufacturing and marketing of our products.
Financial Products -We define Financial Products as it is presented in the supplemental data as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.
Consolidating Adjustments -Eliminations of transactions between ME&T and Financial Products.
The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We believe this presentation will assist readers in understanding our business.
Pages 69 to 76 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information. Certain amounts for prior periods have been reclassified to conform to the current period presentation.
68
Table of Contents
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended September 30, 2024
(Unaudited)
(Millions of dollars)
| Supplemental Consolidating Data | ||||||||
| Consolidated |
Machinery, Energy & Transportation |
Financial Products |
Consolidating Adjustments |
|||||
| Sales and revenues: | ||||||||
| Sales of Machinery, Energy & Transportation | $ | 15,231 | $ | 15,231 | $ | - | $ | - |
| Revenues of Financial Products | 875 | - | 1,078 | (203) |
1
|
|||
| Total sales and revenues | 16,106 | 15,231 | 1,078 | (203) | ||||
| Operating costs: | ||||||||
| Cost of goods sold | 10,066 | 10,067 | - | (1) |
2
|
|||
| Selling, general and administrative expenses | 1,669 | 1,484 | 197 | (12) |
2
|
|||
| Research and development expenses | 533 | 533 | - | - | ||||
| Interest expense of Financial Products | 336 | - | 336 | - | ||||
| Other operating (income) expenses | 355 | 49 | 329 | (23) |
2
|
|||
| Total operating costs | 12,959 | 12,133 | 862 | (36) | ||||
| Operating profit | 3,147 | 3,098 | 216 | (167) | ||||
| Interest expense excluding Financial Products | 125 | 127 | - | (2) |
3
|
|||
| Other income (expense) | 76 | (122) | 33 | 165 |
4
|
|||
| Consolidated profit before taxes | 3,098 | 2,849 | 249 | - | ||||
| Provision (benefit) for income taxes | 642 | 582 | 60 | - | ||||
| Profit of consolidated companies | 2,456 | 2,267 | 189 | - | ||||
| Equity in profit (loss) of unconsolidated affiliated companies | 7 | 7 | - | - | ||||
| Profit of consolidated and affiliated companies | 2,463 | 2,274 | 189 | - | ||||
| Less: Profit (loss) attributable to noncontrolling interests | (1) | (1) | - | - | ||||
|
Profit 5
|
$ | 2,464 | $ | 2,275 | $ | 189 | $ | - |
1Elimination of Financial Products' revenues earned from ME&T.
2Elimination of net expenses recorded between ME&T and Financial Products.
3Elimination of interest expense recorded between Financial Products and ME&T.
4Elimination 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.
5Profit attributable to common shareholders.
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Table of Contents
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Nine Months Ended September 30, 2024
(Unaudited)
(Millions of dollars)
| Supplemental Consolidating Data | ||||||||
| Consolidated | Machinery, Energy & Transportation |
Financial Products |
Consolidating Adjustments |
|||||
| Sales and revenues: | ||||||||
| Sales of Machinery, Energy & Transportation | $ | 46,031 | $ | 46,031 | $ | - | $ | - |
| Revenues of Financial Products | 2,563 | - | 3,150 | (587) |
1
|
|||
| Total sales and revenues | 48,594 | 46,031 | 3,150 | (587) | ||||
| Operating costs: | ||||||||
| Cost of goods sold | 29,878 | 29,883 | - | (5) |
2
|
|||
| Selling, general and administrative expenses | 4,898 | 4,346 | 560 | (8) |
2
|
|||
| Research and development expenses | 1,588 | 1,588 | - | - | ||||
| Interest expense of Financial Products | 948 | - | 948 | - | ||||
| Other operating (income) expenses | 1,134 | 51 | 1,174 | (91) |
2
|
|||
| Total operating costs | 38,446 | 35,868 | 2,682 | (104) | ||||
| Operating profit | 10,148 | 10,163 | 468 | (483) | ||||
| Interest expense excluding Financial Products | 405 | 407 | - | (2) |
3
|
|||
| Other income (expense) | 387 | (163) | 69 | 481 |
4
|
|||
| Consolidated profit before taxes | 10,130 | 9,593 | 537 | - | ||||
| Provision (benefit) for income taxes | 2,166 | 1,983 | 183 | - | ||||
| Profit of consolidated companies | 7,964 | 7,610 | 354 | - | ||||
| Equity in profit (loss) of unconsolidated affiliated companies | 34 | 34 | - | - | ||||
| Profit of consolidated and affiliated companies | 7,998 | 7,644 | 354 | - | ||||
| Less: Profit (loss) attributable to noncontrolling interests | (3) | (4) | 1 | - | ||||
|
Profit 5
|
$ | 8,001 | $ | 7,648 | $ | 353 | $ | - |
1Elimination of Financial Products' revenues earned from ME&T.
2Elimination of net expenses recorded between ME&T and Financial Products.
3Elimination of interest expense recorded between Financial Products and ME&T.
4Elimination 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.
5Profit attributable to common shareholders.
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Table of Contents
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended September 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 | $ | 15,988 | $ | 15,988 | $ | - | $ | - |
| Revenues of Financial Products | 822 | - | 1,017 | (195) |
1
|
|||
| Total sales and revenues | 16,810 | 15,988 | 1,017 | (195) | ||||
| Operating costs: | ||||||||
| Cost of goods sold | 10,583 | 10,586 | - | (3) |
2
|
|||
| Selling, general and administrative expenses | 1,624 | 1,430 | 206 | (12) |
2
|
|||
| Research and development expenses | 554 | 554 | - | - | ||||
| Interest expense of Financial Products | 280 | - | 280 | - | ||||
| Other operating (income) expenses | 320 | 25 | 310 | (15) |
2
|
|||
| Total operating costs | 13,361 | 12,595 | 796 | (30) | ||||
| Operating profit | 3,449 | 3,393 | 221 | (165) | ||||
| Interest expense excluding Financial Products | 129 | 129 | - | - | ||||
| Other income (expense) | 195 | 42 | (12) | 165 |
3
|
|||
| Consolidated profit before taxes | 3,515 | 3,306 | 209 | - | ||||
| Provision (benefit) for income taxes | 734 | 654 | 80 | - | ||||
| Profit of consolidated companies | 2,781 | 2,652 | 129 | - | ||||
| Equity in profit (loss) of unconsolidated affiliated companies | 12 | 12 | - | - | ||||
| Profit of consolidated and affiliated companies | 2,793 | 2,664 | 129 | - | ||||
| Less: Profit (loss) attributable to noncontrolling interests | (1) | (1) | - | - | ||||
|
Profit4
|
$ | 2,794 | $ | 2,665 | $ | 129 | $ | - |
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.
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Table of Contents
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Nine Months Ended September 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 | $ | 47,632 | $ | 47,632 | $ | - | $ | - |
| Revenues of Financial Products | 2,358 | - | 2,907 | (549) |
1
|
|||
| Total sales and revenues | 49,990 | 47,632 | 2,907 | (549) | ||||
| Operating costs: | ||||||||
| Cost of goods sold | 31,751 | 31,758 | - | (7) |
2
|
|||
| Selling, general and administrative expenses | 4,615 | 4,139 | 507 | (31) |
2
|
|||
| Research and development expenses | 1,554 | 1,554 | - | - | ||||
| Interest expense of Financial Products | 742 | - | 742 | - | ||||
| Other operating (income) expenses | 1,496 | 624 | 923 | (51) |
2
|
|||
| Total operating costs | 40,158 | 38,075 | 2,172 | (89) | ||||
| Operating profit | 9,832 | 9,557 | 735 | (460) | ||||
| Interest expense excluding Financial Products | 385 | 385 | - | - | ||||
| Other income (expense) | 354 | 18 | (49) | 385 |
3
|
|||
| Consolidated profit before taxes | 9,801 | 9,190 | 686 | (75) | ||||
| Provision (benefit) for income taxes | 2,194 | 1,993 | 201 | - | ||||
| Profit of consolidated companies | 7,607 | 7,197 | 485 | (75) | ||||
| Equity in profit (loss) of unconsolidated affiliated companies | 52 | 55 | - | (3) |
4
|
|||
| Profit of consolidated and affiliated companies | 7,659 | 7,252 | 485 | (78) | ||||
| Less: Profit (loss) attributable to noncontrolling interests | - | (2) | 5 | (3) |
5
|
|||
|
Profit6
|
$ | 7,659 | $ | 7,254 | $ | 480 | $ | (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.
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Table of Contents
Caterpillar Inc.
Supplemental Data for Financial Position
At September 30, 2024
(Unaudited)
(Millions of dollars)
| Supplemental Consolidating Data | ||||||||
| Consolidated |
Machinery, Energy & Transportation |
Financial Products |
Consolidating Adjustments |
|||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,638 | $ | 4,760 | $ | 878 | $ | - |
| Receivables - trade and other | 9,086 | 3,421 | 489 | 5,176 |
1,2
|
|||
| Receivables - finance | 9,816 | - | 15,188 | (5,372) |
2
|
|||
| Prepaid expenses and other current assets | 3,094 | 2,941 | 417 | (264) |
3
|
|||
| Inventories | 17,312 | 17,312 | - | - | ||||
| Total current assets | 44,946 | 28,434 | 16,972 | (460) | ||||
| Property, plant and equipment - net | 12,837 | 8,943 | 3,894 | - | ||||
| Long-term receivables - trade and other | 1,346 | 582 | 128 | 636 |
1,2
|
|||
| Long-term receivables - finance | 13,263 | - | 14,003 | (740) |
2
|
|||
| Noncurrent deferred and refundable income taxes | 3,050 | 3,553 | 112 | (615) |
4
|
|||
| Intangible assets | 448 | 448 | - | - | ||||
| Goodwill | 5,317 | 5,317 | - | - | ||||
| Other assets | 5,066 | 3,828 | 2,271 | (1,033) |
5
|
|||
| Total assets | $ | 86,273 | $ | 51,105 | $ | 37,380 | $ | (2,212) |
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 3,725 | $ | - | $ | 3,725 | $ | - |
| Accounts payable | 7,705 | 7,630 | 287 | (212) |
6,7
|
|||
| Accrued expenses | 4,980 | 4,351 | 629 | - | ||||
| Accrued wages, salaries and employee benefits | 2,078 | 2,028 | 50 | - | ||||
| Customer advances | 2,404 | 2,385 | 3 | 16 |
7
|
|||
| Other current liabilities | 2,934 | 2,407 | 813 | (286) |
4,5,8
|
|||
| Long-term debt due within one year | 8,392 | 46 | 8,346 | - | ||||
| Total current liabilities | 32,218 | 18,847 | 13,853 | (482) | ||||
| Long-term debt due after one year | 25,784 | 8,738 | 17,150 | (104) |
9
|
|||
| Liability for postemployment benefits | 4,029 | 4,029 | - | - | ||||
| Other liabilities | 4,839 | 3,970 | 1,522 | (653) |
4,5
|
|||
| Total liabilities | 66,870 | 35,584 | 32,525 | (1,239) | ||||
| Commitments and contingencies | ||||||||
| Shareholders' equity | ||||||||
| Common stock | 5,584 | 5,584 | 905 | (905) |
10
|
|||
| Treasury stock | (42,390) | (42,390) | - | - | ||||
| Profit employed in the business | 57,920 | 53,100 | 4,810 | 10 |
10
|
|||
| Accumulated other comprehensive income (loss) | (1,717) | (781) | (936) | - | ||||
| Noncontrolling interests | 6 | 8 | 76 | (78) |
10
|
|||
| Total shareholders' equity | 19,403 | 15,521 | 4,855 | (973) | ||||
| Total liabilities and shareholders' equity | $ | 86,273 | $ | 51,105 | $ | 37,380 | $ | (2,212) |
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 and liabilities between ME&T and Financial Products.
6 Elimination of payables between ME&T and Financial Products.
7 Reclassification of Financial Products' payables to customer advances.
8 Elimination of prepaid insurance in Financial Products' other liabilities.
9 Elimination of debt between ME&T and Financial Products.
10 Eliminations associated with ME&T's investments in Financial Products' subsidiaries.
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Table of Contents
Caterpillar Inc.
Supplemental Data for Financial Position
At December 31, 2023
(Unaudited)
(Millions of dollars)
| Supplemental Consolidating Data | ||||||||
| Consolidated |
Machinery, Energy & Transportation |
Financial Products |
Consolidating Adjustments |
|||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,978 | $ | 6,106 | $ | 872 | $ | - |
| Receivables - trade and other | 9,310 | 3,971 | 570 | 4,769 |
1,2
|
|||
| Receivables - finance | 9,510 | - | 14,499 | (4,989) |
2
|
|||
| Prepaid expenses and other current assets | 4,586 | 4,327 | 341 | (82) |
3
|
|||
| Inventories | 16,565 | 16,565 | - | - | ||||
| Total current assets | 46,949 | 30,969 | 16,282 | (302) | ||||
| Property, plant and equipment - net | 12,680 | 8,694 | 3,986 | - | ||||
| Long-term receivables - trade and other | 1,238 | 565 | 85 | 588 |
1,2
|
|||
| Long-term receivables - finance | 12,664 | - | 13,299 | (635) |
2
|
|||
| Noncurrent deferred and refundable income taxes | 2,816 | 3,360 | 148 | (692) |
4
|
|||
| Intangible assets | 564 | 564 | - | - | ||||
| Goodwill | 5,308 | 5,308 | - | - | ||||
| Other assets | 5,257 | 4,218 | 2,082 | (1,043) |
5
|
|||
| Total assets | $ | 87,476 | $ | 53,678 | $ | 35,882 | $ | (2,084) |
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 4,643 | $ | - | $ | 4,643 | $ | - |
| Accounts payable | 7,906 | 7,827 | 314 | (235) |
6,7
|
|||
| Accrued expenses | 4,958 | 4,361 | 597 | - | ||||
| Accrued wages, salaries and employee benefits | 2,757 | 2,696 | 61 | - | ||||
| Customer advances | 1,929 | 1,912 | 2 | 15 |
7
|
|||
| Dividends payable | 649 | 649 | - | - | ||||
| Other current liabilities | 3,123 | 2,583 | 647 | (107) |
4,8
|
|||
| Long-term debt due within one year | 8,763 | 1,044 | 7,719 | - | ||||
| Total current liabilities | 34,728 | 21,072 | 13,983 | (327) | ||||
| Long-term debt due after one year | 24,472 | 8,626 | 15,893 | (47) |
9
|
|||
| Liability for postemployment benefits | 4,098 | 4,098 | - | - | ||||
| Other liabilities | 4,675 | 3,806 | 1,607 | (738) |
4
|
|||
| Total liabilities | 67,973 | 37,602 | 31,483 | (1,112) | ||||
| Commitments and contingencies | ||||||||
| Shareholders' equity | ||||||||
| Common stock | 6,403 | 6,403 | 905 | (905) |
10
|
|||
| Treasury stock | (36,339) | (36,339) | - | - | ||||
| Profit employed in the business | 51,250 | 46,783 | 4,457 | 10 |
10
|
|||
| Accumulated other comprehensive income (loss) | (1,820) | (783) | (1,037) | - | ||||
| Noncontrolling interests | 9 | 12 | 74 | (77) |
10
|
|||
| Total shareholders' equity | 19,503 | 16,076 | 4,399 | (972) | ||||
| Total liabilities and shareholders' equity | $ | 87,476 | $ | 53,678 | $ | 35,882 | $ | (2,084) |
1 Elimination of receivables between ME&T and Financial Products.
2 Reclassification of ME&T's trade receivables purchased by Financial Products and Financial Products' wholesale inventory receivables.
3 Elimination of ME&T's insurance premiums that are prepaid to Financial Products.
4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.
5 Elimination of other intercompany assets between ME&T and Financial Products.
6 Elimination of payables between ME&T and Financial Products.
7 Reclassification of Financial Products' payables to customer advances.
8 Elimination of prepaid insurance in Financial Products' other liabilities.
9 Elimination of debt between ME&T and Financial Products.
10 Eliminations associated with ME&T's investments in Financial Products' subsidiaries.
74
Table of Contents
Caterpillar Inc.
Supplemental Data for Cash Flow
For the Nine Months Ended September 30, 2024
(Unaudited)
(Millions of dollars)
| Supplemental Consolidating Data | |||||||||
| Consolidated |
Machinery, Energy & Transportation |
Financial Products |
Consolidating Adjustments |
||||||
| Cash flow from operating activities: | |||||||||
| Profit of consolidated and affiliated companies | $ | 7,998 | $ | 7,644 | $ | 354 | $ | - | |
| Adjustments to reconcile profit to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 1,598 | 1,010 | 588 | - | |||||
| Provision (benefit) for deferred income taxes | (329) | (277) | (52) | - | |||||
| (Gain) loss on divestiture | 164 | (46) | 210 | - | |||||
| Other | 221 | 236 | (447) | 432 |
1
|
||||
| Changes in assets and liabilities, net of acquisitions and divestitures: | |||||||||
| Receivables - trade and other | (30) | 554 | (17) | (567) |
1,2
|
||||
| Inventories | (781) | (770) | - | (11) |
1
|
||||
| Accounts payable | (96) | (79) | (40) | 23 |
1
|
||||
| Accrued expenses | 9 | - | 9 | - | |||||
| Accrued wages, salaries and employee benefits | (671) | (660) | (11) | - | |||||
| Customer advances | 476 | 475 | 1 | - | |||||
| Other assets - net | 120 | (226) | 191 | 155 |
1
|
||||
| Other liabilities - net | (37) | (135) | 232 | (134) |
1
|
||||
| Net cash provided by (used for) operating activities | 8,642 | 7,726 | 1,018 | (102) | |||||
| Cash flow from investing activities: | |||||||||
| Capital expenditures - excluding equipment leased to others | (1,285) | (1,264) | (25) | 4 |
1
|
||||
| Expenditures for equipment leased to others | (893) | (20) | (889) | 16 |
1
|
||||
| Proceeds from disposals of leased assets and property, plant and equipment | 541 | 25 | 525 | (9) |
1
|
||||
| Additions to finance receivables | (11,457) | - | (12,271) | 814 |
2
|
||||
| Collections of finance receivables | 10,234 | - | 10,889 | (655) |
2
|
||||
| Net intercompany purchased receivables | - | - | 68 | (68) |
2
|
||||
| Proceeds from sale of finance receivables | 69 | - | 69 | - | |||||
| Net intercompany borrowings | - | - | 15 | (15) |
3
|
||||
| Investments and acquisitions (net of cash acquired) | (32) | (32) | - | - | |||||
| Proceeds from sale of businesses and investments (net of cash sold) | (67) | 86 | (153) | - | |||||
| Proceeds from maturities and sale of securities | 2,841 | 2,565 | 276 | - | |||||
| Investments in securities | (892) | (469) | (423) | - | |||||
| Other - net | 137 | 118 | 19 | - | |||||
| Net cash provided by (used for) investing activities | (804) | 1,009 | (1,900) | 87 | |||||
| Cash flow from financing activities: | |||||||||
| Dividends paid | (1,966) | (1,966) | - | - | |||||
| Common stock issued, including treasury shares reissued | 15 | 15 | - | - | |||||
| Payments to purchase common stock | (7,057) | (7,057) | - | - | |||||
| Net intercompany borrowings | - | (15) | - | 15 |
3
|
||||
| Proceeds from debt issued (original maturities greater than three months) | 7,579 | - | 7,579 | - | |||||
| Payments on debt (original maturities greater than three months) | (6,862) | (1,021) | (5,841) | - | |||||
| Short-term borrowings - net (original maturities three months or less) | (848) | - | (848) | - | |||||
| Net cash provided by (used for) financing activities | (9,139) | (10,044) | 890 | 15 | |||||
| Effect of exchange rate changes on cash | (39) | (37) | (2) | - | |||||
| Increase (decrease) in cash, cash equivalents and restricted cash | (1,340) | (1,346) | 6 | - | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 6,985 | 6,111 | 874 | - | |||||
| Cash, cash equivalents and restricted cash at end of period | $ | 5,645 | $ | 4,765 | $ | 880 | $ | - |
1 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.
2 Reclassification of Financial Products' cash flow activity from investing to operating for receivables that arose from the sale of inventory.
3 Elimination of net proceeds and payments to/from ME&T and Financial Products.
75
Table of Contents
Caterpillar Inc.
Supplemental Data for Cash Flow
For the Nine Months Ended September 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 | $ | 7,659 | $ | 7,252 | $ | 485 | $ | (78) |
1,5
|
| Adjustments to reconcile profit to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 1,599 | 1,015 | 584 | - | |||||
| Provision (benefit) for deferred income taxes | (448) | (456) | 8 | - | |||||
| (Gain) loss on divestiture | 572 | 572 | - | - | |||||
| Other | 205 | 309 | (463) | 359 |
2
|
||||
| Changes in assets and liabilities, net of acquisitions and divestitures: | |||||||||
| Receivables - trade and other | (319) | (46) | 70 | (343) |
2,3
|
||||
| Inventories | (1,424) | (1,420) | - | (4) |
2
|
||||
| Accounts payable | (532) | (628) | 26 | 70 |
2
|
||||
| Accrued expenses | 588 | 557 | 31 | - | |||||
| Accrued wages, salaries and employee benefits | - | 1 | (1) | - | |||||
| Customer advances | 516 | 515 | 1 | - | |||||
| Other assets - net | 128 | 107 | 17 | 4 |
2
|
||||
| Other liabilities - net | 338 | 177 | 147 | 14 |
2
|
||||
| Net cash provided by (used for) operating activities | 8,882 | 7,955 | 905 | 22 | |||||
| Cash flow from investing activities: | |||||||||
| Capital expenditures - excluding equipment leased to others | (1,061) | (1,088) | (16) | 43 |
2
|
||||
| Expenditures for equipment leased to others | (1,177) | (20) | (1,165) | 8 |
2
|
||||
| Proceeds from disposals of leased assets and property, plant and equipment | 563 | 46 | 564 | (47) |
2
|
||||
| Additions to finance receivables | (11,082) | - | (12,493) | 1,411 |
3
|
||||
| Collections of finance receivables | 10,391 | - | 11,554 | (1,163) |
3
|
||||
| Net intercompany purchased receivables | - | - | 429 | (429) |
3
|
||||
| Proceeds from sale of finance receivables | 40 | - | 40 | - | |||||
| Net intercompany borrowings | - | - | 7 | (7) |
4
|
||||
| Investments and acquisitions (net of cash acquired) | (67) | (67) | - | - | |||||
| Proceeds from sale of businesses and investments (net of cash sold) | (14) | (14) | - | - | |||||
| Proceeds from sale of securities | 747 | 553 | 194 | - | |||||
| Investments in securities | (3,689) | (3,340) | (349) | - | |||||
| Other - net | 32 | 43 | (11) | - | |||||
| Net cash provided by (used for) investing activities | (5,317) | (3,887) | (1,246) | (184) | |||||
| Cash flow from financing activities: | |||||||||
| Dividends paid | (1,901) | (1,901) | (155) | 155 |
5
|
||||
| Common stock issued, including treasury shares reissued | 36 | 36 | - | - | |||||
| Payments to purchase common stock | (2,209) | (2,209) | - | - | |||||
| Net intercompany borrowings | - | (7) | - | 7 |
4
|
||||
| Proceeds from debt issued (original maturities greater than three months) | 6,360 | - | 6,360 | - | |||||
| Payments on debt (original maturities greater than three months) | (4,459) | (99) | (4,360) | - | |||||
| Short-term borrowings - net (original maturities three months or less) | (1,726) | (3) | (1,723) | - | |||||
| Net cash provided by (used for) financing activities | (3,899) | (4,183) | 122 | 162 | |||||
| Effect of exchange rate changes on cash | (119) | (55) | (64) | - | |||||
| Increase (decrease) in cash, cash equivalents and restricted cash | (453) | (170) | (283) | - | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 7,013 | 6,049 | 964 | - | |||||
| Cash, cash equivalents and restricted cash at end of period | $ | 6,560 | $ | 5,879 | $ | 681 | $ | - |
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.
5Elimination of dividend activity between Financial Products and ME&T.
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Forward-looking Statements
Certain statements in this Form 10-Q relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "forecast," "target," "guide," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.
Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers' needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment's risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (xviii) currency fluctuations; (xix) our or Cat Financial's compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) catastrophic events, including global pandemics such as the COVID-19 pandemic; and (xxvii) other factors described in more detail under the section entitled "Part I - Item 1A. Risk Factors" of Caterpillar's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as such factors may be updated from time to time in Caterpillar's periodic filings with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item is incorporated by reference from Note 5 - "Derivative financial instruments and risk management" included in Part I, Item 1 and Management's Discussion and Analysis included in Part I, Item 2 of this Form 10-Q.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
An evaluation was performed under the supervision and with the participation of the company's management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the company's disclosure controls and procedures, as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report. Based on that evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Changes in internal control over financial reporting
During the third quarter of 2024, there has been no change in the company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The information required by this Item is incorporated by reference from Note 14 - "Environmental and legal matters" included in Part I, Item 1 of this Form 10-Q.
Item 1A. Risk Factors
There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-Kfor the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
| Period |
Total Number of Shares Purchased |
Average Price
Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Program |
Approximate Dollar
Value of Shares that
May Yet be Purchased
under the Program (in billions)1
|
||
| July 1-31, 2024 | 920,856 | $ | 336.62 | 920,856 | $ | 21.240 |
| August 1-31, 2024 | 840,267 | $ | 335.67 | 840,267 | $ | 20.958 |
| September 1-30, 2024 | 536,592 | $ | 353.98 | 536,592 | $ | 20.768 |
| Total | 2,297,715 | $ | 340.33 | 2,297,715 | ||
|
1In May 2022, the Board approved a share repurchase authorization (the 2022 Authorization) of up to $15.0 billion of Caterpillar common stock effective August 1, 2022, with no expiration. In June 2024, the Board approved an additional share repurchase authorization (the 2024 Authorization) of up to $20.0 billion of Caterpillar common stock, effective June 12, 2024, with no expiration. As of September 30, 2024, approximately $20.8 billion remained available under the 2024 and 2022 Authorizations.
|
||||||
Non-U.S. Employee Stock Purchase Plans
As of September 30, 2024, we had 38 employee stock purchase plans (the "EIP Plans") that are administered outside the United States for our non-U.S. employees, which had approximately 16,000 active participants in the aggregate. During the third quarter of 2024, approximately 51,000 shares of Caterpillar common stock were purchased by the EIP Plans pursuant to the terms of such plans.
Item 5. Other Information
On August 23, 2024, Andrew Bonfield, Chief Financial Officer of the Company, entered into a Rule 10b5-1 sales plan intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. The sales plan will be in effect until the earlier of (1) November 25, 2025 and (2) the date on which an aggregate of 20,000 shares of our common stock have been sold under the plan.
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Item 6. Exhibits
| 10.1 | ||
| 10.2 | ||
| 10.3 | ||
| 10.4 | ||
| 10.5 | ||
| 31.1 |
Certification of Chief Executive Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
| 31.2 |
Certification of Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
| 32 |
Certification of Chief Executive Officer of Caterpillar Inc. and Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive File (embedded within the Inline XBRL document and included in Exhibit 101) |
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CATERPILLAR INC. | ||
| November 6, 2024 | /s/ D. James Umpleby III | Chairman of the Board and Chief Executive Officer |
| D. James Umpleby III | ||
| November 6, 2024 | /s/ Andrew R.J. Bonfield | Chief Financial Officer |
| Andrew R.J. Bonfield | ||
| November 6, 2024 | /s/ Derek Owens | Chief Legal Officer and General Counsel |
| Derek Owens | ||
| November 6, 2024 | /s/ William E. Schaupp | Vice President and Chief Accounting Officer |
| William E. Schaupp |
80