Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.


Jim Umpleby : Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for delivering another strong quarter, including higher adjusted operating profit margin, record adjusted profit per share, and strong ME&T free cash flow. Our strong balance sheet and ME&T free cash flow allowed us to deploy a record $5.1 billion of cash for share repurchases and dividends in the first quarter. Our results reflect a continuation of healthy demand for our products and services across most of our end markets. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets, followed by an update on our sustainability journey. It was another strong quarter. Sales and revenues were about flat in the quarter versus last year, broadly in line with our expectations. Services revenues increased in the quarter. Our adjusted operating profit increased by 5% to $3.5 billion. Adjusted operating profit margin was slightly better than we expected and improved to 22.2% up a 110 basis points versus last year. We achieved a record adjusted profit per share of $5.60 up 14%. We also generated strong ME&T free cash flow in the quarter of $1.3 billion. In addition, our backlog increased to $27.9 billion up $400 million versus the fourth quarter of 2023. We continue to expect 2024 sales and revenues to be broadly similar to the record 2023 level. We have revised our full year 2024 segment expectations to reflect a slightly stronger top line in Energy & Transportation offset by softening in the European market for Construction Industries. We anticipate services to be higher in 2024 as we strive to achieve our 2026 target of $28 billion. For the year, we continue to expect adjusted operating profit margin and ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and revenues remained about flat at $15.8 billion. Compared to our expectations, sales volume was slightly lower while price realization, including geographic mix, was better than we anticipated. Compared to the first quarter of 2023, overall sales to users decreased by 5%. This was slightly lower than we expected, mainly due to weakness in Europe for Construction Industries. Energy & Transportation continued to show strength, where sales to users increased 9%. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 9%. Focusing on Construction Industries, sales to users were down 5%. In North America, our largest geographic region for Construction Industries, sales to users increased as expected, and demand remained healthy for both non-residential and residential construction. Construction projects, as well as government related infrastructure, continue to benefit non-residential demand. Although residential sales to users in North America were down slightly, demand for new housing remained strong. Sales to users declined in EAME primarily due to weakness in Europe related to residential construction and economic conditions. Latin America and Asia Pacific sales to users also saw some declines. In Resource Industries, sales to users declined 17% in the first quarter compared to a very strong first quarter in 2023. Mining, as well as heavy construction and quarry and aggregates were lower, mainly due to softness in off-highway and articulated trucks that we mentioned during our last earnings call. In Energy & Transportation, sales to users increased by 9%. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw increased sales of reciprocating engines in the gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased while industrial declined as we expected from strong levels last year. In total, dealer inventory increased by $1.4 billion versus the fourth quarter. For machines, dealer inventory increased by $1.1 billion, which was slightly higher than our expectations, largely due to sales to users being modestly lower than anticipated. The increase in machine dealer inventory is consistent with normal seasonal patterns of which Construction Industries products accounted for the majority of the increase. The total level of machine dealer inventory is comfortably within the typical range. As I mentioned, backlog increased to $27.9 billion, up $400 million versus the fourth quarter of 2023, led by Energy & Transportation. Backlog remains elevated as a percentage of revenues compared to historical levels. Adjusted operating profit margin increased to 22.2% in the first quarter, a 110 basis point increase over last year, which was slightly better than we anticipated. This was primarily due to better than expected manufacturing costs, mainly related to freight. Moving to slide five. We generated strong ME&T free cash flow of $1.3 billion in the first quarter. We deployed $5.1 billion of cash for share repurchases and dividends in the first quarter, including the initiation of a $3.5 billion accelerated share repurchase program which may last up to nine months. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on slide six, I'll describe our expectations moving forward. We expect a continuation of healthy demand across most of our end markets for our products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I mentioned, we expect services to continue to grow in 2024. We currently do not anticipate a significant change in dealer inventory in machines in 2024, compared to a $700 million increase in 2023. This is expected to be a headwind to sales in 2024. As a reminder, dealers are independent businesses and manage their own inventories. The vast majority of dealer inventories in Energy & Transportation are backed by firm customer orders. The timing of these products being recognized as sales to users is impacted by dealer packaging and commissioning, which is why it is difficult to predict dealer inventory in E&T. This is why we have become more explicit about the differentiation between machine dealer inventory and total dealer inventory. As I mentioned, we anticipate that our 2024 results will be within the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for profitable growth. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America, after a very strong 2023, we continue to expect demand in the region will remain healthy in 2024 for both non-residential and residential construction. We anticipate non-residential construction to remain at similar levels to slightly higher demand levels compared to last year due to construction projects, as well as government related infrastructure. Residential construction demand is expected to be flat to slightly down versus last year, which remains strong in comparison to historical levels. In Asia Pacific, outside of China, we are seeing some softening in economic conditions. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by strong construction activity in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, as well as heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in resource industry dealer inventories during 2024 versus a slight increase last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, and the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. 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. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to be about flat after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. While servicing demand in North America is expected to soften, Cat reciprocating engine demand for power generation is expected to remain strong, largely due to continued data center growth relating to Cloud Computing and Generative AI. Last quarter, I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing capacity for both new engines and aftermarket parts. This investment will approximately double output for large engines and aftermarket parts as compared to 2023. We leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. For Solar Turbines, our backlog and quoting activity both remain strong for oil and gas and power generation. As we said previously, industrial demand is expected to soften relative to a strong 2023. In transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Moving to slide seven, I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products technologies and services, to help our customers achieve their climate related objectives. In January we announced the signing of an electrification strategic agreement with CRH to advance the deployment of Caterpillar‘s Zero-Exhaust Emissions Solutions. CRH is the number one aggregate producer in North America and the first company in that industry to sign such an agreement with Caterpillar. The agreement is focused on accelerating the deployment of Caterpillar’s 70-ton to 100-ton class battery electric off-highway trucks and charging solutions at a CRH site in North America. Through the agreement CRH will participate in Caterpillar’s early learner program for battery electric off-highway trucks. In February Caterpillar oil and gas announced the launch of the Cat Hybrid Energy Storage Solution to help drillers and operators cut fuel consumption, lower total cost of ownership and reduce emissions in oil and gas operations. The custom designed energy storage system stores excess power from the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a natural gas fuel generator set, the transient response is even quicker than a conventional diesel only rigs. Depending upon site configuration the Hybrid Energy Storage Solution has proven to deliver up to 30% fuel cost savings with natural gas, 85% fuel cost savings with fuel gas, and up to an 80% reduction in nitrogen oxides. Carbon dioxide equivalent reductions up to 11% and 7% are possible with natural gas and fuel gas respectively. In addition, we look forward to issuing our 19th Annual Sustainability Report in May. The material in our report reinforce our ongoing commitment to sustainability. With that I'll turn it over to Andrew.


Andrew Bonfield: Yes, so obviously normally what you would see in CI is a first quarter benefit on sales and revenues, mainly due to dealer inventory builds. The last couple of years, that’s been around a billion dollars. We expect that to be significantly less in the first quarter of this year. Correspondingly, we’ve actually seen quite a significant dealer inventory reduction in the fourth quarter - that will be a little bit less, so this is really just a non-operating--actually as we look at underlying sales to users, they will be pretty much in line throughout the whole of the year and will be down slightly for the full year, so that is the underlying characteristics on the top line. The other overlay is really around price. Price will impact the first half. Impact from price, as you saw in the--for CI in the fourth quarter was around $300 million. That will be the impact, the estimated impact on the first quarter; and obviously as we go through the rest of the year and particularly in the second half, the comps become easier and that will actually neutralize as we get into the second half. It’s really just--overall, just really a timing issue related to dealer inventory mostly and the timing of price. When you take those two things out, effectively sales to users should actually be broadly much the same, first half to second half. There is no demand change we’re expecting as we go through the year.

sales and revenues dealer inventory builds first quarter


James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for their strong execution in the first half of the year. In the second quarter, we achieved higher adjusted operating profit margin, record adjusted profit per share and generated robust ME&T free cash flow. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and we'll provide an update on our full year expectations. I'll then provide some insights about our end-markets, followed by an update on our sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the second quarter versus last year, slightly below our expectations. Services increased in the quarter. Our adjusted operating profit increased to $3.7 billion, a record. Adjusted operating profit margin was better than we expected and improved to 22.4% up 110 basis points versus last year. We achieved a record quarterly adjusted profit per share of $5.99, up 8%. We also generated $2.5 billion of ME&T free cash flow in the quarter. In addition, our backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Before I get into the detail of the quarter and outlook for our segments, I'll update our expectations for the full year based on our first half results. Earlier in the year, we estimated that sales and revenues would be broadly similar for the full year. For the first half, the top-line came in marginally below our expectations and ended 2% below the prior year. We now anticipate our sales and revenues will decline at a roughly similar rate in the second half versus the prior year, in-part due to our latest assumptions for dealer inventory, principally into Resource Industries. Overall sales to users and construction industries are running slightly lower than we anticipated, partially offset by stronger-than-expected sales in Energy and Transportation. Service revenues continue to grow. Although sales and revenues have been marginally below our expectations, adjusted operating profit margins have been stronger than we anticipated. Earlier in the year, we expected our adjusted operating profit margin to be in the top half of the target range at the corresponding level of sales. Due to the strength of our performance in the first half of the year, we now expect overall adjusted operating profit margins to be above the top of the target range for the full year. For the second half, we expect adjusted operating profit margins to be better than we previously anticipated or about flat to the second half of 2023, which Andrew will describe. The strength of our performance to date and our improved second half adjusted operating profit margin expectations give us confidence to guide above our target range. Overall, our expectations for full year adjusted operating profit and adjusted profit per share are now higher than it was during our last earnings call. We also anticipate that ME&T free cash flow will remain in the top half of the free cash flow target range. Turning to Slide 4 and our second quarter results. In the second quarter of 2024, sales and revenues declined 4% to $16.7 billion. Sales volume declined slightly more than we expected, while price realization, including geographic mix was better than we anticipated. Dealer inventory also declined in the second quarter. Compared to the second quarter of 2023, overall sales to users decreased 3%, slightly below expectations. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 8%, slightly more than expected. Energy and transportation continued to show strength as sales to users increased 10%. Sales to users in Construction Industries were down 5%. In North America, sales to users were slightly lower than anticipated, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects remained healthy. Residential sales to users in North America were up as demand for new housing remained resilient. Sales to users declined in the EAME, primarily due to weakness in Europe relating to residential construction and economic conditions. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 15%, a slightly smaller decline than we expected versus a very strong second quarter in 2023. Mining as well as heavy construction and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy and Transportation, despite the ongoing weakness in industrial, sales to users increased by 10% as we continue to see strength across most applications. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw increased sales of reciprocating engines into gas compression, while well servicing oil and gas applications were lower. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased, while industrial declined as expected from the strong levels last year. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory. In total, dealer inventory decreased by $200 million versus the first quarter. For machines, dealer inventory decreased by $400 million and remains within our typical range. As I mentioned, backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Energy & Transportation drove the increase as we continue to see strong demand for solar turbines and reciprocating engines for power generation. Adjusted operating profit margin increased to 22.4% in the second quarter, a 110 basis point increase over last year, which was better than we anticipated. Margin exceeded our expectations, primarily due to lower than expected manufacturing costs and slightly better than expected price. Moving to Slide 5, we generated ME&T free cash flow of $2.5 billion in the second quarter. We deployed more than $1.8 billion of cash for share repurchases and about $600 million in dividends in the second quarter. In June, we announced an additional $20 billion share repurchase authorization with no expiration date. We remain committed to consistent share repurchases. Since 2019, when we communicated our intention to return substantially all ME&T free cash flow to shareholders over time, our net share count has decreased by approximately 18%. In addition, we increased our dividend by 8% in the second quarter, which is our fourth straight year of a high single-digit quarterly increase. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash to shareholders over time through dividends and share repurchases. Now on Slide 6. I'll describe our expectations for our three primary segments moving forward. In Construction Industries, after a record 2023, sales to users in the second half are now expected to decline slightly versus last year. In North America, we now anticipate slightly lower construction industry sales to users for full year 2024 than we did previously, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we still expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10 ton excavator industry. In the EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we are expecting the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction, in quarry and aggregates, we continue to anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. We currently anticipate a decrease in Resource Industries dealer inventories in 2024 versus a slight increase last year. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low and the age of the fleet remains elevated and our autonomous solutions continue to see 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. Moving to Energy & Transportation. In oil and gas, in total, we expect a stronger year overall in 2024 versus last year. After a strong 2023, we expect reciprocating engine sales in oil and gas to be flat to slightly down, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year, however, we expect it to soften in the second half. For solar turbines, we continue to expect volume growth in the second half as our backlog remains strong for oil and gas. CAT reciprocating engine and solar turbine demand for power generation is expected to remain strong, largely due to continued data center growth relating to cloud computing and Generative AI. Industrial demand is expected to remain at a relatively low level compared to 2023 in the second half. In Transportation, we anticipate growth as the year progresses in both high speed marine and rail services. Moving to Slide 7. I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate related objectives. In April, Caterpillar and Vale signed an agreement to test battery-electric large mining trucks as well as to conduct studies on ethanol powered trucks. Progress has been made on both initiatives since the agreement was signed, including conducting a joint study on a dual-fuel solution for haul trucks operating on ethanol and diesel fuel. We are supporting Vale's sustainability objectives. In June, we added CAT CG260 Gas Generator sets to our portfolio of commercially available power solutions capable of running on hydrogen fuel. Previously, our portfolio with this capability ranged from 400 KW to 2,500 KW. The addition of the CG260 now provides up to 4,500 KW of electric power for continuous, prime and load management requirements and is approved to operate on gas containing up to 25% hydrogen by volume. Caterpillar offers retrofit kits to upgrade CG260 Generator sets already installed with these same hydrogen capabilities. In addition to our hydrogen capabilities and reciprocating engines, solar turbines has been a leader with its ability to burn a wide variety of fuels, including hydrogen, natural gas and biofuels. Today, Caterpillar has a large and growing lineup of technologies to support customers in their sustainability journey. These two examples highlight how we are helping our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.

sales and revenues $16.7 billion decreased by about 4%


Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.

sales and revenues third quarter of 2024


Andrew Bonfield: Thank you Jim, and good morning everyone. I’ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I’ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I’ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it’s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment’s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment’s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment’s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers’ financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year’s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I’ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don’t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I’ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I’ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year’s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we’ll take your questions.


Michael Wirth: Sure. So yes, we have seen some action now from the U.S. government. We had been previously operating under an OFAC license, which was modified at the beginning of this year, a general license. There's some specific licenses that go with that, that define the terms under which we can operate. The recent action in the new general license issued by OFAC really kind of opens up operating room for others more so than it does for us. We already – it doesn't materially change our circumstances here. And so I think what you'll see is some more people lifting crude, bring it to the – you'll see more crude flow to the U.S. I don't think the – the impact on our operations really is not particularly significant. We are up to something around 130,000 barrels a day from maybe 60,000 barrels a day earlier this year. We still think we can get to 150,000 or so by year-end. So we are seeing improvements and expect there's some more that we can see through the balance of the year. And that's driving – the cash from that is going to pay legitimate operating expenses, tax and royalties, recover some past dues that we are owed. And we're really working on what I would call pretty straightforward field maintenance and things to restore production that aren't particularly long cycle or capital-intensive and staying within the kind of cash that's being generated from those sales in order to fund that. I would expect that's the posture we'll remain in for a while here until we see how the longer-term sanctions environment plays out, the political situation in the country with elections and the like and continue to make progress on recovery of the past dues that I mentioned. And so not a lot of change, I guess, I would say, from our point of view. Pierre, maybe you want to comment on the cash and production.


Nitin Kumar: Hi, good morning, everyone and thanks for taking my question. So it's a party in Part A and Part B type of question, but really on the Permian, Mike, in your slides, you highlight that optimize well spacing and maybe coring up where you were drilling in 2023 help the well productivity. At the Analyst Day, you had talked about some technologies and I'm just curious where any of the improvements you saw in '23 related to those and then Part B very quickly, you're growing almost 200,000 barrels from here until in the next two years. Last core, you had some infrastructure issues. What are you doing to get ahead of those infrastructure issues that don't resurface over that plan period?


Mike Wirth: Yeah, so we've now got a fourth quarter is the first full quarter with PDC. The third quarter we had two months out of the three with PDC in there. And you can see we came in in the fourth quarter a little bit over 400,000 barrels a day, which is our plans are to hold the DJ around 400,000 barrels a day going forward in a highly efficient factory and fourth quarter was maybe even a little stronger than we might have expected. There wasn't as much weather related downtime in November and December and then there were some accounting adjustments that were booked into the fourth quarter that were not really related to operations. So the above 400 is there's a few things contributing to that that probably are not repeating or going to pull back a little bit. But we're confident we can hold around 400,000 barrels a day. We're still executing the well design and well spacing that was in the PDC basis of design, which is a little bit different than ours. A little few more wells and tighter spacing and driven more to drive volume. Our basis of design is more focused on return on invested capital and so it's wider spacing. It's bigger fracks, but it's less capital overall and higher return and so as we transition to a standardized, more standardized basis of design across the basin, you'll see that roll into the numbers. We got four rigs that are going. We got permits out for multiple years, nearly to the end of the decade and so we're very, very pleased and we're learning things. I got to tell you, you know, there's some stuff that we've learned from PDC that will apply not only in the rest of the DJ, but it's going to apply in the Permian as well. It's going to help us. So, going forward, these are high cash margin, low break even barrels. We plan to hold it at a plateau around 400 and we've -- synergies are on track there. We've got virtually all the CapEx synergies are essentially in the bag. We're already down to $1 billion there. OpEx is very close to the $100 million we got into. We're now seeing some procurement synergies, which we hadn't originally envisioned. So everything about it is at or better than what we had guided to.


Michael Wirth: Thanks. Yeah. So just to quickly touch on AOSP, you know, there was one kind of most logical buyer. Right? And it was the operator, and we have had discussions over the years and have not been able to really get to a common view on value. And so that is what has changed. And so if you want to see that as opportunistic, that is fine. But we really wanted to realize the value that we saw in that asset, and we have been able to do that. The DJ, look, you know, the first thing I will say is the integration there and the synergy delivery continues to track record that we have had over a long time of exceeding our synergy commitments. And, you know, when we do a deal and we come out with a target, it is intended to give you a high confidence number that you can use, and we have done the diligence we have at that point in, you know, our track record as we find more and we deliver more. We are very happy with the quality of the asset and the ability to drive strong performance. We have learned from each of the companies that we have acquired. I talked a little bit about the lower carbon footprint there. We have seen some other things like gas lift and new laterals that have been used. Some of these companies that we are starting to work with in some of our other parts of our portfolio. And the last thing I will say is the team there does a wonderful job of balancing the multi-step permitting process, and I know there has been some concern expressed by people about the regulatory environments. You know, we are working very closely with the regulator in Colorado to ensure that we can achieve their objectives and that we can achieve our objectives. And I would say that is a very constructive relationship. We have got comprehensive area plans in place that derisk the longer-term development. And the quality of the assets, you know, 400,000 barrels a day out through the end of the decade. You know, three years ago, we had zero in the DJ Basin. And so very pleased with it. We are big there. We are the biggest operator there. The question was, are you going to acquire some additional positions there? I would not say that is high on the priority list. The real key is to drive value out of this asset.

DJ Basin 400,000 barrels a day end of the decade


Mike Wirth : Yeah. So let me start. I'm really pleased with our team in the Permian and the performance again in the fourth quarter. We delivered 992,000 barrels a day in the fourth quarter. We were over 1 million barrels a day in December. For the full year, we saw a growth of 18% and really, really strong performance across all aspects of the Permian. And we expect to continue to grow even as we've now passed our peak investments, and we've started to bring capital investment down. We still expect to see a 9% or 10% production growth in 2025. Something a little bit less than that, probably in 2026. And we're headed towards a lower rate of growth. And at some point, you can't grow a position like this infinitely. That was the criticism of the industry last decade is companies only focused on growing, and they never focused on generating free cash flow and returning to shareholders. And that's always been our plan to do just that. So we'll have an asset that will produce something over 1 million barrels a day for many, many years into the future. And as we can maintain that with a lower rate of capital investment than we've required to get to where we are, that really opens up the free cash flow off of that asset. So we are very pleased with that. We've got 400,000 barrels a day, give or take now in the DJ Basin, which is kind of in that plateau phase where we can draw free cash flow off of that. We closed Hess. There's another couple of hundred thousand barrels a day in the Bakken. You bring Argentina in, and now you're talking 1.7 million barrels a day or so. And this year, we produced 3.3 in change. And so it's kind of 50% of the portfolio. And the nice thing about that is that very modest CapEx you can hold that production flat for quite some time and use that as a big cash generator. And so that is the intent. There's always the prospects that we see technology breakthroughs. We're working on improved recoveries that if economic could open a new phase of growth. And I don't want to predict that, but I certainly wouldn't want to rule that out. And so as we continue to get better and better at this and develop technologies to improve recoveries, we can extend the plateau, we could raise plateaus, but this is a highly economic asset that is a core position that will generate production and cash long into the future. And of course, in the Permian, the royalty advantage that we have is kind of icing on top of that cake. And so that's how we think about it. I can't give you a magic formula, a percentage. But it's -- like I said, it's approaching 50% of our overall production, which is a significant piece. Thanks, Steve.

DJ Basin 400,000 barrels a day plateau phase


Pierre Breber : Thanks, Mike. We reported first quarter earnings of $6.6 billion, or $3.46 per share. Adjusted earnings were $6.7 billion, or $3.55 per share. We had one special item this quarter related to changes in the energy profits tax in the United Kingdom. The appendix of this presentation contains a reconciliation of non-GAAP measures. Strong operating cash flow enabled Chevron to deliver on its financial priorities during the quarter a 6% per share dividend increase, higher CapEx within budget, net debt ratio under 5%, share repurchases at the top of our prior guidance range. Adjusted first quarter earnings were up over $200 million versus last year despite 20% lower oil prices. Adjusted Upstream earnings were lower mainly due to realizations and adjusted downstream earnings increased primarily due to higher refining margins. Both segments benefitted from a change in timing effects. Higher interest income and lower accruals for stock-based compensation decreased all other charges. Compared with last quarter, adjusted earnings were down $1.1 billion. Adjusted Upstream earnings decreased primarily due to lower realizations. Other items include the absence of last quarter’s dividend withholding tax at TCO and lower exploration and transportation expenses. Adjusted Downstream earnings were essentially flat. Lower margins and volumes were offset with higher chemical earnings and other favorable items including trading results. Lower accruals for incentive-based compensation decreased All Other net charges and also benefitted the operating segments First quarter oil equivalent production was down about 80,000 barrels per day from last year due to the expiration of a contract in Thailand and the sale of our Eagle Ford asset. This was partially offset by growth in the Permian. We expect 2023 production growth in the Permian to be back-end loaded as wells put on production, POPs increase across both operated and non-operated areas. We expect our royalty production to be roughly flat. As discussed during our Investor Day, we’re increasing activity in New Mexico. All four company-operated rigs added this year, one each quarter, will be in New Mexico, leading to more POPs expected in the second half of the year and into 2024. We also continue to be active in Texas. Last year, about half of our company-operated production was in the Delaware Basin in Texas with the remainder split about evenly between the Midland Basin and New Mexico. More than half of our non-operated production is with five major operators in large, contiguous positions in core areas with multiyear development programs, where we have visibility to capex and execution schedules and a royalty benefit compared to the operator. The balance is with dozens of other operators where we have a little less visibility, but similar predictability from greater diversification. More than half of our royalty production comes from the Pecos River area in the heart of the Delaware Basin. The balance of our royalty position is in the remainder of the Delaware and Midland Basins, also with well-known operators. In summary, Chevron has a large, diverse position in the Permian with a unique royalty advantage where we learn from our own operations and from others. Now, looking ahead. In the second quarter, we expect planned turnarounds at Gorgon and in the Gulf of Mexico along with downtime at a FSO in Thailand and a number of planned refinery turnarounds. Also, we expect share buybacks to increase to a $17.5 billion annual rate. In summary, 1Q was another quarter with strong financial results, continued capital discipline, and a steady return of cash to shareholders. We’re confident that consistent and straightforward management, through commodity cycles, will create value for stakeholders. Back to you, Jake.


Pierre Breber: As Mike said, strong, consistent financial performance enabled Chevron to return record cash to shareholders this quarter, while also investing within our CapEx budget and paying down debt. Working capital lowered cash flow primarily due to true-up tax payments outside the US. Excluding tax payments, working capital movements are variable. Our typical pattern in the second half of the year is to draw down working capital. Chevron's net debt ratio ended the quarter at 7%, significantly below the low end of our guidance range. Surplus cash on the balance sheet was reduced during the quarter, with cash balances ending at $9.6 billion, well above the cash required to run the company. Adjusted second quarter earnings were down $5.6 billion versus the same quarter last year. Adjusted Upstream earnings were lower mainly due to realizations, partly offset by higher liftings. Other includes primarily favorable tax items and income from Venezuela non-equity investments. Adjusted Downstream earnings decreased primarily due to lower refining margins. OpEx was up mainly due to higher transportation costs and the inclusion of REG. Compared with last quarter, adjusted earnings were down $900 million. Adjusted Upstream earnings decreased primarily due to lower realizations. This was partially offset by higher production in the US and non-recurring tax benefits. Adjusted Downstream earnings were down modestly, lower margins were partially offset with higher volumes. Second quarter oil equivalent production was down about 20,000 barrels per day from last quarter, primarily due to planned turnarounds at Gorgon and in the Gulf of Mexico and downtime associated with the Canadian wildfires. This was mostly offset by growth in the Permian. Now, looking ahead. In the third quarter, we have a planned turnaround at TCO and a planned pitstop at Gorgon, completed earlier this week. Our full-year production outlook is trending near the low end of the annual guidance range. Since PDC's proxy solicitation on July 7th, we've not been permitted to buy back our shares. After we close the acquisition in August, we plan to resume buybacks at the $17.5 billion annual rate, which we expect to continue through the fourth quarter. We do not expect a dividend from TCO until the fourth quarter. Full-year affiliate dividends are expected to be near the low end of our guidance. Putting it all together, we delivered another quarter with solid financial results, strong project execution and continued return of cash to shareholders. Our approach is consistent and you can see that in our actions and results. Back to you, Jake.

adjusted earnings down $900 million last quarter


Pierre Breber: Thanks, Mike. We delivered another quarter with strong earnings, cash flow and ROCE. This quarter's results included two special items: a one-time tax benefit of $560 million in Nigeria and pension settlement costs of $40 million. Foreign currency benefits were $285 million. The appendix of this presentation contains a reconciliation of non-GAAP measures. Organic CapEx this quarter included about $200 million for PDC legacy operations after closing in August. Our balance sheet remains strong, ending the quarter with a net debt ratio in the single digits. Another quarter of solid cash flow enabled us to deliver on all of our financial priorities. Despite restrictions during the PDC transaction, we were able to repurchase well over $3 billion in Chevron shares. Cash used to reduce debt was primarily related to PDC's higher cost borrowing. Cash balances ended the quarter near $6 billion, a little above what's needed to run our businesses. Adjusted third quarter earnings were down $5.1 billion versus the same quarter last year. Adjusted upstream earnings were lower mainly due to realizations and negative timing effects. Higher unfavorable discrete tax charges and exploration expenses were partly offset by lower DD&A, Venezuela cash recoveries and other favorable items. Adjusted downstream earnings decreased primarily due to a negative swing in timing effects and lower marketing margins. Compared with last quarter, adjusted earnings were down just over $50 million. Adjusted upstream earnings were roughly flat as higher prices and volumes were offset by unfavorable discrete tax charges and negative timing effects due to the rise in prices. DD&A and OpEx were both higher in part due to the addition of PDC legacy assets for two months in the quarter. Adjusted downstream earnings increased primarily due to higher refining margins, partially offset by unfavorable timing effects. All other was down on unfavorable tax items and decreased interest income in line with lower cash balances. Third quarter oil equivalent production was up 6% over last quarter primarily due to two months of legacy PDC production. This was partly offset by a planned turnaround at TCO and pitstop at Gorgon. The Permian, excluding legacy PDC, was down 2% due to lower non-operated production; company-operated production was flat with the second quarter. Now, looking ahead. Our fourth quarter estimate for turnarounds and downtime includes approximately 30,000 barrels of oil equivalent per day for Tamar. We anticipate affiliate dividends in the fourth quarter to be largely from TCO. As a reminder, we record a 15% withholding tax on TCO dividends. Due to the pending transaction with Hess, share repurchases will be restricted pursuant to SEC regulations. Chevron expects share repurchases in the fourth quarter to be around $3 billion plus or minus 20%, depending primarily on the timing of the Hess definitive proxy statement mailing. In summary, our actions and performance show that Chevron keeps delivering strong results. With a strategy that remains clear and consistent, we are well positioned to deliver value to our shareholders in any environment. With that, I'll turn it back to Jake.

adjusted earnings just over $50 million last quarter


Pierre Breber: Thanks Mike. We reported fourth quarter earnings of $2.3 billion, or $1.22 per share. Adjusted earnings were $6.5 billion, or $3.45 per share. Included in the quarter were $3.7 billion in charges pre-announced in January. Foreign currency charges were almost $480 million. Our 2023 CapEx included $650 million of inorganic acquisitions and around $450 million invested in legacy PDC assets post-closing. Excluding these items, CapEx was about 5% above budget after three consecutive years below. Share repurchases matched the third quarter. Our balance sheet remains strong, ending the year with a net debt ratio comfortably in the single digits. Turning to the quarter, adjusted earnings were higher than last quarter by roughly $730 million. Adjusted upstream earnings improved due to higher liftings, in line with record quarterly production, and favorable timing effects. Adjusted Downstream earnings decreased on lower refining margins, partially offset by a favorable swing in timing effects. All Other benefited from lower corporate taxes and employee costs. For the full year, adjusted earnings decreased nearly $12 billion compared to the prior year. Adjusted Upstream earnings decreased primarily due to lower prices. Adjusted Downstream earnings were lower largely due to declining refining margins. Other segment earnings improved on lower employee costs and higher interest income. Solid financial performance enabled Chevron to deliver, again, on all four of its financial priorities. We announced an 8% increase in our dividend, reflecting our confidence in expected future free cash flow growth. We maintained capital discipline in both traditional and new energies. We reduced debt by over $4 billion, including all debt assumed in the PDC acquisition and we repurchased about 5% of our shares outstanding. Last year, we produced more oil and gas than any other year in the company’s history, including a record number of LNG cargoes out of Australia. We expect 2024 production to be higher again, by 4% to 7%. Our plans include production growth in the DJ Basin, with a full year of legacy PDC operations and continued organic growth in the Permian. Our guidance this year includes an estimated impact from asset sales as we further high-grade our portfolio. Looking ahead, our first quarter downtime estimate includes around 20 thousand barrels of oil equivalent per day associated with January’s cold weather in North America. Earnings estimates from refinery turnarounds are mostly driven by Pascagoula. Share repurchases in the quarter will continue to be restricted under SEC regulations. Depending on commodity prices and margins, affiliate dividends are estimated around $4 billion, roughly flat with last year. We do not expect significant affiliate dividends in the first quarter. The difference between affiliate earnings and dividends is expected to decrease in the second half of the year after TCO’s start-up of WPMP. Our CapEx guidance range is unchanged from the December budget announcement. In prior years, our CapEx rate in the first half of the year was about 20% lower than the second half. Our price sensitivities have increased at higher production levels. About 20% of the Brent sensitivity relates to oil-linked LNG sales and less than 10% relates to North America natural gas liquids. Back to you, Mike.