CATERPILLAR INC. CATERPILLAR CATERPILLAR INC. 2020 ANNUAL REPORT 2020 ANNUAL REPORT $1.4B Research & CORPORATE PROFILE Development $41.7B $37.9M Since 1925, we’ve been driving sustainable Sales & Foundation progress around the globe. Connecting people Revenues Investment to food, water, energy, work, school and one another — it’s what our products make possible. Throughout the product life cycle, we offer services 161 that combine leading-edge technology with Cat® Dealers decades of product expertise. These products and services, backed by our global dealer network, 97,300 21 Employees provide exceptional customer value. Brands 4M+ ~1M Cat® Products at Work Connected Around the World1 Assets WORLD’S LEADING MANUFACTURER OF: • Construction & Mining Equipment ~150 190+ 61% • Diesel & Natural Gas Engines Primary Countries • Industrial Gas Turbines Locations Where Sales Outside We Do the U.S. • Diesel-Electric Locomotives In ~25 Countries Business 1. Includes discontinued products All numbers represent REPORTABLE SEGMENTS year-end 2020 data. • Construction Industries • Resource Industries • Energy & Transportation • Financial Products CORPORATE HEADQUARTERS Deerfield, Illinois STOCK SYMBOL CAT 21 YEARS ON THE DOW JONES SUSTAINABILITY INDEX / 1 / / 1 / / 1 / / 1 / 2020 ANNUAL REPORT / 1 / / 1 // 1 / / 1 / CHAIRMAN & CEO MESSAGE DEAR FELLOW SHAREHOLDERS We will emerge from the pandemic as an even stronger company, well-positioned for long-term profitable growth. In a year of unexpected and unparalleled challenges, I am proud of our global team’s performance as they provided essential products and services that enabled our customers to support a world in need. By prioritizing employees’ safety, health and well-being, we remained both safe and productive as we managed through the pandemic. Despite the difficult environment, we achieved the best safety performance on record for the second consecutive year – a testament to our employees’ safety-first mindset. We finished the year with an operating profit margin of 10.9% and were pleased our adjusted operating profit margin of 11.8% was within the targeted range we announced during our 2019 investor day. We expected it would be difficult to achieve our targeted range due to the impact of COVID-19 and our intent to continue investing in new products and services to drive long-term profitable growth. Also notable, 2020 marked the 27th consecutive year we paid higher annual dividends to shareholders. We are proud of our status as a Dividend Aristocrat. | 01 | 2020 ANNUAL REPORT EXECUTING OUR STRATEGY We have intensified our focus on growing services by working FOR PROFITABLE GROWTH more closely with our dealers to help our customers be even more successful. Through integrated services offerings like Successfully navigating the many obstacles we faced in 2020 Customer Value Agreements (CVAs), dealers can better support has only strengthened our resolve that we have the right customers throughout the lifecycle of their equipment, with an strategy – based on operational excellence, expanded offerings easy-to-buy, easy-to-own experience. Last year we increased and services – and that we are well-positioned for long-term the number of products sold with CVAs and the average length profitable growth. of the agreements. The operational excellence element of our strategy has served Through our digital strategy, we improved our customers’ ability us well, resulting in disciplined management of structural costs. to conveniently manage their equipment and conduct business By carefully managing costs and improving efficiencies, we with Caterpillar and our dealers. Our digital investments allow went into the pandemic with a strong financial position. We us to leverage our more than one million connected machines continued to invest in expanded offerings and services to help and engines to expand our offerings and services. make our customers more successful. GIVING BACK THROUGH An example of continued investment in expanded offerings is THE CATERPILLAR FOUNDATION our new GX line of excavators launched last fall in China. The GX series provides a more competitive offering by delivering The record level of support for worldwide COVID-19 relief the durability, safety and services customers expect, plus up efforts through the Caterpillar Foundation speaks to our to 15% lower fuel consumption than prior models and up to Caterpillar team’s generosity. The Foundation donated 25% lower maintenance cost. $10 million (USD) to directly support COVID-19 response and help impacted organizations. CATERPILLAR INNOVATION, THEN AND NOW In 2020, Caterpillar celebrated 95 years since the Holt Manufacturing Company and C.L. Best Tractor Co. merged to form the Caterpillar Tractor Co. From then until now, our business has grown tremendously, expanded globally and played a role in projects that have shaped the world’s history. While many things have changed since our earliest days, our commitment to safety, quality and customer success has remained foundational. Benjamin Holt C.L. Best | 02 | 2020 ANNUAL REPORT BUILDING A BETTER, MORE SUSTAINABLE WORLD Caterpillar has a long-standing commitment to sustainability. It is one of our five Values in Action, which are the foundation of who we are and what we do every day. We are reducing emissions in our operations and are investing to help our customers meet their climate-related objectives. Our 2020 Sustainability Report features our new sustainability goals, several of which we established to enhance our future performance and impact. We continue executing our strategy for profitable growth, improving operational excellence and investing in expanded offerings and services to help our customers succeed. We are grateful for our team’s accomplishments in 2020 as they put safety first, remained productive and continued to deliver for our customers and stakeholders. It was not the year we were expecting as we celebrated 95 years of operation. Yet, for nearly a century, we have overcome many challenges, and once again, our employees rose to the occasion, laying the foundation for many more years of success. We will emerge from the pandemic as an even stronger company, well-positioned for long-term profitable growth. Jim Umpleby Chairman & CEO In 1904, founder Benjamin Holt invented the track-type tractor when he realized that heavy machines needed an even distribution of weight to move over soft soils. Today, our tradition of innovation continues with products and services from a family of brands that span industries and support customers around the globe – enabling progress and helping build a better world. Our innovation is no longer limited to just a few ingenious minds. Caterpillar today is a diverse and global team of makers, problem solvers and world builders who pursue excellence in all they do. | 03 | 2020 ANNUAL REPORT 2020 PERFORMANCE AT A GLANCE Caterpillar delivered solid operational performance despite a 22% decline in sales and revenues for the year. We remained disciplined and focused on maintaining control of our structural costs, which helped us achieve an operating profit margin of 10.9%. Adjusted operating profit margin of 11.8% was within our 2019 Investor Day target range. We generated operating cash flow of $6.3 billion and, as a result, we were able to return $3.4 billion to shareholders through dividends and share repurchases, while returning 110% of Machinery, Energy & Transportation (ME&T) free cash flow* to shareholders. We maintained our dividend in 2020 and paid dividends of $2.2 billion, continuing our status as a Dividend Aristocrat. SALES AND REVENUES SALES BY REGION OPERATING PROFIT ($ in billions) ($ in billions) ($ in billions) $54.7 $53.8 $41.7 $8.3 $8.3 $4.6 11 11 11 11 10 10 10 10 9 9 9 9 40 8 40 8 8 8 8 8 7 7 7 7 7 7 30 6 30 6 6 6 6 6 5 5 5 5 5 5 20 4 20 4 4 4 4 4 North America3 – $18.2 3 3 3 3 3 10 • 2 10 2 2 2 2 2 • Asia/Pacific 1– $10.2 1 1 1 1 1 EAME – $9.9 2018 2019 2020 • 2018 2019 2020 • Latin America – $3.4 Consolidated Sales & Revenue Operating Prot Consolidated Sales & RevenueProt Per Share Operating Prot Dividends Declared Prot Per Share Dividends Declared PROFIT PER SHARE ADJUSTED PROFIT PER SHARE** DIVIDENDS PAID (in dollars) (in dollars) PER SHARE (in dollars) $10.26 $10.74 $5.46 $11.22 $11.40 $6.56 $3.28 $3.78 $4.12 11 11 11 10 10 11 11 10 11 11 9 9 10 10 9 10 10 40 8 8 8 9 9 8 9 9 7 40 8 7 7 40 8 8 8 7 8 8 7 7 7 30 6 7 6 6 7 7 6 6 30 6 6 6 5 30 5 5 6 6 5 5 5 5 5 5 5 20 4 4 4 4 20 4 20 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 10 2 10 2 2 2 10 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 2018 2019 2020 2018 2019 2020 2018 2019 2020 Consolidated Sales & Revenue Operating Prot Consolidated Sales & RevenueProt Per Share Operating Prot Dividends Declared Prot Per Share Dividends Declared Consolidated Sales & Revenue Operating Prot Prot Per Share * A reconciliationDividends of ME&T Declared free cash flow to consolidated net cash providedAdujsted by operating Prot activities Per Sharecan be found in our 2020 10-K filing, which is available on our website at www.caterpillar.com/investors. ** A reconciliation of adjusted profit per share to U.S. GAAP can be found in our 2020 10-K filing, which is available on our website at www.caterpillar.com/investors. | 04 | 2020 ANNUAL REPORT 2020 END-MARKET HIGHLIGHTS CONSTRUCTION INDUSTRIES RESOURCE INDUSTRIES Lower end-user demand and changes in dealer inventories Lower end-user demand for equipment supporting heavy resulted in lower sales in 2020.