Caterpillar Inc. CAT

In Energy Power & Transportation, demand is expected to remain strong Energy, we anticipate growth in Power Generation, as we expect growth Generation for both reciprocating engines and turbines and turbine-related services in 2025 as compared to 2024. Overall strength in Power Generation, for both prime and backup power applications, continues to be 2026, driven by increasing energy demands demand to support data center growth build-out related to cloud computing and generative artificial intelligence Artificial Intelligence (AI). Through continued focus on improving manufacturing efficiencies, along Additionally, we are starting to see orders for prime power trend higher as data center customers look for alternative power solutions to keep pace with initial stages of our investment their growth. After reaching record levels in 2025, Oil & Gas is expected to increase large engine output capability, we expect growth in reciprocating engines for Power Generation in 2025. We also expect growth in turbines and turbine-related services for Power Generation, driven by increased customer demand. For Oil and Gas, we expect see moderate growth in 2025 as compared 2026. Reciprocating engine sales are expected to 2024. We expect reciprocating engines and services to be slightly down increase, driven by strong demand in 2025 due to continuing capital discipline by our customers, industry consolidation and efficiency improvements in our customers’ operations. We expect growth for turbines and turbine-related services in Oil & Gas in 2025 as compared to 2024. gas compression applications. For turbines and turbine-related services used in Oil & Gas applications, we expect another year of strong sales in 2026 comparable to our record 2025 performance as backlog remains strong, and we see healthy, with continued healthy solid order and inquiry activity. Demand for products in Industrial applications in 2025 is expected to remain at a relatively low level, similar to 2024. grow moderately in 2026 as we see continued recovery from previous lows. In Transportation, we anticipate growth in 2025, driven by rail services. services and locomotive deliveries in 2026 compared to 2025.

We maintain a number of credit facilities to support general corporate purposes (facilities) and have issued debt securities to manage liquidity and fund operations (debt securities). The agreements relating to a number of the facilities and the debt securities contain certain restrictive covenants applicable to us and certain subsidiaries, including Cat Financial. These covenants include maintaining a minimum consolidated net worth (defined as the consolidated shareholder’s equity including preferred stock but excluding the pension and other post-retirement benefits balance within accumulated other comprehensive income (loss)), limitations on the incurrence of liens and sales and leaseback transactions, restrictions on the transfer of certain property and certain restrictions on consolidation and merger. Cat Financial has also agreed under certain of these agreements not to exceed a certain leverage ratio (consolidated debt to consolidated net worth, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31), to maintain a minimum interest coverage ratio (calculated as (1) profit excluding income taxes, interest expense and net gain (loss) from interest rate derivatives to (2) interest expense calculated at the end of each fiscal quarter for the prior four consecutive fiscal quarter period) and not to terminate, amend or modify its support agreement with us.

Income tax reporting (ASU 2023-09) — In December 2023, the FASB Financial Accounting Standards Board (FASB) issued accounting guidance to expand the annual disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. The expanded disclosures are were effective for our the year ending December 31, 2025 2025, and can be are being applied prospectively or retrospectively. We are in the process of evaluating the effect of this new guidance on the related disclosures. prospectively. See Note 6, Income taxes, for additional information.