Table of Contents LIQUIDITY AND CAPITAL RESOURCES Sources of funds We generate significant capital resources from operating activities, which are the primary source of funding for our ME&T operations. Funding for these businesses is also available from commercial paper and long-term debt issuances. Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. During 2020, we experienced favorable liquidity conditions globally in both our ME&T and Financial Products' operations. On a consolidated basis, we ended 2020 with $9.35 billion of cash, an increase of $1.07 billion from year-end 2019. We intend to maintain a strong cash and liquidity position. Consolidated operating cash flow for 2020 was $6.33 billion, down $585 million compared to 2019. The decrease was primarily due to profit adjusted for non-cash items, including lower accruals for short-term incentive compensation and postretirement benefits. Partially offsetting lower profit were the absence of a discretionary pension contribution, reduced working capital requirements and lower payments for short-term incentive compensation during 2020. Within working capital, changes to accounts receivable and accounts payable favorably impacted cash flow, but were partially offset by unfavorable changes in accrued expenses, inventories and customer advances. See further discussion of operating cash flow under ME&T and Financial Products. Total debt as of December 31, 2020 was $37.16 billion, a decrease of $494 million from year-end 2019. Debt related to Financial Products decreased $2.51 billion, while debt related to ME&T increased $2.02 billion in 2020. The increase was due to the issuance of new debt to maintain our strong financial position and increase liquidity. In April 2020, we issued $800 million of ten-year bonds at 2.6 percent and $1.2 billion of 30-year bonds at 3.25 percent. We have three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes. Based on management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of December 31, 2020 was $2.75 billion. Information on our Credit Facility is as follows: • The 364-day facility of $3.15 billion (of which $0.82 billion is available to ME&T) expires in September 2021. • The three-year facility, as amended and restated in September 2019, of $2.73 billion (of which $0.72 billion is available to ME&T) expires in September 2022. • The five-year facility, as amended and restated in September 2019, of $4.62 billion (of which $1.21 billion is available to ME&T) expires in September 2024. At December 31, 2020, Caterpillar’s consolidated net worth was $15.41 billion, which was above the $9.00 billion required under the Credit Facility.  The consolidated net worth is defined as the consolidated shareholder’s equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss). At December 31, 2020, Cat Financial’s covenant interest coverage ratio was 1.72 to 1. This is above the 1.15 to 1 minimum ratio, calculated as (1) profit excluding income taxes, interest expense and net gain/(loss) from interest rate derivatives to (2) interest expense calculated at the end of each calendar quarter for the rolling four quarter period then most recently ended, required by the Credit Facility. In addition, at December 31, 2020, Cat Financial’s six-month covenant leverage ratio was 6.74 to 1 and year-end covenant leverage ratio was 6.95 to 1. This is below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31, required by the Credit Facility. In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of banks may terminate the commitments allocated to the party that does not meet its covenants. Additionally, in such event, certain of Cat Financial's other lenders under other loan agreements where similar financial covenants or cross default provisions are applicable, may, at their election, choose to pursue remedies under those loan agreements, including accelerating the repayment of outstanding borrowings. At December 31, 2020, there were no borrowings under the Credit Facility. 44