Welcome to the fourth quarter 2022 Caterpillar Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan Fiedler. Thank you. Please go ahead. Thank you, Emma. Good morning, everyone, and welcome to Caterpillar's fourth quarter of 2022 earnings call. I'm Ryan Fiedler, Vice President of Investor Relations. Joining me today are Jim Umpleby, Chairman and CEO, Andrew Bonfield, Chief Financial Officer, Kyle Epley, Senior Vice President of the Global Finance Services Division, and Rob Rengel, Senior IR Manager. During our call, which will extend to 8:40 A.M. Central, we'll be discussing the fourth quarter and full year earnings release we issued earlier today. You can find our slides, the news release, and a webcast recap at investors.caterpillar.com under Events and Presentations. The content of this call is protected by U.S. and international copyright law. Any rebroadcast, retransmission, reproduction, or distribution of all or part of this content without Caterpillar's prior written permission is prohibited. Moving to slide 2. During our call today, we'll make forward-looking statements which are subject to risks and uncertainties. We'll also make assumptions that could cause our actual results to be different than the information we're sharing with you on this call. Please refer to our recent SEC filings and the forward-looking statements reminder in the news release for details on factors that individually or in aggregate could cause our actual results to vary materially from our forecast. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. On today's call, we'll also refer to non-GAAP numbers. For a reconciliation of any non-GAAP numbers to the appropriate U.S. GAAP numbers, please see the appendix of the earnings call slides. Today, we reported profit per share of $2.79 for the fourth quarter of 2022 compared with $3.91 of profit per share in the fourth quarter of 2021. We're including adjusted profit per share in addition to our U.S. GAAP results. Our adjusted profit per share was $3.86 for the fourth quarter of 2022 compared with adjusted profit per share of $2.69 for the fourth quarter of 2021. Adjusted profit per share for both quarters excluded mark-to-market gains for remeasurement of pension and other post-employment benefit plans, as well as restructuring items. Adjusted profit per share for the fourth quarter of 2022 also excluded a goodwill impairment. Now, let's turn to slide 3 and turn the call over to our Chairman and CEO, Jim Umpleby. Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out 2022, I'd like to start by recognizing our global team for another strong quarter. Our results reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter and for the full year. I'll provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. Overall, it was another strong quarter as demand remained healthy for our products and services. Sales rose by 20% versus the fourth quarter of 2021, better than we expected. Supply chain improvements enabled stronger than expected shipments, particularly in Construction Industries, and supported an increase in dealer inventories. We achieved double-digit top line increases in each of our 3 primary segments and saw sales growth in North America, Latin America, and EAME, while Asia Pacific was about flat. Adjusted operating profit margins increased to 17% in the fourth quarter, an all-time record, as we saw margins improve both on a sequential and year-over-year basis. Adjusted profit per share was $3.86, which includes an unfavorable $0.41 per share of foreign currency headwind, largely due to ME&T balance sheet translation. This was caused by the rapid decline in the U.S. dollar late in the year and reversed much of the favorable impact we saw in the first 3 quarters of 2022. We generated a 17% increase in total sales to $59.4 billion in the year. Services also increased by 17% to $22 billion. Adjusted operating profit margin for the full year was 15.4%, a 170 basis point increase over the prior year. We did not achieve our Investor Day margin targets for the year, which I'll discuss more in a moment, I'm pleased that we increased adjusted operating profit by over $2 billion and grew absolute OPACC dollars, which is our internal measure of profitable growth. For the year, we achieved adjusted profit per share of $13.84, also an all-time record. We generated $5.8 billion of ME&T free cash flow firmly in our target range. Despite the strong sales in the fourth quarter, backlog grew by $400 million in the quarter to end the year at $30.4 billion, a 32% year-over-year increase. As I've mentioned, we did see some improvement in certain areas of the supply chain in the fourth quarter. Pockets of challenge continue, particularly with some suppliers related to Energy & Transportation and Resource Industries. Similar to previous quarters, our sales would have been higher if not for these supply chain issues. Our global team delivered one of the best years in our nearly 100-year history, including record full year adjusted profit per share. Despite the supply chain challenges, our team achieved double-digit top-line growth and generated strong ME&T free cash flow. We remain committed to serving our customers, executing our strategy, and investing for long-term profitable growth. Turning to slide 4. In the fourth quarter of 2022, sales increased 20% versus last year to $16.6 billion. The increase was due to favorable price realization and volume growth, which included dealer inventory increases and growth in sales of equipment to end users. Compared with the fourth quarter of 2021, sales to users increased 8%, broadly in line with our expectations. For machines, including Construction Industries and Resource Industries, sales to users rose by 4%, while Energy & Transportation was up 19%. Sales to users in Construction Industries were up 1% in line with expectations. As a reminder, non-residential represents approximately 75% of Caterpillar sales in Construction Industries. North American sales to users increased as demand remained healthy for both non-residential and residential despite some moderation in residential. Latin America saw higher sales to users while EAME and Asia Pacific declined slightly in the quarter. Excluding China, sales to users in the Asia Pacific region increased. In Resource Industries, Sales to Users increased 13%, which was lower than anticipated, mainly due to timing issues related to outbound logistics and commissioning. The segment Sales to Users increased primarily due to heavy construction in Quarry and Aggregates. In Energy & Transportation, Sales to Users increased by 19%, slightly above our expectations. In the fourth quarter, Oil & Gas Sales to Users benefited from continued strength in large engine repowers. We also saw strong turbine and turbine-related services. Power generation and industrial Sales to Users continued to remain positive due to favorable market conditions. Transportation declined from a relatively low base, primarily due to lower locomotive deliveries, while marine was up slightly. Dealer inventory increased by about $700 million in the fourth quarter, which was above our expectations compared to a decrease of about $100 million in the same quarter last year. As I mentioned, supply chain improvements enabled stronger than expected shipments, particularly in Construction Industries, and supported an increase in dealer inventories. We saw increases in each of our primary segments and within Construction Industries. Dealer inventories are now in their typical historical range of three to four months of projected sales. In Construction Industries, the largest dealer inventory increase came in North America, which benefited our most constrained region. Over 70% of the combined year-end dealer inventory in Resource Industries and Energy & Transportation is supported by customer orders. As expected, we generated improved adjusted operating profit margin in the quarter, both year-over-year and sequentially. Our adjusted operating profit margin increased by 560 basis points versus last year to 17%, which does not include the non-cash goodwill impairment charges and restructuring costs associated with Progress Rail. I'll provide more detail on rail later in my remarks. Turning to slide five, I'll now provide full year highlights. In 2022, we generated sales of $59.4 billion, up 17% versus last year. This was due to favorable price realization and higher sales volume, driven by the impact from changes in dealer inventory, increased services, and higher sales of equipment to end users. As I mentioned, we generated $22 billion of services revenues in 2022, a 17% increase over 2021. Services growth in 2022 benefited from our ongoing initiatives and investments as well as price realization. We now have over 1.4 million connected assets, up from 1.2 million in 2021. We delivered over 60% of our new equipment with a Customer Value Agreement, and the launch of our new app called Cat Central helped drive growth in e-commerce sales to users. We also had the highest level of parts availability in our history. Overall, our confidence continues to increase that we'll achieve our $28 billion services target in 2026. Our full year adjusted operating profit margin was 15.4%, 170 basis point increase over 2021. Although we significantly increased margins in the fourth quarter versus last year, overall, they did not improve enough for us to achieve our full year Investor Day and margin targets. Our margins in 2022 were impacted by supply chain inefficiencies, ongoing inflationary pressures within manufacturing costs, and our conscious decision to continue to invest for profitable growth. As I mentioned during our last earnings call, our margin targets are progressive, which means we expect to achieve higher operating profit margins as sales increase. In a higher inflationary environment where a relatively larger portion of the sales increase is due to price realization, there's less operating leverage, which makes the delivery of those progressive margins more challenging. Andrew will provide more information about our operating profit margin targets. Moving to slide 6. We generated ME&T pre-cash flow of $5.8 billion for the full year, which was in line with our Investor Day range of $4 billion-$8 billion. We returned $6.7 billion to shareholders, or 115% of ME&T pre-cash flow, which included $4.2 billion in repurchased stock and $2.4 billion in dividends to shareholders. 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. On slide 7, I'll share some high-level assumptions on our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our segments, and we expect 2023 to be better than 2022 on both top and bottom line. Just to remind you, our internal measure of profitable growth is absolute OPACC dollars. We believe increasing absolute OPACC dollars will lead to continued higher total shareholder returns over time. We expect to achieve our updated adjusted operating profit margin targets and ME&T free cash flow target range of $4 billion-$8 billion during 2023. I'll discuss our outlook for key end markets this year, starting with Construction Industries. In North America, overall, we see positive momentum in 2023. We expect non-residential construction in North America to grow due to the positive impact of government-related infrastructure investments, healthy backlogs, and rental replenishment. Although residential construction continues to moderate due to tightening financial conditions, it remains at a healthy level. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending and supportive commodity prices. As we mentioned during our last earnings call, weakness continues in China in the excavator industry above 10 tons. We expect it to remain below 2022 levels due to low construction activity. In EAME, business activity is expected to be about flat versus last year based on healthy backlogs and strong construction demand in the Middle East, offset by uncertain economic conditions in Europe. Construction activity in Latin America is expected to be flat to slightly down versus the strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. That said, our customers remained capital disciplined. We anticipate production and utilization levels will remain elevated, and our autonomous solutions continue to gain momentum. We expect the continuation of high equipment utilization and a low level of parked trucks, which both support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing opportunities for profitable growth. In heavy construction and Quarry and Aggregates, we anticipate continued growth supported by infrastructure and major non-residential construction projects. In Energy & Transportation, we expect sales growth due to strong order rates in most applications. In oil and gas, although customers remain disciplined, we are encouraged by continued strength in demand and order intakes for the year. New equipment orders for Solar Turbines continue to be robust. Power generation orders are expected to remain healthy, including data center strength. Industrial remains healthy with momentum continuing for 2023. In rail, North American locomotive sales are expected to remain muted. We anticipate strength in high-speed marine as customers continue to upgrade aging fleets. During the fourth quarter, we took a $925 million non-cash goodwill impairment charge related to our Rail division, which is part of the Energy & Transportation segment. The impairment was primarily driven by a revision in our long-term outlook for the company's locomotive offerings. We believe opportunities exist for new locomotives, overhauls, repowers, and modernizations, but at lower levels than previously forecasted and occurring over a longer time horizon. In addition to the goodwill impairment charge, we also incurred restructuring cost of $180 million in the quarter, primarily related to non-cash inventory adjustments within this division. Importantly, our rail services, including track, signaling, and freight car, remain robust. Progress Rail plays an integral part in supporting and maintaining rail infrastructure in countries around the globe. Rail remains one of the most efficient ways of transporting goods across the land. We will continue to offer Tier 4 solutions to our customers. However, strategic investments in new locomotive products will continue shifting to competitive, sustainable solutions that help customers meet their carbon reduction initiatives, including hybrid, full battery electric, and alternative fuel power sources, including hydrogen. These alternative power solutions for rail will leverage modularity and scale across Resource Industries, Construction Industries, and Energy & Transportation. We believe these enterprise-wide investments will provide Caterpillar with a strategic advantage over time. Moving to slide 8. We continued to advance our sustainability journey in the fourth quarter of 2022 as we strive to help our customers achieve their climate-related objectives. In November, Caterpillar announced the successful demonstration of its first battery electric 793 large mining truck prototype with support from key mining customers participating in Caterpillar's Early Learner Program. The truck performed at the same specification as a diesel truck on our 7-kilometer course, achieving a top speed of 60 kilometers per hour carrying a full load and 12 kilometers per hour with that same load at a 10% grade. In addition to the truck, we also unveiled plans to create a working and more sustainable minesite of the future at our Arizona-based proving ground. This includes installing and utilizing a variety of renewable energy sources, leveraging technologies from our Electric Power Division and new Electrification + Energy Solutions Division. We also invested in Lithos Energy, Inc., a lithium-ion battery pack producer that manufactures battery packs for the types of demanding environments our Cat equipment thrives in. This collaboration supports our commitment to delivering robust electrified products and solutions to our customers. Lastly, in 2022, we continued to advance our autonomous journey, achieving an industry first of moving over 5 billion tons autonomously across 25 mine sites worldwide. During the fourth quarter, we announced our first autonomous solution in the aggregates industry. We'll collaborate with Luck Stone, the nation's largest family-owned and operated producer of crushed stone, sand, and gravel, to expand these solutions beyond mining. We'll utilize Cat MineStar command for hauling system on 777 trucks, contributing to continued improvements in safety and productivity for our customers. These examples reinforce our ongoing sustainability leadership and how we help our customers build a better, more sustainable world. We look forward to issuing our eighteenth annual sustainability report during the second quarter. With that, I'll turn the call over to Andrew. Thank you, Jim, and good morning, everyone. I'll begin by covering our fourth quarter results, including the performance of our business segments. I'll cover the balance sheet and ME&T free cash flow before concluding on high-level assumptions for 2023, including the first quarter. Beginning on slide 9, sales and revenues for the fourth quarter increased by 20% or $2.8 billion to $16.6 billion. The sales increase versus the prior year was due to strong price realization and volume, partially offset by currency impacts. Sales were higher than we expected as supply chain constraints eased in some areas, and we were able to ship more product. Operating profit increased by 4% or $69 million to $1.7 billion as strong price realization and volume growth were mostly offset by a goodwill impairment charge, higher manufacturing costs, and restructuring expenses. Our adjusted operating profit was $2.8 billion, up $1.2 billion versus the prior year, and the adjusted operating profit margin was 17.0%. This was an increase of 560 basis points versus the prior year quarter due to favorable price realization and volume growth, which outpaced manufacturing cost increases. Fourth quarter margins were lower than we were targeting, as well as being lower than where we needed them to be to meet our full-year Investor Day margin target. I will talk more about that in a moment. Adjusted profit per share increased by 43% to $3.86 in the fourth quarter, compared to $2.69 in the fourth quarter of last year. Adjusted profit per share in the fourth quarter excluded a goodwill impairment charge of $925 million or $1.71 per share related to our rail division, as Jim has explained. This charge is held at the corporate level and does not impact Energy & Transportation segment margins. Adjusted profit per share figures also exclude mark-to-market gains for the remeasurement of pension and OPEB plans and restructuring items. Restructuring costs of $209 million or $0.29 in the quarter were primarily related to non-cash inventory write-downs within our rail division. These charges impacted the corporate level, and the inventory write-downs are within cost of goods sold in the income statement. For the full year, restructuring costs were about $600 million. Last quarter, we told you that a non-cash charge of approximately $600 million could slip into 2023, which it did. We expect to close on the divestiture of our Longwall business in early February, and the non-cash charge will be included in our first quarter 2023 restructuring charges. The provision for income taxes in the fourth quarter, excluding the amounts relating to mark-to-market goodwill impairment and other discrete items, reflected a global annual effective tax rate of approximately 23%, as we had expected. Our fourth quarter results include an unfavorable non-cash foreign currency impact within other income expense of $0.41 related to ME&T balance sheet translation in the quarter. To explain, many of our foreign entities are US dollar functional. These entities are generally in a net liability position, causing a favorable translation impact in periods of US dollar strength. Within each of the first three quarters of the year, we saw some benefit as the dollar sequentially trended stronger. Within the fourth quarter, this trend reversed. Given the significant weakening of the US dollar within the fourth quarter of 2022, the negative impact to profit was sizable. As you would imagine, our forward-looking assumptions do not include expectations for currency fluctuations. To give a bit more context, other income and expense, excluding the impact of pension mark-to-market adjustments, has trended at around $250 million of income per quarter for all of 2021 and for the first three quarters of 2022. This has reflected a number of offsetting items, including currency. In the fourth quarter, excluding pension mark-to-market, other income expense swung to a $70 million expense. The majority of that change is due to the foreign exchange translation adjustment, which is why we have highlighted this. Sales were better than we had expected. As we had anticipated, margins increased, as I said earlier, not by enough to meet our Investor Day margin targets. Adjusted profit per share rose by 43%, that was moderated by the $0.41 non-cash foreign currency balance sheet translation charge that I mentioned a moment ago. Moving on to slide 10. The 20% increase in the top line was driven by favorable price realization and higher sales volume. Volume was supported by the $800 million year-over-year impact of changes in dealer inventory and an 8% increase in sales to users. From a sales perspective, currency remained a headwind given the strength of the US dollar. As I mentioned earlier, sales were higher than we expected in the quarter, mostly due to some improvements in the supply chain, which enabled stronger shipments, particularly in Construction Industries. The increase in dealer inventories reflects the improved shipments in Construction Industries and customer delivery timing in Resource Industries and Energy & Transportation. Overall, market dynamics remain healthy as sales to users continue to increase and our backlog is strong at $30.4 billion. Moving to slide 11. Fourth quarter operating profit increased by 4% impacted by the goodwill impairment charge and restructuring expenses. Adjusted operating profit increased by 78% as favorable price realization and higher sales volume continued to outpace higher manufacturing costs. Manufacturing costs increased primarily due to higher material costs and unfavorable cost absorption as we decreased our inventories in the fourth quarter compared to an increase in the prior year. Related to our recent price cost performance, keep in mind that we are still catching up from the increases in manufacturing costs which have occurred over the last few years. In particular, material and freight costs have increased by about 20% since 2020, and our full year gross margins remain below our 2019 levels. Our fourth quarter adjusted operating profit margin of 17% was a 560 basis point increase versus the prior year. As Jim has mentioned, this is our highest ever quarterly adjusted operating margin. As I said earlier, we did not achieve our invested margin targets. As Jim said, in a high inflation environment, you do not get the benefit of operating leverage that you would normally expect when sales increases are volume driven. You will recall that our margin targets are progressive, which means at the top end of the range, for every $1 billion in sales incremental revenues, we need to deliver close to 40 percentage points of that through adjusted operating profit. This is challenging to achieve in a high inflation environment when sales are increasing due to price realization designed to mitigate increases in manufacturing costs. Also, please keep in mind that we made a conscious decision to continue to invest for future profitable growth. We have not seen inflation anywhere near double-digit levels since the targets were introduced in 2017. In a low inflation environment, productivity improvements can be made to offset inflationary increases. Normal targets remain effective. In the current high inflation environment, you cannot achieve the level of productivity. We are adjusting the target for sales range to reflect the inflationary increases we've seen in 2022. On slide 12, we've updated our margin target slope to account for the impact of inflation as depicted on the chart. We still have the same aspirations for margins. However, the corresponding level of sales and costs are generally around 9% higher than they'd have been in a non-inflationary environment. As you can see, the low end of the sales range is now $42 billion, while the top end is $72 billion. This compares to the previous bookends of $39 billion and $66 billion, respectively. The key point is that despite the inflationary impact on sales and costs which impact margins, our expectations for profit and cash generation have not changed. We remain focused on delivering increases in absolute OPACC dollars. Depending on the inflationary environment that we see in 2023, we'll have to revisit the range next January. Moving to slide 13. Across our three primary segments, sales and margins improved in the fourth quarter versus the prior year, supported by price realization and sales volume. As expected, price more than offset manufacturing costs in all three segments. Starting with Construction Industries, sales increased by 19% in the fourth quarter to $6.8 billion, driven by favorable price realization and sales volume, partially offset by currency. Volume increased primarily due to changes in dealer inventory and higher sales to users. Dealer inventory increased in the quarter compared to a reduction last year. Sales in North America rose by 34% due mostly to strong pricing. The positive change in dealer inventory and higher sales to users. Sales in Latin America increased by 39% on strong price realization and higher sales volume. The latter due mostly to a favorable change in dealer inventory. In the EAME, sales increased by 10% on price realization and sales volume, partially offset by the unfavorable currency. Sales volume was supported by a positive year-over-year change in dealer inventory as the decrease in the prior year's quarter was larger than this year's decline. Sales in Asia Pacific decreased by 10%, mostly due to unfavorable currency impacts, partially offset by stronger price realization. Lower sales volume also contributed to the decline as dealers decreased inventory during the fourth quarter compared to an increase in the prior year. Fourth quarter profit for Construction Industries increased by 87% versus the prior year to $1.5 billion. Price realization and higher sales volume drove the increase. Unfavorable manufacturing costs largely reflected higher material costs, unfavorable cost absorption and increased rate. The segment's operating margin of 21.7% was an increase of 780 basis points versus last year. The margin for the quarter was better than we'd expected on stronger volume, price, and moderating material costs. As a reminder, the fourth quarter is usually the weakest quarter for margins in Construction Industries, with the benefit of price realization, the reverse was true in 2022. Turning to slide 14, Resource Industries sales grew by 26% in the fourth quarter to $3.4 billion. The improvement was primarily due to favorable price realization and higher sales volume. Volume increased due to the impact of changes in dealer inventories and higher sales of equipment to end users. Dealer inventory increased more during the fourth quarter 2022 than the prior year due to the timing of customer deliveries, which includes the impact of outbound logistics delays and commissioning. Fourth quarter profit for Resource Industries increased by 110% versus the prior year to $605 million, mainly due to favorable price realization and higher sales volume. This was partially offset by higher manufacturing costs, primarily material, freight, and volume-related manufacturing costs. The segment's operating margin of 17.6% was an increase of 700 basis points versus last year, strengthening versus the third quarter, as we had expected. On slide 15. Energy & Transportation sales increased by 19% in the fourth quarter to $6.8 billion, with sales up across all applications. Oil & Gas sales increased by 38% due to higher sales of turbines and turbine-related services, reciprocating engines, and aftermarket parts. Power Generation sales increased by 12% as sales were higher in large reciprocating engines supporting data center applications. Sales increased in small reciprocating engines, turbines, and turbine-related services as well. Industrial sales rose by 19% with strength across all regions. Finally, Transportation sales increased by 6%, benefited from marine applications and reciprocating engine aftermarket parts. Rail services were offset by lower deliveries of locomotives. Fourth quarter profit for Energy & Transportation increased by 72% versus the prior year to $1.2 billion. The improvement was primarily due to higher sales volume and favorable price realization. Higher manufacturing and SG&A and R&D costs acted as a partial offset. Manufacturing cost increases largely reflected higher material costs and volume-related manufacturing costs. SG&A and R&D expenses increased due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 17.3% was an increase of 530 basis points versus last year, strengthening versus the third quarter as we had expected. Moving to slide 16. Financial Products revenue increased by 10% to $853 million, benefited by higher average financing rates across all regions. Segment profit decreased by 24% to $189 million. The profit decrease was mainly due to a higher provision for credit losses at Cat Financial and an unfavorable impact from equity securities in Insurance Services. The increase in provisions reflects changes in general economic factors rather than company-specific economic factors. Despite these changes, our leading indicators remain strong. Past dues were 1.89% compared with 1.95% at the end of the fourth quarter of 2021. This was an 11 basis point decrease in past dues compared to the third quarter of 2022. Retail new business volume declined versus the prior year, but remained steady compared to the third quarter. As I mentioned last quarter, Cat Financial is not seeing slowing business activity but continues to see strong competition from banks due to higher interest rates and more customers willing to pay cash for their machines. Used equipment demand remains strong with inventories at historically low levels. We continue to see high conversion rates as well as customers to choose to buy at the end of the lease term. On slide 17. ME&T free cash flow in the quarter increased by about $1.2 billion versus the prior year to $3 billion. The increase was primarily due to higher profit. On working capital, our inventory decreased by about $600 million in the quarter. Improved availability of some components benefited shipments as we decreased our work in process inventory. We also saw strong shipments of Solar Turbines in the quarter. We repurchased about $900 million common stock in the quarter and paid around $600 million in dividends. As Jim mentioned, we generated $5.8 billion in ME&T free cash flow for the year, inclusive of CapEx of about $1.3 billion. We are pleased with the strong free cash flow we generated in a year where we paid $1.3 billion in short-term incentive compensation and increased our inventories by over $2 billion. Our liquidity remains strong with an enterprise cash balance of $7 billion and another $1.5 billion in slightly longer-dated liquid marketable securities, which generate improved yields on that cash. On slide 18. I'll share some high-level assumptions for the full year, followed by the first quarter. As we begin 2023, demand remains constructive given the strong order backlog and improving supply chain dynamics. We do not expect the benefit of a dealer inventory tailwind, like we saw last year. As a reminder, dealer inventory rose by $2.4 billion in 2022. Around 40% of the increase relates to Construction Industries, with the balance reflecting the timing of deliveries to customers in Resource Industries and Energy and Transportation. As Jim mentioned, over 70% of the combined year-end dealer inventory in Resource Industries and Energy and Transportation is supported by customer orders. For the full year 2023, we anticipate increased sales supported by price realization. We expect stronger sales to users in 2023, the headwind from the $2.4 billion dealer inventory build in 2022 will moderate volume growth. Our planning assumption is that we do not expect a significant change in dealer inventory by the end of the year. We do expect service sales momentum to continue after reaching $22 billion in 2022. From a sales seasonality perspective, we expect a more typical year with lighter first quarter for total sales. For the full year, we expect our adjusted operating profit to increase, reflecting higher sales, and we expect to be within our updated adjusted operating margin ranges. Pricing actions from 2022 will continue to roll into 2023, and we will evaluate future actions as appropriate to offset inflationary pressures. We currently expect to see a moderation of input cost inflation as the year progresses, and therefore a corresponding moderation in price realization as we move through the year. Price, though, should still more than offset manufacturing costs for the year. Increases in SG&A and R&D expenses are expected to exceed the benefit of lower short-term incentive compensation expense this year as we continue to invest in strategic initiatives such as services growth and technology, including digital, electrification, and autonomy. Below operating profit, we anticipate a headwind of approximately just over $800 million or about $80 million per quarter in other income and expense at the corporate level related to pension expense due to higher interest costs given higher interest rates. This is a non-cash item. For the full year of 2022, the strengthening of the U.S. dollar acted as a tailwind of $189 million relating to the ME&T balance sheet translation impact that I spoke about earlier. This would not recur if the weakening we've seen in rates thus far continues. Based on current rates, we'd see a headwind of around about $80 million in the first quarter. Remember that 2022 was not a typical year for us as margins increased sequentially through the year as the benefit of price realization was stronger in the second half of the year. Also, manufacturing volumes were impacted by supply chain issues which did impact absorption rates from quarter to quarter. These factors will mean that we do not expect to return to our normal seasonal margin patterns in 2023. Moving on, we expect to achieve our ME&T free cash flow target of $4 billion-$8 billion for the year, with CapEx in the range of about $1.5 billion. We'll have about $1.4 billion cash outflow in the first quarter related to the payout of last year's incentive compensation, slightly higher than we saw in the first quarter of 2022. We anticipate restructuring expenses of around $700 million this year, the majority of which is related to the Longwall divestiture charge that I mentioned earlier. Finally, we anticipate a global effective tax rate of 23%, excluding discrete items. On to our assumptions for the first quarter. In the first quarter compared to the prior year, we expect sales to increase on price and slightly stronger volume, reflecting higher sales to users. With regard to dealer inventory, we expect a typical seasonal build in the first quarter of this year. As a reminder, dealers increased inventories by $1.3 billion in the first quarter of 2022, and we expect a lower build in the first quarter of 2023. Sales should increase across the three primary segments in the first quarter versus the prior year. Compared to the fourth quarter, we anticipate lower sales on the first quarter at the enterprise level following our typical seasonal pattern. We expect lower sales sequentially in each of our three primary segments as well. To provide some color, Construction Industries is following an abnormally strong fourth quarter, where shipments exceeded our expectations. Resource Industries had a strong fourth quarter with its highest quarterly shipments since 2012 and expects lower sequential sales in the first quarter due to the timing of shipments, which, as you know, can be lumpy. Energy and Transportation sales should be sequentially lower as well following normal seasonal patterns. Keep in mind that Solar Turbines had a strong fourth quarter. Specific to the first quarter versus the prior year, keep in mind that the first quarter margins last year were very low. We expect substantially strong enterprise and segment margins in the first quarter on favorable price and volume. Price realization should more than offset manufacturing costs at both the enterprise and primary segment levels as well. We could see headwinds related to pension and currency below operating profit, as I just mentioned. Compared to the fourth quarter of 2022, we expect adjusted operating profit margins to be flattish to down for the first quarter of the year at the enterprise level. Keep in mind that our fourth quarter of 2022 adjusted operating profit margins were our highest quarterly margins ever. By segment, in Construction Industries, we normally see higher margins in the fourth quarter, first quarter. However, coming off a very strong fourth quarter, we expect lower volume to weigh on margins sequentially. This is the business which usually drives the enterprise-wide sequential margin improvement from the fourth quarter to the first. Similarly, lower volume should drive sequentially lower margins in Resource Industries. In Energy and Transportation, we expect lower margins sequentially following a strong fourth quarter, which is the normal pattern for this business. Turning to slide 19, let me summarize. Sales grew by 20% led by strong price realization and volume gains across the three primary segments. The adjusted operating profit margin increased by 560 basis points to 17%. ME&T free cash flow was strong at $3 billion for the quarter, and we continue to return cash to shareholders on a consistent basis. Service revenues were $22 billion for the full year, a 17% increase as momentum built in 2022. The outlook remains positive with improving supply chain dynamics and their backlog up around $400 million to over $30 billion. We've updated our margin target scope to account for the impact of inflation on sales and costs. We expect our 2023 adjusted operating margins to be within our updated range. Despite the inflationary impact on sales and costs, our expectations for profit and cash flow generation have not changed, and we will continue to execute our strategy for long-term profit growth. I want to confirm that our full year 2022 restructuring costs were about $300 million for the year. Apologies if we made an error in the call. Now I'll hand over to questions. As a reminder, management asks that we limit to one question per analyst. If clarification is desired, please rejoin the queue. Your first question comes from the line of Mircea Dobre with Baird. Your line is now open. Thank you. Good morning, everyone. Hi, Mig. Wanted to appreciate all the color on dealer inventories. I guess it looks to me like about $1 billion of the build is in Construction. A good chunk of that is in North America. Retail sales here have been, you know, call it flattish over the past three quarters or so. I guess I'm curious, as you think about Q1 and you think about that seasonal inventory build, where do you expect that to occur? Is the channel stocked enough in North America Construction? How comfortable are you with dealers actually being able to put through this inventory to end users in 2023? Thank you. You know, we typically see an increase ahead of the spring selling season, so that's why we think it'll be a traditional kind of increase. You know, we talked about what we see happening in the various markets. Again, the strength in infrastructure, which is 75% of CI, it's a moderation in residential in North America, as we discussed. But again, North America has really had been our most constrained region, so we're pleased to see healthier dealer inventories in North America. You know, we're now in that typical range of 3 to 4 months. Again, we talked about the fact that, you know, RI and E&T typically don't hold a lot of dealer inventory. Hoping to get an order over 70% of the year-end dealer inventory for RI and E&T is tied to customer orders. Again, hope that helps. Your next question comes from the line of Rob Wertheimer with Melius Research. Your line is now open. Oh, hi. Thank you. I'm gonna ask about turbines in, within E&T. Obviously the global energy mix is shifting, you know, on that gas to Russia and so forth. Are you able to say orders have been strong, I assume related partly to that? Is the solution sort of already in the pipeline for Solar, or there are a lot of projects underway and/or under consideration that you expect to keep that segment elevated for the next several years? Well, Rob, it's always good morning. It's always tough to make a multi-year prediction. I will say that, you know, order rates are quite strong for solar, as is quotation activity. Of course, solar is very involved in that natural gas value chain, compressing a lot of gas to LNG facilities for export around the world. You know, there has been an underinvestment, I'd argue, in oil and gas over the last few years, and that is starting to be reversed now. That has a positive impact on both our Cat Oil & Gas business and our solar business. Again, very difficult always to make a multi-year projection, not knowing what's happening in the economy. Based on what we see today, business is quite strong for Solar, both in the services side and on the new equipment side. One of the things we have seen, you know, for a while there, after the decline in oil prices, a few years ago, we saw a decline in international projects. That's picked up for Solar, so we're seeing more international projects. We're also seeing strength in North American gas compression Solar as well. Your next question comes from the line of Jamie Cook with Credit Suisse. Your line is now open. Hey, good morning. I guess my question... Yeah. Can you talk for 2023, where is your opportunity to put through incremental price and where you see deflation? The question just comes from, Jim, you know, just the incremental margins that you put up in the fourth quarter were fairly impressive. I'm just wondering how big sort of the price cost, you know, tailwind can be in 2023 with the strong pricing actions and supply chain easing and, you know, potentially, deflation in some areas. Thanks. Well, Jamie, you know, we always certainly when we think about price actions, we take a number of things into account. Certainly, we take into account the increases from our suppliers in cost. We also, of course, pay very close attention to competitive market and always striving to provide more value to our customers. It's difficult for us to make a prediction as to what will happen. I guess we demonstrated the ability to pass along price when we need to because of inflationary factors. Again, we always keep competition in mind as well. Again, pleased at how we're doing so far and the way we're managing that balance. As I think we've said from our planning assumptions perspective, obviously there is some carryover price impacting us, in particular in the first half of the year. As we expect to go through the year, we expect that benefit of price to moderate in the second half. Also, we expect the increases in manufacturing costs to continue to moderate as we go through the year. Obviously, that's a planning assumption, and as always the case, you know, that is predicated on the assumption that input inflation does moderate. As Jim said, we'll obviously keep an eye open on that and take pricing actions accordingly. Your next question comes from the line of Jerry Revich with Goldman Sachs. Your line is now open. Yes. Hi. Good morning, everyone. Morning, Jerry. I'm wondering if you just talk about your production plan in Construction Industries and what are you folks looking for in terms of decision to potentially curtail production if we do continue to see dealer inventory builds ahead of expectations? Just if you could just touch on the key indicators that you're looking at and, you know, how can we gradually affect the production slowdown if that's indeed what we need to do over the course of 2023. Thanks. Thanks, Jerry. Certainly, you know, again, we obviously pay very close attention to what's happening in the marketplace. We pay attention to STUs. Dealers or independent businesses make their own decisions about inventory, but certainly, you know, we do work with them and the last thing we wanna do is to have too much inventory in the channel. As it occurs today, as we mentioned earlier, we're now back in our normal typical range, and we still have many dealers that would like more equipment from us to support customer orders. We, you know, talked about the fact that non-resi is 75% of Construction Industries, and it is still quite robust and strong, and we expect it to grow. Yes, some moderation in residential, but again, 75% is non-resi. Again, as we always do, we'll pay close attention to the market, and we'll modify our production plans as appropriate. There are still some products that we need to produce more of, quite frankly, and we're still dealing with some supply chain issues in some areas. Again, it's not a one-size-fits-all answer. We've talked about the fact that China is slow and we expect it to continue to be slow, below 2022 levels. In many areas, demand is still quite strong. Your next question comes from the line of David Raso with Evercore. Your line is now open. Hi. Thank you for the time. My question relates to the first quarter guidance. Normal seasonality on sales, EBIT margins usually go up a couple hundred basis points. I mean, that's sort of a, you know, a $4.50 EPS number. What you're implying is a little closer to $4. The margins in particular, you mentioned pension, and I know CI is at a high level, so the comp is tough sequentially. On price cost, what are you assuming on price cost first quarter versus fourth quarter? If you could just give us some color. It's just to see the margins flat to down sequentially, even with the tough comp is a bit unique. Just if you could help us flesh out sort of the price cost. Thank you. Yeah. David, great question, part of the reason why I highlighted that CI margins were actually very, very high in the fourth quarter. Part of that was because normally in the fourth quarter, you don't see a deal, you know, deal inventory build as big as we did see in the fourth quarter. The fact that that release did help overall CI margins come in a little bit better than we expected as well. What that does mean is normally, yes, correct, we normally get a 200 to 300 basis points bump in the first quarter, based on production and ramping up production. Those production rates aren't quite the same as they would normally be 4th quarter to 1st quarter, because obviously we're looking at a very different profile, particularly given that obviously we were building production through 2022, particularly in CI. That is the biggest challenge, and that's probably the biggest single factor which will drive margins sequentially lower. We still expect strong price in Q1. It will not be as big as Q4 for the simple reason we are lapping price increases that we put through at the beginning of 2022. That will be coming down slightly, but we do expect price cost to be favorable for the 1st half of the year. That's just gonna create a little bit of noise in the margin structure quarter on quarter. Unfortunately, we are not gonna go back to the normal lower margins in Q1, higher margins in Q4, which you guys are gonna be able to model. It's gonna still be a little bit different as we go through 2023. Obviously, 2022 was the opposite. Your next question comes from the line of Tami Zakaria with JP Morgan. Your line is now open. Hi. Good morning. Thank you so much. I'm trying to understand the volume commentary for this year. Since you expect sales to end users to be stronger this year versus last year, but you don't expect dealer inventory restocking benefit, does that mean dealer inventory could actually decline again from current levels to support the stronger sales to end users? No. As a assumption at the moment, Tami, thanks for the question, is that at the moment, as a planning assumption, as is always the case, the dealer inventories will be flattish for the year, and should not increase or decrease. Effectively, what that does mean, though, is obviously the headwind exists from our shipments on the $2.4 billion of dealer inventory that got built in 2022. Remind you, a big chunk of that, around about 60% is in E&T and in RI, which is related to customer orders, which will be fall through into sales to end users in due course. Overall, we expect, again, sales to users to be up over year-over-year, and that will, and the dealer inventory, headwind will opt moderate that level of increase, the volume that we will see in our shipments, as I said in my remarks. Your next question comes from the line of Michael Feniger with Bank of America. Your line is now open. Thank you. Just following up on the solar comments and Oil & Gas portfolio. You know, E&T was a dominant driver of earnings 7 to 8 years ago with leading margins for Cat. It's one of the only segments you're not getting that double-digit pricing right now. It's lagged the others. Do you see room for that to pick up following this reversal of underinvestment the last few years? Is there anything structurally keeping Cat from returning to those prior peak margins in E&T? Thank you. Good morning, Mike. Thanks for the question. You may recall that we put through price increases later in E&T than we did with machines just based on the market dynamics that existed at the time. Having said that, as I mentioned, particularly in oil and gas and power generation, market is quite strong, and we expect our volumes certainly in oil and gas to increase. You know, we're dealing with in Cat Oil and Gas still some supply chain challenges. We're dealing with that. That factor was your ramp up. Solar is, again, I mentioned earlier, very strong fourth quarter, but still very robust order rates coming in and a lot of quotation activity. Again, you know, we do expect that E&T to improve in 2023. You know, and I won't try to compare it to where they were a few years ago. I'm gonna say that, you know, the business is strong and improving. Your next question comes from the line of Nicole DeBlase with Deutsche Bank. Your line is now open. Yeah, thanks. Good morning. I just wanted to dig into- Morning, Nicole. Good morning. I just wanted to dig into the manufacturing cost side of the price cost equation. It sounds to me, reading through the comments you made in response to an earlier question, that you still expect manufacturing costs to be a headwind year-over-year in 2023. Can you just kind of talk through the big components of that materials versus freight and why we shouldn't expect at some point in 2023 for manufacturing costs to become a tailwind? Thank you. Yeah. I mean, there's a couple of factors obviously, that come into that. Material costs will still be a headwind, we expect. Some of that is material cost inflation that we're still seeing through this year. Some of that material cost inflation is not just necessarily commodity costs. Some of it will be labor cost, and some of it will include energy costs. All of those factors we are anticipating will moderate as we go through the year. We are starting to see signs of lower levels of requests for price increases coming from suppliers. That's a positive sign. Hopefully as, you know, as things unwind through the year, some of that will moderate. Again, we have not, you know, in our planning assumptions, we, you know, we base our pricing actions on what we're assuming from a manufacturing cost perspective. Obviously, we'll take action as appropriate, if we need to, if there are greater increases than we're currently expecting, in manufacturing costs in 2023. Your next question comes from the line of Chad Dillard with Bernstein. Your line is now open. Hi. Good morning, guys. Morning, Chad. In China, I know you mentioned that you're expecting levels to be below 22 at least on the end market perspective. Maybe you could talk about just like what you're seeing in like in the channel, from an inventory perspective, relative to, I guess, normalized levels. Then how should we think about the business, now that you have the GX series, you know, for a full China cycle? Yeah. Again, just to reiterate, you know, we had a couple of really strong years in China in 2020, 2021 and we had saw softening in 2022 and again, we don't see signs of improvement at this point. We continue to invest in new products to try to maintain our competitiveness with new products. That's continuing, and we've been pleased with the response to those new products, including the GX. That above 10 ton excavator market, we do expect to be weaker in 2023 than it was in 2022. The inventory in the fourth quarter versus the build in the prior year is lower. Yeah. We actually had a reduction in dealer inventory in Asia Pac this year, in CI versus the build in the previous year. Your next question comes from the line of Timothy Thein with Citi. Your line is now open. Yeah, thanks. Jim, maybe just a follow-up on the just mining outlook within RI. I get the point about the miners being, you know, capital discipline, which has been in place for some time. You know, just on the back of. What appears to be strong results and outlooks from a competitor in Asia overnight. Maybe just say a bit more about, you know, kind of the outlook and your views on the mining piece of RI for 2023. Thank you. Yeah. Thank you, Tim. You know, we've been talking for a number of years in our earnings call about what we expected in the mining industry, which was, you know, moderate growth year-over-year. As opposed to what we saw, you know, going back, you know, thinking about 10 or 12 or 15 years ago where we saw some wild cycles up and down. Really I believe that's a function of our mining customers remaining capital disciplined. That's a very positive thing, I think, for them and for us 'cause and what we've been saying for a number of years now on our earnings calls that we expect a year-over-year moderate increase, and that's exactly the way it's playing out. We're very encouraged by our quotation activity with customers, the conversations that are going on. We have a strong backlog, which we feel good about. Parked trucks remain at low levels. There's high utilization of equipment. You know, customers make decisions on a whole variety of factors as to whether or not they're gonna rebuild or they're gonna buy new trucks, and we benefit from either one of those things. We're very encouraged by our autonomous solution, and we firmly believe we have, you know, the best solution in the industry, and that's being demonstrated by the purchasing decisions that our customers are making. As a reminder, of course, RI also includes Quarry and Aggregates, which the trends there are positive as well. A lot of that's driven by infrastructure spending and anticipated infrastructure spending. Again, we feel good about the mining business. Again, quotation activity is very strong and we're having very good conversations with customers. Your next question comes from the line of Matt Elkott with Cowen. Your line is now open. Good morning. Thank you. I was hoping you guys can provide us with some more insight into the strength you're seeing in the Middle East. Related to that, but longer term, Saudi Arabia has big plans in both construction and more recently mining. Are there any meaningful incremental opportunities for you guys there? Well, good morning, Matt. I believe we mentioned in our prepared remarks that, you know, EAME, which is Europe, Africa, and the Middle East, is expected to be about flat. We said that strength in the Middle East is offsetting some uncertainty in Europe. Certainly, you know, when oil prices are elevated, that tends to provide, you know, the investment capabilities for customers in the Middle East, whether it's for oil and gas business or for construction. Again, it is certainly a bright spot and a positive one and one that we feel will continue through 2023. Your next question comes from the line of Steven Fisher with UBS. Your line is now open. Thanks. Good morning. I'm just curious what was different about the supply chain and construction, which sounded like it was, is pretty smooth versus E&T and Resource, which sounded like we're still a little challenging? Is it just still the randomness that's out there? Last quarter, you talked about some of the manufacturing inefficiencies due to supply chain. Just curious how that played out in Q4 and what you expect for that in 2023? Thank you. Yeah. Thanks. Thanks, Steve. Certainly, you know, we have a diverse group of suppliers and a diverse product line and we did see, you know, some improvement in the quarter, but there are still some areas of strength. You know, just we think and it's very different product by product. Even though you'll see a number of suppliers in better shape, all it takes is one component to prevent you from shipping an engine or a machine. Part of it is just the nature of the beast, I think it's what's happening in various industries. If we look at our large engines, you know, it's more of a struggle, frankly, than it is with some of our construction machines at the moment. These things ebb and flow over time, but that's where we are today. We still see some semiconductor availability challenges. I know on the higher end chips, that's improved significantly in the industry based on industry reports. For the semiconductors that we use, it continues to be a challenge. You know, in the fourth quarter, we certainly did still experience inefficiencies associated with supply chain challenges, and that had an impact on us 'cause we're still doing things like workarounds, and it's not anywhere as smooth as it needs to be. Yeah. I think if you look out for the rest of the year, what we do expect is that obviously we start to lap those in the second half of the year, those inefficiencies. We should either see a moderation or actually a reversal of some of that, supply chain inefficiency we saw, in the second half of the year. Your next question comes from the line of Kristen Owen with Oppenheimer. Your line is now open. Hi. Good morning. Thank you for the question. Hi, Kristen. Wanted to follow up on the services growth. You reported now $22 billion on track to meet that $28 billion target by 2026. Can you just talk to us about some of the growth drivers in that business and maybe provide us with an update on Customer Value Agreement take rates? You bet. Again, we are encouraged, as I mentioned, about our progress in services. We mentioned when we threw that target out that it wouldn't be a straight line, it wouldn't be linear, and we knew we had to make investments to make it happen. We are continuing to invest in a whole variety of things. You know, we've got more connected assets now, 1.4 million up from 1.2 million last year. We are investing significantly in our e-commerce capabilities. That's one where arguably I'd argue we were a bit behind, but we made great progress and very proud of what the team is doing there, those sales are increasing. To answer your question on Customer Value Agreements, over 60% of new equipment in 2022 was delivered with a CVA. That's really important 'cause it creates that customer touch point, and it gives us the ability to demonstrate that value that we can provide. Also we're investing heavily in AI. You know, we have what are called Prioritized Service Events. What that does is allows us to give dealers a lead on aftermarket service and repair in advance. It does, you know, it provides value to our dealers, of course, but it also provides value to our customers because it allows them to avoid unplanned downtime. That's really be a part of it as well. Also, you know, we're working on parts availability, and we need to have the right parts at the right place at the right time. That's one of the benefits of having connected assets and also utilizing AI with those connected assets to ensure that we anticipate where those parts will be needed, and that's a key enabler as well. Operator, we have time for one more question. Your final question today comes from the line of Stephen Volkmann with Jefferies. Your line is now open. Thank you guys for fitting me in here. My question is on inventory. The Cat inventory on your balance sheet was up $2.2 billion or something roughly in 2022, and I'm sure some of that was price. Is there an opportunity to sort of draw that back down as supply chains improve, or are we in sort of a new reality where we need a little bit higher inventory because of the vagaries of all the supply chains and international trade and etcetera? Yeah, you know, we're not running as lean as I would like us to be, certainly that is a consequence of the supply chain challenges we're having. I think I mentioned in previous calls, you know, the term decommit is one that I hadn't been familiar with until COVID hit and where customers at a very short notice decommit and don't give us components when we need them. That's created inefficiencies. It's also resulted in more inventory. I wouldn't say it's a permanent condition. I believe you know, as the supply chain situation improves, I do expect us to become leaner again and to be able to reduce our internal inventory. Thank you. All right. Well, that's it. Thank you all for joining us. I really do appreciate your questions. Just to summarize here. You know, I'm very proud of our global team. They delivered one of the best years we had on record. We had strong overall top line growth. Services grew 17%. We generated strong adjusted operating profit in ME&T free cash flow in the year, and we achieved an all-time record for adjusted profit per share. As we think about the year, we're encouraged by the strong quotation activity, our $30 billion backlog, and as we mentioned, we believe 2023 will be an even better year than 2022 on both the top and bottom line. We continue to remain focused on supporting our customers and executing our strategy for long-term profitable growth. Again, thank you for your questions. Thank you, Jim, Andrew, and everyone who joined us today. A replay of our call will be available online later this morning. We'll also post a transcript on our investor relations website as soon as it's available. You'll also find a fourth quarter results video with our CFO and an SEC filing with our sales to users data. Click on investors.caterpillar.com and then click on Financials to view those materials. If you have any questions, please reach out to Rob or me. The investor relations general phone number is 309-675-4549. We hope you enjoy the rest of your day. I'll turn it back to Emma to conclude the call. Thank you so much for attending today's call. You may now disconnect.