Segment Information


A.	Basis for segment information

Our Executive Office is comprised of five Group Presidents, a Senior Vice President, an Executive Vice President and a CEO. Group Presidents are accountable for a related set of end-to-end businesses that they manage. The Senior Vice President leads the Caterpillar Enterprise System Group, which was formed during the second quarter of 2013, and the Executive Vice President leads the Law and Public Policy Division. The CEO allocates resources and manages performance at the Group President level. As such, the CEO serves as our Chief Operating Decision Maker and operating segments are primarily based on the Group President reporting structure.

Three of our operating segments, Construction Industries, Resource Industries and Energy & Transportation are led by Group Presidents. One operating segment, Financial Products, is led by a Group President who has responsibility for Corporate Services. Corporate Services is a cost center primarily responsible for the performance of certain support functions globally and to provide centralized services; it does not meet the definition of an operating segment. One Group President leads three smaller operating segments that are included in the All Other operating segments. The Caterpillar Enterprise System Group and Law and Public Policy Division are cost centers and do not meet the definition of an operating segment.

Effective January 1, 2014, responsibility for paving products, forestry products, industrial and waste products and tunnel boring equipment moved from Resource Industries to the All Other operating segments. The responsibility for select work tools was moved from Resource Industries to Construction Industries, and the responsibility for administration of three wholly-owned dealers in Japan moved from Construction Industries to the All Other operating segments. In addition, restructuring costs in 2013 were included in operating segments and are now a reconciling item between Segment profit and Consolidated profit before taxes. The segment information for 2013 has been retrospectively adjusted to conform to the 2014 presentation.


B.	Description of segments

We have seven operating segments, of which four are reportable segments. Following is a brief description of our reportable segments and the business activities included in the All Other operating segments:

Construction Industries: A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes backhoe loaders, small wheel loaders, small track-type tractors, skid steer loaders, multi-terrain loaders, mini excavators, compact wheel loaders, telehandlers, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, compact track loaders, medium track-type tractors, track-type loaders, motor graders and pipe layers. In addition, Construction Industries has responsibility for an integrated manufacturing cost center. Inter-segment sales are a source of revenue for this segment.

Resource Industries: A segment primarily responsible for supporting customers using machinery in mining and quarrying applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors, large mining trucks, hard rock vehicles, longwall miners, electric rope shovels, draglines, hydraulic shovels, drills, highwall miners, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, select work tools, machinery components and electronics and control systems. Resource Industries also manages areas that provide services to other parts of the company, including integrated manufacturing and research and development. In addition, segment profit includes the impact from divestiture of portions of the Bucyrus distribution business. Inter-segment sales are a source of revenue for this segment.

Energy & Transportation (formerly Power Systems): A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related parts across industries serving power generation, industrial, oil and gas and transportation applications, including marine and rail-related businesses. Responsibilities include business strategy, product design, product management, development, manufacturing, marketing, sales and product support of turbines and turbine-related services, reciprocating engine powered generator sets, integrated systems used in the electric power generation industry, reciprocating engines and integrated systems and solutions for the marine and oil and gas industries; reciprocating engines supplied to the industrial industry as well as Caterpillar machinery; the business strategy, product design, product management, development, manufacturing, remanufacturing, leasing, and service of diesel-electric locomotives and components and other rail-related products and services. Inter-segment sales are a source of revenue for this segment.

Financial Products Segment: Provides financing to customers and dealers for the purchase and lease of Caterpillar and other equipment, as well as some financing for Caterpillar sales to dealers. Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The segment also provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment.

All Other operating segments: Primarily includes activities such as: the remanufacturing of Cat® engines and components and remanufacturing services for other companies as well as the business strategy, product management, development, manufacturing, marketing and product support of undercarriage, specialty products, hardened bar stock components and ground engaging tools primarily for Cat products, paving products, forestry products, industrial and waste products, and tunnel boring equipment; the product management, development, marketing, sales and product support of on-highway vocational trucks for North America; parts distribution; distribution services responsible for dealer development and administration including three wholly-owned dealers in Japan, dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts. Results for the All Other operating segments are included as a reconciling item between reportable segments and consolidated external reporting.


C.	Segment measurement and reconciliations

There are several methodology differences between our segment reporting and our external reporting. The following is a list of the more significant methodology differences:

•

Machinery, Energy & Transportation segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles, accounts payable, and customer advances. Liabilities other than accounts payable and customer advances are generally managed at the corporate level and are not included in segment operations. Financial Products Segment assets generally include all categories of assets.


•	Segment inventories and cost of sales are valued using a current cost methodology.


•	Goodwill allocated to segments is amortized using a fixed amount based on a 20 year useful life. This methodology difference only impacts segment assets; no goodwill amortization expense is included in segment profit. In addition, only a portion of goodwill for certain acquisitions made in 2011 or later has been allocated to segments.


•	The present value of future lease payments for certain Machinery, Energy & Transportation operating leases is included in segment assets. The estimated financing component of the lease payments is excluded.

•

Currency exposures for Machinery, Energy & Transportation are generally managed at the corporate level and the effects of changes in exchange rates on results of operations within the year are not included in segment profit. The net difference created in the translation of revenues and costs between exchange rates used for U.S. GAAP reporting and exchange rates used for segment reporting are recorded as a methodology difference.


•	Postretirement benefit expenses are split; segments are generally responsible for service and prior service costs, with the remaining elements of net periodic benefit cost included as a methodology difference.


•	Machinery, Energy & Transportation segment profit is determined on a pretax basis and excludes interest expense, gains and losses on interest rate swaps and other income/expense items. Financial Products Segment profit is determined on a pretax basis and includes other income/expense items.

Reconciling items are created based on accounting differences between segment reporting and our consolidated external reporting. Please refer to pages 37 to 43 for financial information regarding significant reconciling items. Most of our reconciling items are self-explanatory given the above explanations. For the reconciliation of profit, we have grouped the reconciling items as follows:


•	Corporate costs: These costs are related to corporate requirements and strategies that are considered to be for the benefit of the entire organization.


•	Restructuring costs: Primarily costs for employee severance and long-lived asset impairments. A table, Reconciliation of Restructuring Costs on page 40, has been included to illustrate how segment profit would have been impacted by the restructuring costs. See Note 20 for more information.


•	Methodology differences: See previous discussion of significant accounting differences between segment reporting and consolidated external reporting.


•	Timing: Timing differences in the recognition of costs between segment reporting and consolidated external reporting.



Reportable Segments
Three Months Ended June 30,
(Millions of dollars)
	2014
	External sales and revenues		Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	5,407	$	56	$	5,463	$	131	$	674	$	6,430	$	79
Resource Industries	2,241		145		2,386		172		133		9,957		76
Energy & Transportation	5,175		586		5,761		159		1,009		8,561		95
Machinery, Energy & Transportation	$	12,823	$	787	$	13,610	$	462	$	1,816	$	24,948	$	250
Financial Products Segment	834		—		834		217		244		38,342		510
Total	$	13,657	$	787	$	14,444	$	679	$	2,060	$	63,290	$	760

	2013
	External sales and revenues		Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	4,875	$	91	$	4,966	$	121	$	368	$	7,607	$	124
Resource Industries	3,135		126		3,261		171		524		10,389		135
Energy & Transportation	5,263		461		5,724		156		953		8,492		161
Machinery, Energy & Transportation	$	13,273	$	678	$	13,951	$	448	$	1,845	$	26,488	$	420
Financial Products Segment	806		—		806		188		233		36,980		451
Total	$	14,079	$	678	$	14,757	$	636	$	2,078	$	63,468	$	871



Reportable Segments
Six Months Ended June 30,
(Millions of dollars)
	2014
	External sales and revenues		Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at June 30		Capital expenditures
Construction Industries	$	10,471	$	131	$	10,602	$	265	$	1,362	$	6,430	$	143
Resource Industries	4,364		258		4,622		345		282		9,957		100
Energy & Transportation	9,951		1,136		11,087		315		1,836		8,561		171
Machinery, Energy & Transportation	$	24,786	$	1,525	$	26,311	$	925	$	3,480	$	24,948	$	414
Financial Products Segment	1,651		—		1,651		436		484		38,342		779
Total	$	26,437	$	1,525	$	27,962	$	1,361	$	3,964	$	63,290	$	1,193

	2013
	External sales and revenues		Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	9,094	$	190	$	9,284	$	236	$	596	$	7,607	$	224
Resource Industries	6,488		254		6,742		335		983		10,389		235
Energy & Transportation	9,668		857		10,525		307		1,544		8,492		265
Machinery, Energy & Transportation	$	25,250	$	1,301	$	26,551	$	878	$	3,123	$	26,488	$	724
Financial Products Segment	1,601		—		1,601		368		506		36,980		771
Total	$	26,851	$	1,301	$	28,152	$	1,246	$	3,629	$	63,468	$	1,495



Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments				Consolidated Total
Three Months Ended June 30, 2014
Total external sales and revenues from reportable segments	$	12,823		$	834	$	—			$	13,657
All Other operating segments	583			—		—				583
Other	(15		)	17		(92		)	¹	(90		)
Total sales and revenues	$	13,391		$	851	$	(92	)		$	14,150

Three Months Ended June 30, 2013
Total external sales and revenues from reportable segments	$	13,273		$	806	$	—			$	14,079
All Other operating segments	624			—		—				624
Other	(11		)	17		(88		)	¹	(82		)
Total sales and revenues	$	13,886		$	823	$	(88	)		$	14,621
¹ Elimination of Financial Products revenues from Machinery, Energy & Transportation.



Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments				Consolidated Total
Six Months Ended June 30, 2014
Total external sales and revenues from reportable segments	$	24,786		$	1,651	$	—			$	26,437
All Other operating segments	1,137			—		—				1,137
Other	(39		)	31		(175		)	¹	(183		)
Total sales and revenues	$	25,884		$	1,682	$	(175	)		$	27,391

Six Months Ended June 30, 2013
Total external sales and revenues from reportable segments	$	25,250		$	1,601	$	—			$	26,851
All Other operating segments	1,141			—		—				1,141
Other	(21		)	36		(176		)	¹	(161		)
Total sales and revenues	$	26,370		$	1,637	$	(176	)		$	27,831
¹ Elimination of Financial Products revenues from Machinery, Energy & Transportation.



Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidated Total
Three Months Ended June 30, 2014
Total profit from reportable segments	$	1,816		$	244		$	2,060
All Other operating segments	223			—			223
Cost centers	22			—			22
Corporate costs	(427		)	—			(427		)
Timing	(39		)	—			(39		)
Restructuring costs	(114		)	—			(114		)
Methodology differences:
Inventory/cost of sales	9			—			9
Postretirement benefit expense	(118		)	—			(118		)
Financing costs	(123		)	—			(123		)
Equity in (profit) loss of unconsolidated affiliated companies	(1		)	—			(1		)
Currency	3			—			3
Other income/expense methodology differences	(71		)	—			(71		)
Other methodology differences	—			(4		)	(4		)
Total consolidated profit before taxes	$	1,180		$	240		$	1,420

Three Months Ended June 30, 2013
Total profit from reportable segments	$	1,845		$	233		$	2,078
All Other operating segments	208			—			208
Cost centers	17			—			17
Corporate costs	(390		)	—			(390		)
Timing	(60		)	—			(60		)
Restructuring costs	(28		)	—			(28		)
Methodology differences:
Inventory/cost of sales	(67		)	—			(67		)
Postretirement benefit expense	(166		)	—			(166		)
Financing costs	(117		)	—			(117		)
Equity in (profit) loss of unconsolidated affiliated companies	1			—			1
Currency	(54		)	—			(54		)
Other income/expense methodology differences	(68		)	—			(68		)
Other methodology differences	2			(3		)	(1		)
Total consolidated profit before taxes	$	1,123		$	230		$	1,353



Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidated Total
Six Months Ended June 30, 2014
Total profit from reportable segments	$	3,480		$	484		$	3,964
All Other operating segments	458			—			458
Cost centers	74			—			74
Corporate costs	(793		)	—			(793		)
Timing	(80		)	—			(80		)
Restructuring costs	(263		)	—			(263		)
Methodology differences:
Inventory/cost of sales	23			—			23
Postretirement benefit expense	(220		)	—			(220		)
Financing costs	(237		)	—			(237		)
Equity in (profit) loss of unconsolidated affiliated companies	(2		)	—			(2		)
Currency	(23		)	—			(23		)
Other income/expense methodology differences	(131		)	—			(131		)
Other methodology differences	(4		)	(4		)	(8		)
Total consolidated profit before taxes	$	2,282		$	480		$	2,762

Six Months Ended June 30, 2013
Total profit from reportable segments	$	3,123		$	506		$	3,629
All Other operating segments	413			—			413
Cost centers	57			—			57
Corporate costs	(740		)	—			(740		)
Timing	(6		)	—			(6		)
Restructuring costs	(35		)	—			(35		)
Methodology differences:
Inventory/cost of sales	(103		)	—			(103		)
Postretirement benefit expense	(331		)	—			(331		)
Financing costs	(241		)	—			(241		)
Currency	(39		)	—			(39		)
Other income/expense methodology differences	(120		)	—			(120		)
Other methodology differences	(18		)	14			(4		)
Total consolidated profit before taxes	$	1,960		$	520		$	2,480

Reconciliation of Restructuring costs:

As noted above, restructuring costs are a reconciling item between Segment profit and Consolidated profit before taxes. Had we included the amounts in the segments' results, the profit would have been as shown below:



Reconciliation of Restructuring costs:
(Millions of dollars)	Segment profit		Restructuring costs			Segment profit with restructuring costs
Three Months Ended June 30, 2014
Construction Industries	$	674	$	(96	)	$	578
Resource Industries	133		(10		)	123
Energy & Transportation	1,009		(3		)	1,006
Financial Products Segment	244		—			244
All Other operating segments	223		(2		)	221
Total	$	2,283	$	(111	)	$	2,172

Three Months Ended June 30, 2013
Construction Industries	$	368	$	(1	)	$	367
Resource Industries	524		(7		)	517
Energy & Transportation	953		(4		)	949
Financial Products Segment	233		—			233
All Other operating segments	208		(14		)	194
Total	$	2,286	$	(26	)	$	2,260



Reconciliation of Restructuring costs:
(Millions of dollars)	Segment profit		Restructuring costs			Segment profit with restructuring costs
Six Months Ended June 30, 2014
Construction Industries	$	1,362	$	(227	)	$	1,135
Resource Industries	282		(21		)	261
Energy & Transportation	1,836		(6		)	1,830
Financial Products Segment	484		—			484
All Other operating segments	458		(6		)	452
Total	$	4,422	$	(260	)	$	4,162

Six Months Ended June 30, 2013
Construction Industries	$	596	$	(3	)	$	593
Resource Industries	983		(9		)	974
Energy & Transportation	1,544		(6		)	1,538
Financial Products Segment	506		—			506
All Other operating segments	413		(15		)	398
Total	$	4,042	$	(33	)	$	4,009



Reconciliation of Assets:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidating Adjustments			Consolidated Total
June 30, 2014
Total assets from reportable segments	$	24,948		$	38,342		$	—		$	63,290
All Other operating segments	2,709			—			—			2,709
Items not included in segment assets:
Cash and short-term investments	6,615			—			—			6,615
Intercompany receivables	1,187			—			(1,187		)	—
Investment in Financial Products	4,934			—			(4,934		)	—
Deferred income taxes	2,533			—			(475		)	2,058
Goodwill and intangible assets	3,878			—			—			3,878
Property, plant and equipment – net and other assets	1,665			—			—			1,665
Operating lease methodology difference	(209		)	—			—			(209		)
Liabilities included in segment assets	10,551			—			—			10,551
Inventory methodology differences	(2,461		)	—			—			(2,461		)
Other	(130		)	(68		)	(71		)	(269		)
Total assets	$	56,220		$	38,274		$	(6,667	)	$	87,827

December 31, 2013
Total assets from reportable segments	$	26,488		$	36,980		$	—		$	63,468
All Other operating segments	2,973			—			—			2,973
Items not included in segment assets:
Cash and short-term investments	4,597			—			—			4,597
Intercompany receivables	1,219			—			(1,219		)	—
Investment in Financial Products	4,798			—			(4,798		)	—
Deferred income taxes	2,541			—			(525		)	2,016
Goodwill and intangible assets	3,582			—			—			3,582
Property, plant and equipment – net and other assets	1,175			—			—			1,175
Operating lease methodology difference	(273		)	—			—			(273		)
Liabilities included in segment assets	10,357			—			—			10,357
Inventory methodology differences	(2,539		)	—			—			(2,539		)
Other	(214		)	(135		)	(111		)	(460		)
Total assets	$	54,704		$	36,845		$	(6,653	)	$	84,896



Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidated Total
Three Months Ended June 30, 2014
Total depreciation and amortization from reportable segments	$	462		$	217	$	679
Items not included in segment depreciation and amortization:
All Other operating segments	73			—		73
Cost centers	38			—		38
Other	(7		)	6		(1		)
Total depreciation and amortization	$	566		$	223	$	789

Three Months Ended June 30, 2013
Total depreciation and amortization from reportable segments	$	448		$	188	$	636
Items not included in segment depreciation and amortization:
All Other operating segments	76			—		76
Cost centers	37			—		37
Other	5			7		12
Total depreciation and amortization	$	566		$	195	$	761



Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidated Total
Six Months Ended June 30, 2014
Total depreciation and amortization from reportable segments	$	925		$	436	$	1,361
Items not included in segment depreciation and amortization:
All Other operating segments	139			—		139
Cost centers	75			—		75
Other	(17		)	12		(5		)
Total depreciation and amortization	$	1,122		$	448	$	1,570

Six Months Ended June 30, 2013
Total depreciation and amortization from reportable segments	$	878		$	368	$	1,246
Items not included in segment depreciation and amortization:
All Other operating segments	155			—		155
Cost centers	73			—		73
Other	(2		)	12		10
Total depreciation and amortization	$	1,104		$	380	$	1,484



Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
Three Months Ended June 30, 2014
Total capital expenditures from reportable segments	$	250		$	510	$	—		$	760
Items not included in segment capital expenditures:
All Other operating segments	56			—		—			56
Cost centers	28			—		—			28
Timing	(38		)	—		—			(38		)
Other	(27		)	28		(11		)	(10		)
Total capital expenditures	$	269		$	538	$	(11	)	$	796

Three Months Ended June 30, 2013
Total capital expenditures from reportable segments	$	420		$	451	$	—		$	871
Items not included in segment capital expenditures:
All Other operating segments	87			—		—			87
Cost centers	51			—		—			51
Timing	(8		)	—		—			(8		)
Other	(50		)	32		(18		)	(36		)
Total capital expenditures	$	500		$	483	$	(18	)	$	965



Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
Six Months Ended June 30, 2014
Total capital expenditures from reportable segments	$	414		$	779	$	—		$	1,193
Items not included in segment capital expenditures:
All Other operating segments	94			—		—			94
Cost centers	49			—		—			49
Timing	229			—		—			229
Other	(48		)	52		(34		)	(30		)
Total capital expenditures	$	738		$	831	$	(34	)	$	1,535

Six Months Ended June 30, 2013
Total capital expenditures from reportable segments	$	724		$	771	$	—		$	1,495
Items not included in segment capital expenditures:
All Other operating segments	151			—		—			151
Cost centers	86			—		—			86
Timing	526			—		—			526
Other	(74		)	48		(35		)	(61		)
Total capital expenditures	$	1,413		$	819	$	(35	)	$	2,197