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 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 also 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, 2015, responsibility for product management for certain components moved from Resource Industries to Energy & Transportation. Segment information for 2014 has been retrospectively adjusted to conform to the 2015 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, pipelayers, and mid-tier soil compactors. 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: 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, and industrial and waste products; 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 a wholly-owned dealer 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 is 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 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 30 to 34 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 separation costs and long-lived asset impairments. A table, Reconciliation of Restructuring Costs on page 32, has been included to illustrate how segment profit would have been impacted by the restructuring costs. See Note 19 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. For example, certain costs are reported on the cash basis for segment reporting and the accrual basis for consolidated external reporting.




Reportable Segments
Three Months Ended March 31,
(Millions of dollars)
	2015
	External sales and revenues		Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at March 31		Capital expenditures
Construction Industries	$	4,695	$	51	$	4,746	$	119	$	740	$	6,252	$	36
Resource Industries	1,928		93		2,021		161		85		9,301		30
Energy & Transportation	4,762		514		5,276		156		986		8,385		149
Machinery, Energy & Transportation	$	11,385	$	658	$	12,043	$	436	$	1,811	$	23,938	$	215
Financial Products Segment	795		—		795		215		227		36,172		294
Total	$	12,180	$	658	$	12,838	$	651	$	2,038	$	60,110	$	509

	2014
	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	$	5,064	$	75	$	5,139	$	134	$	688	$	6,596	$	64
Resource Industries	2,123		102		2,225		171		143		9,497		24
Energy & Transportation	4,776		550		5,326		158		833		8,470		76
Machinery, Energy & Transportation	$	11,963	$	727	$	12,690	$	463	$	1,664	$	24,563	$	164
Financial Products Segment	817		—		817		219		240		37,011		269
Total	$	12,780	$	727	$	13,507	$	682	$	1,904	$	61,574	$	433



Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments				Consolidated Total
Three Months Ended March 31, 2015
Total external sales and revenues from reportable segments	$	11,385		$	795	$	—			$	12,180
All Other operating segments	586			—		—				586
Other	(10		)	18		(72		)	¹	(64		)
Total sales and revenues	$	11,961		$	813	$	(72	)		$	12,702

Three Months Ended March 31, 2014
Total external sales and revenues from reportable segments	$	11,963		$	817	$	—			$	12,780
All Other operating segments	554			—		—				554
Other	(24		)	14		(83		)	¹	(93		)
Total sales and revenues	$	12,493		$	831	$	(83	)		$	13,241
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 March 31, 2015
Total profit from reportable segments	$	1,811		$	227	$	2,038
All Other operating segments	225			—		225
Cost centers	61			—		61
Corporate costs	(499		)	—		(499		)
Timing	18			—		18
Restructuring costs	(36		)	—		(36		)
Methodology differences:
Inventory/cost of sales	(35		)	—		(35		)
Postretirement benefit expense	(104		)	—		(104		)
Financing costs	(136		)	—		(136		)
Equity in (profit) loss of unconsolidated affiliated companies	(2		)	—		(2		)
Currency	(27		)	—		(27		)
Other income/expense methodology differences	59			—		59
Other methodology differences	(9		)	2		(7		)
Total consolidated profit before taxes	$	1,326		$	229	$	1,555

Three Months Ended March 31, 2014
Total profit from reportable segments	$	1,664		$	240	$	1,904
All Other operating segments	235			—		235
Cost centers	52			—		52
Corporate costs	(366		)	—		(366		)
Timing	(41		)	—		(41		)
Restructuring costs	(149		)	—		(149		)
Methodology differences:
Inventory/cost of sales	14			—		14
Postretirement benefit expense	(102		)	—		(102		)
Financing costs	(114		)	—		(114		)
Equity in (profit) loss of unconsolidated affiliated companies	(1		)	—		(1		)
Currency	(26		)	—		(26		)
Other income/expense methodology differences	(60		)	—		(60		)
Other methodology differences	(4		)	—		(4		)
Total consolidated profit before taxes	$	1,102		$	240	$	1,342

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 March 31, 2015
Construction Industries	$	740	$	(11	)	$	729
Resource Industries	85		(8		)	77
Energy & Transportation	986		(3		)	983
Financial Products Segment	227		—			227
All Other operating segments	225		(13		)	212
Total	$	2,263	$	(35	)	$	2,228

Three Months Ended March 31, 2014
Construction Industries	$	688	$	(131	)	$	557
Resource Industries	143		(11		)	132
Energy & Transportation	833		(3		)	830
Financial Products Segment	240		—			240
All Other operating segments	235		(4		)	231
Total	$	2,139	$	(149	)	$	1,990



Reconciliation of Assets:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidating Adjustments			Consolidated Total
March 31, 2015
Total assets from reportable segments	$	23,938		$	36,172		$	—		$	60,110
All Other operating segments	2,614			—			—			2,614
Items not included in segment assets:
Cash and short-term investments	6,218			—			—			6,218
Intercompany receivables	1,164			—			(1,164		)	—
Investment in Financial Products	4,146			—			(4,146		)	—
Deferred income taxes	3,385			—			(757		)	2,628
Goodwill and intangible assets	3,520			—			—			3,520
Property, plant and equipment – net and other assets	1,231			—			—			1,231
Operating lease methodology difference	(211		)	—			—			(211		)
Liabilities included in segment assets	9,640			—			—			9,640
Inventory methodology differences	(2,606		)	—			—			(2,606		)
Other	(499		)	(90		)	(65		)	(654		)
Total assets	$	52,540		$	36,082		$	(6,132	)	$	82,490

December 31, 2014
Total assets from reportable segments	$	24,563		$	37,011		$	—		$	61,574
All Other operating segments	2,810			—			—			2,810
Items not included in segment assets:
Cash and short-term investments	6,317			—			—			6,317
Intercompany receivables	1,185			—			(1,185		)	—
Investment in Financial Products	4,488			—			(4,488		)	—
Deferred income taxes	3,627			—			(674		)	2,953
Goodwill and intangible assets	3,492			—			—			3,492
Property, plant and equipment – net and other assets	1,174			—			—			1,174
Operating lease methodology difference	(213		)	—			—			(213		)
Liabilities included in segment assets	9,837			—			—			9,837
Inventory methodology differences	(2,697		)	—			—			(2,697		)
Other	(395		)	(102		)	(69		)	(566		)
Total assets	$	54,188		$	36,909		$	(6,416	)	$	84,681



Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidated Total
Three Months Ended March 31, 2015
Total depreciation and amortization from reportable segments	$	436		$	215	$	651
Items not included in segment depreciation and amortization:
All Other operating segments	66			—		66
Cost centers	38			—		38
Other	(10		)	8		(2		)
Total depreciation and amortization	$	530		$	223	$	753

Three Months Ended March 31, 2014
Total depreciation and amortization from reportable segments	$	463		$	219	$	682
Items not included in segment depreciation and amortization:
All Other operating segments	66			—		66
Cost centers	37			—		37
Other	(10		)	6		(4		)
Total depreciation and amortization	$	556		$	225	$	781



Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
Three Months Ended March 31, 2015
Total capital expenditures from reportable segments	$	215		$	294	$	—		$	509
Items not included in segment capital expenditures:
All Other operating segments	46			—		—			46
Cost centers	19			—		—			19
Timing	253			—		—			253
Other	(56		)	63		(8		)	(1		)
Total capital expenditures	$	477		$	357	$	(8	)	$	826

Three Months Ended March 31, 2014
Total capital expenditures from reportable segments	$	164		$	269	$	—		$	433
Items not included in segment capital expenditures:
All Other operating segments	38			—		—			38
Cost centers	21			—		—			21
Timing	267			—		—			267
Other	(21		)	24		(23		)	(20		)
Total capital expenditures	$	469		$	293	$	(23	)	$	739