Segment information


A.	Basis for segment information

Our Executive Office is comprised of a Chief Executive Officer (CEO), four Group Presidents, a Chief Financial Officer (CFO), a General Counsel & Corporate Secretary and a Chief Human Resources Officer. The Group Presidents and CFO are accountable for a related set of end-to-end businesses that they manage. The General Counsel & Corporate Secretary leads the Law, Security and Public Policy Division. The Chief Human Resources Officer leads the Human Resources Organization. The CEO allocates resources and manages performance at the Group President/CFO level. As such, the CEO serves as our Chief Operating Decision Maker, and operating segments are primarily based on the Group President/CFO 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 the CFO 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 two smaller operating segments that are included in the All Other operating segments. The Law, Security and Public Policy Division and the Human Resources Organization are cost centers and do not meet the definition of an operating segment.

Segment information for 2017 has been recast due to our adoption of new accounting guidance issued by the FASB related to the presentation of net periodic pension costs and net periodic postretirement benefit costs. Prior service cost (credits) is no longer included in segment profit. See Note 2 for additional information.


B.	Description of segments

We have six 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, forestry 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 asphalt pavers, backhoe loaders, compactors, cold planers, compact track and multi-terrain loaders, mini, small, medium and large track excavators, forestry excavators, feller bunchers, harvesters, knuckleboom loaders, motor graders, pipelayers, road reclaimers, site prep tractors, skidders, skid steer loaders, telehandlers, small and medium track-type tractors, track-type loaders, utility vehicles, wheel excavators, compact, small and medium wheel loaders and related parts and work tools. Inter-segment sales are a source of revenue for this segment.

Resource Industries: A segment primarily responsible for supporting customers using machinery in mining, quarry and aggregates, waste and material handling 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, rotary drills, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, landfill compactors, soil compactors, hard rock continuous mining systems, select work tools, machinery components, electronics and control systems and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics and autonomous machine capabilities. Resource Industries also manages areas that provide services to other parts of the company, including integrated manufacturing and research and development. 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 Oil and Gas, Power Generation, Industrial and Transportation applications, including marine and rail-related businesses. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support of turbine machinery and integrated systems and solutions 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 Cat machinery; the remanufacturing of Cat engines and components and remanufacturing services for other companies; the business strategy, product design, product management and development, manufacturing, remanufacturing, leasing and service of diesel-electric locomotives and components and other rail-related products and services and product support of on-highway vocational trucks for North America. Inter-segment sales are a source of revenue for this segment.

Financial Products Segment: Provides financing alternatives to customers and dealers around the world for Caterpillar products, as well as financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of our equipment. The segment also earns revenues from Machinery, Energy & Transportation, but the related costs are not allocated to operating segments.

All Other operating segments: Primarily includes activities such as: business strategy, product management and development, manufacturing of filters and fluids, undercarriage, ground engaging tools, fluid transfer products, precision seals, rubber sealing and connecting components primarily for Cat products; parts distribution; integrated logistics solutions, 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; digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience. 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 reported as a methodology difference.


•	Stock-based compensation expense is not included in segment profit.


•	Postretirement benefit expenses are split; segments are generally responsible for 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 most 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 45 to 51 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 primarily for compliance and legal functions for the benefit of the entire organization.

•

Restructuring costs: Primarily costs for employee separation, long-lived asset impairments and contract terminations. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs primarily for accelerated depreciation, inventory write-downs, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold. A table, Reconciliation of Restructuring costs on page 48, 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 September 30
(Millions of dollars)
	2018
	External sales and revenues			Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at September 30		Capital expenditures
Construction Industries	$	5,654		$	29	$	5,683	$	93	$	1,058	$	5,071	$	58
Resource Industries	2,538			100		2,638		115		414		6,439		49
Energy & Transportation	4,577			978		5,555		159		973		8,302		161
Machinery, Energy & Transportation	$	12,769		$	1,107	$	13,876	$	367	$	2,445	$	19,812	$	268
Financial Products Segment	845		¹	—		845		212		201		35,729		298
Total	$	13,614		$	1,107	$	14,721	$	579	$	2,646	$	55,541	$	566

	2017
	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	$	4,854		$	32	$	4,886	$	99	$	884	$	4,838	$	50
Resource Industries	1,870			86		1,956		129		229		6,403		41
Energy & Transportation	3,961			877		4,838		165		743		7,564		113
Machinery, Energy & Transportation	$	10,685		$	995	$	11,680	$	393	$	1,856	$	18,805	$	204
Financial Products Segment	774		¹	—		774		204		185		34,893		308
Total	$	11,459		$	995	$	12,454	$	597	$	2,041	$	53,698	$	512

¹ Includes revenues from Machinery, Energy & Transportation of $122 million and $93 million in the third quarter of 2018 and 2017, respectively.




Reportable Segments
Nine Months Ended September 30
(Millions of dollars)
	2018
	External sales and revenues			Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at September 30		Capital expenditures
Construction Industries	$	17,450		$	82	$	17,532	$	272	$	3,329	$	5,071	$	162
Resource Industries	7,177			296		7,473		346		1,203		6,439		111
Energy & Transportation	13,567			2,931		16,498		474		2,859		8,302		463
Machinery, Energy & Transportation	$	38,194		$	3,309	$	41,503	$	1,092	$	7,391	$	19,812	$	736
Financial Products Segment	2,467		¹	—		2,467		627		476		35,729		1,192
Total	$	40,661		$	3,309	$	43,970	$	1,719	$	7,867	$	55,541	$	1,928

	2017
	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	$	13,875		$	70	$	13,945	$	301	$	2,418	$	4,838	$	107
Resource Industries	5,299			254		5,553		386		488		6,403		93
Energy & Transportation	11,258			2,484		13,742		485		1,982		7,564		320
Machinery, Energy & Transportation	$	30,432		$	2,808	$	33,240	$	1,172	$	4,888	$	18,805	$	520
Financial Products Segment	2,310		¹	—		2,310		616		559		34,893		1,018
Total	$	32,742		$	2,808	$	35,550	$	1,788	$	5,447	$	53,698	$	1,538

¹ Includes revenues from Machinery, Energy & Transportation of $345 million and $281 million through the first three quarters of 2018 and 2017, respectively.

For the three and nine months ending September 30, 2018, sales and revenues by geographic region reconciled to consolidated sales and revenues were as follows:



Sales and Revenues by Geographic Region
(Millions of dollars)	North America			Latin America			EAME			Asia/ Pacific			External Sales and Revenues
Three Months Ended September 30, 2018
Construction Industries	$	2,646		$	369		$	1,109		$	1,530		$	5,654
Resource Industries	849			427			574			688			2,538
Energy & Transportation	2,309			330			1,180			758			4,577
All Other operating segments	15			—			4			18			37
Corporate Items and Eliminations	(40		)	1			(5		)	1			(43		)
Machinery, Energy & Transportation Sales	5,779			1,127			2,862			2,995			12,763

Financial Products Segment	559			68			101			117			845
Corporate Items and Eliminations	(62		)	(12		)	(6		)	(18		)	(98		)
Financial Products Revenues	497			56			95			99			747

Consolidated Sales and Revenues	$	6,276		$	1,183		$	2,957		$	3,094		$	13,510

Nine Months Ended September 30, 2018
Construction Industries	$	8,005		$	1,105		$	3,347		$	4,993		$	17,450
Resource Industries	2,451			1,181			1,663			1,882			7,177
Energy & Transportation	7,116			897			3,425			2,129			13,567
All Other operating segments	47			1			12			55			115
Corporate Items and Eliminations	(108		)	(1		)	(8		)	—			(117		)
Machinery, Energy & Transportation Sales	17,511			3,183			8,439			9,059			38,192

Financial Products Segment	1,608			213			303			343			2,467
Corporate Items and Eliminations	(168		)	(36		)	(18		)	(57		)	(279		)
Financial Products Revenues	1,440			177			285			286			2,188

Consolidated Sales and Revenues	$	18,951		$	3,360		$	8,724		$	9,345		$	40,380

For the three and nine months ending September 30, 2018, Energy & Transportation segment sales by end user application were as follows:



Energy & Transportation External Sales
(Millions of dollars)	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Oil and gas	$	1,362	$	4,044
Power generation	1,102		3,063
Industrial	863		2,738
Transportation	1,250		3,722
Energy & Transportation External Sales	$	4,577	$	13,567




Reconciliation of Sales and revenues:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments				Consolidated Total
Three Months Ended September 30, 2017
Total external sales and revenues from reportable segments	$	10,685		$	774	$	—			$	11,459
All Other operating segments	56			—		—				56
Other	(28		)	19		(93		)	¹	(102		)
Total sales and revenues	$	10,713		$	793	$	(93	)		$	11,413




	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments				Consolidated Total
Nine Months Ended September 30, 2017
Total external sales and revenues from reportable segments	$	30,432		$	2,310	$	—			$	32,742
All Other operating segments	126			—		—				126
Other	(76		)	53		(279		)	¹	(302		)
Total sales and revenues	$	30,482		$	2,363	$	(279	)		$	32,566
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 September 30, 2018
Total profit from reportable segments	$	2,445		$	201		$	2,646
All Other operating segments	(10		)	—			(10		)
Cost centers	29			—			29
Corporate costs	(134		)	—			(134		)
Timing	(18		)	—			(18		)
Restructuring costs	(96		)	(14		)	(110		)
Methodology differences:
Inventory/cost of sales	(20		)	—			(20		)
Postretirement benefit expense	58			—			58
Stock-based compensation expense	(50		)	(2		)	(52		)
Financing costs	(56		)	—			(56		)
Currency	(96		)	—			(96		)
Other income/expense methodology differences	(88		)	—			(88		)
Other methodology differences	(19		)	5			(14		)
Total consolidated profit before taxes	$	1,945		$	190		$	2,135

Three Months Ended September 30, 2017
Total profit from reportable segments	$	1,856		$	185		$	2,041
All Other operating segments	5			—			5
Cost centers	17			—			17
Corporate costs	(158		)	—			(158		)
Timing	(21		)	—			(21		)
Restructuring costs	(89		)	(1		)	(90		)
Methodology differences:
Inventory/cost of sales	(4		)	—			(4		)
Postretirement benefit expense	38			—			38
Stock-based compensation expense	(46		)	(2		)	(48		)
Financing costs	(116		)	—			(116		)
Currency	(37		)	—			(37		)
Other income/expense methodology differences	(71		)	—			(71		)
Other methodology differences	(32		)	(1		)	(33		)
Total consolidated profit before taxes	$	1,342		$	181		$	1,523



Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidated Total
Nine Months Ended September 30, 2018
Total profit from reportable segments	$	7,391		$	476		$	7,867
All Other operating segments	70			—			70
Cost centers	55			—			55
Corporate costs	(480		)	—			(480		)
Timing	(168		)	—			(168		)
Restructuring costs	(278		)	(15		)	(293		)
Methodology differences:
Inventory/cost of sales	3			—			3
Postretirement benefit expense	227			—			227
Stock-based compensation expense	(158		)	(6		)	(164		)
Financing costs	(203		)	—			(203		)
Currency	(145		)	—			(145		)
Other income/expense methodology differences	(261		)	—			(261		)
Other methodology differences	(61		)	8			(53		)
Total consolidated profit before taxes	$	5,992		$	463		$	6,455

Nine Months Ended September 30, 2017
Total profit from reportable segments	$	4,888		$	559		$	5,447
All Other operating segments	(28		)	—			(28		)
Cost centers	13			—			13
Corporate costs	(447		)	—			(447		)
Timing	(128		)	—			(128		)
Restructuring costs	(1,009		)	(2		)	(1,011		)
Methodology differences:
Inventory/cost of sales	(80		)	—			(80		)
Postretirement benefit expense	129			—			129
Stock-based compensation expense	(158		)	(7		)	(165		)
Financing costs	(369		)	—			(369		)
Currency	(195		)	—			(195		)
Other income/expense methodology differences	(105		)	—			(105		)
Other methodology differences	(93		)	3			(90		)
Total consolidated profit before taxes	$	2,418		$	553		$	2,971

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 (loss)			Restructuring costs			Segment profit (loss) with restructuring costs
Three Months Ended September 30, 2018
Construction Industries	$	1,058		$	(19	)	$	1,039
Resource Industries	414			(53		)	361
Energy & Transportation	973			(31		)	942
Financial Products Segment	201			—			201
All Other operating segments	(10		)	(4		)	(14		)
Total	$	2,636		$	(107	)	$	2,529

Three Months Ended September 30, 2017
Construction Industries	$	884		$	(15	)	$	869
Resource Industries	229			(59		)	170
Energy & Transportation	743			(28		)	715
Financial Products Segment	185			—			185
All Other operating segments	5			(13		)	(8		)
Total	$	2,046		$	(115	)	$	1,931



Reconciliation of Restructuring costs:
(Millions of dollars)	Segment profit (loss)			Restructuring costs			Segment profit (loss) with restructuring costs
Nine Months Ended September 30, 2018
Construction Industries	$	3,329		$	(62	)	$	3,267
Resource Industries	1,203			(149		)	1,054
Energy & Transportation	2,859			(60		)	2,799
Financial Products Segment	476			(1		)	475
All Other operating segments	70			(13		)	57
Total	$	7,937		$	(285	)	$	7,652

Nine Months Ended September 30, 2017
Construction Industries	$	2,418		$	(709	)	$	1,709
Resource Industries	488			(229		)	259
Energy & Transportation	1,982			(86		)	1,896
Financial Products Segment	559			(2		)	557
All Other operating segments	(28		)	(32		)	(60		)
Total	$	5,419		$	(1,058	)	$	4,361



Reconciliation of Assets:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidating Adjustments			Consolidated Total
September 30, 2018
Total assets from reportable segments	$	19,812		$	35,729		$	—		$	55,541
All Other operating segments	1,273			—			—			1,273
Items not included in segment assets:
Cash and short-term investments	7,189			—			—			7,189
Intercompany receivables	1,644			—			(1,644		)	—
Investment in Financial Products	4,165			—			(4,165		)	—
Deferred income taxes	1,818			—			(628		)	1,190
Goodwill and intangible assets	4,304			—			—			4,304
Property, plant and equipment – net and other assets	2,035			—			—			2,035
Operating lease methodology difference	(184		)	—			—			(184		)
Inventory methodology differences	(2,374		)	—			—			(2,374		)
Liabilities included in segment assets	9,814			—			—			9,814
Other	(510		)	(13		)	(56		)	(579		)
Total assets	$	48,986		$	35,716		$	(6,493	)	$	78,209

December 31, 2017
Total assets from reportable segments	$	18,805		$	34,893		$	—		$	53,698
All Other operating segments	1,312			—			—			1,312
Items not included in segment assets:
Cash and short-term investments	7,381			—			—			7,381
Intercompany receivables	1,733			—			(1,733		)	—
Investment in Financial Products	4,064			—			(4,064		)	—
Deferred income taxes	2,166			—			(574		)	1,592
Goodwill and intangible assets	4,210			—			—			4,210
Property, plant and equipment – net and other assets	2,341			—			—			2,341
Operating lease methodology difference	(191		)	—			—			(191		)
Inventory methodology differences	(2,287		)	—			—			(2,287		)
Liabilities included in segment assets	9,352			—			—			9,352
Other	(399		)	(14		)	(33		)	(446		)
Total assets	$	48,487		$	34,879		$	(6,404	)	$	76,962



Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery, Energy & Transportation		Financial Products		Consolidated Total
Three Months Ended September 30, 2018
Total depreciation and amortization from reportable segments	$	367	$	212	$	579
Items not included in segment depreciation and amortization:
All Other operating segments	55		—		55
Cost centers	33		—		33
Other	22		9		31
Total depreciation and amortization	$	477	$	221	$	698

Three Months Ended September 30, 2017
Total depreciation and amortization from reportable segments	$	393	$	204	$	597
Items not included in segment depreciation and amortization:
All Other operating segments	52		—		52
Cost centers	36		—		36
Other	28		10		38
Total depreciation and amortization	$	509	$	214	$	723



Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery, Energy & Transportation		Financial Products		Consolidated Total
Nine Months Ended September 30, 2018
Total depreciation and amortization from reportable segments	$	1,092	$	627	$	1,719
Items not included in segment depreciation and amortization:
All Other operating segments	170		—		170
Cost centers	96		—		96
Other	52		28		80
Total depreciation and amortization	$	1,410	$	655	$	2,065

Nine Months Ended September 30, 2017
Total depreciation and amortization from reportable segments	$	1,172	$	616	$	1,788
Items not included in segment depreciation and amortization:
All Other operating segments	162		—		162
Cost centers	106		—		106
Other	67		30		97
Total depreciation and amortization	$	1,507	$	646	$	2,153



Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
Three Months Ended September 30, 2018
Total capital expenditures from reportable segments	$	268		$	298	$	—		$	566
Items not included in segment capital expenditures:
All Other operating segments	63			—		—			63
Cost centers	30			—		—			30
Timing	(5		)	—		—			(5		)
Other	(65		)	45		(33		)	(53		)
Total capital expenditures	$	291		$	343	$	(33	)	$	601

Three Months Ended September 30, 2017
Total capital expenditures from reportable segments	$	204		$	308	$	—		$	512
Items not included in segment capital expenditures:
All Other operating segments	26			—		—			26
Cost centers	17			—		—			17
Timing	(21		)	—		—			(21		)
Other	(31		)	19		(9		)	(21		)
Total capital expenditures	$	195		$	327	$	(9	)	$	513



Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
Nine Months Ended September 30, 2018
Total capital expenditures from reportable segments	$	736		$	1,192	$	—		$	1,928
Items not included in segment capital expenditures:
All Other operating segments	101			—		—			101
Cost centers	70			—		—			70
Timing	152			—		—			152
Other	(214		)	165		(73		)	(122		)
Total capital expenditures	$	845		$	1,357	$	(73	)	$	2,129

Nine Months Ended September 30, 2017
Total capital expenditures from reportable segments	$	520		$	1,018	$	—		$	1,538
Items not included in segment capital expenditures:
All Other operating segments	71			—		—			71
Cost centers	40			—		—			40
Timing	58			—		—			58
Other	(115		)	62		(17		)	(70		)
Total capital expenditures	$	574		$	1,080	$	(17	)	$	1,637