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Segment information

12 Months Ended

Dec. 31, 2019


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 Chief Legal Officer, General Counsel and 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 Chief Legal Officer, General Counsel and 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 one smaller operating segment that is included in the All Other operating segment. 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.

B. Description of segments

We have five 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 segment:

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, heavy construction, 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; autonomous ready vehicles and solutions; 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 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 Caterpillar 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 ME&T, but the related costs are not allocated to operating segments.

All Other operating segment: Primarily includes activities such as: business strategy, product management and development, manufacturing and sourcing 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; and 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 segment 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:

•

ME&T segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles, accounts payable and customer advances. Beginning in 2019, operating lease right-of-use assets are included in segment assets. In 2018, the present value of future lease payments for certain ME&T operating leases was included in segment assets while the estimated financing component of the lease payments was excluded. 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.

•

Currency exposures for ME&T 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.


•	ME&T 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 137 to 143 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: May include 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 which may consist of accelerated depreciation, inventory write-downs, building demolition, 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. Beginning in 2019, only certain restructuring costs are excluded from segment profit. A table, Reconciliation of Restructuring costs on page 140, has been included to illustrate how segment profit would have been impacted by the restructuring costs. See Note 25 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.



Segment Information
(Millions of dollars)
Reportable Segments:
	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
2019
Construction Industries	$	22,556		$	93	$	22,649	$	331	$	3,931	$	5,219	$	201
Resource Industries	9,813			463		10,276		425		1,629		6,214		168
Energy & Transportation	18,485			3,612		22,097		628		3,910		8,612		613
Machinery, Energy & Transportation	$	50,854		$	4,168	$	55,022	$	1,384	$	9,470	$	20,045	$	982
Financial Products Segment	3,434		¹	—		3,434		829		832		35,813		1,534
Total	$	54,288		$	4,168	$	58,456	$	2,213	$	10,302	$	55,858	$	2,516

2018
Construction Industries	$	23,116		$	121	$	23,237	$	367	$	4,174	$	4,902	$	266
Resource Industries	9,888			382		10,270		462		1,603		6,442		188
Energy & Transportation	18,832			3,953		22,785		640		3,938		8,386		742
Machinery, Energy & Transportation	$	51,836		$	4,456	$	56,292	$	1,469	$	9,715	$	19,730	$	1,196
Financial Products Segment	3,279		¹	—		3,279		834		505		36,002		1,559
Total	$	55,115		$	4,456	$	59,571	$	2,303	$	10,220	$	55,732	$	2,755

2017
Construction Industries	$	19,133		$	107	$	19,240	$	400	$	3,255	$	4,838	$	228
Resource Industries	7,504			357		7,861		514		698		6,403		183
Energy & Transportation	15,964			3,418		19,382		653		2,856		7,564		527
Machinery, Energy & Transportation	$	42,601		$	3,882	$	46,483	$	1,567	$	6,809	$	18,805	$	938
Financial Products Segment	3,093		¹	—		3,093		820		792		34,893		1,373
Total	$	45,694		$	3,882	$	49,576	$	2,387	$	7,601	$	53,698	$	2,311

¹ Includes revenues from ME&T of $524 million, $470 million and $384 million for the years 2019, 2018 and 2017, respectively.

For the years ended December 31, 2019 and 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
2019
Construction Industries	$	11,455		$	1,533		$	4,012		$	5,556		$	22,556
Resource Industries	3,632			1,533			1,836			2,812			$	9,813
Energy & Transportation	8,864			1,389			4,994			3,238			$	18,485
All Other operating segment	25			7			28			67			$	127
Corporate Items and Eliminations	(192		)	—			(20		)	(14		)	(226		)
Machinery, Energy & Transportation Sales	23,784			4,462			10,850			11,659			$	50,755

Financial Products Segment	2,235			299			408			492			3,434			¹
Corporate Items and Eliminations	(234		)	(51		)	(35		)	(69		)	(389		)
Financial Products Revenues	2,001			248			373			423			3,045

Consolidated Sales and Revenues	$	25,785		$	4,710		$	11,223		$	12,082		$	53,800



	North America			Latin America			EAME			Asia/ Pacific			External Sales and Revenues
2018
Construction Industries	$	10,754		$	1,479		$	4,410		$	6,473		$	23,116
Resource Industries	3,357			1,647			2,217			2,667			$	9,888
Energy & Transportation	9,685			1,331			4,934			2,882			$	18,832
All Other operating segment	63			3			18			70			$	154
Corporate Items and Eliminations	(155		)	—			(11		)	(2		)	(168		)
Machinery, Energy & Transportation Sales	23,704			4,460			11,568			12,090			$	51,822

Financial Products Segment	2,153			281			387			458			3,279			¹
Corporate Items and Eliminations	(234		)	(46		)	(26		)	(73		)	(379		)
Financial Products Revenues	1,919			235			361			385			2,900

Consolidated Sales and Revenues	$	25,623		$	4,695		$	11,929		$	12,475		$	54,722

¹ Includes revenues from ME&T of $524 million and $470 million in the years ended December 31, 2019 and 2018, respectively.



Reconciliation of Sales and Revenues:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments				Consolidated Total
2017
Total external sales and revenues from reportable segments	$	42,601		$	3,093	$	—			$	45,694
All Other operating segment	178			—		—				178
Other	(103		)	74		(381		)	¹	(410		)
Total sales and revenues	$	42,676		$	3,167	$	(381	)		$	45,462


¹	Elimination of Financial Products revenues from ME&T.

For the years ended December 31, 2019 and 2018, Energy & Transportation segment sales by end user application were as follows:



Energy & Transportation External Sales
(Millions of dollars)	2019		2018
Oil and gas	$	5,205	$	5,763
Power generation	4,474		4,334
Industrial	3,749		3,640
Transportation	5,057		5,095
Energy & Transportation External Sales	$	18,485	$	18,832



Reconciliation of consolidated profit before taxes:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidated Total
2019
Total profit from reportable segments	$	9,470		$	832		$	10,302
All Other operating segment	4			—			4
Cost centers	(6		)	—			(6		)
Corporate costs	(602		)	(5		)	(607		)
Timing	(93		)	—			(93		)
Restructuring costs	(163		)	(44		)	(207		)
Methodology differences:
Inventory/cost of sales	(19		)	—			(19		)
Postretirement benefit expense	(401		)	—			(401		)
Stock-based compensation expense	(198		)	(7		)	(205		)
Financing costs	(248		)	—			(248		)
Currency	(175		)	—			(175		)
Other income/expense methodology differences	(481		)	—			(481		)
Other methodology differences	(107		)	55			(52		)
Total consolidated profit before taxes	$	6,981		$	831		$	7,812

2018
Total profit from reportable segments	$	9,715		$	505		$	10,220
All Other operating segment	23			—			23
Cost centers	2			—			2
Corporate costs	(610		)	—			(610		)
Timing	(257		)	—			(257		)
Restructuring costs	(370		)	(16		)	(386		)
Methodology differences:
Inventory/cost of sales	51			—			51
Postretirement benefit expense	(124		)	—			(124		)
Stock-based compensation expense	(190		)	(8		)	(198		)
Financing costs	(257		)	—			(257		)
Currency	(219		)	—			(219		)
Other income/expense methodology differences	(362		)	—			(362		)
Other methodology differences	(86		)	25			(61		)
Total consolidated profit before taxes	$	7,316		$	506		$	7,822

2017
Total profit from reportable segments	$	6,809		$	792		$	7,601
All Other operating segment	(44		)	—			(44		)
Cost centers	22			—			22
Corporate costs	(633		)	—			(633		)
Timing	(151		)	—			(151		)
Restructuring costs	(1,253		)	(3		)	(1,256		)
Methodology differences:
Inventory/cost of sales	(77		)	—			(77		)
Postretirement benefit expense	(141		)	—			(141		)
Stock-based compensation expense	(198		)	(8		)	(206		)
Financing costs	(524		)	—			(524		)
Currency	(218		)	—			(218		)
Other income/expense methodology differences	(181		)	—			(181		)
Other methodology differences	(97		)	(13		)	(110		)
Total consolidated profit before taxes	$	3,314		$	768		$	4,082

Reconciliation of Restructuring costs:

As noted above, certain 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
2019
Construction Industries	$	3,931		$	(55	)	$	3,876
Resource Industries	1,629			(56		)	1,573
Energy & Transportation	3,910			(82		)	3,828
Financial Products Segment	832			—			832
All Other operating segment	4			(11		)	(7		)
Total	$	10,306		$	(204	)	$	10,102

2018
Construction Industries	$	4,174		$	(58	)	$	4,116
Resource Industries	1,603			(191		)	1,412
Energy & Transportation	3,938			(84		)	3,854
Financial Products Segment	505			(2		)	503
All Other operating segment	23			(40		)	(17		)
Total	$	10,243		$	(375	)	$	9,868

2017
Construction Industries	$	3,255		$	(719	)	$	2,536
Resource Industries	698			(276		)	422
Energy & Transportation	2,856			(115		)	2,741
Financial Products Segment	792			(3		)	789
All Other operating segment	(44		)	(39		)	(83		)
Total	$	7,557		$	(1,152	)	$	6,405



Reconciliation of Assets:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
2019
Total assets from reportable segments	$	20,045		$	35,813	$	—		$	55,858
All Other operating segment	1,337			—		—			1,337
Items not included in segment assets:
Cash and short-term investments	7,299			—		—			7,299
Intercompany receivables	758			—		(758		)	—
Investment in Financial Products	4,260			—		(4,260		)	—
Deferred income taxes	2,002			—		(708		)	1,294
Goodwill and intangible assets	4,435			—		—			4,435
Property, plant and equipment – net and other assets	2,529			—		—			2,529
Inventory methodology differences	(2,426		)	—		—			(2,426		)
Liabilities included in segment assets	8,541			—		—			8,541
Other	(343		)	134		(205		)	(414		)
Total assets	$	48,437		$	35,947	$	(5,931	)	$	78,453

2018
Total assets from reportable segments	$	19,730		$	36,002	$	—		$	55,732
All Other operating segment	1,279			—		—			1,279
Items not included in segment assets:
Cash and short-term investments	6,968			—		—			6,968
Intercompany receivables	1,633			—		(1,633		)	—
Investment in Financial Products	3,672			—		(3,672		)	—
Deferred income taxes	2,015			—		(692		)	1,323
Goodwill and intangible assets	4,279			—		—			4,279
Property, plant and equipment – net and other assets	1,802			—		—			1,802
Inventory methodology differences	(2,503		)	—		—			(2,503		)
Liabilities included in segment assets	9,766			—		—			9,766
Other	(166		)	66		(37		)	(137		)
Total assets	$	48,475		$	36,068	$	(6,034	)	$	78,509



Reconciliation of Depreciation and amortization:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidated Total
2019
Total depreciation and amortization from reportable segments	$	1,384		$	829	$	2,213
Items not included in segment depreciation and amortization:
All Other operating segment	210			—		210
Cost centers	136			—		136
Other	(17		)	35		18
Total depreciation and amortization	$	1,713		$	864	$	2,577

2018
Total depreciation and amortization from reportable segments	$	1,469		$	834	$	2,303
Items not included in segment depreciation and amortization:
All Other operating segment	225			—		225
Cost centers	130			—		130
Other	71			37		108
Total depreciation and amortization	$	1,895		$	871	$	2,766

2017
Total depreciation and amortization from reportable segments	$	1,567		$	820	$	2,387
Items not included in segment depreciation and amortization:
All Other operating segment	220			—		220
Cost centers	143			—		143
Other	86			41		127
Total depreciation and amortization	$	2,016		$	861	$	2,877



Reconciliation of Capital expenditures:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
2019
Total capital expenditures from reportable segments	$	982		$	1,534	$	—		$	2,516
Items not included in segment capital expenditures:
All Other operating segment	131			—		—			131
Cost centers	101			—		—			101
Timing	(11		)	—		—			(11		)
Other	(129		)	102		(41		)	(68		)
Total capital expenditures	$	1,074		$	1,636	$	(41	)	$	2,669

2018
Total capital expenditures from reportable segments	$	1,196		$	1,559	$	—		$	2,755
Items not included in segment capital expenditures:
All Other operating segment	170			—		—			170
Cost centers	100			—		—			100
Timing	42			—		—			42
Other	(287		)	216		(80		)	(151		)
Total capital expenditures	$	1,221		$	1,775	$	(80	)	$	2,916

2017
Total capital expenditures from reportable segments	$	938		$	1,373	$	—		$	2,311
Items not included in segment capital expenditures:
All Other operating segment	134			—		—			134
Cost centers	84			—		—			84
Timing	(96		)	—		—			(96		)
Other	(144		)	80		(33		)	(97		)
Total capital expenditures	$	916		$	1,453	$	(33	)	$	2,336

Enterprise-wide Disclosures:

Information about Geographic Areas:



							Property, plant and equipment - net
	External sales and revenues ¹						December 31,
(Millions of dollars)	2019		2018		2017		2019		2018
Inside United States	$	22,806	$	22,690	$	18,552	$	7,568	$	8,152
Outside United States	30,994		32,032		26,910		5,336		5,422
Total	$	53,800	$	54,722	$	45,462	$	12,904	$	13,574

1Sales of ME&T are based on dealer or customer location. Revenues from services provided are based on where service is rendered.