Segment Information

A. Basis for Segment Information

We report information internally for operating segments based on management responsibility. Our operating segments offer financing to customers and dealers for the purchase and lease of Caterpillar and other equipment, as well as financing for Caterpillar sales to dealers. Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans within each of the respective segments.

B. Description of Segments

We have six operating segments that offer financing services. Following is a brief description of our segments:


•	North America - Includes our operations in the United States and Canada.


•	Europe - Includes our operations in Europe, Africa, the Middle East and the Commonwealth of Independent States.


•	Asia/Pacific - Includes our operations in Australia, New Zealand, China, Japan and Southeast Asia.


•	Latin America - Includes our operations in Mexico and Central and South American countries.


•	Caterpillar Power Finance - Provides financing worldwide for marine vessels with Caterpillar engines and for Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.


•	Mining - Serves large mining customers worldwide and provides project financing in various countries.

To align with the review of operating results by the Chief Executive Officer, our segment reporting was updated effective February 1, 2018. Prior year data has been revised to conform to the current period segment presentation.

C. Segment Measurement and Reconciliations

Cash, debt and other expenses are allocated to our segments based on their respective portfolios. The related Interest expense is calculated based on the amount of allocated debt and the rates associated with that debt. The performance of each segment is assessed based on a consistent leverage ratio. The Provision for credit losses is based on each segment's respective finance receivable portfolio. Capital expenditures include expenditures for equipment on operating leases and other miscellaneous capital expenditures.

Reconciling items are created based on accounting differences between segment reporting and consolidated external reporting. For the reconciliation of profit before income taxes, we have grouped the reconciling items as follows:


•	Unallocated - This item is related to corporate requirements and strategies that are considered to be for the benefit of the entire organization. Also included are the consolidated results of the special purpose corporation (see Note 7 for additional information) and other miscellaneous items.


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


•	Methodology - Methodology differences between segment reporting and consolidated external reporting are as follows:


◦	Segment assets include off-balance sheet managed assets for which we maintain servicing responsibilities.


◦	The impact of differences between the actual leverage and the segment leverage ratios.


◦	Interest expense includes realized forward points on foreign currency forward contracts.


◦	The net gain or loss from interest rate derivatives.


◦	The profit attributable to noncontrolling interests is considered a component of segment profit.

Supplemental segment data and reconciliations to consolidated external reporting for the three months ended June 30 was as follows:



(Millions of dollars) 2018	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at June 30, 2018			Capital expenditures
North America	$	378		$	105		$	91		$	144	$	8		$	15,650		$	456
Europe	71			5			13			19		13			4,390			22
Asia/Pacific	95			44			30			4		(1		)	4,714			3
Latin America	63			(20		)	25			8		36			3,070			19
Caterpillar Power Finance	31			(36		)	15			—		46			2,606			—
Mining	70			11			15			33		2			2,196			31
Total Segments	708			109			189			208		104			32,626			531
Unallocated	23			(65		)	62			1		—			1,855			2
Timing	(8		)	9			—			—		—			44			—
Methodology	—			47			(61		)	—		—			(213		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(223		)	—
Total	$	723		$	100		$	190		$	209	$	104		$	34,089		$	533

2017	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at December 31, 2017			Capital expenditures
North America	$	331		$	90		$	74		$	129	$	7		$	14,790		$	353
Europe	67			22			9			21		(3		)	4,332			28
Asia/Pacific	66			22			22			7		(2		)	4,214			1
Latin America	75			4			31			10		14			3,407			9
Caterpillar Power Finance	38			7			10			1		13			2,746			—
Mining	72			30			13			34		(9		)	2,399			45
Total Segments	649			175			159			202		20			31,888			436
Unallocated	34			(44		)	47			—		—			1,719			3
Timing	(7		)	(1		)	—			—		(2		)	53			—
Methodology	—			34			(38		)	—		—			(256		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(244		)	—
Total	$	676		$	164		$	168		$	202	$	18		$	33,160		$	439

⁽¹⁾ Elimination is primarily related to intercompany loans.

Supplemental segment data and reconciliations to consolidated external reporting for the six months ended June 30 was as follows:



(Millions of dollars) 2018	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at June 30, 2018			Capital expenditures
North America	$	739		$	200		$	173		$	279	$	25		$	15,650		$	666
Europe	139			12			23			39		24			4,390			36
Asia/Pacific	177			84			55			10		(5		)	4,714			7
Latin America	132			(16		)	54			15		48			3,070			27
Caterpillar Power Finance	65			(39		)	27			1		64			2,606			—
Mining	132			16			30			63		8			2,196			64
Total Segments	1,384			257			362			407		164			32,626			800
Unallocated	45			(132		)	120			1		—			1,855			94
Timing	(16		)	6			—			—		7			44			—
Methodology	—			93			(118		)	—		—			(213		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(223		)	—
Total	$	1,413		$	224		$	364		$	408	$	171		$	34,089		$	894

2017	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at December 31, 2017			Capital expenditures
North America	$	651		$	172		$	147		$	258	$	14		$	14,790		$	535
Europe	132			42			18			41		(2		)	4,332			46
Asia/Pacific	129			48			42			14		(6		)	4,214			3
Latin America	155			10			62			21		29			3,407			42
Caterpillar Power Finance	79			36			21			2		7			2,746			—
Mining	142			45			25			71		(9		)	2,399			80
Total Segments	1,288			353			315			407		33			31,888			706
Unallocated	65			(81		)	89			—		—			1,719			4
Timing	(15		)	(7		)	—			—		1			53			—
Methodology	—			66			(74		)	—		—			(256		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(244		)	—
Total	$	1,338		$	331		$	330		$	407	$	34		$	33,160		$	710

⁽¹⁾ Elimination is primarily related to intercompany loans.