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 September 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 September 30, 2018			Capital expenditures
North America	$	402		$	121		$	94		$	148	$	7		$	15,559		$	204
Europe	69			12			12			17		8			4,663			20
Asia/Pacific	92			44			29			4		—			4,477			3
Latin America	61			15			23			6		6			2,936			1
Caterpillar Power Finance	33			(21		)	13			1		34			2,502			—
Mining	64			19			15			32		(7		)	2,186			67
Total Segments	721			190			186			208		48			32,323			295
Unallocated	23			(72		)	62			—		(1		)	1,923			3
Timing	(9		)	6			—			—		—			70			—
Methodology	—			39			(54		)	—		—			(152		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(327		)	—
Total	$	735		$	163		$	194		$	208	$	47		$	33,837		$	298

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	$	338		$	90		$	77		$	130	$	11		$	14,790		$	187
Europe	68			20			9			19		2			4,332			25
Asia/Pacific	68			25			22			5		1			4,214			2
Latin America	61			(16		)	30			10		17			3,407			6
Caterpillar Power Finance	40			18			11			—		3			2,746			—
Mining	71			12			12			36		4			2,399			88
Total Segments	646			149			161			200		38			31,888			308
Unallocated	35			(47		)	50			—		—			1,719			—
Timing	(8		)	(13		)	—			1		10			53			—
Methodology	—			37			(42		)	—		—			(256		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(244		)	—
Total	$	673		$	126		$	169		$	201	$	48		$	33,160		$	308

⁽¹⁾ Elimination is primarily related to intercompany loans.

Supplemental segment data and reconciliations to consolidated external reporting for the nine months ended September 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 September 30, 2018			Capital expenditures
North America	$	1,141		$	321		$	267		$	427	$	32		$	15,559		$	870
Europe	208			24			35			56		32			4,663			56
Asia/Pacific	269			128			84			14		(5		)	4,477			10
Latin America	193			(1		)	77			21		54			2,936			28
Caterpillar Power Finance	98			(60		)	40			2		98			2,502			—
Mining	196			35			45			95		1			2,186			131
Total Segments	2,105			447			548			615		212			32,323			1,095
Unallocated	68			(204		)	182			1		(1		)	1,923			97
Timing	(25		)	12			—			—		7			70			—
Methodology	—			132			(172		)	—		—			(152		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(327		)	—
Total	$	2,148		$	387		$	558		$	616	$	218		$	33,837		$	1,192

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	$	989		$	262		$	224		$	388	$	25		$	14,790		$	722
Europe	200			62			27			60		—			4,332			71
Asia/Pacific	197			73			64			19		(5		)	4,214			5
Latin America	216			(6		)	92			31		46			3,407			48
Caterpillar Power Finance	119			54			32			2		10			2,746			—
Mining	213			57			37			107		(5		)	2,399			168
Total Segments	1,934			502			476			607		71			31,888			1,014
Unallocated	100			(128		)	139			—		—			1,719			4
Timing	(23		)	(20		)	—			1		11			53			—
Methodology	—			103			(116		)	—		—			(256		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(244		)	—
Total	$	2,011		$	457		$	499		$	608	$	82		$	33,160		$	1,018

⁽¹⁾ Elimination is primarily related to intercompany loans.