Segment Information

A. Basis for Segment Information

We report information internally for operating segments based on management responsibility. Our operating segments provide 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 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.


•	EAME - 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, Southeast Asia and India.


•	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.

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 8 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.

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



(Millions of dollars) 2019	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at June 30, 2019			Capital expenditures
North America	$	414		$	131		$	99		$	146	$	2		$	15,990		$	388
EAME	73			22			13			17		(2		)	4,917			18
Asia/Pacific	105			52			29			3		5			4,737			4
Latin America	62			3			25			5		13			3,040			17
Caterpillar Power Finance	26			(33		)	11			1		42			1,856			—
Mining	70			7			14			32		11			2,393			26
Total Segments	750			182			191			204		71			32,933			453
Unallocated	15			(83		)	65			—		—			2,140			6
Timing	(8		)	(4		)	—			—		—			22			—
Methodology	—			46			(56		)	—		—			(201		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(329		)	—
Total	$	757		$	141		$	200		$	204	$	71		$	34,565		$	459

2018	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at December 31, 2018			Capital expenditures
North America	$	378		$	105		$	91		$	144	$	8		$	15,632		$	456
EAME	71			5			13			19		13			4,862			22
Asia/Pacific	95			44			30			4		(1		)	4,639			3
Latin America	63			(20		)	25			8		36			2,972			19
Caterpillar Power Finance	31			(36		)	15			—		46			2,259			—
Mining	70			11			15			33		2			2,234			31
Total Segments	708			109			189			208		104			32,598			531
Unallocated	23			(65		)	62			1		—			1,957			2
Timing	(8		)	9			—			—		—			55			—
Methodology	—			47			(61		)	—		—			(159		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(270		)	—
Total	$	723		$	100		$	190		$	209	$	104		$	34,181		$	533

⁽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) 2019	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at June 30, 2019			Capital expenditures
North America	$	815		$	247		$	196		$	290	$	9		$	15,990		$	567
EAME	145			46			27			34		(3		)	4,917			41
Asia/Pacific	199			94			59			6		8			4,737			10
Latin America	122			6			48			11		29			3,040			19
Caterpillar Power Finance	55			(49		)	24			1		68			1,856			—
Mining	139			19			28			64		13			2,393			59
Total Segments	1,475			363			382			406		124			32,933			696
Unallocated	34			(166		)	129			—		—			2,140			9
Timing	(16		)	(9		)	—			—		—			22			—
Methodology	—			95			(110		)	—		—			(201		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(329		)	—
Total	$	1,493		$	283		$	401		$	406	$	124		$	34,565		$	705

2018	External Revenues			Profit before income taxes			Interest Expense			Depreciation on equipment leased to others		Provision for credit losses			Assets at December 31, 2018			Capital expenditures
North America	$	739		$	200		$	173		$	279	$	25		$	15,632		$	666
EAME	139			12			23			39		24			4,862			36
Asia/Pacific	177			84			55			10		(5		)	4,639			7
Latin America	132			(16		)	54			15		48			2,972			27
Caterpillar Power Finance	65			(39		)	27			1		64			2,259			—
Mining	132			16			30			63		8			2,234			64
Total Segments	1,384			257			362			407		164			32,598			800
Unallocated	45			(132		)	120			1		—			1,957			94
Timing	(16		)	6			—			—		7			55			—
Methodology	—			93			(118		)	—		—			(159		)	—
Inter-segment Eliminations ⁽¹⁾	—			—			—			—		—			(270		)	—
Total	$	1,413		$	224		$	364		$	408	$	171		$	34,181		$	894

⁽¹⁾ Elimination is primarily related to intercompany loans.