| Segment Information | Segment information A. Basis for segment information Our Executive Office is comprised of five Group Presidents, an Executive Vice President and a CEO. Group Presidents are accountable for a related set of end-to-end businesses that they manage. The Executive Vice President leads the Law and Public Policy Division. The CEO allocates resources and manages performance at the Group President level. As such, the CEO serves as our Chief Operating Decision Maker and operating segments are primarily based on the Group President 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 a Group President 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 and Public Policy Division is a cost center and does not meet the definition of an operating segment. 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 backhoe loaders, small wheel loaders, small track-type tractors, skid steer loaders, multi-terrain loaders, mini excavators, compact wheel loaders, telehandlers, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, compact track loaders, medium track-type tractors, track-type loaders, motor graders, pipelayers, forestry and paving products and related parts. 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, 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, track and rotary drills, highwall miners, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, landfill compactors, soil compactors, material handlers, continuous miners, scoops and haulers, hardrock 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 power generation, industrial, oil and gas 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 turbines 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. All Other operating segments : Primarily includes activities such as: business strategy, product management and development, and manufacturing of filters and fluids, undercarriage, tires and rims, ground engaging tools, fluid transfer products, precision seals, and rubber sealing and connecting components primarily for Cat products; parts distribution; 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 recorded 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 and prior 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 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 39 to 45 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. Restructuring costs also include other exit-related costs primarily for accelerated depreciation, inventory write-downs, equipment relocation and project management costs and also LIFO inventory decrement benefits from inventory liquidations at closed facilities (primarily included in Cost of goods sold). A table, Reconciliation of Restructuring costs on page 42, has been included to illustrate how segment profit would have been impacted by the restructuring costs. See Note 18 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 June 30 (Millions of dollars) 2017 External sales and revenues Inter- segment sales and revenues Total sales and revenues Depreciation and amortization Segment profit Segment assets at June 30 Capital expenditures Construction Industries $ 4,930 $ 29 $ 4,959 $ 100 $ 901 $ 4,475 $ 36 Resource Industries 1,759 77 1,836 130 97 6,584 31 Energy & Transportation 3,941 827 4,768 162 700 7,405 91 Machinery, Energy & Transportation $ 10,630 $ 933 $ 11,563 $ 392 $ 1,698 $ 18,464 $ 158 Financial Products Segment 776 — 776 204 191 36,506 464 Total $ 11,406 $ 933 $ 12,339 $ 596 $ 1,889 $ 54,970 $ 622 2016 External sales and revenues Inter- segment sales and revenues Total sales and revenues Depreciation and amortization Segment profit (loss) Segment assets at December 31 Capital expenditures Construction Industries $ 4,426 $ 12 $ 4,438 $ 116 $ 550 $ 5,367 $ 40 Resource Industries 1,457 57 1,514 153 (163 ) 7,135 59 Energy & Transportation 3,750 658 4,408 169 602 7,791 96 Machinery, Energy & Transportation $ 9,633 $ 727 $ 10,360 $ 438 $ 989 $ 20,293 $ 195 Financial Products Segment 759 — 759 213 202 35,224 612 Total $ 10,392 $ 727 $ 11,119 $ 651 $ 1,191 $ 55,517 $ 807 Reportable Segments Six Months Ended June 30 (Millions of dollars) 2017 External sales and revenues Inter- segment sales and revenues Total sales and revenues Depreciation and amortization Segment profit Segment Capital expenditures Construction Industries $ 9,021 $ 38 $ 9,059 $ 202 $ 1,536 $ 4,475 $ 57 Resource Industries 3,429 168 3,597 257 255 6,584 52 Energy & Transportation 7,297 1,607 8,904 320 1,252 7,405 207 Machinery, Energy & Transportation $ 19,747 $ 1,813 $ 21,560 $ 779 $ 3,043 $ 18,464 $ 316 Financial Products Segment 1,536 — 1,536 412 374 36,506 710 Total $ 21,283 $ 1,813 $ 23,096 $ 1,191 $ 3,417 $ 54,970 $ 1,026 2016 External sales and revenues Inter- segment sales and revenues Total sales and revenues Depreciation and amortization Segment profit (loss) Segment assets at December 31 Capital expenditures Construction Industries $ 8,469 $ 20 $ 8,489 $ 229 $ 990 $ 5,367 $ 68 Resource Industries 2,906 128 3,034 308 (259 ) 7,135 94 Energy & Transportation 7,028 1,290 8,318 335 1,012 7,791 243 Machinery, Energy & Transportation $ 18,403 $ 1,438 $ 19,841 $ 872 $ 1,743 $ 20,293 $ 405 Financial Products Segment 1,502 — 1,502 418 370 35,224 909 Total $ 19,905 $ 1,438 $ 21,343 $ 1,290 $ 2,113 $ 55,517 $ 1,314 Reconciliation of Sales and revenues: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total Three Months Ended June 30, 2017 Total external sales and revenues from reportable segments $ 10,630 $ 776 $ — $ 11,406 All Other operating segments 33 — — 33 Other (24 ) 17 (101 ) 1 (108 ) Total sales and revenues $ 10,639 $ 793 $ (101 ) $ 11,331 Three Months Ended June 30, 2016 Total external sales and revenues from reportable segments $ 9,633 $ 759 $ — $ 10,392 All Other operating segments 41 — — 41 Other (29 ) 19 (81 ) 1 (91 ) Total sales and revenues $ 9,645 $ 778 $ (81 ) $ 10,342 1 Elimination of Financial Products revenues from Machinery, Energy & Transportation. Reconciliation of Sales and revenues: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total Six Months Ended June 30, 2017 Total external sales and revenues from reportable segments $ 19,747 $ 1,536 $ — $ 21,283 All Other operating segments 70 — — 70 Other (48 ) 34 (186 ) 1 (200 ) Total sales and revenues $ 19,769 $ 1,570 $ (186 ) $ 21,153 Six Months Ended June 30, 2016 Total external sales and revenues from reportable segments $ 18,403 $ 1,502 $ — $ 19,905 All Other operating segments 79 — — 79 Other (57 ) 35 (159 ) 1 (181 ) Total sales and revenues $ 18,425 $ 1,537 $ (159 ) $ 19,803 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 June 30, 2017 Total profit from reportable segments $ 1,698 $ 191 $ 1,889 All Other operating segments (20 ) — (20 ) Cost centers (11 ) — (11 ) Corporate costs (174 ) — (174 ) Timing (69 ) — (69 ) Restructuring costs (169 ) — (169 ) Methodology differences: Inventory/cost of sales (8 ) — (8 ) Postretirement benefit expense 38 — 38 Stock-based compensation expense (65 ) (3 ) (68 ) Financing costs (123 ) — (123 ) Currency (119 ) — (119 ) Other income/expense methodology differences 21 — 21 Other methodology differences (28 ) — (28 ) Total consolidated profit before taxes $ 971 $ 188 $ 1,159 Three Months Ended June 30, 2016 Total profit from reportable segments $ 989 $ 202 $ 1,191 All Other operating segments (14 ) — (14 ) Cost centers 14 — 14 Corporate costs (149 ) — (149 ) Timing 9 — 9 Restructuring costs (137 ) (2 ) (139 ) Methodology differences: — Inventory/cost of sales (16 ) — (16 ) Postretirement benefit expense 56 — 56 Stock-based compensation expense (43 ) (2 ) (45 ) Financing costs (132 ) — (132 ) Currency 28 — 28 Other income/expense methodology differences (54 ) — (54 ) Other methodology differences (11 ) 1 (10 ) Total consolidated profit before taxes $ 540 $ 199 $ 739 Reconciliation of Consolidated profit before taxes: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidated Total Six Months Ended June 30, 2017 Total profit from reportable segments $ 3,043 $ 374 $ 3,417 All Other operating segments (33 ) — (33 ) Cost centers (4 ) — (4 ) Corporate costs (289 ) — (289 ) Timing (107 ) — (107 ) Restructuring costs (920 ) (1 ) (921 ) Methodology differences: Inventory/cost of sales (76 ) — (76 ) Postretirement benefit expense 79 — 79 Stock-based compensation expense (112 ) (5 ) (117 ) Financing costs (253 ) — (253 ) Currency (158 ) — (158 ) Other income/expense methodology differences (34 ) — (34 ) Other methodology differences (60 ) 4 (56 ) Total consolidated profit before taxes $ 1,076 $ 372 $ 1,448 Six Months Ended June 30, 2016 Total profit from reportable segments $ 1,743 $ 370 $ 2,113 All Other operating segments (21 ) — (21 ) Cost centers 39 — 39 Corporate costs (308 ) — (308 ) Timing 41 — 41 Restructuring costs (296 ) (4 ) (300 ) Methodology differences: Inventory/cost of sales (19 ) — (19 ) Postretirement benefit expense 111 — 111 Stock-based compensation expense (140 ) (6 ) (146 ) Financing costs (267 ) — (267 ) Currency (12 ) — (12 ) Other income/expense methodology differences (110 ) — (110 ) Other methodology differences (23 ) 6 (17 ) Total consolidated profit before taxes $ 738 $ 366 $ 1,104 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 June 30, 2017 Construction Industries $ 901 $ (27 ) $ 874 Resource Industries 97 (111 ) (14 ) Energy & Transportation 700 (44 ) 656 Financial Products Segment 191 (1 ) 190 All Other operating segments (20 ) (13 ) (33 ) Total $ 1,869 $ (196 ) $ 1,673 Three Months Ended June 30, 2016 Construction Industries $ 550 $ (3 ) $ 547 Resource Industries (163 ) (69 ) (232 ) Energy & Transportation 602 (55 ) 547 Financial Products Segment 202 (2 ) 200 All Other operating segments (14 ) (9 ) (23 ) Total $ 1,177 $ (138 ) $ 1,039 Reconciliation of Restructuring costs: (Millions of dollars) Segment profit (loss) Restructuring costs Segment profit (loss) with restructuring costs Six Months Ended June 30, 2017 Construction Industries $ 1,536 $ (694 ) $ 842 Resource Industries 255 (170 ) 85 Energy & Transportation 1,252 (58 ) 1,194 Financial Products Segment 374 (2 ) 372 All Other operating segments (33 ) (19 ) (52 ) Total $ 3,384 $ (943 ) $ 2,441 Six Months Ended June 30, 2016 Construction Industries $ 990 $ (25 ) $ 965 Resource Industries (259 ) (94 ) (353 ) Energy & Transportation 1,012 (155 ) 857 Financial Products Segment 370 (4 ) 366 All Other operating segments (21 ) (14 ) (35 ) Total $ 2,092 $ (292 ) $ 1,800 Reconciliation of Assets: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total June 30, 2017 Total assets from reportable segments $ 18,464 $ 36,506 $ — $ 54,970 All Other operating segments 1,368 — — 1,368 Items not included in segment assets: Cash and short-term investments 8,926 — — 8,926 Intercompany receivables 1,662 — (1,662 ) — Investment in Financial Products 4,169 — (4,169 ) — Deferred income taxes 3,651 — (886 ) 2,765 Goodwill and intangible assets 4,128 — — 4,128 Property, plant and equipment – net and other assets 1,935 — — 1,935 Operating lease methodology difference (190 ) — — (190 ) Inventory methodology differences (2,284 ) — — (2,284 ) Intercompany loan included in Financial Products' assets — — (1,500 ) (1,500 ) Liabilities included in segment assets 8,890 — — 8,890 Other (454 ) (14 ) (30 ) (498 ) Total assets $ 50,265 $ 36,492 $ (8,247 ) $ 78,510 December 31, 2016 Total assets from reportable segments $ 20,293 $ 35,224 $ — $ 55,517 All Other operating segments 1,381 — — 1,381 Items not included in segment assets: Cash and short-term investments 5,257 — — 5,257 Intercompany receivables 1,713 — (1,713 ) — Investment in Financial Products 3,638 — (3,638 ) — Deferred income taxes 3,648 — (947 ) 2,701 Goodwill and intangible assets 3,883 — — 3,883 Property, plant and equipment – net and other assets 1,645 — — 1,645 Operating lease methodology difference (186 ) — — (186 ) Inventory methodology differences (2,373 ) — — (2,373 ) Liabilities included in segment assets 7,400 — — 7,400 Other (436 ) (29 ) (56 ) (521 ) Total assets $ 45,863 $ 35,195 $ (6,354 ) $ 74,704 Reconciliations of Depreciation and amortization: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidated Total Three Months Ended June 30, 2017 Total depreciation and amortization from reportable segments $ 392 $ 204 $ 596 Items not included in segment depreciation and amortization: All Other operating segments 56 — 56 Cost centers 35 — 35 Other 24 9 33 Total depreciation and amortization $ 507 $ 213 $ 720 Three Months Ended June 30, 2016 Total depreciation and amortization from reportable segments $ 438 $ 213 $ 651 Items not included in segment depreciation and amortization: All Other operating segments 53 — 53 Cost centers 38 — 38 Other 2 10 12 Total depreciation and amortization $ 531 $ 223 $ 754 Reconciliations of Depreciation and amortization: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidated Total Six Months Ended June 30, 2017 Total depreciation and amortization from reportable segments $ 779 $ 412 $ 1,191 Items not included in segment depreciation and amortization: All Other operating segments 110 — 110 Cost centers 70 — 70 Other 39 20 59 Total depreciation and amortization $ 998 $ 432 $ 1,430 Six Months Ended June 30, 2016 Total depreciation and amortization from reportable segments $ 872 $ 418 $ 1,290 Items not included in segment depreciation and amortization: All Other operating segments 105 — 105 Cost centers 78 — 78 Other 1 20 21 Total depreciation and amortization $ 1,056 $ 438 $ 1,494 Reconciliations of Capital expenditures: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total Three Months Ended June 30, 2017 Total capital expenditures from reportable segments $ 158 $ 464 $ — $ 622 Items not included in segment capital expenditures: All Other operating segments 25 — — 25 Cost centers 14 — — 14 Timing (9 ) — — (9 ) Other (18 ) (14 ) (5 ) (37 ) Total capital expenditures $ 170 $ 450 $ (5 ) $ 615 Three Months Ended June 30, 2016 Total capital expenditures from reportable segments $ 195 $ 612 $ — $ 807 Items not included in segment capital expenditures: All Other operating segments 51 — — 51 Cost centers 16 — — 16 Other (23 ) 22 (8 ) (9 ) Total capital expenditures $ 239 $ 634 $ (8 ) $ 865 Reconciliations of Capital expenditures: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total Six Months Ended June 30, 2017 Total capital expenditures from reportable segments $ 316 $ 710 $ — $ 1,026 Items not included in segment capital expenditures: All Other operating segments 45 — — 45 Cost centers 23 — — 23 Timing 79 — — 79 Other (84 ) 43 (8 ) (49 ) Total capital expenditures $ 379 $ 753 $ (8 ) $ 1,124 Six Months Ended June 30, 2016 Total capital expenditures from reportable segments $ 405 $ 909 $ — $ 1,314 Items not included in segment capital expenditures: All Other operating segments 67 — — 67 Cost centers 28 — — 28 Timing 217 — — 217 Other (99 ) 95 (17 ) (21 ) Total capital expenditures $ 618 $ 1,004 $ (17 ) $ 1,605 |
