| Segment Information | Segment information A. Basis for segment information Our Executive Office is comprised of a Chief Executive Officer (CEO), five Group Presidents, a General Counsel & Corporate Secretary and a Chief Human Resources Officer. Group Presidents are accountable for a related set of end-to-end businesses that they manage. The General Counsel & Corporate Secretary leads the Law and Public Policy Division. The Chief Human Resources Officer leads the Human Services 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 and the Human Services Division are cost centers and do 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, compact track loaders, multi-terrain loaders, mini excavators, compact wheel loaders, telehandlers, select work tools, small, medium and large track excavators, wheel excavators, medium wheel 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 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 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 all of which are 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 September 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 September 30 Capital expenditures Construction Industries $ 4,854 $ 32 $ 4,886 $ 99 $ 884 $ 4,739 $ 50 Resource Industries 1,870 86 1,956 129 226 6,596 41 Energy & Transportation 3,961 877 4,838 165 750 7,502 113 Machinery, Energy & Transportation $ 10,685 $ 995 $ 11,680 $ 393 $ 1,860 $ 18,837 $ 204 Financial Products Segment 774 — 774 204 185 35,415 308 Total $ 11,459 $ 995 $ 12,454 $ 597 $ 2,045 $ 54,252 $ 512 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 $ 3,554 $ 27 $ 3,581 $ 117 $ 326 $ 5,367 $ 46 Resource Industries 1,377 69 1,446 150 (77 ) 7,135 68 Energy & Transportation 3,534 629 4,163 170 572 7,791 97 Machinery, Energy & Transportation $ 8,465 $ 725 $ 9,190 $ 437 $ 821 $ 20,293 $ 211 Financial Products Segment 749 — 749 215 183 35,224 357 Total $ 9,214 $ 725 $ 9,939 $ 652 $ 1,004 $ 55,517 $ 568 Reportable Segments Nine Months Ended September 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 $ 13,875 $ 70 $ 13,945 $ 301 $ 2,420 $ 4,739 $ 107 Resource Industries 5,299 254 5,553 386 481 6,596 93 Energy & Transportation 11,258 2,484 13,742 485 2,002 7,502 320 Machinery, Energy & Transportation $ 30,432 $ 2,808 $ 33,240 $ 1,172 $ 4,903 $ 18,837 $ 520 Financial Products Segment 2,310 — 2,310 616 559 35,415 1,018 Total $ 32,742 $ 2,808 $ 35,550 $ 1,788 $ 5,462 $ 54,252 $ 1,538 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 $ 12,023 $ 47 $ 12,070 $ 346 $ 1,316 $ 5,367 $ 114 Resource Industries 4,283 197 4,480 458 (336 ) 7,135 162 Energy & Transportation 10,562 1,919 12,481 505 1,584 7,791 340 Machinery, Energy & Transportation $ 26,868 $ 2,163 $ 29,031 $ 1,309 $ 2,564 $ 20,293 $ 616 Financial Products Segment 2,251 — 2,251 633 553 35,224 1,266 Total $ 29,119 $ 2,163 $ 31,282 $ 1,942 $ 3,117 $ 55,517 $ 1,882 Reconciliation of Sales and revenues: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total Three Months Ended September 30, 2017 Total external sales and revenues from reportable segments $ 10,685 $ 774 $ — $ 11,459 All Other operating segments 56 — — 56 Other (28 ) 19 (93 ) 1 (102 ) Total sales and revenues $ 10,713 $ 793 $ (93 ) $ 11,413 Three Months Ended September 30, 2016 Total external sales and revenues from reportable segments $ 8,465 $ 749 $ — $ 9,214 All Other operating segments 28 — — 28 Other (30 ) 19 (71 ) 1 (82 ) Total sales and revenues $ 8,463 $ 768 $ (71 ) $ 9,160 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 Nine Months Ended September 30, 2017 Total external sales and revenues from reportable segments $ 30,432 $ 2,310 $ — $ 32,742 All Other operating segments 126 — — 126 Other (76 ) 53 (279 ) 1 (302 ) Total sales and revenues $ 30,482 $ 2,363 $ (279 ) $ 32,566 Nine Months Ended September 30, 2016 Total external sales and revenues from reportable segments $ 26,868 $ 2,251 $ — $ 29,119 All Other operating segments 107 — — 107 Other (87 ) 54 (230 ) 1 (263 ) Total sales and revenues $ 26,888 $ 2,305 $ (230 ) $ 28,963 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 September 30, 2017 Total profit from reportable segments $ 1,860 $ 185 $ 2,045 All Other operating segments 6 — 6 Cost centers 17 — 17 Corporate costs (158 ) — (158 ) Timing (21 ) — (21 ) Restructuring costs (89 ) (1 ) (90 ) Methodology differences: Inventory/cost of sales (4 ) — (4 ) Postretirement benefit expense 32 — 32 Stock-based compensation expense (46 ) (2 ) (48 ) Financing costs (116 ) — (116 ) Currency (37 ) — (37 ) Other income/expense methodology differences (71 ) — (71 ) Other methodology differences (31 ) (1 ) (32 ) Total consolidated profit before taxes $ 1,342 $ 181 $ 1,523 Three Months Ended September 30, 2016 Total profit from reportable segments $ 821 $ 183 $ 1,004 All Other operating segments (22 ) — (22 ) Cost centers 29 — 29 Corporate costs (121 ) — (121 ) Timing 12 — 12 Restructuring costs (323 ) (1 ) (324 ) Methodology differences: — Inventory/cost of sales 19 — 19 Postretirement benefit expense 37 — 37 Stock-based compensation expense (40 ) (1 ) (41 ) Financing costs (129 ) — (129 ) Currency (10 ) — (10 ) Other income/expense methodology differences (60 ) — (60 ) Other methodology differences (11 ) — (11 ) Total consolidated profit before taxes $ 202 $ 181 $ 383 Reconciliation of Consolidated profit before taxes: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidated Total Nine Months Ended September 30, 2017 Total profit from reportable segments $ 4,903 $ 559 $ 5,462 All Other operating segments (27 ) — (27 ) Cost centers 13 — 13 Corporate costs (447 ) — (447 ) Timing (128 ) — (128 ) Restructuring costs (1,009 ) (2 ) (1,011 ) Methodology differences: Inventory/cost of sales (80 ) — (80 ) Postretirement benefit expense 111 — 111 Stock-based compensation expense (158 ) (7 ) (165 ) Financing costs (369 ) — (369 ) Currency (195 ) — (195 ) Other income/expense methodology differences (105 ) — (105 ) Other methodology differences (91 ) 3 (88 ) Total consolidated profit before taxes $ 2,418 $ 553 $ 2,971 Nine Months Ended September 30, 2016 Total profit from reportable segments $ 2,564 $ 553 $ 3,117 All Other operating segments (43 ) — (43 ) Cost centers 68 — 68 Corporate costs (429 ) — (429 ) Timing 53 — 53 Restructuring costs (619 ) (5 ) (624 ) Methodology differences: Inventory/cost of sales — — — Postretirement benefit expense 148 — 148 Stock-based compensation expense (180 ) (7 ) (187 ) Financing costs (396 ) — (396 ) Currency (22 ) — (22 ) Other income/expense methodology differences (170 ) — (170 ) Other methodology differences (34 ) 6 (28 ) Total consolidated profit before taxes $ 940 $ 547 $ 1,487 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 September 30, 2017 Construction Industries $ 884 $ (15 ) $ 869 Resource Industries 226 (59 ) 167 Energy & Transportation 750 (28 ) 722 Financial Products Segment 185 — 185 All Other operating segments 6 (13 ) (7 ) Total $ 2,051 $ (115 ) $ 1,936 Three Months Ended September 30, 2016 Construction Industries $ 326 $ (9 ) $ 317 Resource Industries (77 ) (254 ) (331 ) Energy & Transportation 572 (39 ) 533 Financial Products Segment 183 (1 ) 182 All Other operating segments (22 ) (15 ) (37 ) Total $ 982 $ (318 ) $ 664 Reconciliation of Restructuring costs: (Millions of dollars) Segment profit (loss) Restructuring costs Segment profit (loss) with restructuring costs Nine Months Ended September 30, 2017 Construction Industries $ 2,420 $ (709 ) $ 1,711 Resource Industries 481 (229 ) 252 Energy & Transportation 2,002 (86 ) 1,916 Financial Products Segment 559 (2 ) 557 All Other operating segments (27 ) (32 ) (59 ) Total $ 5,435 $ (1,058 ) $ 4,377 Nine Months Ended September 30, 2016 Construction Industries $ 1,316 $ (34 ) $ 1,282 Resource Industries (336 ) (348 ) (684 ) Energy & Transportation 1,584 (194 ) 1,390 Financial Products Segment 553 (5 ) 548 All Other operating segments (43 ) (29 ) (72 ) Total $ 3,074 $ (610 ) $ 2,464 Reconciliation of Assets: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total September 30, 2017 Total assets from reportable segments $ 18,837 $ 35,415 $ — $ 54,252 All Other operating segments 1,345 — — 1,345 Items not included in segment assets: Cash and short-term investments 8,736 — — 8,736 Intercompany receivables 1,567 — (1,567 ) — Investment in Financial Products 4,435 — (4,435 ) — Deferred income taxes 3,595 — (855 ) 2,740 Goodwill and intangible assets 4,203 — — 4,203 Property, plant and equipment – net and other assets 1,979 — — 1,979 Operating lease methodology difference (189 ) — — (189 ) Inventory methodology differences (2,207 ) — — (2,207 ) Intercompany loan included in Financial Products' assets — — (1,000 ) (1,000 ) Liabilities included in segment assets 9,153 — — 9,153 Other (378 ) (29 ) (45 ) (452 ) Total assets $ 51,076 $ 35,386 $ (7,902 ) $ 78,560 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 September 30, 2017 Total depreciation and amortization from reportable segments $ 393 $ 204 $ 597 Items not included in segment depreciation and amortization: All Other operating segments 52 — 52 Cost centers 36 — 36 Other 28 10 38 Total depreciation and amortization $ 509 $ 214 $ 723 Three Months Ended September 30, 2016 Total depreciation and amortization from reportable segments $ 437 $ 215 $ 652 Items not included in segment depreciation and amortization: All Other operating segments 53 — 53 Cost centers 39 — 39 Other 6 11 17 Total depreciation and amortization $ 535 $ 226 $ 761 Reconciliations of Depreciation and amortization: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidated Total Nine Months Ended September 30, 2017 Total depreciation and amortization from reportable segments $ 1,172 $ 616 $ 1,788 Items not included in segment depreciation and amortization: All Other operating segments 162 — 162 Cost centers 106 — 106 Other 67 30 97 Total depreciation and amortization $ 1,507 $ 646 $ 2,153 Nine Months Ended September 30, 2016 Total depreciation and amortization from reportable segments $ 1,309 $ 633 $ 1,942 Items not included in segment depreciation and amortization: All Other operating segments 158 — 158 Cost centers 117 — 117 Other 7 31 38 Total depreciation and amortization $ 1,591 $ 664 $ 2,255 Reconciliations of Capital expenditures: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total Three Months Ended September 30, 2017 Total capital expenditures from reportable segments $ 204 $ 308 $ — $ 512 Items not included in segment capital expenditures: All Other operating segments 26 — — 26 Cost centers 17 — — 17 Timing (21 ) — — (21 ) Other (31 ) 19 (9 ) (21 ) Total capital expenditures $ 195 $ 327 $ (9 ) $ 513 Three Months Ended September 30, 2016 Total capital expenditures from reportable segments $ 211 $ 357 $ — $ 568 Items not included in segment capital expenditures: All Other operating segments 35 — — 35 Cost centers 20 — — 20 Timing 4 — — 4 Other (30 ) 22 (24 ) (32 ) Total capital expenditures $ 240 $ 379 $ (24 ) $ 595 Reconciliations of Capital expenditures: (Millions of dollars) Machinery, Energy & Transportation Financial Products Consolidating Adjustments Consolidated Total Nine Months Ended September 30, 2017 Total capital expenditures from reportable segments $ 520 $ 1,018 $ — $ 1,538 Items not included in segment capital expenditures: All Other operating segments 71 — — 71 Cost centers 40 — — 40 Timing 58 — — 58 Other (115 ) 62 (17 ) (70 ) Total capital expenditures $ 574 $ 1,080 $ (17 ) $ 1,637 Nine Months Ended September 30, 2016 Total capital expenditures from reportable segments $ 616 $ 1,266 $ — $ 1,882 Items not included in segment capital expenditures: All Other operating segments 102 — — 102 Cost centers 48 — — 48 Timing 221 — — 221 Other (129 ) 117 (41 ) (53 ) Total capital expenditures $ 858 $ 1,383 $ (41 ) $ 2,200 |
