| Segment Information | Segment information A. Basis for segment information Our Executive Office is comprised of a Chief Executive Officer (CEO), four Group Presidents, a Chief Financial Officer (CFO), a Chief Legal Officer, General Counsel and Corporate Secretary and a Chief Human Resources Officer. The Group Presidents and CFO are accountable for a related set of end-to-end businesses that they manage. The Chief Legal Officer, General Counsel and Corporate Secretary leads the Law, Security and Public Policy Division. The Chief Human Resources Officer leads the Human Resources Organization. The CEO allocates resources and manages performance at the Group President/CFO level. As such, the CEO serves as our Chief Operating Decision Maker, and operating segments are primarily based on the Group President/CFO 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 the CFO 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 one smaller operating segment that is included in the All Other operating segment. The Law, Security and Public Policy Division and the Human Resources Organization are cost centers and do not meet the definition of an operating segment. B. Description of segments We have five 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 segment: Construction Industries : A segment primarily responsible for supporting customers using machinery in infrastructure 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 asphalt pavers; backhoe loaders; compactors; cold planers; compact track and multi-terrain loaders; mini, small, medium and large track excavators; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; small and medium track-type tractors; track-type loaders; utility vehicles; wheel excavators; compact, small and medium wheel loaders; and related parts and work tools. Inter-segment sales are a source of revenue for this segment. Resource Industries : A segment primarily responsible for supporting customers using machinery in mining, heavy construction, quarry and aggregates, 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, rotary drills, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, landfill compactors, soil compactors, 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 Oil and Gas, Power Generation, Industrial 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. The product portfolio includes turbine machinery and integrated systems and solutions 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; and reciprocating engines supplied to the industrial industry as well as Cat machinery. Responsibilities also include the remanufacturing of Caterpillar 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 Caterpillar equipment. The segment also earns revenues from ME&T, but the related costs are not allocated to operating segments. Financial Products’ segment profit is determined on a pretax basis and includes other income/expense items. All Other operating segment : Primarily includes activities such as: business strategy; product management and development; manufacturing and sourcing of filters and fluids, undercarriage, ground-engaging tools, fluid transfer products, precision seals, rubber sealing and connecting components primarily for Cat® products; parts distribution; integrated logistics solutions; 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; brand management and marketing strategy; and 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 segment 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: • ME&T segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles, accounts payable and customer advances. Beginning in 2020, we revised how we allocate certain assets between segments. We have recast all prior period amounts to align with the current methodology. We generally manage at the corporate level liabilities other than accounts payable and customer advances, and we do not include these in segment operations. Financial Products Segment assets generally include all categories of assets. • We value segment inventories and cost of sales using a current cost methodology. • We amortize goodwill allocated to segments using a fixed amount based on a 20 -year useful life. This methodology difference only impacts segment assets; We do not include goodwill amortization expense in segment profit. In addition, we have allocated to segments only a portion of goodwill for certain acquisitions made in 2011 or later. • We generally manage currency exposures for ME&T at the corporate level and do not include in segment profit the effects of changes in exchange rates on results of operations within the year. We report 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 as a methodology difference. • We do not include stock-based compensation expense in segment profit. • Postretirement benefit expenses are split; segments are generally responsible for service costs, with the remaining elements of net periodic benefit cost included as a methodology difference. • We determine ME&T segment profit on a pretax basis and exclude interest expense and most other income/expense items. We determine Financial Products Segment profit on a pretax basis and include other income/expense items. Reconciling items are created based on accounting differences between segment reporting and our consolidated external reporting. Please refer to pages 36 to 39 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: May include costs for employee separation, long-lived asset impairments and contract terminations. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold. Only certain restructuring costs are excluded from segment profit. See Note 20 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, we report certain costs on the cash basis for segment reporting and the accrual basis for consolidated external reporting. For the three and six months ended June 30, 2020 and 2019 , sales and revenues by geographic region reconciled to consolidated sales and revenues were as follows: Sales and Revenues by Geographic Region (Millions of dollars) North America Latin America EAME Asia/ Pacific External Sales and Revenues Intersegment Sales and Revenues Total Sales and Revenues Three Months Ended June 30, 2020 Construction Industries $ 1,604 $ 212 $ 933 $ 1,283 $ 4,032 $ 16 $ 4,048 Resource Industries 507 270 379 554 1,710 116 1,826 Energy & Transportation 1,816 197 929 599 3,541 608 4,149 Financial Products Segment 493 60 96 114 763 1 — 763 Total sales and revenues from reportable segments 4,420 739 2,337 2,550 10,046 740 10,786 All Other operating segment 7 1 5 15 28 87 115 Corporate Items and Eliminations (41 ) (10 ) (9 ) (17 ) (77 ) (827 ) (904 ) Total Sales and Revenues $ 4,386 $ 730 $ 2,333 $ 2,548 $ 9,997 $ — $ 9,997 Three Months Ended June 30, 2019 Construction Industries $ 3,513 $ 392 $ 1,108 $ 1,433 $ 6,446 $ 21 $ 6,467 Resource Industries 1,058 448 446 759 2,711 108 2,819 Energy & Transportation 2,297 325 1,160 742 4,524 962 5,486 Financial Products Segment 563 76 102 132 873 1 — 873 Total sales and revenues from reportable segments 7,431 1,241 2,816 3,066 14,554 1,091 15,645 All Other operating segment 14 1 4 15 34 91 125 Corporate Items and Eliminations (111 ) (13 ) (14 ) (18 ) (156 ) (1,182 ) (1,338 ) Total Sales and Revenues $ 7,334 $ 1,229 $ 2,806 $ 3,063 $ 14,432 $ — $ 14,432 1 Includes revenues from Construction Industries, Resource Industries, Energy & Transportation and All Other operating segment of $88 million and $136 million in the three months ended June 30, 2020 and 2019, respectively. Sales and Revenues by Geographic Region (Millions of dollars) North America Latin America EAME Asia/ Pacific External Sales and Revenues Intersegment Sales and Revenues Total Sales and Revenues Six Months Ended June 30, 2020 Construction Industries $ 3,689 $ 477 $ 1,822 $ 2,356 $ 8,344 $ 10 $ 8,354 Resource Industries 1,203 590 774 1,122 3,689 221 3,910 Energy & Transportation 3,554 446 1,982 1,177 7,159 1,339 8,498 Financial Products Segment 1,018 130 198 231 1,577 1 — 1,577 Total sales and revenues from reportable segments 9,464 1,643 4,776 4,886 20,769 1,570 22,339 All Other operating segment 12 3 16 25 56 168 224 Corporate Items and Eliminations (110 ) (24 ) (22 ) (37 ) (193 ) (1,738 ) (1,931 ) Total Sales and Revenues $ 9,366 $ 1,622 $ 4,770 $ 4,874 $ 20,632 $ — $ 20,632 Six Months Ended June 30, 2019 Construction Industries $ 6,478 $ 711 $ 2,114 $ 2,995 $ 12,298 $ 42 $ 12,340 Resource Industries 2,009 871 914 1,564 5,358 213 5,571 Energy & Transportation 4,448 657 2,192 1,460 8,757 1,939 10,696 Financial Products Segment 1,121 146 204 252 1,723 1 — 1,723 Total sales and revenues from reportable segments 14,056 2,385 5,424 6,271 28,136 2,194 30,330 All Other operating segment 22 1 15 33 71 175 246 Corporate Items and Eliminations (221 ) (23 ) (26 ) (39 ) (309 ) (2,369 ) (2,678 ) Total Sales and Revenues $ 13,857 $ 2,363 $ 5,413 $ 6,265 $ 27,898 $ — $ 27,898 1 Includes revenues from Construction Industries, Resource Industries, Energy & Transportation and All Other operating segment of $193 million and $267 million in the six months ended June 30, 2020 and 2019, respectively. For the three and six months ended June 30, 2020 and 2019 , Energy & Transportation segment sales by end user application were as follows: Energy & Transportation External Sales Three Months Ended June 30 (Millions of dollars) 2020 2019 Oil and gas $ 1,027 $ 1,305 Power generation 895 1,021 Industrial 678 957 Transportation 941 1,241 Energy & Transportation External Sales $ 3,541 $ 4,524 Six Months Ended June 30 2020 2019 Oil and gas $ 1,888 $ 2,436 Power generation 1,749 2,057 Industrial 1,479 1,861 Transportation 2,043 2,403 Energy & Transportation External Sales $ 7,159 $ 8,757 Reconciliation of Consolidated profit before taxes: (Millions of dollars) Three Months Ended June 30 Six Months Ended June 30 2020 2019 2020 2019 Profit from reportable segments: Construction Industries $ 518 $ 1,247 $ 1,158 $ 2,332 Resource Industries 152 481 456 1,057 Energy & Transportation 624 886 1,226 1,724 Financial Products Segment 148 193 253 404 Total profit from reportable segments 1,442 2,807 3,093 5,517 Profit from All Other operating segment (3 ) 11 4 36 Cost centers (23 ) 17 9 41 Corporate costs (120 ) (149 ) (287 ) (325 ) Timing (24 ) (58 ) (51 ) (124 ) Restructuring costs (96 ) (103 ) (124 ) (142 ) Methodology differences: Inventory/cost of sales (38 ) (8 ) (18 ) (1 ) Postretirement benefit expense (118 ) 2 285 (15 ) Stock-based compensation expense (67 ) (68 ) (114 ) (113 ) Financing costs (119 ) (51 ) (199 ) (115 ) Currency (60 ) (92 ) (208 ) (48 ) Other income/expense methodology differences (80 ) (121 ) (172 ) (250 ) Other methodology differences (16 ) (9 ) (27 ) (19 ) Total consolidated profit before taxes $ 678 $ 2,178 $ 2,191 $ 4,442 Reconciliation of Assets: (Millions of dollars) June 30, 2020 December 31, 2019 Assets from reportable segments: Construction Industries $ 4,581 $ 4,601 Resource Industries 6,281 6,505 Energy & Transportation 8,943 8,548 Financial Products Segment 34,270 35,813 Total assets from reportable segments 54,075 55,467 Assets from All Other operating segment 1,620 1,728 Items not included in segment assets: Cash and short-term investments 8,030 7,299 Deferred income taxes 1,353 1,294 Goodwill and intangible assets 4,597 4,435 Property, plant and equipment – net and other assets 2,460 2,529 Inventory methodology differences (2,625 ) (2,426 ) Liabilities included in segment assets 7,701 8,541 Other (645 ) (414 ) Total assets $ 76,566 $ 78,453 Reconciliation of Depreciation and amortization: (Millions of dollars) Three Months Ended June 30 Six Months Ended June 30 2020 2019 2020 2019 Depreciation and amortization from reportable segments: Construction Industries $ 61 $ 74 $ 122 $ 147 Resource Industries 104 112 207 224 Energy & Transportation 149 155 295 307 Financial Products Segment 198 207 403 413 Total depreciation and amortization from reportable segments 512 548 1,027 1,091 Items not included in segment depreciation and amortization: All Other operating segment 63 53 125 105 Cost centers 32 33 65 65 Other 1 13 5 27 Total depreciation and amortization $ 608 $ 647 $ 1,222 $ 1,288 Reconciliation of Capital expenditures: (Millions of dollars) Three Months Ended June 30 Six Months Ended June 30 2020 2019 2020 2019 Capital expenditures from reportable segments: Construction Industries $ 28 $ 41 $ 48 $ 69 Resource Industries 36 37 53 60 Energy & Transportation 144 118 231 216 Financial Products Segment 256 459 503 705 Total capital expenditures from reportable segments 464 655 835 1,050 Items not included in segment capital expenditures: All Other operating segment 23 22 38 35 Cost centers 6 29 15 49 Timing (14 ) (5 ) 146 129 Other (29 ) (23 ) (36 ) (38 ) Total capital expenditures $ 450 $ 678 $ 998 $ 1,225 |
