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 assets at June 30		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