XML 66 R25.htm IDEA: XBRL DOCUMENT v3.20.1
Segment Information
 3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
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 of the following product portfolio: 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.
 
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. All prior period amounts have been recast to align with the current methodology. 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.

•
Currency exposures for ME&T 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 costs, with the remaining elements of net periodic benefit cost included as a methodology difference.

•
ME&T segment profit is determined on a pretax basis and excludes interest expense and most 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 31 to 35 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. A table, Reconciliation of Restructuring costs on page 33, has been included to illustrate how segment profit would have been impacted by the restructuring costs. 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, certain costs are reported on the cash basis for segment reporting and the accrual basis for consolidated external reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reportable Segments
Three Months Ended March 31
(Millions of dollars)
 
2020
 
External 
sales and
revenues
 
Inter-
segment 
sales and
revenues
 
Total sales
and 
revenues
 
Depreciation
and 
amortization
 
Segment 
profit
 
Segment
assets at
March 31
 
Capital 
expenditures
Construction Industries
$
4,312

 
$
(6
)
 
$
4,306

 
$
61

 
$
640

 
$
4,793

 
$
20

Resource Industries
1,979

 
105

 
2,084

 
103

 
304

 
6,278

 
17

Energy & Transportation
3,618

 
731

 
4,349

 
146

 
602

 
8,577

 
87

Machinery, Energy & Transportation
9,909

 
830

 
10,739

 
310

 
1,546

 
19,648

 
124

Financial Products Segment
814

1 
—

 
814

 
205

 
105

 
34,445

 
247

Total
$
10,723

 
$
830

 
$
11,553

 
$
515

 
$
1,651

 
$
54,093

 
$
371

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
External 
sales and
revenues
 
Inter-
segment 
sales and
revenues
 
Total sales
and 
revenues
 
Depreciation 
and
amortization
 
Segment 
profit
 
Segment 
assets at
December 31
 
Capital 
expenditures
Construction Industries
$
5,852

 
$
21

 
$
5,873

 
$
73

 
$
1,085

 
$
4,601

 
$
28

Resource Industries
2,647

 
105

 
2,752

 
112

 
576

 
6,505

 
23

Energy & Transportation
4,233

 
977

 
5,210

 
152

 
838

 
8,548

 
98

Machinery, Energy & Transportation
12,732

 
1,103

 
13,835

 
337

 
2,499

 
19,654

 
149

Financial Products Segment
850

1 
—

 
850

 
206

 
211

 
35,813

 
246

Total
$
13,582

 
$
1,103

 
$
14,685

 
$
543

 
$
2,710

 
$
55,467

 
$
395

 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Includes revenues from Machinery, Energy & Transportation of $105 million and $131 million in the three months ended March 31, 2020 and 2019, respectively.
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 

For the three months ending March 31, 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
 
Three Months Ended March 31, 2020
 
 

 
 

 
 

 
 

 
 
 
Construction Industries
 
$
2,085

 
$
265

 
$
889

 
$
1,073

 
$
4,312

 
Resource Industries
 
696

 
320

 
395

 
568

 
1,979

 
Energy & Transportation
 
1,738

 
249

 
1,053

 
578

 
3,618

 
All Other operating segment
 
5

 
2

 
11

 
10

 
28

 
Corporate Items and Eliminations
 
(15
)
 
(2
)
 
(4
)
 
(2
)
 
(23
)
 
Machinery, Energy & Transportation Sales
 
4,509

 
834

 
2,344

 
2,227

 
9,914

 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Products Segment
 
525

 
70

 
102

 
117

 
814

1 
Corporate Items and Eliminations
 
(54
)
 
(12
)
 
(9
)
 
(18
)
 
(93
)
 
Financial Products Revenues
 
471

 
58

 
93

 
99

 
721

 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Sales and Revenues
 
$
4,980

 
$
892

 
$
2,437

 
$
2,326

 
$
10,635

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 

 
 

 
 

 
 

 
 
 
Construction Industries
 
$
2,965

 
$
319

 
$
1,006

 
$
1,562

 
$
5,852

 
Resource Industries
 
951

 
423

 
468

 
805

 
2,647

 
Energy & Transportation
 
2,151

 
332

 
1,032

 
718

 
4,233

 
All Other operating segment
 
8

 
—

 
11

 
18

 
37

 
Corporate Items and Eliminations
 
(41
)
 
1

 
(3
)
 
(2
)
 
(45
)
 
Machinery, Energy & Transportation Sales
 
6,034

 
1,075

 
2,514


3,101


12,724

 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Products Segment
 
558

 
70

 
102

 
120

 
850

1 
Corporate Items and Eliminations
 
(69
)
 
(11
)
 
(9
)
 
(19
)
 
(108
)
 
Financial Products Revenues
 
489

 
59

 
93

 
101

 
742

 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Sales and Revenues
 
$
6,523

 
$
1,134

 
$
2,607

 
$
3,202

 
$
13,466

 
 
 
 
 
 
 
 
 
 
 
 
 

1 Includes revenues from Machinery, Energy & Transportation of $105 million and $131 million in the three months ended March 31, 2020 and 2019, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

For the three months ending March 31, 2020 and 2019, Energy & Transportation segment sales by end user application were as follows:
Energy & Transportation External Sales
 
 
 
 
 
 
Three Months Ended March 31
(Millions of dollars)
 
2020
 
2019
Oil and gas
 
$
861

 
$
1,131

Power generation
 
854

 
1,036

Industrial
 
801

 
904

Transportation
 
1,102

 
1,162

Energy & Transportation External Sales
 
$
3,618

 
$
4,233

 
 
 
 
 
 
 
 
 
 

Reconciliation of Consolidated profit before taxes:
 
 
 
 
 
(Millions of dollars)
Machinery,
Energy &
Transportation
 
Financial
Products
 
Consolidated
 Total
Three Months Ended March 31, 2020
 
 
 
 
 
Total profit from reportable segments
$
1,546

 
$
105

 
$
1,651

All Other operating segment
7

 
—

 
7

Cost centers
32

 
—

 
32

Corporate costs
(161
)
 
(6
)
 
(167
)
Timing
(27
)
 
—

 
(27
)
Restructuring costs
(28
)
 
—

 
(28
)
Methodology differences:
 
 
 

 


Inventory/cost of sales
20

 
—

 
20

Postretirement benefit expense
403

 
—

 
403

Stock-based compensation expense
(45
)
 
(2
)
 
(47
)
Financing costs
(80
)
 
—

 
(80
)
Currency
(148
)
 
—

 
(148
)
Other income/expense methodology differences
(92
)
 
—

 
(92
)
Other methodology differences
(19
)
 
8

 
(11
)
Total consolidated profit before taxes
$
1,408

 
$
105

 
$
1,513

 
 
 
 
 
 
Three Months Ended March 31, 2019
 

 
 

 
 

Total profit from reportable segments
$
2,499

 
$
211

 
$
2,710

All Other operating segment
25

 
—

 
25

Cost centers
24

 
—

 
24

Corporate costs
(171
)
 
(5
)
 
(176
)
Timing
(66
)
 
—

 
(66
)
Restructuring costs
(39
)
 
—

 
(39
)
Methodology differences:
 
 
 
 
 
Inventory/cost of sales
7

 
—

 
7

Postretirement benefit expense
(17
)
 
—

 
(17
)
Stock-based compensation expense
(43
)
 
(2
)
 
(45
)
Financing costs
(64
)
 
—

 
(64
)
Currency
44

 
—

 
44

Other income/expense methodology differences
(129
)
 
—

 
(129
)
Other methodology differences
(12
)
 
2

 
(10
)
Total consolidated profit before taxes
$
2,058

 
$
206

 
$
2,264

 
 
 
 
 
 

 
 
 
 
 
 

Reconciliation of Restructuring costs:

As noted above, certain 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
 
Restructuring costs
 
Segment profit with
restructuring costs
Three Months Ended March 31, 2020
 
 
 
 
 
 
Construction Industries
 
$
640

 
$
2

 
$
642

Resource Industries
 
304

 
29

 
333

Energy & Transportation
 
602

 
(60
)
 
542

Financial Products Segment
 
105

 
—

 
105

All Other operating segment
 
7

 
4

 
11

Total
 
$
1,658

 
$
(25
)
 
$
1,633

 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
Construction Industries
 
$
1,085

 
$
(9
)
 
$
1,076

Resource Industries
 
576

 
(14
)
 
562

Energy & Transportation
 
838

 
(11
)
 
827

Financial Products Segment
 
211

 
—

 
211

All Other operating segment
 
25

 
(5
)
 
20

Total
 
$
2,735

 
$
(39
)
 
$
2,696

 
 
 
 
 
 
 

 
 
 
 
 
 
 


Reconciliation of Assets:
 
 
 
 
 
 
 
(Millions of dollars)
Machinery,
Energy &
Transportation
 
Financial
Products
 
Consolidating
 Adjustments
 
Consolidated
 Total
March 31, 2020
 
 
 
 
 
 
 
Total assets from reportable segments
$
19,648

 
$
34,445

 
$
—

 
$
54,093

All Other operating segment
1,717

 
—

 
—

 
1,717

Items not included in segment assets:
 

 
 

 
 

 
 

Cash and short-term investments
6,251

 
—

 
—

 
6,251

Intercompany receivables
137

 
—

 
(137
)
 
—

Investment in Financial Products
3,999

 
—

 
(3,999
)
 
—

Deferred income taxes
1,975

 
—

 
(645
)
 
1,330

Goodwill and intangible assets
4,504

 
—

 
—

 
4,504

Property, plant and equipment – net and other assets
2,584

 
—

 
—

 
2,584

Inventory methodology differences
(2,554
)
 
—

 
—

 
(2,554
)
Liabilities included in segment assets
8,512

 
—

 
—

 
8,512

Other
(522
)
 
119

 
(140
)
 
(543
)
Total assets
$
46,251

 
$
34,564

 
$
(4,921
)
 
$
75,894

 
 
 
 
 
 
 
 
December 31, 2019
 

 
 

 
 

 
 

Total assets from reportable segments
$
19,654

 
$
35,813

 
$
—

 
$
55,467

All Other operating segment
1,728

 
—

 
—

 
1,728

Items not included in segment assets:
 

 
 

 
 

 
 

Cash and short-term investments
7,299

 
—

 
—

 
7,299

Intercompany receivables
758

 
—

 
(758
)
 
—

Investment in Financial Products
4,260

 
—

 
(4,260
)
 
—

Deferred income taxes
2,002

 
—

 
(708
)
 
1,294

Goodwill and intangible assets
4,435

 
—

 
—

 
4,435

Property, plant and equipment – net and other assets
2,529

 
—

 
—

 
2,529

Inventory methodology differences
(2,426
)
 
—

 
—

 
(2,426
)
Liabilities included in segment assets
8,541

 
—

 
—

 
8,541

Other
(343
)
 
134

 
(205
)
 
(414
)
Total assets
$
48,437

 
$
35,947

 
$
(5,931
)
 
$
78,453




Reconciliations of Depreciation and amortization:
 
 
 
 
 
(Millions of dollars)
Machinery,
Energy &
Transportation
 
Financial
Products
 
Consolidated
 Total
Three Months Ended March 31, 2020
 
 
 
 
 
Total depreciation and amortization from reportable segments
$
310

 
$
205

 
$
515

Items not included in segment depreciation and amortization:
 

 
 

 
 

All Other operating segment
62

 
—

 
62

Cost centers
33

 
—

 
33

Other
(3
)
 
7

 
4

Total depreciation and amortization
$
402

 
$
212

 
$
614

 
 
 
 
 
 
Three Months Ended March 31, 2019
 

 
 

 
 

Total depreciation and amortization from reportable segments
$
337

 
$
206

 
$
543

Items not included in segment depreciation and amortization:
 

 
 

 
 

All Other operating segment
52

 
—

 
52

Cost centers
32

 
—

 
32

Other
3

 
11

 
14

Total depreciation and amortization
$
424

 
$
217

 
$
641

 
 
 
 
 
 

 
 
 
 
 
 

Reconciliations of Capital expenditures:
 
 
 
 
 
 
 
(Millions of dollars)
Machinery,
Energy &
Transportation
 
Financial
Products
 
Consolidating
 Adjustments
 
Consolidated
 Total
Three Months Ended March 31, 2020
 

 
 

 
 

 
 

Total capital expenditures from reportable segments
$
124

 
$
247

 
$
—

 
$
371

Items not included in segment capital expenditures:
 

 
 

 
 

 
 

All Other operating segment
15

 
—

 
—

 
15

Cost centers
9

 
—

 
—

 
9

Timing
160

 
—

 
—

 
160

Other
(6
)
 
3

 
(4
)
 
(7
)
Total capital expenditures
$
302

 
$
250

 
$
(4
)
 
$
548

 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 

 
 

 
 

 
 

Total capital expenditures from reportable segments
$
149

 
$
246

 
$
—

 
$
395

Items not included in segment capital expenditures:
 

 
 

 
 

 
 

All Other operating segment
13

 
—

 
—

 
13

Cost centers
20

 
—

 
—

 
20

Timing
134

 
—

 
—

 
134

Other
(19
)
 
5

 
(1
)
 
(15
)
Total capital expenditures
$
297

 
$
251

 
$
(1
)
 
$
547