Segment Information

12 Months Ended

Dec. 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 and General Counsel 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 and General Counsel 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 one 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. We include results for the All Other operating segment 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 137 to 139 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 24 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 years ended December 31, 2020, 2019 and 2018, 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
2020
Construction Industries	$	7,365	$	1,031	$	3,466	$	5,014	$	16,876		$	42	$	16,918
Resource Industries	2,286		1,253		1,570		2,337		$	7,446		460		7,906
Energy & Transportation	6,843		932		4,448		2,441		$	14,664		2,806		17,470
Financial Products Segment	1,930		257		392		465		$	3,044	1	—		3,044
Total sales and revenues from reportable segments	18,424		3,473		9,876		10,257		42,030			3,308		45,338
All Other operating segment	27		4		26		56		113			354		467
Corporate Items and Eliminations	(237)		(45)		(44)		(69)		(395)			(3,662)		(4,057)
Total Sales and Revenues	$	18,214	$	3,432	$	9,858	$	10,244	$	41,748		$	—	$	41,748
2019
Construction Industries	$	11,455	$	1,533	$	4,012	$	5,556	$	22,556		$	93	$	22,649
Resource Industries	3,632		1,533		1,836		2,812		9,813			463		10,276
Energy & Transportation	8,864		1,389		4,994		3,238		18,485			3,612		22,097
Financial Products Segment	2,235		299		408		492		3,434		1	—		3,434
Total sales and revenues from reportable segments	26,186		4,754		11,250		12,098		54,288			4,168		58,456
All Other operating segment	25		7		28		67		127			373		500
Corporate Items and Eliminations	(426)		(51)		(55)		(83)		(615)			(4,541)		(5,156)
Total Sales and Revenues	$	25,785	$	4,710	$	11,223	$	12,082	$	53,800		$	—	$	53,800
2018
Construction Industries	$	10,754	$	1,479	$	4,410	$	6,473	$	23,116		$	121	$	23,237
Resource Industries	3,357		1,647		2,217		2,667		9,888			382		10,270
Energy & Transportation	9,685		1,331		4,934		2,882		18,832			3,953		22,785
Financial Products Segment	2,153		281		387		458		3,279		1	—		3,279
Total sales and revenues from reportable segments	25,949		4,738		11,948		12,480		55,115			4,456		59,571
All Other operating segment	63		3		18		70		154			328		482
Corporate Items and Eliminations	(389)		(46)		(37)		(75)		(547)			(4,784)		(5,331)
Total Sales and Revenues	$	25,623	$	4,695	$	11,929	$	12,475	$	54,722		$	—	$	54,722

1 Includes revenues from Construction Industries, Resource Industries, Energy & Transportation and All Other operating segment of $362 million , $524 million, and $470 million in the years ended December 31, 2020, 2019 and 2018, respectively.

For the years ended December 31, 2020, 2019 and 2018, Energy & Transportation segment sales by end user application were as follows:

Energy & Transportation External Sales
(Millions of dollars)
	2020		2019		2018
Oil and gas	$	3,701	$	5,205	$	5,763
Power generation	3,963		4,474		4,334
Industrial	2,945		3,749		3,640
Transportation	4,055		5,057		5,095
Energy & Transportation External Sales	$	14,664	$	18,485	18,832

Reconciliation of Consolidated profit before taxes:
(Millions of dollars)
	2020		2019		2018
Profit from reportable segments:
Construction Industries	$	2,373	$	3,931	$	4,174
Resource Industries	896		1,629		1,603
Energy & Transportation	2,405		3,910		3,938
Financial Products Segment	590		832		505
Total profit from reportable segments	6,264		10,302		10,220
Profit from All Other operating segment	28		4		23
Cost centers	(4)		(6)		2
Corporate costs	(517)		(607)		(610)
Timing	(106)		(93)		(257)
Restructuring costs	(241)		(207)		(386)
Methodology differences:
Inventory/cost of sales	4		(19)		51
Postretirement benefit expense	(173)		(401)		(124)
Stock-based compensation expense	(202)		(205)		(198)
Financing costs	(444)		(248)		(257)
Currency	(266)		(175)		(219)
Other income/expense methodology differences	(322)		(481)		(362)
Other methodology differences	(26)		(52)		(61)
Total consolidated profit before taxes	$	3,995	$	7,812	$	7,822

Reconciliation of Assets:
(Millions of dollars)	December 31,
	2020		2019
Assets from reportable segments:
Construction Industries	$	4,259	$	4,601
Resource Industries	6,035		6,505
Energy & Transportation	8,582		8,548
Financial Products Segment	34,278		35,813
Total assets from reportable segments	53,154		55,467
Assets from All Other operating segment	1,717		1,728
Items not included in segment assets:
Cash and short-term investments	8,822		7,299
Deferred income taxes	1,413		1,294
Goodwill and intangible assets	4,847		4,435
Property, plant and equipment – net and other assets	2,833		2,529
Inventory methodology differences	(2,536)		(2,426)
Liabilities included in segment assets	8,466		8,541
Other	(392)		(414)
Total assets	$	78,324	$	78,453

Reconciliation of Depreciation and amortization:
(Millions of dollars)
	2020		2019		2018
Depreciation and amortization from reportable segments:
Construction Industries	$	245	$	302	$	367
Resource Industries	418		450		462
Energy & Transportation	593		624		640
Financial Products Segment	773		829		834
Total depreciation and amortization from reportable segments	2,029		2,205		2,303
Items not included in segment depreciation and amortization:
All Other operating segment	267		210		225
Cost centers	126		135		130
Other	10		27		108
Total depreciation and amortization	$	2,432	$	2,577	$	2,766

Reconciliation of Capital expenditures:
(Millions of dollars)
	2020		2019		2018
Capital expenditures from reportable segments:
Construction Industries	$	213	$	201	$	266
Resource Industries	125		168		188
Energy & Transportation	495		613		742
Financial Products Segment	1,100		1,534		1,559
Total capital expenditures from reportable segments	1,933		2,516		2,755
Items not included in segment capital expenditures:
All Other operating segment	156		131		170
Cost centers	47		101		100
Timing	19		(11)		42
Other	(40)		(68)		(151)
Total capital expenditures	$	2,115	$	2,669	$	2,916

Enterprise-wide Disclosures:
Information about Geographic Areas:
							Property, plant and equipment - net
	External sales and revenues 1						December 31,
(Millions of dollars)	2020		2019		2018		2020		2019
Inside United States	$	16,269	$	22,806	$	22,690	$	7,242	$	7,568
Outside United States	25,479		30,994		32,032		5,159		5,336
Total	$	41,748	$	53,800	$	54,722	$	12,401	$	12,904
1 Sales of ME&T are based on dealer or customer location. Revenues from services provided are based on where service is rendered.