Segment information

12 Months Ended

Dec. 31, 2011

Segment information

Segment information

22.  Segment information

A.   Basis for segment information

In the first quarter of 2011, we implemented revised internal financial measurements in line with changes to our organizational structure that were announced during 2010.  Our previous structure used a matrix organization comprised of multiple profit and cost center divisions.  There were twenty-five operating segments, twelve of which were reportable segments.  These segments were led by vice-presidents that were managed by Caterpillar’s Executive Office (comprised of our CEO and Group Presidents), which served as our Chief Operating Decision Maker.  As part of the strategy revision, Group Presidents were given accountability for a related set of end-to-end businesses that they manage, a significant change for the company.  The CEO allocates resources and manages performance at the Group President level.  As such, the CEO now 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 Power Systems, are led by Group Presidents.  One operating segment, Financial Products, is led by a Group President who 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 three smaller operating segments that are included in All Other operating segments.

B.   Description of segments

We have seven operating segments, of which four are reportable segments.  Following is a brief description of our reportable segments and the business activities included in All Other operating segments:

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, 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, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, medium track-type tractors, track-type loaders, motor graders, pipelayers and related parts.  In addition, Construction Industries has responsibility for Power Systems and components in Japan and an integrated manufacturing cost center that supports Machinery and Power Systems businesses.  Inter-segment sales are a source of revenue for this segment.

Resource Industries:A segment primarily responsible for supporting customers using machinery in mining and quarrying 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, underground mining equipment, tunnel boring equipment, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, compactors, select work tools, forestry products, paving products, machinery components and electronics and control systems.  In addition, Resource Industries manages areas that provide services to other parts of the company, including integrated manufacturing, research and development and coordination of the Caterpillar Production System.  On July 8, 2011, the acquisition of Bucyrus was completed.  This added the responsibility for business strategy, product design, product management and development, manufacturing, marketing and sales and product support for electric rope shovels, draglines, hydraulic shovels, drills, highwall miners and electric drive off-highway trucks to Resource Industries.  In addition, segment profit includes Bucyrus acquisition-related costs and the impact from divestiture of a portion of the Bucyrus distribution business.  Inter-segment sales are a source of revenue for this segment.

Power Systems:  A segment primarily responsible for supporting customers using reciprocating engines, turbines and related parts across industries serving electric power, industrial, petroleum and marine applications as well as rail-related businesses.  Responsibilities include business strategy, product design, product management and development, manufacturing, marketing, sales and product support of 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 petroleum industries; reciprocating engines supplied to the industrial industry as well as Caterpillar machinery; the business strategy, product design, product management and development, manufacturing, marketing, sales and product support of turbines and turbine related services; the business strategy, product design, product management and development, manufacturing, remanufacturing, maintenance, marketing, sales, leasing and service of diesel-electric locomotives and components and other rail-related products and services.  Inter-segment sales are a source of revenue for this segment.

Financial Products Segment:  Provides financing to customers and dealers for the purchase and lease of Caterpillar and other equipment, as well as some financing for Caterpillar sales to dealers.  Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The division also provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment.

All Other:  Primarily includes activities such as: the remanufacturing of Cat engines and components and remanufacturing services for other companies as well as the business strategy, product management, development, manufacturing, marketing and product support of undercarriage, specialty products, hardened bar stock components and ground engaging tools primarily for Caterpillar products; logistics services for Caterpillar and other companies; the product management, development, marketing, sales and product support of on-highway vocational trucks for North America (U.S. & Canada only); distribution services responsible for dealer development and administration, dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; and the 50/50 joint venture with Navistar (NC2) until it became a wholly owned subsidiary of Navistar effective September 29, 2011.  Inter-segment sales are a source of revenue for this segment.  Results for All Other operating segments are included as reconciling items 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 and Power Systems segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles and accounts payable.  Liabilities other than accounts payable 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 is amortized using a fixed amount based on a twenty year useful life.  This methodology difference only impacts segment assets; no goodwill amortization expense is included in segment results.

·The present value of future lease payments for certain Machinery and Power Systems operating leases is included in segment assets.  The estimated financing component of the lease payments is excluded.

·Currency exposures for Machinery and Power Systems 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 results.  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 are recorded as a methodology difference.

·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 and Power Systems 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 A-66 to A-72 for financial information regarding significant reconciling items.  Most of our reconciling items are self-explanatory given the above explanations.  For the reconciliation of profit (loss), we have grouped the reconciling items as follows:

·Corporate costs:  These costs are related to corporate requirements and strategies that are considered to be for the benefit of the entire organization.

·Redundancy costs:  Redundancy costs include pension and other postretirement benefit plan curtailments, settlements and special termination benefits as well as employee separation charges. Most of these costs are reconciling items between profit and consolidated profit before tax. A table, Reconciliation of Redundancy Costs on page A-69, has been included to illustrate how segment profit would have been impacted by the redundancy costs.  See Notes 12 and 26 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.

Table IV — Segment Information

(Millions of dollars)

Reportable Segments

	Externalsales andrevenues		Inter- segmentsales &revenues		Total sales andrevenues		Depreciationandamortization		Segmentprofit (loss)			Segmentassets atDecember 31		Capitalexpenditures
2011
Construction Industries	$	19,667	$	575	$	20,242	$	526	$	2,056		$	7,942	$	915
Resource Industries	15,629		1,162		16,791		463		3,334			14,559		717
Power Systems	20,114		2,339		22,453		544		3,053			8,917		834
Machinery and Power Systems	$	55,410	$	4,076	$	59,486	$	1,533	$	8,443		$	31,418	$	2,466
Financial Products Segment	3,003		—		3,003		710		587			31,747		1,191
Total	$	58,413	$	4,076	$	62,489	$	2,243	$	9,030		$	63,165	$	3,657
2010
Construction Industries	$	13,572	$	674	$	14,246	$	515	$	783		$	6,927	$	576
Resource Industries	8,667		894		9,561		281		1,789			3,892		339
Power Systems	15,537		1,684		17,221		502		2,288			8,321		567
Machinery and Power Systems	$	37,776	$	3,252	$	41,028	$	1,298	$	4,860		$	19,140	$	1,482
Financial Products Segment	2,946		—		2,946		715		429			30,346		960
Total	$	40,722	$	3,252	$	43,974	$	2,013	$	5,289		$	49,486	$	2,442
2009
Construction Industries	$	8,507	$	516	$	9,023	$	555	$	(768	)	$	6,600	$	403
Resource Industries	5,857		414		6,271		313		288			3,773		243
Power Systems	13,389		855		14,244		439		1,660			6,665		531
Machinery and Power Systems	$	27,753	$	1,785	$	29,538	$	1,307	$	1,180		$	17,038	$	1,177
Financial Products Segment	3,139		—		3,139		742		399			32,230		976
Total	$	30,892	$	1,785	$	32,677	$	2,049	$	1,579		$	49,268	$	2,153

Reconciliation of Sales and Revenues:

(Millions of dollars)	Machineryand Power Systems			Financial Products		ConsolidatingAdjustments			ConsolidatedTotal
2011
Total external sales and revenues from reportable segments	$	55,410		$	3,003	$	—		$	58,413
All other operating segments	2,021			—		—			2,021
Other	(39		)	54		(311		)1	(296		)
Total sales and revenues	$	57,392		$	3,057	$	(311	)	$	60,138
2010
Total external sales and revenues from reportable segments	$	37,776		$	2,946	$	—		$	40,722
All other operating segments	2,156			—		—			2,156
Other	(65		)	40		(265		)1	(290		)
Total sales and revenues	$	39,867		$	2,986	$	(265	)	$	42,588
2009
Total external sales and revenues from reportable segments	$	27,753		$	3,139	$	—		$	30,892
All other operating segments	1,791			—		—			1,791
Other	(4		)	29		(312		)1	(287		)
Total sales and revenues	$	29,540		$	3,168	$	(312	)	$	32,396

1 Elimination of Financial Products revenues from Machinery and Power Systems.

Reconciliation of Profit Before Taxes:

(Millions of dollars)	Machineryand PowerSystems			Financial Products			ConsolidatedTotal
2011
Total profit from reportable segments	$	8,443		$	587		$	9,030
All other operating segments	837			—			837
Cost centers	14			—			14
Corporate costs	(1,173		)	—			(1,173		)
Timing	(203		)	—			(203		)
Redundancy charges	(1		)	—			(1		)
Methodology differences:
Inventory/cost of sales	21			—			21
Postretirement benefit expense	(670		)	—			(670		)
Financing costs	(408		)	—			(408		)
Equity in profit of unconsolidated affiliated companies	24			—			24
Currency	(315		)	—			(315		)
Interest rate swap	(149		)	—			(149		)
Other income/expense methodology differences	(273		)	—			(273		)
Other methodology differences	(42		)	33			(9		)
Total profit before taxes	$	6,105		$	620		$	6,725
2010
Total profit from reportable segments	$	4,860		$	429		$	5,289
All other operating segments	720			—			720
Cost centers	(11		)	—			(11		)
Corporate costs	(954		)	—			(954		)
Timing	(185		)	—			(185		)
Redundancy charges	(33		)	—			(33		)
Methodology differences:
Inventory/cost of sales	(13		)	—			(13		)
Postretirement benefit expense	(640		)	—			(640		)
Financing costs	(314		)	—			(314		)
Equity in profit of unconsolidated affiliated companies	24			—			24
Currency	6			—			6
Interest rate swap	(10		)	—			(10		)
Other income/expense methodology differences	(131		)	—			(131		)
Other methodology differences	(16		)	18			2
Total profit before taxes	$	3,303		$	447		$	3,750
2009
Total profit from reportable segments	$	1,180		$	399		$	1,579
All other operating segments	625			—			625
Cost centers	(50		)	—			(50		)
Corporate costs	(654		)	—			(654		)
Timing	249			—			249
Redundancy charges	(654		)	(10		)	(664		)
Methodology differences:
Inventory/cost of sales	56			—			56
Postretirement benefit expense	(346		)	—			(346		)
Financing costs	(348		)	—			(348		)
Equity in profit of unconsolidated affiliated companies	12			—			12
Currency	256			—			256
Interest rate swap	(1		)				(1		)
Other income/expense methodology differences	(157		)	—			(157		)
Other methodology differences	6			6			12
Total profit before taxes	$	174		$	395		$	569

Reconciliation of Redundancy costs:

As noted above, redundancy costs are a reconciling item between Segment profit (loss) and Consolidated profit (loss) before tax.  For the year ended December 31, 2009, redundancy costs of $42 million were charged to operating segments.  Had we included the remaining amounts in the segments’ results, the profit (loss) would have been as shown below:

(Millions of dollars)	Segmentprofit (loss)			Redundancycosts			Segmentprofit (loss) withredundancy costs
2009
Construction Industries	$	(768	)	$	(256	)	$	(1,024	)
Resource Industries	288			(183		)	105
Power Systems	1,660			(139		)	1,521
Financial Products Segment	399			(10		)	389
All other operating segments	625			(76		)	549
Consolidated Total	$	2,204		$	(664	)	$	1,540

Reconciliation of Assets:

(Millions of dollars)	Machineryand Power Systems			Financial Products			ConsolidatingAdjustments			ConsolidatedTotal
2011
Total assets from reportable segments	$	31,418		$	31,747		$	—		$	63,165
All other operating segments	2,035			—			—			2,035
Items not included in segment assets:
Cash and short-term investments	1,829			—			—			1,829
Intercompany receivables	75			—			(75		)	—
Investment in Financial Products	4,035			—			(4,035		)	—
Deferred income taxes	4,109			—			(533		)	3,576
Goodwill, intangible assets and other assets	2,025			—			—			2,025
Operating lease methodology difference	(511		)	—			—			(511		)
Liabilities included in segment assets	12,088			—			—			12,088
Inventory methodology differences	(2,786		)	—			—			(2,786		)
Other	362			(194		)	(143		)	25
Total assets	$	54,679		$	31,553		$	(4,786	)	$	81,446
2010
Total assets from reportable segments	$	19,140		$	30,346		$	—		$	49,486
All other operating segments	2,472			—			—			2,472
Items not included in segment assets:
Cash and short-term investments	1,825			—			—			1,825
Intercompany receivables	618			—			(618		)	—
Investment in Financial Products	4,275			—			(4,275		)	—
Deferred income taxes	3,745			—			(519		)	3,226
Goodwill, intangible assets and other assets	1,511			—			—			1,511
Operating lease methodology difference	(567		)	—			—			(567		)
Liabilities included in segment assets	8,758			—			—			8,758
Inventory methodology differences	(2,913		)	—			—			(2,913		)
Other	627			(233		)	(172		)	222
Total assets	$	39,491		$	30,113		$	(5,584	)	$	64,020
2009
Total assets from reportable segments	$	17,038		$	32,230		$	—		$	49,268
All other operating segments	2,373			—			—			2,373
Items not included in segment assets:
Cash and short-term investments	2,239			—			—			2,239
Intercompany receivables	106			—			(106		)	—
Investment in Financial Products	4,514			—			(4,514		)	—
Deferred income taxes	4,177			—			(434		)	3,743
Goodwill, intangible assets and other assets	1,329			—			—			1,329
Operating lease methodology difference	(578		)	—			—			(578		)
Liabilities included in segment assets	5,053			—			—			5,053
Inventory methodology differences	(2,780		)	—			—			(2,780		)
Other	725			(255		)	(1,079		)	(609		)
Total assets	$	34,196		$	31,975		$	(6,133	)	$	60,038

Reconciliation of Depreciation and amortization

(Millions of dollars)	Machineryand Power Systems			Financial Products		ConsolidatingAdjustments		ConsolidatedTotal
2011
Total depreciation and amortization from reportable segments	$	1,533		$	710	$	—	$	2,243
Items not included in segment depreciation and amortization:
All other operating segments	172			—		—		172
Cost centers	99			—		—		99
Other	(2		)	15		—		13
Total depreciation and amortization	$	1,802		$	725	$	—	$	2,527
2010
Total depreciation and amortization from reportable segments	$	1,298		$	715	$	—	$	2,013
Items not included in segment depreciation and amortization:
All other operating segments	194			—		—		194
Cost centers	97			—		—		97
Other	(16		)	8		—		(8		)
Total depreciation and amortization	$	1,573		$	723	$	—	$	2,296
2009
Total depreciation and amortization from reportable segments	$	1,307		$	742	$	—	$	2,049
Items not included in segment depreciation and amortization:
All other operating segments	177			—		—		177
Cost centers	128			—		—		128
Other	(18		)	—		—		(18		)
Total depreciation and amortization	$	1,594		$	742	$	—	$	2,336

Reconciliation of Capital expenditures

(Millions of dollars)	Machineryand Power Systems			Financial Products		ConsolidatingAdjustments			ConsolidatedTotal
2011
Total capital expenditures from reportable segments	$	2,466		$	1,191	$	—		$	3,657
Items not included in segment capital expenditures:
All other operating segments	343			—		—			343
Cost centers	177			—		—			177
Timing	(211		)	—		—			(211		)
Other	(129		)	163		(76		)	(42		)
Total capital expenditures	$	2,646		$	1,354	$	(76	)	$	3,924
2010
Total capital expenditures from reportable segments	$	1,482		$	960	$	—		$	2,442
Items not included in segment capital expenditures:
All other operating segments	285			—		—			285
Cost centers	105			—		—			105
Timing	(180		)	—		—			(180		)
Other	(29		)	32		(69		)	(66		)
Total capital expenditures	$	1,663		$	992	$	(69	)	$	2,586
2009
Total capital expenditures from reportable segments	$	1,177		$	976	$	—		$	2,153
Items not included in segment capital expenditures:
All other operating segments	87			—		—			87
Cost centers	65			—		—			65
Timing	156			—		—			156
Other	15			—		(4		)	11
Total capital expenditures	$	1,500		$	976	$	(4	)	$	2,472

Enterprise-wide Disclosures:

Information about Geographic Areas:

							Net property, plant and equipment
	External Sales & Revenues1						December 31,
(Millions of dollars)	2011		2010		2009		2011			2010			2009
Inside United States	$	18,004	$	13,674	$	10,560	$	7,388		$	6,427		$	6,260
Outside United States	42,134		28,914		21,836		7,007		2	6,112		2	6,126		2
Total	$	60,138	$	42,588	$	32,396	$	14,395		$	12,539		$	12,386

1Sales of machinery and power systems are based on dealer or customer location. Revenues from services provided are based on where service is rendered.

2The only country with greater than 10% of total net property, plant and equipment for the periods presented, other than the United States, is Japan with $1,220 million, $1,266 million and $1,432 million as of December 31, 2011, 2010, and 2009, respectively.