CATERPILLAR INC | 2013 | FY | 3

Segment information
 
A.
Basis for segment information
 
Our Executive Office is comprised of five Group Presidents, a Senior Vice President and a CEO. Group Presidents are accountable for a related set of end-to-end businesses that they manage.  The Senior Vice President leads the Caterpillar Enterprise System Group, which was formed during the second quarter of 2013 with the goal of improving our manufacturing and supply chain capabilities, driving sustained improvements in customer deliveries, improving operational efficiencies and building on recent product quality improvements. 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 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. The Caterpillar Enterprise System Group is also a cost center and does not meet the definition of an operating segment.  One Group President leads a smaller operating segment that is included in the All Other operating segment.

In 2012, a portion of goodwill related to recent acquisitions was allocated to Machinery and Power Systems operating segments and is now a methodology difference between segment and external reporting. The segment information for 2011 has been retrospectively adjusted.

 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 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, compact track loaders, medium track-type tractors, track-type loaders, motor graders and pipelayers. In addition, Construction Industries has responsibility for Power Systems and three wholly-owned dealers in Japan and an integrated manufacturing cost center. 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, electric rope shovels, draglines, hydraulic shovels, drills, highwall miners, tunnel boring equipment, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, select work tools, forestry products, paving products, industrial and waste products, machinery components and electronics and control systems. Resource Industries also manages areas that provide services to other parts of the company, including integrated manufacturing and research and development. In addition, segment profit includes the impact from divestiture of portions of the Bucyrus distribution business and the acquisition of ERA Mining Machinery Limited, including its wholly-owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., Ltd., commonly known as Siwei, which was completed during the second quarter of 2012. In the fourth quarter of 2013, Siwei was renamed Caterpillar (Zhengzhou) Ltd. Siwei primarily designs, manufactures, sells and supports underground coal mining equipment in China. 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, 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, development, manufacturing, marketing, sales and product support of turbines and turbine-related services; the development, manufacturing, remanufacturing, maintenance, 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 segment 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 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; the product management, development, marketing, sales and product support of on-highway vocational trucks for North America; 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. On July 31, 2012, we sold a majority interest in Caterpillar's third party logistics business. Inter-segment sales are a source of revenue for this segment. 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:
 
•
Machinery and Power Systems 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 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 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 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, gains and losses on interest rate swaps 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-87 to A-91 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 and strategies that are considered to be for the benefit of the entire organization.

•
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.

Segment Information
(Millions of dollars) 
Reportable Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
2013
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Construction Industries
 
$
18,445

 
$
336

 
$
18,781

 
$
576

 
$
1,363

 
$
8,429

 
$
645

Resource Industries
 
13,270

 
871

 
14,141

 
758

 
1,575

 
11,201

 
539

Power Systems
 
20,155

 
1,895

 
22,050

 
642

 
3,400

 
8,492

 
677

Machinery and Power Systems
 
$
51,870

 
$
3,102

 
$
54,972

 
$
1,976

 
$
6,338

 
$
28,122

 
$
1,861

Financial Products Segment
 
3,224

 
—

 
3,224

 
789

 
990

 
36,980

 
1,806

Total
 
$
55,094

 
$
3,102

 
$
58,196

 
$
2,765

 
$
7,328

 
$
65,102

 
$
3,667

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Construction Industries
 
$
19,334

 
$
470

 
$
19,804

 
$
565

 
$
1,789

 
$
10,393

 
$
1,045

Resource Industries
 
21,158

 
1,117

 
22,275

 
694

 
4,318

 
13,455

 
1,143

Power Systems
 
21,122

 
2,407

 
23,529

 
604

 
3,434

 
9,323

 
960

Machinery and Power Systems
 
$
61,614

 
$
3,994

 
$
65,608

 
$
1,863

 
$
9,541

 
$
33,171

 
$
3,148

Financial Products Segment
 
3,090

 
—

 
3,090

 
708

 
763

 
36,563

 
1,660

Total
 
$
64,704

 
$
3,994

 
$
68,698

 
$
2,571

 
$
10,304

 
$
69,734

 
$
4,808

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
12,292

 
717

Power Systems
 
20,114

 
2,339

 
22,453

 
544

 
3,053

 
8,748

 
834

Machinery and Power Systems
 
$
55,410

 
$
4,076

 
$
59,486

 
$
1,533

 
$
8,443

 
$
28,982

 
$
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

 
$
60,729

 
$
3,657

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Reconciliation of Sales and Revenues: 
 
 
 
 
 
 
 
 
(Millions of dollars)
 
Machinery
and Power
Systems
 
Financial
Products
 
Consolidating
Adjustments
 
Consolidated
Total
2013
 
 

 
 

 
 

 
 

Total external sales and revenues from reportable segments
 
$
51,870

 
$
3,224

 
$
—

 
$
55,094

All Other operating segment
 
886

 
—

 
—

 
886

Other
 
(62
)
 
78

 
(340
)
1 
(324
)
Total sales and revenues
 
$
52,694

 
$
3,302

 
$
(340
)
 
$
55,656

 
 
 
 
 
 
 
 
 
2012
 
 

 
 

 
 

 
 

Total external sales and revenues from reportable segments
 
$
61,614

 
$
3,090

 
$
—

 
$
64,704

All Other operating segment
 
1,501

 
—

 
—

 
1,501

Other
 
(47
)
 
70

 
(353
)
1 
(330
)
Total sales and revenues
 
$
63,068

 
$
3,160

 
$
(353
)
 
$
65,875

 
 
 
 
 
 
 
 
 
2011
 
 

 
 

 
 

 
 

Total external sales and revenues from reportable segments
 
$
55,410

 
$
3,003

 
$
—

 
$
58,413

All Other operating segment
 
2,021

 
—

 
—

 
2,021

Other
 
(39
)
 
54

 
(311
)
1 
(296
)
Total sales and revenues
 
$
57,392

 
$
3,057

 
$
(311
)
 
$
60,138

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


Reconciliation of consolidated profit before taxes:
 
 
 
 
 
 
(Millions of dollars)
 
Machinery
and Power
Systems
 
Financial
Products
 
Consolidated
Total
2013
 
 

 
 

 
 

Total profit from reportable segments
 
$
6,338

 
$
990

 
$
7,328

All Other operating segment
 
663

 
—

 
663

Cost centers
 
119

 
—

 
119

Corporate costs
 
(1,442
)
 
—

 
(1,442
)
Timing
 
89

 
—

 
89

Methodology differences:
 
 

 
 

 


Inventory/cost of sales
 
(112
)
 
—

 
(112
)
Postretirement benefit expense
 
(685
)
 
—

 
(685
)
Financing costs
 
(469
)
 
—

 
(469
)
Equity in (profit) loss of unconsolidated affiliated companies
 
6

 
—

 
6

Currency
 
(110
)
 
—

 
(110
)
Interest rate swap
 
(1
)
 
—

 
(1
)
Other income/expense methodology differences
 
(238
)
 
—

 
(238
)
Other methodology differences
 
(50
)
 
30

 
(20
)
Total consolidated profit before taxes
 
$
4,108

 
$
1,020

 
$
5,128

 
 
 
 
 
 
 
2012
 
 

 
 

 
 

Total profit from reportable segments
 
$
9,541

 
$
763

 
$
10,304

All Other operating segment
 
1,014

 
—

 
1,014

Cost centers
 
17

 
—

 
17

Corporate costs
 
(1,517
)
 
—

 
(1,517
)
Timing
 
(298
)
 
—

 
(298
)
Methodology differences:
 
 

 
 

 
 

Inventory/cost of sales
 
43

 
—

 
43

Postretirement benefit expense
 
(696
)
 
—

 
(696
)
Financing costs
 
(474
)
 
—

 
(474
)
Equity in (profit) loss of unconsolidated affiliated companies
 
(14
)
 
—

 
(14
)
Currency
 
108

 
—

 
108

Interest rate swap
 
2

 
—

 
2

Other income/expense methodology differences
 
(251
)
 
—

 
(251
)
Other methodology differences
 
(19
)
 
17

 
(2
)
Total consolidated profit before taxes
 
$
7,456

 
$
780

 
$
8,236

 
 
 
 
 
 
 
2011
 
 

 
 

 
 

Total profit from reportable segments
 
$
8,443

 
$
587

 
$
9,030

All Other operating segment
 
837

 
—

 
837

Cost centers
 
14

 
—

 
14

Corporate costs
 
(1,174
)
 
—

 
(1,174
)
Timing
 
(203
)
 
—

 
(203
)
Methodology differences:
 
 

 
 

 
 

Inventory/cost of sales
 
21

 
—

 
21

Postretirement benefit expense
 
(670
)
 
—

 
(670
)
Financing costs
 
(408
)
 
—

 
(408
)
Equity in (profit) loss 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 consolidated profit before taxes
 
$
6,105

 
$
620

 
$
6,725

 
 
 
 
 
 
 


Reconciliation of Assets:
 
 
 
 
 
 
 
 
(Millions of dollars)
 
Machinery
and Power
Systems
 
Financial
Products
 
Consolidating
Adjustments
 
Consolidated
Total
2013
 
 

 
 

 
 

 
 

Total assets from reportable segments
 
$
28,122

 
$
36,980

 
$
—

 
$
65,102

All Other operating segment
 
1,431

 
—

 
—

 
1,431

Items not included in segment assets:
 
 

 
 

 
 

 
 

Cash and short-term investments
 
4,597

 
—

 
—

 
4,597

Intercompany receivables
 
1,219

 
—

 
(1,219
)
 
—

Investment in Financial Products
 
4,798

 
—

 
(4,798
)
 
—

Deferred income taxes
 
2,541

 
—

 
(525
)
 
2,016

Goodwill and intangible assets
 
3,582

 
—

 
—

 
3,582

Property, plant and equipment – net and other assets
 
1,091

 
—

 
—

 
1,091

Operating lease methodology difference
 
(290
)
 
—

 
—

 
(290
)
Liabilities included in segment assets
 
10,372

 
—

 
—

 
10,372

Inventory methodology differences
 
(2,539
)
 
—

 
—

 
(2,539
)
Other
 
(220
)
 
(135
)
 
(111
)
 
(466
)
Total assets
 
$
54,704

 
$
36,845

 
$
(6,653
)
 
$
84,896

 
 
 
 
 
 
 
 
 
2012
 
 

 
 

 
 

 
 

Total assets from reportable segments
 
$
33,171

 
$
36,563

 
$
—

 
$
69,734

All Other operating segment
 
1,499

 
—

 
—

 
1,499

Items not included in segment assets:
 
 

 
 

 
 

 


Cash and short-term investments
 
3,306

 
—

 
—

 
3,306

Intercompany receivables
 
303

 
—

 
(303
)
 
—

Investment in Financial Products
 
4,433

 
—

 
(4,433
)
 
—

Deferred income taxes
 
3,926

 
—

 
(516
)
 
3,410

Goodwill and intangible assets
 
3,145

 
—

 
—

 
3,145

Property, plant and equipment – net and other assets
 
668

 
—

 
—

 
668

Operating lease methodology difference
 
(329
)
 
—

 
—

 
(329
)
Liabilities included in segment assets
 
10,907

 
—

 
—

 
10,907

Inventory methodology differences
 
(2,949
)
 
—

 
—

 
(2,949
)
Other
 
(182
)
 
(107
)
 
(132
)
 
(421
)
Total assets
 
$
57,898

 
$
36,456

 
$
(5,384
)
 
$
88,970

 
 
 
 
 
 
 
 
 
2011
 
 

 
 

 
 

 
 

Total assets from reportable segments
 
$
28,982

 
$
31,747

 
$
—

 
$
60,729

All Other operating segment
 
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 and intangible assets
 
2,816

 
—

 
—

 
2,816

Property, plant and equipment – net and other assets
 
1,645

 
—

 
—

 
1,645

Operating lease methodology difference
 
(511
)
 
—

 
—

 
(511
)
Liabilities included in segment assets
 
11,860

 
—

 
—

 
11,860

Inventory methodology differences
 
(2,786
)
 
—

 
—

 
(2,786
)
Other
 
362

 
(194
)
 
(143
)
 
25

Total assets
 
$
54,451

 
$
31,553

 
$
(4,786
)
 
$
81,218

 
 
 
 
 
 
 
 
 


Reconciliation of Depreciation and amortization:
 
 
 
 
 
 
(Millions of dollars)
 
Machinery
and Power
Systems
 
Financial
Products
 
Consolidated
Total
2013
 
 

 
 

 
 

Total depreciation and amortization from reportable segments
 
$
1,976

 
$
789

 
$
2,765

Items not included in segment depreciation and amortization:
 
 

 
 

 
 

All Other operating segment
 
173

 
—

 
173

Cost centers
 
140

 
—

 
140

Other
 
(16
)
 
25

 
9

Total depreciation and amortization
 
$
2,273

 
$
814

 
$
3,087

 
 
 
 
 
 
 
2012
 
 

 
 

 
 

Total depreciation and amortization from reportable segments
 
$
1,863

 
$
708

 
$
2,571

Items not included in segment depreciation and amortization:
 
 

 
 

 
 

All Other operating segment
 
168

 
—

 
168

Cost centers
 
89

 
—

 
89

Other
 
(38
)
 
23

 
(15
)
Total depreciation and amortization
 
$
2,082

 
$
731

 
$
2,813

 
 
 
 
 
 
 
2011
 
 

 
 

 
 

Total depreciation and amortization from reportable segments
 
$
1,533

 
$
710

 
$
2,243

Items not included in segment depreciation and amortization:
 
 

 
 

 
 

All Other operating segment
 
172

 
—

 
172

Cost centers
 
77

 
—

 
77

Other
 
20

 
15

 
35

Total depreciation and amortization
 
$
1,802

 
$
725

 
$
2,527

 
 
 
 
 
 
 
 
Reconciliation of Capital expenditures:
 
 
 
 
 
 
 
 
(Millions of dollars)
 
Machinery
and Power
Systems
 
Financial
Products
 
Consolidating
Adjustments
 
Consolidated
Total
2013
 
 

 
 

 
 

 
 

Total capital expenditures from reportable segments
 
$
1,861

 
$
1,806

 
$
—

 
$
3,667

Items not included in segment capital expenditures:
 
 

 
 

 
 

 
 

All Other operating segment
 
340

 
—

 
—

 
340

Cost centers
 
169

 
—

 
—

 
169

Timing
 
363

 
—

 
—

 
363

Other
 
(128
)
 
105

 
(70
)
 
(93
)
Total capital expenditures
 
$
2,605

 
$
1,911

 
$
(70
)
 
$
4,446

 
 
 
 
 
 
 
 
 
2012
 
 

 
 

 
 

 
 

Total capital expenditures from reportable segments
 
$
3,148

 
$
1,660

 
$
—

 
$
4,808

Items not included in segment capital expenditures:
 
 

 
 

 
 

 
 

All Other operating segment
 
359

 
—

 
—

 
359

Cost centers
 
175

 
—

 
—

 
175

Timing
 
(71
)
 
—

 
—

 
(71
)
Other
 
(176
)
 
136

 
(155
)
 
(195
)
Total capital expenditures
 
$
3,435

 
$
1,796

 
$
(155
)
 
$
5,076

 
 
 
 
 
 
 
 
 
2011
 
 

 
 

 
 

 
 

Total capital expenditures from reportable segments
 
$
2,466

 
$
1,191

 
$
—

 
$
3,657

Items not included in segment capital expenditures:
 
 

 
 

 
 

 
 

All Other operating segment
 
343

 
—

 
—

 
343

Cost centers
 
146

 
—

 
—

 
146

Timing
 
(211
)
 
—

 
—

 
(211
)
Other
 
(98
)
 
163

 
(76
)
 
(11
)
Total capital expenditures
 
$
2,646

 
$
1,354

 
$
(76
)
 
$
3,924

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Enterprise-wide Disclosures:
 
Information about Geographic Areas:
 
 
 
 
 
 
 
 
 
Property, plant and equipment - net
 
 
 
External sales and revenues 1
 
December 31,
 
(Millions of dollars)
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
Inside United States
 
$
18,579

 
$
20,239

 
$
17,980

 
$
8,723

 
$
8,559

 
$
7,448

 
Outside United States
 
37,077


45,636

2 
42,158


8,352


7,902


6,947


Total
 
$
55,656

 
$
65,875

 
$
60,138

 
$
17,075

 
$
16,461

 
$
14,395

 
 
1 
Sales of Machinery and Power Systems are based on dealer or customer location. Revenues from services provided are based on where service is rendered.
2 
The only country with greater than 10 percent of external sales and revenues for any of the periods presented, other than the United States, is Australia with $6,822 million as of December 31, 2012.
 
 
 
 
 

us-gaap:SegmentReportingDisclosureTextBlock