Profit by Segment (Millions of dollars) 2019 2018 $ Change % Change Construction Industries $ 3,931 $ 4,174 $ (243) (6%) Resource Industries 1,629 1,603 26 2% Energy & Transportation 3,910 3,938 (28) (1%) All Other Segment 4 23 (19) (83%) Corporate Items and Eliminations (1,504) (1,583) 79 Machinery, Energy & Transportation 7,970 8,155 (185) (2%) Financial Products Segment 832 505 327 65% Corporate Items and Eliminations (81) 17 (98) Financial Products 751 522 229 44% Consolidating Adjustments (431) (384) (47) Consolidated Operating Profit $ 8,290 $ 8,293 $ (3) —% Other Profit/Loss and Tax Items • Interest expense excluding Financial Products in 2019 was $421 million, compared with $404 million in 2018. The increase was due to higher average debt outstanding during 2019 than 2018. • Other income (expense) in 2019 was expense of $57 million, compared with expense of $67 million in 2018. The decrease was due to a lower expected return on  pension and other postretirement benefit (OPEB)  plan assets more than offset by lower foreign exchange losses, unrealized and realized gains on marketable securities at Insurance Services and the favorable impact of commodity hedges. • The provision for income taxes for 2019 reflected an annual effective tax rate of 25.2 percent, compared with 24.1 percent for 2018, excluding the discrete items discussed in the following paragraph. The increase from 2018 was largely driven by the application of U.S. tax reform provisions to the earnings of certain non-U.S. subsidiaries, which do not have a calendar fiscal year-end. These provisions did not apply to these subsidiaries in 2018. ◦ A tax benefit of $178 million to adjust previously unrecognized tax benefits as a result of receipt of additional guidance in 2019 related to the calculation of the mandatory deemed repatriation of non-U.S. earnings due to U.S. tax reform. In 2018, the mandatory deemed repatriation estimate increased by $50 million. ◦ A tax benefit of $41 million in 2019, compared with $56 million in 2018, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. ◦ A net benefit of $183 million in 2018 to adjust deferred tax balances. (See Note – 6 “Income Taxes” of Part II, Item 8 “Financial Statements and Supplementary Data” for more information.) • In North America, the sales increase was primarily due to higher demand for construction equipment and favorable price realization. • Sales were higher in Latin America. While construction activities remained at low levels, the increase was driven by road and non-residential construction activities. • Sales decreased in EAME primarily due to changes in dealer inventories and the unfavorable impact of a weaker euro, partially offset by favorable price realization. Dealer inventories increased during 2018, compared with a decrease during 2019. 30 Construction Industries’ total sales were $22.649 billion for 2019, a decrease of $588 million, or 3 percent, compared with $23.237 billion for 2018. The decrease was primarily due to lower sales volume driven by changes in dealer inventories, partially offset by higher end-user demand. Dealer inventories increased significantly more during 2018 than during 2019. Favorable price realization was offset by unfavorable currency impacts from a weaker euro, Chinese yuan and Australian dollar. Sales increased in North America and Latin America, and decreased in Asia/Pacific and EAME. Construction Industries The provision for income taxes also included the following: Table of Contents