Table of Contents Sales by Application (Millions of dollars) 2018 2017 $ Change % Change Oil and Gas $ 5,763 $ 4,424 $ 1,339 30% Power Generation 4,334 3,551 783 22% Industrial 3,640 3,445 195 6% Transportation 5,095 4,544 551 12% External Sales 18,832 15,964 2,868 18% Inter-Segment 3,953 3,418 535 16% Total Sales $ 22,785 $ 19,382 $ 3,403 18% Energy & Transportation’s total sales were $22.785 billion in 2018, compared with $19.382 billion in 2017. The increase was primarily due to higher sales volume across all applications. Favorable price realization also contributed to the increase in sales. Energy & Transportation’s profit was $3.938 billion in 2018, compared with $2.856 billion in 2017. The improvement was due to higher sales volume and favorable price realization. This was partially offset due to increased spending for strategic growth initiatives and higher freight costs. Energy & Transportation’s profit as a percent of total sales was 17.3 percent in 2018, compared with 14.7 percent in 2017. Financial Products’ segment revenues were $3.279 billion, an increase of $186 million, or 6 percent, from 2017. The increase was primarily due to higher average financing rates and higher average  earning assets  in North America and Asia/Pacific. These favorable impacts were partially offset by lower intercompany lending activity in North America, lower average earning assets in Latin America and lower average financing rates in Europe. Financial Products’ segment profit was $505 million in 2018, compared with $792 million in 2017. The decrease was primarily due to an increase in the provision for credit losses at Cat Financial, an unfavorable impact from equity securities in Insurance Services and lower intercompany lending activity. These unfavorable impacts, which are not expected to recur in 2019, were partially offset by higher average earning assets and an increase in net yield on average earning assets. At the end of 2018, past dues at Cat Financial were 3.55 percent, compared with 2.78 percent at the end of 2017. Write-offs, net of recoveries, were $189 million for 2018, compared with $114 million for 2017. As of December 31, 2018, Cat Financial's allowance for credit losses totaled $511 million, or 1.80 percent of finance receivables, compared with $365 million, or 1.33 percent of finance receivables at December 31, 2017. The increase in past dues, write-offs and allowance for credit losses was primarily due to weakening in the Cat Power Finance portfolio. Expense for corporate items and eliminations was $1.566 billion in 2018, a decrease of $1.209 billion from 2017. The decrease in expense was mostly due to lower restructuring costs and methodology differences. Restructuring costs were $394 million in 2018. In 2017, restructuring costs impacting operating profit were $1.227 billion with about half related to the closure of the facility in Gosselies, Belgium and the remainder related to other restructuring actions across the company. 31 Corporate Items and Eliminations Financial Products Segment Energy & Transportation • Oil and Gas  - Sales increased due to higher demand in North America for well servicing and gas compression applications. Growth in U.S. onshore oil and gas drove increased sales for reciprocating engines and related aftermarket parts. Sales of turbines and turbine-related services were higher for production applications. • Power Generation  - Sales improved across all regions, with the largest increase in North America, primarily for reciprocating engine applications including data centers, and for aftermarket parts. In addition, sales increased in EAME from reciprocating engine projects, turbines and turbine-related services and favorable currency. • Industrial  - Sales were higher in Asia/Pacific and North America, primarily due to improving economic conditions supporting higher engine sales into industrial applications. Sales in EAME were about flat as economic uncertainty in a few countries in the Middle East was mostly offset by favorable currency impacts. • Transportation  - Sales were higher for rail services driven by acquisitions in Asia/Pacific and EAME and increased rail traffic in North America. Marine sales were higher in Asia/Pacific, led by increased activity in the ferry sector.