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OPERATING SEGMENTS
 9 Months Ended
Oct. 03, 2021
Segment Reporting [Abstract]  
OPERATING SEGMENTS
NOTE 13. OPERATING SEGMENTS
Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the President and Chief Operating Officer.
Our reportable operating segments consist of Engine, Distribution, Components, Power Systems and New Power. This reporting structure is organized according to the products and markets each segment serves. The Engine segment produces engines (15 liters and smaller) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Components segment sells filtration products, aftertreatment systems, turbochargers, electronics, fuel systems and automated transmissions. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components. The New Power segment designs, manufactures, sells and supports hydrogen production solutions as well as electrified power systems ranging from fully electric to hybrid along with innovative components and subsystems, including battery and fuel cell technologies. We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers.
We use segment earnings or losses before interest expense, income taxes, depreciation and amortization and noncontrolling interests (EBITDA) as the primary basis for the CODM to evaluate the performance of each of our reportable operating segments. We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. Segment amounts exclude certain expenses not specifically identifiable to segments.
The accounting policies of our operating segments are the same as those applied in our Condensed Consolidated Financial Statements. We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. We do not allocate gains or losses of corporate owned life insurance to individual segments. EBITDA may not be consistent with measures used by other companies.
Summarized financial information regarding our reportable operating segments for the three months ended is shown in the table below:
In millionsEngineDistributionComponentsPower SystemsNew PowerTotal Segments
Three months ended October 3, 2021  
External sales$1,961 $1,952 $1,347 $688 $20 $5,968 
Intersegment sales617 7 446 476 3 1,549 
Total sales2,578 1,959 1,793 1,164 23 7,517 
Research, development and engineering expenses97 10 78 55 26 266 
Equity, royalty and interest income (loss) from investees61 15 10 11 (3)94 
Interest income3 2 1 1 — 7 
EBITDA391 192 253 134 (58)912 
Depreciation and amortization(1)
53 28 44 29 5 159 
Three months ended September 27, 2020    
External sales$1,617 $1,715 $1,201 $567 $18 $5,118 
Intersegment sales495 6 340 414 — 1,255 
Total sales2,112 1,721 1,541 981 18 6,373 
Research, development and engineering expenses72 9 64 53 26 224 
Equity, royalty and interest income (loss) from investees74 13 13 — (2)98 
Interest income1 1 1 1 — 4 
EBITDA382 182 261 101 (40)886 
Depreciation and amortization(1)
51 30 47 32 5 165 
(1) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses."
Summarized financial information regarding our reportable operating segments for the nine months ended is shown in the table below:
In millionsEngineDistributionComponentsPower SystemsNew PowerTotal Segments
Nine months ended October 3, 2021    
External sales$5,776 $5,692 $4,627 $1,999 $77 $18,171 
Intersegment sales1,752 22 1,312 1,330 5 4,421 
Total sales7,528 5,714 5,939 3,329 82 22,592 
Research, development and engineering expenses288 35 232 172 75 802 
Equity, royalty and interest income (loss) from investees278 47 41 32 (1)397 
Interest income7 5 3 3 — 18 
EBITDA1,147 553 975 399 (169)2,905 
Depreciation and amortization(1)
154 88 138 97 17 494 
Nine months ended September 27, 2020    
External sales$4,133 $5,123 $3,192 $1,495 $38 $13,981 
Intersegment sales1,560 17 1,001 1,147 — 3,725 
Total sales5,693 5,140 4,193 2,642 38 17,706 
Research, development and engineering expenses217 20 187 148 79 651 
Equity, royalty and interest income (loss) from investees236 45 46 18 (3)342 
Interest income6 3 3 3 — 15 
EBITDA897 500 681 269 (121)2,226 
Depreciation and amortization(1)
155 91 142 96 13 497 
(1) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $3 million and $2 million for the nine months ended October 3, 2021 and September 27, 2020, respectively. A portion of depreciation expense is included in "Research, development and engineering expenses."
A reconciliation of our total segment sales to total net sales in the Condensed Consolidated Statements of Net Income was as follows:
 Three months endedNine months ended
In millionsOctober 3,
2021		September 27,
2020		October 3,
2021		September 27,
2020
Total segment sales$7,517 $6,373 $22,592 $17,706 
Elimination of intersegment sales(1,549)(1,255)(4,421)(3,725)
Total net sales$5,968 $5,118 $18,171 $13,981 
A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below:
 Three months endedNine months ended
In millionsOctober 3,
2021		September 27,
2020		October 3,
2021		September 27,
2020
TOTAL SEGMENT EBITDA$912 $886 $2,905 $2,226 
Intersegment elimination(50)(10)(89)45 
Less:
Interest expense28 25 85 71 
Depreciation and amortization159 165 494 497 
INCOME BEFORE INCOME TAXES675 686 2,237 1,703 
Less: Income tax expense134 182 473 402 
CONSOLIDATED NET INCOME541 504 1,764 1,301 
Less: Net income attributable to noncontrolling interests7 3 27 13 
NET INCOME ATTRIBUTABLE TO CUMMINS INC.$534 $501 $1,737 $1,288