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OPERATING SEGMENTS | 12 Months Ended
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Dec. 31, 2021
Segment Reporting [Abstract] |
OPERATING SEGMENTS | NOTE 22. 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. The New Power segment is currently in the development phase with a primary focus on research and development activities for our power systems, components and subsystems. 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 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 at December 31, is shown in the table below:
In millions |  | Engine |  | Distribution |  | Components |  | Power Systems |  | New Power |  | Total Segments |  |  |  |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External sales |  | $ | 7,589 |  |  | $ | 7,742 |  |  | $ | 5,932 |  |  | $ | 2,650 |  |  | $ | 108 |  |  | $ | 24,021 |  |  |  |  |
Intersegment sales |  | 2,365 |  |  | 30 |  |  | 1,733 |  |  | 1,765 |  |  | 8 |  |  | 5,901 |  |  |  |  |
Total sales |  | 9,954 |  |  | 7,772 |  |  | 7,665 |  |  | 4,415 |  |  | 116 |  |  | 29,922 |  |  |  |  |
Research, development and engineering expenses |  | 399 |  |  | 48 |  |  | 307 |  |  | 234 |  |  | 102 |  |  | 1,090 |  |  |  |  |
Equity, royalty and interest income (loss) from investees |  | 340 |  |  | 63 |  |  | 50 |  |  | 56 |  |  | (3) |  |  | 506 |  |  |  |  |
Interest income |  | 8 |  |  | 7 |  |  | 5 |  |  | 5 |  |  | — |  |  | 25 |  |  |  |  |
Segment EBITDA |  | 1,411 |  |  | 731 |  |  | 1,180 |  |  | 496 |  |  | (223) |  |  | 3,595 |  |  |  |  |
Depreciation and amortization (1) |  | 205 |  |  | 116 |  |  | 183 |  |  | 131 |  |  | 24 |  |  | 659 |  |  |  |  |
Net assets |  | 1,554 |  |  | 2,294 |  |  | 2,938 |  |  | 2,251 |  |  | 602 |  |  | 9,639 |  |  |  |  |
Investments and advances to equity investees |  | 742 |  |  | 329 |  |  | 254 |  |  | 164 |  |  | 49 |  |  | 1,538 |  |  |  |  |
Capital expenditures |  | 341 |  |  | 92 |  |  | 184 |  |  | 80 |  |  | 37 |  |  | 734 |  |  |  |  |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External sales |  | $ | 5,925 |  |  | $ | 7,110 |  |  | $ | 4,650 |  |  | $ | 2,055 |  |  | $ | 71 |  |  | $ | 19,811 |  |  |  |  |
Intersegment sales |  | 2,097 |  |  | 26 |  |  | 1,374 |  |  | 1,576 |  |  | 1 |  |  | 5,074 |  |  |  |  |
Total sales |  | 8,022 |  |  | 7,136 |  |  | 6,024 |  |  | 3,631 |  |  | 72 |  |  | 24,885 |  |  |  |  |
Research, development and engineering expenses |  | 290 |  |  | 31 |  |  | 264 |  |  | 212 |  |  | 109 |  |  | 906 |  |  |  |  |
Equity, royalty and interest income (loss) from investees |  | 312 |  |  | 62 |  |  | 61 |  |  | 21 |  |  | (4) |  |  | 452 |  |  |  |  |
Interest income |  | 9 |  |  | 4 |  |  | 4 |  |  | 4 |  |  | — |  |  | 21 |  |  |  |  |
Segment EBITDA |  | 1,235 |  |  | 665 |  |  | 961 |  |  | 343 |  |  | (172) |  |  | 3,032 |  |  |  |  |
Depreciation and amortization (1) |  | 208 |  |  | 122 |  |  | 192 |  |  | 130 |  |  | 18 |  |  | 670 |  |  |  |  |
Net assets |  | 1,306 |  |  | 2,444 |  |  | 2,878 |  |  | 2,134 |  |  | 504 |  |  | 9,266 |  |  |  |  |
Investments and advances to equity investees |  | 681 |  |  | 313 |  |  | 215 |  |  | 200 |  |  | 32 |  |  | 1,441 |  |  |  |  |
Capital expenditures |  | 202 |  |  | 89 |  |  | 140 |  |  | 79 |  |  | 18 |  |  | 528 |  |  |  |  |
(Table continued on next page)
In millions |  | Engine |  | Distribution |  | Components |  | Power Systems |  | New Power |  | Total Segments |  |  |  |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External sales |  | $ | 7,570 |  |  | $ | 8,040 |  |  | $ | 5,253 |  |  | $ | 2,670 |  |  | $ | 38 |  |  | $ | 23,571 |  |  |  |  |
Intersegment sales |  | 2,486 |  |  | 31 |  |  | 1,661 |  |  | 1,790 |  |  | — |  |  | 5,968 |  |  |  |  |
Total sales |  | 10,056 |  |  | 8,071 |  |  | 6,914 |  |  | 4,460 |  |  | 38 |  |  | 29,539 |  |  |  |  |
Research, development and engineering expenses |  | 337 |  |  | 28 |  |  | 300 |  |  | 230 |  |  | 106 |  |  | 1,001 |  |  |  |  |
Equity, royalty and interest income from investees |  | 200 |  |  | 52 |  |  | 40 |  |  | 38 |  |  | — |  |  | 330 |  |  |  |  |
Interest income |  | 15 |  |  | 15 |  |  | 8 |  |  | 8 |  |  | — |  |  | 46 |  |  |  |  |
Segment EBITDA (excluding restructuring actions) |  | 1,472 |  |  | 693 |  |  | 1,117 |  |  | 524 |  |  | (148) |  |  | 3,658 |  |  |  |  |
Restructuring actions (2) |  | 18 |  |  | 37 |  |  | 20 |  |  | 12 |  |  | 1 |  |  | 88 |  |  |  |  |
Segment EBITDA |  | 1,454 |  |  | 656 |  |  | 1,097 |  |  | 512 |  |  | (149) |  |  | 3,570 |  |  |  |  |
Depreciation and amortization (1) |  | 202 |  |  | 115 |  |  | 222 |  |  | 118 |  |  | 12 |  |  | 669 |  |  |  |  |
Capital expenditures |  | 240 |  |  | 136 |  |  | 191 |  |  | 107 |  |  | 26 |  |  | 700 |  |  |  |  |
(1) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs were $3 million, $3 million and $3 million for the years ended 2021, 2020 and 2019, respectively. A portion of depreciation expense is included in "Research, development and engineering expense."
(2) See Note 21 "RESTRUCTURING ACTIONS," for additional information.
A reconciliation of our total segment sales to total net sales in the Consolidated Statements of Net Income was as follows:
|  | Years ended December 31,
In millions |  | 2021 |  | 2020 |  | 2019
Total segment sales |  | $ | 29,922 |  |  | $ | 24,885 |  |  | $ | 29,539 |
Elimination of intersegment sales |  | (5,901) |  |  | (5,074) |  |  | (5,968) |
Total net sales |  | $ | 24,021 |  |  | $ | 19,811 |  |  | $ | 23,571 |
A reconciliation of our segment information to the corresponding amounts in the Consolidated Statements of Net Income is shown in the table below:
|  | Years ended December 31,
In millions |  | 2021 |  | 2020 |  | 2019
TOTAL SEGMENT EBITDA |  | $ | 3,595 |  |  | $ | 3,032 |  |  | $ | 3,570 |
Intersegment elimination |  | (74) |  |  | 76 |  |  | 42 |
Less: |  |  |  |  |  |
Interest expense |  | 111 |  |  | 100 |  |  | 109 |
Depreciation and amortization |  | 659 |  |  | 670 |  |  | 669 |
INCOME BEFORE INCOME TAXES |  | 2,751 |  |  | 2,338 |  |  | 2,834 |
Less: Income tax expense |  | 587 |  |  | 527 |  |  | 566 |
CONSOLIDATED NET INCOME |  | 2,164 |  |  | 1,811 |  |  | 2,268 |
Less: Net income attributable to noncontrolling interests |  | 33 |  |  | 22 |  |  | 8 |
NET INCOME ATTRIBUTABLE TO CUMMINS INC. |  | $ | 2,131 |  |  | $ | 1,789 |  |  | $ | 2,260 |
A reconciliation of our segment net assets to the corresponding amounts in the Consolidated Balance Sheets is shown in the table below:
|  | December 31, |
In millions |  | 2021 |  | 2020 |  |  |
Net assets for operating segments |  | $ | 9,639 |  |  | $ | 9,266 |  |  |  |
Cash, cash equivalents and marketable securities |  | 3,187 |  |  | 3,862 |  |  |  |
Net liabilities deducted in arriving at net assets (1) |  | 9,486 |  |  | 8,947 |  |  |  |
Pension and OPEB adjustments excluded from net assets |  | 966 |  |  | 67 |  |  |  |
Deferred tax assets not allocated to segments |  | 428 |  |  | 479 |  |  |  |
Deferred debt costs not allocated to segments |  | 4 |  |  | 3 |  |  |  |
Total assets |  | $ | 23,710 |  |  | $ | 22,624 |  |  |  |
(1) Liabilities deducted in arriving at net assets include certain accounts payable, accrued expenses, long-term liabilities and other items. |
See Note 2, "REVENUE FROM CONTRACTS WITH CUSTOMERS," for segment net sales by geographic area. Long-lived assets include property, plant and equipment, net of depreciation, investments and advances to equity investees and other assets, excluding deferred tax assets, refundable taxes and deferred debt expenses. Long-lived segment assets by geographic area were as follows:
|  | December 31,
In millions |  | 2021 |  | 2020 |  |
United States |  | $ | 3,978 |  |  | $ | 3,776 |  |  |
China |  | 1,136 |  |  | 1,010 |  |  |
India |  | 573 |  |  | 595 |  |  |
United Kingdom |  | 384 |  |  | 370 |  |  |
Netherlands |  | 314 |  |  | 295 |  |  |
Mexico |  | 195 |  |  | 187 |  |  |
Canada |  | 163 |  |  | 149 |  |  |
Other international countries |  | 554 |  |  | 545 |  |  |
Total long-lived assets |  | $ | 7,297 |  |  | $ | 6,927 |  |  |
Our largest customer is PACCAR Inc. Worldwide sales to this customer were approximately $3.6 billion, $2.9 billion and $3.9 billion for the years ended December 31, 2021, 2020 and 2019, representing 15 percent, 15 percent and 17 percent, respectively, of our consolidated net sales. No other customer accounted for more than 10 percent of consolidated net sales.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123359005&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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