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OPERATING SEGMENTS
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
OPERATING SEGMENTS
NOTE 16. 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 Chief Executive Officer.
Our reportable operating segments consist of Components, Engine, Distribution, Power Systems and Accelera. This reporting structure is organized according to the products and markets each segment serves. The Components segment sells axles, drivelines, brakes and suspension systems for commercial diesel and natural gas applications, aftertreatment systems, turbochargers, fuel systems, valvetrain technologies, automated transmissions and electronics. 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 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 Accelera segment designs, manufactures, sells and supports hydrogen production technologies as well as electrified power systems with innovative components and subsystems, including battery, fuel cell and electric powertrain technologies. The Accelera segment is currently in the early stages of commercializing these technologies with efforts primarily focused on the development of our electrolyzers for hydrogen production and electrified power systems and related 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 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 and the gain and certain costs related to the divestiture of Atmus. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information. EBITDA may not be consistent with measures used by other companies.
Summarized financial information regarding our reportable operating segments for the three and nine months ended September 30, 2024 and 2023 is shown in the table below:
In millionsComponentsEngineDistributionPower SystemsAcceleraTotal Segments
Three months ended September 30, 2024  
External sales$2,287 $2,215 $2,942 $912 $100 $8,456 
Intersegment sales437 698 10 775 10 1,930 
Total sales2,724 2,913 2,952 1,687 110 10,386 
Research, development and engineering expenses85 147 13 57 57 359 
Equity, royalty and interest income (loss) from investees12 53 25 20 (11)99 
Interest income4 2 7 1 — 14 
Segment EBITDA351 427 370 328 (115)1,361 
Depreciation and amortization (1)
121 62 31 33 16 263 
Three months ended September 30, 2023   
External sales$2,780 $2,236 $2,519 $798 $98 $8,431 
Intersegment sales456 695 16 646 5 1,818 
Total sales3,236 2,931 2,535 1,444 103 10,249 
Research, development and engineering expenses93 159 14 60 50 376 
Equity, royalty and interest income (loss) from investees26 62 22 11 (3)118 
Interest income8 4 9 3 — 24 
Segment EBITDA441 
(2)
395 306 234 (114)1,262 
Depreciation and amortization (1)
120 59 28 30 18 255 
Nine months ended September 30, 2024
External sales$7,647 $6,923 $8,292 $2,508 $285 $25,655 
Intersegment sales1,391 2,069 24 2,157 29 5,670 
Total sales9,038 8,992 8,316 4,665 314 31,325 
Research, development and engineering expenses250 468 41 180 166 1,105 
Equity, royalty and interest income (loss) from investees51 158 73 65 (22)325 
Interest income21 16 29 7 — 73 
Segment EBITDA1,230 
(2)
1,286 978 866 (333)4,027 
Depreciation and amortization (1)
367 181 92 99 45 784 
Nine months ended September 30, 2023
External sales$8,747 $6,751 $7,494 $2,271 $259 $25,522 
Intersegment sales1,471 2,154 42 1,973 14 5,654 
Total sales10,218 8,905 7,536 4,244 273 31,176 
Research, development and engineering expenses287 441 43 189 150 1,110 
Equity, royalty and interest income (loss) from investees71 198 70 42 (11)370 
Interest income21 14 24 7 1 67 
Segment EBITDA1,434 
(2)
1,277 940 654 (322)3,983 
Depreciation and amortization (1)
368 166 84 91 47 756 
(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 $10 million and $4 million for the nine months ended September 30, 2024 and September 30, 2023, respectively. A portion of depreciation expense is included in research, development and engineering expenses.
(2) Included $21 million of costs associated with the divestiture of Atmus for the nine months ended September 30, 2024. Included $20 million and $50 million of costs associated with the divestiture of Atmus for the three and nine months ended September 30, 2023. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.
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
 September 30,September 30,
In millions2024202320242023
TOTAL SEGMENT EBITDA$1,361 $1,262 $4,027 $3,983 
Intersegment eliminations and other (1)
28 (32)
(2)
1,279 
(3)
(88)
(2)
Less:
Interest expense83 97 281 283 
Depreciation and amortization263 255 784 756 
INCOME BEFORE INCOME TAXES$1,043 $878 $4,241 $2,856 
(1) Included intersegment sales, intersegment profit in inventory and unallocated corporate expenses.
(2) Included $6 million and $17 million of costs associated with the divestiture of Atmus for the three and nine months ended September 30, 2023.
(3) Included a $1.3 billion gain related the divestiture of Atmus and $14 million of costs associated with the divestiture of Atmus (included in corporate expenses) for the nine months ended September 30, 2024. See NOTE 14, "ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE," for additional information.