Cummins Reports Strong First Quarter Profits; Increases Financial Guidance for 2010

    --  Strength in emerging markets, operational improvements more than offset
        weakness in U.S. on-highway engine markets
    --  Company expects to earn 10 percent EBIT margin on $12 billion in sales
        in 2010

COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported higher sales and significantly improved profits in the first quarter compared to the same period in 2009. The gains came on the strength of the Company's performance in key international markets, and cost reductions and productivity gains in manufacturing facilities across the Company.

Sales of $2.48 billion rose 2 percent from $2.44 billion in the first quarter in 2009, as growth in the Company's Components and Distribution segments slightly more than offset declines in the Engine and Power Generation segments.

Net income attributable to Cummins Inc. increased to $149 million, or $0.75 a share, from $7 million, or $0.04 a share, during the same period in 2009. Earnings Before Interest and Taxes (EBIT) rose to $266 million, or 10.7 percent of sales, compared to the $94 million, or 3.9 percent of sales a year ago, which excluded restructuring charges.

Compared to the fourth quarter of 2009, sales were down 27 percent due to lower demand in North America, but EBIT remained strong at 10.7 percent of sales, compared to the 11.4 percent reported last quarter, which excluded restructuring charges.

Three of the Company's four business segments reported improved profits compared to the first quarter of 2009, with only the later-cycle Power Generation business reporting a decline.

The Company's operational improvements were most evident in the Engine and Components segments, where gross margins and EBIT improved significantly, while the Distribution segment continued its strong performance.

"Our strength in large developing markets such as China, India and Brazil has given us a significant boost as those economies have continued to recover from the recession more quickly than other regions," said Cummins Chairman and Chief Executive Officer Tim Solso.

"In addition, while demand in the North American on-highway truck markets was very low as we expected due to the implementation of new emissions standards in the U.S. in January 2010, our work during the downturn to reduce costs and improve productivity, largely through our well-established Six Sigma quality program, has allowed us to be much more efficient and to respond quickly to the volatility in demand," Solso added.

Based on the first quarter results and its forecast for the remainder of the year, the Company today increased its sales and EBIT guidance for 2010. The Company now expects sales to be $12 billion and to earn an EBIT margin of 10 percent of sales.

The Company benefited from stronger demand in China, India and Brazil as those countries continue their recovery from the recession in 2009. Demand for trucks, construction, mining and distributed power generation equipment strengthened in all three countries - as well as with European OEM customers that export to China, India and the Middle East, and is expected to continue through 2010.

The Company reported weaker demand in North America with medium-duty truck and bus, and heavy-duty engine shipments declining 80 percent from the same period a year ago - and by approximately 90 percent from the fourth quarter of last year. Demand in the North American on-highway engine markets is expected to remain weak through the end of the second quarter, before gradually improving in the second half of the year.

Joint venture income more than doubled year-over-year to $76 million in the first quarter, largely on increased volume at the Company's engine joint ventures in China and India.

The Company also expects to generate positive cash flow in 2010 and is forecasting capital spending of approximately $400 million for the year, an increase of nearly 30 percent from 2009, to fund projects critical to the Company's long-term growth.

"Our employees worldwide have done outstanding work, which is reflected in our strong first quarter results, but our priorities for the year have not changed," said Tom Linebarger, Cummins President and Chief Operating Officer.

"We remain focused on managing the business conservatively so that we can earn a solid profit for the duration of the global downturn and position the Company for strong profitable growth in all markets as the economy recovers," Linebarger said.

First quarter details (all comparisons are to same period in 2009)

Engine Segment

    --  Sales - $1.42 billion, down 5 percent
    --  Segment EBIT - $133 million (9.3 percent of sales), compared to a loss
        of $16 million
    --  Total on-highway sales decreased 13 percent
        o Revenues in worldwide heavy-duty truck fell 36 percent; worldwide
          medium-duty truck and bus revenues decreased 5 percent; sales to the
          light-duty automotive market increased 33 percent on the launch of
          2010 model year Dodge Ram pickup
    --  Industrial sales increased 24 percent
        o Construction sales increased 62 percent; marine engine sales increased
          13 percent; mining sales increased 28 percent; oil and gas sales fell
          80 percent

Power Generation

    --  Sales - $517 million, down 21 percent
    --  Segment EBIT - $34 million (6.6 percent of sales), down 51 percent from
        $69 million (10.5 percent of sales)
    --  Commercial Product sales down 27 percent; Commercial Projects down 21
        percent; Generator Technologies down 21 percent; Power Electronics down
        13 percent. Consumer sales rose 43 percent.
    --  Markets with the largest declines were Western Europe, Middle East,
        Africa and North America. The segment saw sales gains in India, China
        and Eastern Europe.

Components

    --  Sales - $630 million, up 19 percent
    --  Segment EBIT - $57 million (9.0 percent of sales), up from $1 million
        (0.2 percent of sales)
    --  Emission Solutions sales up 30 percent; Turbo Technologies sales up 28
        percent; Filtration up 13 percent; Fuel Systems down 4 percent
    --  Fuel systems sales decreased mainly as result of demand decline in North
        American truck and bus engine markets.
    --  Turbo Technologies sales growth led by large increases in volumes in
        China and recovery in aftermarket sales.
    --  Emission Solutions sales gain driven by higher volumes in North America
        as a result of the transition to the EPA 2010 emissions standards.

Distribution

    --  Sales - $476 million, up 15 percent
    --  Segment EBIT - $72 million (15.1 percent of sales), up 24 percent from
        $58 million (14.0 percent of sales). Gain of $12 million on the
        acquisition of the Cummins Western Canada distributor contributed to
        improved segment EBIT margin.
    --  Cummins Western Canada consolidation contributed $54 million in sales.
        Largest sales declines by region were in Europe and North and Central
        America, excluding Western Canada. Asia Pacific posted largest revenue
        gain. Aftermarket growth in most regions more than offset decline in
        power generation and engine sales.

Joint Ventures

    --  Total income - $76 million, up 130 percent from $33 million
    --  Engine JVs accounted for nearly all of the gain from previous year, led
        by China and India JVs.

Presentation of Non-GAAP Financial Information

EBIT and EBIT excluding restructuring and other charges and net income attributable to Cummins Inc. are non-GAAP measures used in this release. Each is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units.

Webcast information

Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

About Cummins

Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in approximately 190 countries and territories through a network of more than 500 company-owned and independent distributor locations and approximately 5,200 dealer locations. The Company reported net income attributable to Cummins Inc. of $428 million on sales of $10.8 billion in 2009. Press releases can be found on the Web at www.cummins.com.

Forward-looking disclosure statement

Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to, general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility and other risks detailed from time to time in Cummins Securities and Exchange Commission filings.


CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

                                        Three months ended

                                        March 28,    December 31,    March 29,

In millions, except per share amounts   2010         2009            2009

NET SALES                               $ 2,478      $ 3,400         $ 2,439

Cost of sales                           1,877        2,627           1,994

GROSS MARGIN                            601          773             445

OPERATING EXPENSES AND INCOME

Selling, general and administrative     335          348             300
expenses

Research, development and engineering   92           108             85
expenses

Equity, royalty and interest income     76           67              33
from investees (Note 1)

Restructuring and other charges                      4               66

Other operating (expense) income, net   (4        )  5               2

OPERATING INCOME                        246          385             29

Interest income                         3            3               2

Interest expense                        9            9               7

Other income (expense), net (Note 2)    17           (5           )  (3        )

INCOME BEFORE INCOME TAXES              257          374             21

Income tax expense (Note 3)             87           84              7

CONSOLIDATED NET INCOME                 170          290             14

Less: net income attributable to        21           20              7
noncontrolling interests

NET INCOME ATTRIBUTABLE TO CUMMINS      $ 149        $ 270           $ 7
INC.

EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO CUMMINS INC.

Basic                                   $ 0.75       $ 1.36          $ 0.04

Diluted                                 $ 0.75       $ 1.36          $ 0.04

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic                                     198.4        198.4           196.8

Diluted                                   198.7        198.7           197.0

CASH DIVIDENDS DECLARED PER COMMON      $ 0.175      $ 0.175         $ 0.175
SHARE



(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America (GAAP).


CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

                                                        March 28,   December 31,

In millions, except par value                           2010        2009

ASSETS

Current assets

Cash and cash equivalents                               $ 885       $ 930

Marketable securities                                     217         190

Accounts and notes receivable, net                        1,727       2,004

Inventories                                               1,549       1,341

Deferred income taxes                                     302         295

Prepaid expenses and other current assets                 240         243

Total current assets                                      4,920       5,003

Long-term assets

Property, plant and equipment                             4,696       4,765

Accumulated depreciation                                  (2,834 )    (2,879 )

Property, plant and equipment, net                        1,862       1,886

Investments and advances related to equity method         638         574
investees

Goodwill                                                  365         364

Other intangible assets, net                              239         228

Deferred income taxes                                     413         436

Other assets                                              332         325

Total assets                                            $ 8,769     $ 8,816

LIABILITIES

Current liabilities

Loans payable                                           $ 95        $ 37

Accounts payable (principally trade)                      1,030       957

Current portion of accrued product warranty               387         426

Accrued compensation, benefits and retirement costs       308         366

Deferred revenue                                          144         128

Other accrued expenses                                    522         518

Total current liabilities                                 2,486       2,432

Long-term liabilities

Long-term debt                                            640         637

Pensions                                                  406         514

Postretirement benefits other than pensions               466         453

Other liabilities and deferred revenue                    719         760

Total liabilities                                         4,717       4,796

EQUITY

Cummins Inc. shareholders' equity

Common stock, $2.50 par value, 500 shares authorized,     1,862       1,860
221.9 and 222.0 shares issued

Retained earnings                                         3,689       3,575

Treasury stock, at cost, 21.3 and 20.7 shares             (769   )    (731   )

Common stock held by employee benefits trust, at cost,    (36    )    (36    )
3.0 and 3.0 shares

Accumulated other comprehensive loss

Defined benefit postretirement plans                      (794   )    (788   )

Other                                                     (161   )    (107   )

Total accumulated other comprehensive loss                (955   )    (895   )

Total Cummins Inc. shareholders' equity                   3,791       3,773

Noncontrolling interests                                  261         247

Total equity                                              4,052       4,020

Total liabilities and equity                            $ 8,769     $ 8,816



(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.


CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

                                                        Three months ended

                                                        March 28,    March 29,

In millions                                             2010         2009

CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated net income                                 $ 170        $ 14

Adjustments to reconcile consolidated net income to
net cash provided by operating activities:

Restructuring charges, net of cash payments                          48

Depreciation and amortization                           79           76

Gain on fair value adjustment for consolidated          (12       )
investee

Deferred income tax provision (benefit)                 13           (21       )

Equity in income of investees, net of dividends         (53       )  52

Pension expense, net of pension contributions           (93       )  15

Other post-retirement benefits expense, net of cash     (1        )  (8        )
payments

Stock-based compensation expense                        6            6

Translation and hedging activities                      (9        )  19

Changes in current assets and liabilities, net of
acquisitions and divestitures:

Accounts and notes receivable                           275          49

Inventories                                             (189      )  44

Other current assets                                    3            9

Accounts payable                                        54           (103      )

Accrued expenses                                        (154      )  (173      )

Changes in long-term liabilities                        29           36

Other, net                                              8            13

Net cash provided by operating activities               126          76

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures                                    (47       )  (64       )

Investments in internal use software                    (17       )  (11       )

Proceeds from disposals of property, plant and          38           6
equipment

Investments in and advances (to) from equity investees  (11       )  5

Acquisition of businesses, net of cash acquired         (71       )  (2        )

Investments in marketable securities--acquisitions      (133      )  (69       )

Investments in marketable securities--liquidations      108          78

Cash flows from derivatives not designated as hedges    (11       )  (33       )

Net cash used in investing activities                   (144      )  (90       )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings                                70           7

Payments on borrowings and capital lease obligations    (20       )  (19       )

Net borrowings under short-term credit agreements       5            4

Distributions to noncontrolling interests               (1        )  (9        )

Dividend payments on common stock                       (35       )  (35       )

Repurchases of common stock                             (39       )

Other, net                                              13           (1        )

Net cash used in financing activities                   (7        )  (53       )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH        (20       )  (6        )
EQUIVALENTS

Net decrease in cash and cash equivalents               (45       )  (73       )

Cash and cash equivalents at beginning of year          930          426

CASH AND CASH EQUIVALENTS AT END OF PERIOD              $ 885        $ 353



(a) Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.



CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

In millions   Engine     Power       Components  Distribution  Non-segment  Total
                         Generation                            items(1)

Three months
ended March
28, 2010

External      $ 1,173    $ 378       $ 453       $ 474         $ --         $ 2,478
sales

Intersegment  250        139         177         2             (568 )
sales

Total sales   1,423      517         630         476           (568 )       2,478

Depreciation
and           41         10          20          7                          78
amortization
(2)

Research,
development
and           60         7           25                                     92
engineering
expense

Equity,
royalty and
interest      35         6           5           30                         76
income from
investees

Interest      2          1                                                  3
income

Segment EBIT  133        34          57          72            (30  )       266

Three months
ended
December 31,
2009

External      $ 1,974    $ 477       $ 466       $ 483         $ --         $ 3,400
sales

Intersegment  194        124         266         3             (587 )
sales

Total sales   2,168      601         732         486           (587 )       3,400

Depreciation
and           50         14          20          3                          87
amortization
(2)

Research,
development
and           73         8           27                                     108
engineering
expense

Equity,
royalty and
interest      24         6           4           33                         67
income from
investees

Restructuring
and other                                                      4            4
charges

Interest      1          2                                                  3
income

Segment EBIT  211        34          73          67            (2   )       383

Three months
ended March
29, 2009

External      $ 1,205    $ 477       $ 346       $ 411         $ --         $ 2,439
sales

Intersegment  287        180         184         2             (653 )
sales

Total sales   1,492      657         530         413           (653 )       2,439

Depreciation
and           41         11          18          5                          75
amortization
(2)

Research,
development
and           58         8           19                                     85
engineering
expense

Equity,
royalty and
interest      (3      )  5           1           30                         33
income from
investees

Restructuring
and other                                                      66           66
charges

Interest      1          1                                                  2
income

Segment EBIT  (16     )  69          1           58            (84  )       28

(1) Includes intersegment sales and profit in inventory eliminations and
unallocated corporate expenses. There were no significant unallocated corporate
expenses for the three months ended March 28, 2010. For the three months ended
December 31, 2009, unallocated corporate expenses included $4 million of
restructuring and other charges and a gain of $7 million related to flood damage
recoveries. For the three months ended March 29, 2009, unallocated corporate
expenses included $66 million of restructuring charges and a $6 million gain
related to flood damage recoveries.

(2) Depreciation and amortization as shown on a segment basis excludes the
amortization of debt discount that is included in the Condensed Consolidated
Statements of Income as "Interest expense."




CUMMINS INC. AND SUBSIDIARIES

RECONCILIATION OF SEGMENT INFORMATION

(Unaudited)

A reconciliation of our segment information to the corresponding
amounts in the Condensed Consolidated Statements of Income is shown in
the table below:

                            Three months ended

                            March 28,  December 31,  March 29,

In millions                 2010       2009          2009

Segment EBIT                $ 266      $ 383         $ 28

Less:

Interest expense            9          9             7

Income before income taxes  $ 257      $ 374         $ 21




FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Earnings before interest, taxes, noncontrolling interests and restructuring and
other charges

We define EBIT as earnings or loss before interest expense, income tax expense
and noncontrolling interests in income of consolidated subsidiaries (EBIT). We
use EBIT to assess and measure the performance of our operating segments and
also as a component in measuring our variable compensation programs. Below is a
reconciliation of EBIT, a non-GAAP financial measure, to "Net income
attributable to Cummins Inc.", for each of the applicable periods:

                                          Three months ended

                                          March 28,   December 31,   March 29,

In millions                               2010        2009           2009

Earnings before interest expense, income
taxes and restructuring and other         $ 266       $ 387          $ 94
charges

Earnings before interest expense, income
taxes and restructuring and other         10.7      % 11.4         % 3.9       %
charges as a percentage of sales

Less:

Restructuring and other charges                       4              66

Earnings before interest and income       $ 266       $ 383          $ 28
taxes

EBIT as a percentage of net sales         10.7      % 11.3         % 1.1       %

Less:

Interest expense                          9           9              7

Income tax expense                        87          84             7

Consolidated net income                   170         290            14

Less:

Net income attributable to                21          20             7
noncontrolling interests

Net income attributable to Cummins Inc.   $ 149       $ 270          $ 7

Net income attributable to Cummins Inc.   6.0       % 7.9          % 0.3       %
as a percentage of net sales




CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Net income and diluted earnings per share (EPS) attributable to Cummins Inc.
excluding restructuring and other charges

We believe this is a useful measure of our operating performance for the
period presented as it illustrates our operating performance without regard
to restructuring. This measure is not in accordance with, or an alternative
for, accounting principles generally accepted in the United States of America
and may not be consistent with measures used by other companies. It should be
considered supplemental data. The following table reconciles net income
attributable to Cummins Inc. excluding restructuring and other charges to
"Net income attributable to Cummins Inc." for the three months ended December
31, 2009, and the three months ended March 29, 2009. There were no
restructuring actions taken in the three months ended March 28, 2010.

                                           Three months ended

                                           December 31, 2009  March 29, 2009

In millions                                Net     Diluted    Net     Diluted
                                           Income  EPS        Income  EPS

Net income attributable to Cummins Inc.    $ 272   $ 1.37     $ 51    $ 0.26
excluding restructuring and other charges

Less:

Restructuring and other charges, net(1)    2       0.01       44      0.22

Net income attributable to Cummins Inc.    $ 270   $ 1.36     $ 7     $ 0.04

(1) During the three months ended December 31, 2009, and March 29, 2009,
management approved and committed to undertake restructuring actions, which
resulted in pretax charges of $4 million and $66 million, respectively. These
charges included employee-related liabilities for severance and benefits,
exit costs and pension and other postretirement benefit curtailment charges.




CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

NOTE 1. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

Equity, royalty and interest income from investees included in our Condensed
Consolidated Statements of Income for the interim reporting periods was as
follows:

                                         Three months ended

                                         March 28,  December 31,  March 29,

In millions                              2010       2009          2009

Distribution Entities

North American distributors              $ 23       $ 26          $ 26

Komatsu Cummins Chile, Ltda.             3          3             2

All other distributors                   1          1             1

Manufacturing Entities

Dongfeng Cummins Engine Company, Ltd.    18         15

Chongqing Cummins Engine Company, Ltd.   10         8             8

Tata Cummins Ltd.                        4          3             (2        )

All other manufacturers                  10         4             (5        )

Cummins share of net income              69         60            30

Royalty and interest income              7          7             3

Equity, royalty and interest income from $ 76       $ 67          $ 33
investees




NOTE 2. OTHER INCOME (EXPENSE)

Other income (expense) included the
following:

                                        Three months ended

                                        March 28,    December 31,    March 29,

In millions                             2010         2009            2009

Gain on acquisition of Cummins Western  $ 12         $               $
Canada

Foreign currency gains (losses)         7            (2           )  (8        )

Other, net                              (2        )  (3           )  5

Total other income (expense), net       $ 17         $ (5         )  $ (3      )



NOTE 3. INCOME TAXES

Our effective tax rate for the year is expected to approximate 31 percent, absent discrete period activity. Our tax rate is generally less than the 35 percent U.S. income tax rate primarily due to lower tax rates on foreign income. The tax rate for the three month period ended March 28, 2010, was 34 percent and includes a discrete tax charge of $7 million (3 percent) related to the enactment of the "Patient Protection and Affordable Care Act."

Our effective tax rate for March 29, 2009 was 33 percent. This rate is less than the 35 percent U.S. income tax rate primarily due to lower tax rates on foreign income.


Sales

 $Millions                 Q1         Q2         Q3         Q4         YTD

 2010

 Engine Business

              Heavy-Duty   252                                         252
              Truck

              Medium Duty  217                                         217
              Truck+Bus

              Light Duty   207                                         207
              Auto+RV

              Industrial   577                                         577

              Stationary   170                                         170
              Power

              TOTAL ENGINE 1,423                                       1,423
              BUSINESS

 Power Generation          517                                         517

 Components                630                                         630

 Distributors              476                                         476

 Eliminations              (568    )                                   (568    )

              TOTAL        2,478      0          0          0          2,478

 2009

 Engine Business

              Heavy-Duty   394        395        493        714        1,996
              Truck

              Medium Duty  229        240        294        469        1,232
              Truck+Bus

              Light Duty   156        94         120        318        688
              Auto+RV

              Industrial   467        440        407        507        1,821

              Stationary   246        137        125        160        668
              Power

              TOTAL ENGINE 1,492      1,306      1,439      2,168      6,405
              BUSINESS

 Power Generation          657        610        549        601        2,417

 Components                530        502        591        732        2,355

 Distributors              413        463        422        486        1,784

 Eliminations              (653    )  (450    )  (471    )  (587    )  (2,161  )

              TOTAL        2,439      2,431      2,530      3,400      10,800

Engine
Shipments

 Units                     Q1         Q2         Q3         Q4         YTD

 2010

              Midrange     69,100                                      69,100

              Heavy-duty   8,700                                       8,700

              High         3,400                                       3,400
              Horsepower

 TOTAL                     81,200     0          0          0          81,200

 2009

              Midrange     60,600     49,200     58,800     100,600    269,200

              Heavy-duty   16,600     16,400     20,600     32,300     85,900

              High         3,900      3,200      2,600      3,700      13,400
              Horsepower

 TOTAL                     81,100     68,800     82,000     136,600    368,500

 2008

              Midrange     114,200    114,800    102,400    86,900     418,300

              Heavy-duty   24,700     31,700     29,400     22,500     108,300

              High         4,600      5,500      5,300      5,200      20,600
              Horsepower

 TOTAL                     143,500    152,000    137,100    114,600    547,200




    Source: Cummins Inc.