Cummins Reports Fifth Consecutive Year of Record Sales and Earnings, Despite Weaker Demand in the Fourth Quarter

Company Expects to Earn Solid Profit in 2009 Despite Forecasted 20 Percent Drop in Sales

COLUMBUS, Ind.--(BUSINESS WIRE)-- Cummins Inc. (NYSE: CMI) today reported its fifth consecutive year of record sales and profits, despite significant global economic challenges that negatively affected fourth quarter performance.

For the year, sales increased 10 percent to $14.34 billion, from $13.05 billion in 2007. Net income rose 8 percent to $801 million, or $4.08 per share, compared to $739 million or $3.70 per share the previous year. Earnings Before Interest and Taxes (EBIT) were $1.29 billion, or 9.0 percent of sales, compared to $1.23 billion, or 9.4 percent of sales.

Net income included a $37 million pre-tax charge ($0.13 a share) to cover the costs associated with job reductions in the fourth quarter that included reducing its professional workforce by nearly 650 people. Excluding this charge, EBIT was $1.33 billion, or 9.3 percent of sales.

As the Company publicly stated in mid-December when it revised its sales and EBIT guidance downward for 2008, market conditions around the world began to deteriorate rapidly and sharply in the fourth quarter as the global recession continued to spread.

Fourth quarter sales fell 6 percent to $3.29 billion compared to $3.52 billion during the same period in 2007. Net income dropped to $89 million or $0.45 a share, from $198 million, or $1.00 a share a year ago, while EBIT decreased to $129 million, or 3.9 percent of sales, from $324 million, or 9.2 percent of sales. Excluding the restructuring charge, EBIT was $166 million, or 5.0 percent of sales.

Sales declines in the Company's Engine and Components segments, driven by sharp demand drops in the global truck and construction markets, more than offset gains in Power Generation and Distribution. All four segments, however, experienced weakening demand during the course of the quarter. The Company's financial performance in the quarter also was negatively affected by lower joint venture income and the impact of a strengthening U.S. dollar.

"Given our record-setting performance during the first nine months of the year, the rapid drop in demand in the fourth quarter as a result of the global recession was a major disappointment," said Cummins Chairman and Chief Executive Officer Tim Solso. "At the same time, we moved quickly to lower our costs and tightly manage our capital spending, and already have taken further action in early 2009."

Based on its latest market forecast and the expectation the global economy will not improve in 2009, Cummins today is providing sales and EBIT guidance that is below the Company's 2008 performance. Cummins expects sales in 2009 to be approximately 20 percent lower than 2008, and to earn an EBIT margin of 6.5 percent of sales, excluding restructuring costs associated with the actions announced in the first quarter of 2009.

Sales are forecast to drop across all business segments, with the largest decline expected to come from the Components and Engine segments. All business segments, however, are expected to be profitable in 2009 and the Company will continue to aggressively reduce costs while investing in key growth opportunities.

In January, Cummins announced that it will reduce its worldwide professional workforce by at least an additional 800 people by March 1 and freeze pay for most salaried workers. In addition, the Company's officers had their pay reduced by 10 percent for 2009.

By the end of March, the Company will have reduced its global workforce by more than 1,400 salaried professionals and more than 1,300 hourly manufacturing plant employees - or about 6 percent of its total workforce - since the beginning of the fourth quarter 2008. During that time, Cummins has taken a number of other steps to align its costs with the current and expected future demand for its products, including:

    --  Cutting 2,500 contract and temporary workers
    --  Freezing hiring, except in rare cases
    --  Reducing the number of corporate officers by 10 percent by March 31
    --  Temporarily closing or shortening work weeks at a number of
        manufacturing facilities
    --  Cutting discretionary spending
    --  Reducing IT spending
    --  Reducing planned capital expenditures in 2009 significantly from
        originally planned levels, while continuing to focus on critical needs
        such as the necessary development work to meet new emissions standards
        in the U.S. in 2010.

Despite the difficult economic climate, the Company's balance sheet remains strong with low debt, healthy cash reserves and access to a $1.1 billion credit revolver. Cash generation and investment in future products, such as those to meet new U.S. emissions standards in 2010, and to support customer requirements will be a priority in 2009. In light of the current economic conditions, the Company also has suspended its stock repurchase program but remains committed to maintaining its current dividend.

"We are in an extraordinarily challenging period, and while we don't expect overall economic conditions to improve in 2009, we entered this recession in the strongest financial position in the Company's history," Solso said. "Our experienced management team understands what it takes for Cummins to be successful in difficult times, and I am confident that we will do the hard work and make the difficult decisions necessary to emerge from this downturn well positioned to resume our recent history of profitable growth."

Fourth quarter details

Engine Segment

Sales of $1.94 billion were 10 percent lower than $2.16 billion in same period a year ago. Segment EBIT fell 79 percent to $25 million, or 1.3 percent of sales, compared to $120 million, or 5.6 percent of sales, in 2007.

Engine shipments declined in nearly all on-highway markets, including heavy-duty truck (9 percent); medium-duty truck (9 percent); Chrysler/light-duty auto (34 percent) recreational vehicle (72 percent) and construction (30 percent). The segment's performance also was negatively affected by higher material costs, currency effects, increased warranty expense and lower income from its joint ventures.

Power Generation Segment

Sales increased 6 percent to $887 million compared to $840 million a year ago, while Segment EBIT of $75 million, or 8.5 percent of sales, decreased 13 percent compared to $86 million, or 10.2 percent of sales, in the same period in 2007.

Commercial generator sales improved 14 percent to $562 million, driven by strength in Western Europe and China, and more than offset a large decline in the Company's consumer generator business as a result of continued weakness in the U.S. Higher material costs and unfavorable currency effects offset improved pricing, resulting in lower segment EBIT.

Components Segment

Sales decreased 13 percent to $676 million, from $777 million in the fourth quarter 2007, while Segment EBIT of $2 million, or 0.3 percent of sales, fell 96 percent from $47 million, or 6.0 percent of sales, the same period a year ago. In addition to lower sales, unfavorable currency effects, increased warranty expense and the gain associated with the sale of a business in the fourth quarter of 2007 contributed to lower year-over-year Segment EBIT.

Sales were flat in the Company's exhaust aftertreatment business, but fell significantly in the other three businesses in the segment: Fuel Systems sales fell 25 percent, Turbocharger sales fell 18 percent and Filtration sales decreased 11 percent as the segment felt the effects of the demand drop in truck and construction equipment markets around much of the world.

Distribution Segment

Sales increased 19 percent to $557 million, from $468 million in the fourth quarter of 2007. Excluding the impact of currency, sales grew in all nine of the business' geographic regions, led by sales of high horsepower engines to industrial markets and power generator equipment. Results from a recently consolidated distributor location in the United States also contributed significantly to the sales gain.

Segment EBIT of $64 million, or 11.5 percent of sales, was 14 percent higher than $56 million, or 12.0 percent of sales, during the same period in 2007. The strong Segment EBIT performance came despite unfavorable currency effects, primarily in Europe, as a result of the strong U.S. dollar.

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. Cummins reported net income of $801 million on sales of $14.34 billion in 2008. Press releases can be found on the Web at www.cummins.com.

Presentation of Non-GAAP Financial Information

EBIT is a non-GAAP measure 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. EST. 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.

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

                                   December 31,    September 28,    December 31,

                                   2008            2008             2007

                                   in millions (except per share amounts)

NET SALES                          $ 3,288         $ 3,693          $ 3,516

Cost of sales                      2,672           2,873            2,834

GROSS MARGIN                       616             820              682

OPERATING EXPENSES AND INCOME

Selling, general and               350             388              359
administrative expenses

Research, development and          102             113              93
engineering expenses

Equity, royalty and interest       51              66               59
income from investees (Note 1)

Restructuring charges (Note 2)     37              --               --

Other operating (expense) income,  (3           )  (2            )  13
net

OPERATING INCOME                   175             383              302

Interest income                    4               4                9

Interest expense                   9               10               14

Other (expense) income, net (Note  (50          )  (7            )  13
3)

INCOME BEFORE INCOME TAXES AND     120             370              310
MINORITY INTERESTS

Income tax expense (Note 4)        15              123              97

Minority interests in income of    16              18               15
consolidated subsidiaries

NET INCOME                         $ 89            $ 229            $ 198

EARNINGS PER COMMON SHARE

Basic                              $ 0.46          $ 1.18           $ 1.01

Diluted                            $ 0.45          $ 1.17           $ 1.00

WEIGHTED AVERAGE SHARES
OUTSTANDING

Basic                                194.7           194.9            195.7

Diluted                              196.6           196.5            197.5

Cash dividends declared per share  $ 0.175         $ 0.175          $ 0.125



(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 INCOME

(Unaudited) (a)

                                          For the years ended

                                          December 31,   December 31,

                                          2008           2007

                                          in millions (except per share amounts)

NET SALES                                 $ 14,342       $ 13,048

Cost of sales                             11,320         10,492

GROSS MARGIN                              3,022          2,556

OPERATING EXPENSES AND INCOME

Selling, general and administrative       1,459          1,296
expenses

Research, development and engineering     422            329
expenses

Equity, royalty and interest income from  253            205
investees (Note 1)

Restructuring charges (Note 2)            37             --

Other operating (expense) income, net     (12          ) 22

OPERATING INCOME                          1,345          1,158

Interest income                           18             36

Interest expense                          42             58

Other (expense) income, net (Note 3)      (70          ) 33

INCOME BEFORE INCOME TAXES AND MINORITY   1,251          1,169
INTERESTS

Income tax expense (Note 4)               387            381

Minority interests in income of           63             49
consolidated subsidiaries

NET INCOME                                $ 801          $ 739

EARNINGS PER COMMON SHARE

Basic                                     $ 4.11         $ 3.72

Diluted                                   $ 4.08         $ 3.70

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic                                       195.0          198.4

Diluted                                     196.5          199.9

Cash dividends declared per share         $ 0.60         $ 0.43



(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 BALANCE SHEETS

(Unaudited) (a)

                                                   December 31,  December 31,

                                                   2008          2007

                                                   in millions
                                                   (except par value)

ASSETS

Current assets

Cash and cash equivalents                           $ 426         $ 577

Marketable securities                               77            120

Accounts and notes receivable, net                  1,782         1,998

Inventories                                         1,783         1,692

Other current assets                                639           428

Total current assets                                4,707         4,815

Long-term assets

Property, plant and equipment, net                  1,841         1,645

Investments and advances related to equity method   588           514
investees

Goodwill and other intangible assets, net           585           538

Other assets                                        770           683

Total assets                                        $ 8,491       $ 8,195

LIABILITIES

Current liabilities

Short-term borrowings                               $ 69          $ 119

Accounts payable (principally trade)                1,009         1,263

Accrued expenses                                    1,486         1,329

Total current liabilities                           2,564         2,711

Long-term liabilities

Long-term debt                                      629           555

Other liabilities                                   1,771         1,227

Total liabilities                                   4,964         4,493

MINORITY INTERESTS                                  250           293

SHAREHOLDERS' EQUITY

Common stock, $2.50 par value, 500 and 300 shares   554           551
authorized, 221.7 and 220.4 shares issued

Additional paid-in capital                          1,240         1,168

Retained earnings                                   3,334         2,660

Treasury stock, at cost, 20.4 and 18.2 shares       (715    )     (593    )

Common stock held by employee benefits trust, at    (61     )     (79     )
cost, 5.1 and 6.5 shares

Unearned compensation                               (5      )     (11     )

Accumulated other comprehensive loss                (1,070  )     (287    )

Total shareholders' equity                          3,277         3,409

Total liabilities, minority interests and           $ 8,491       $ 8,195
shareholders' equity



(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)

                                                  For the years ended

                                                  December 31,   December 31,

                                                  2008           2007

                                                  in millions

NET CASH PROVIDED BY OPERATING ACTIVITIES (Note   $ 987          $ 810
5)

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures                              (543         ) (353         )

Investments in internal use software              (82          ) (67          )

Investments in and advances to equity investees   (89          ) (66          )

Acquisition of businesses, net of cash acquired   (142         ) (20          )

Proceeds from the sale of an equity investment    64             35

Investments in marketable                         (390         ) (405         )
securities--acquisitions

Investments in marketable                         409            395
securities--liquidations

Purchases of other investments                    (62          ) (57          )

Other, net                                        (13          ) 23

Net cash used in investing activities             (848         ) (515         )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings                          76             15

Payments on borrowings and capital lease          (152         ) (144         )
obligations

Dividend payments on common stock                 (122         ) (89          )

Proceeds from sale of common stock held by        63             14
employee benefit trust

Repurchases of common stock                       (128         ) (335         )

Other, net                                        26             (37          )

Net cash used in financing activities             (237         ) (576         )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH  (53          ) 18
EQUIVALENTS

Net decrease in cash and cash equivalents         (151         ) (263         )

Cash and cash equivalents at beginning of year    577            840

CASH AND CASH EQUIVALENTS AT END OF PERIOD        $ 426          $ 577



(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)

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

              in millions

Three months
ended
December 31,
2008

External      $ 1,590   $ 675       $ 468       $ 555         $ --         $ 3,288
sales

Intersegment    346       212         208         2             (768   )     --
sales

Total sales     1,936     887         676         557           (768   )     3,288

Depreciation
and           47        10          16          8             ―          81
amortization
(2)

Research,
development
and           71        10          21          ―           ―          102
engineering
expense

Equity,
royalty and
interest      8         6           4           33            --           51
income from
investees

Restructuring ―       ―         ―         ―           37           37
charges

Interest      3         ―         ―         1             --           4
income

Segment EBIT  25        75          2           64            (37      )   129

Three months
ended
September 28,
2008

External      $ 1,927   $ 653       $ 535       $ 578         $ --         $ 3,693
sales

Intersegment  352       235         266         3             (856     )   --
sales

Total sales   2,279     888         801         581           (856     )   3,693

Depreciation
and           43        9           16          6             --           74
amortization
(2)

Research,
development
and           75        11          27          --            --           113
engineering
expense

Equity,
royalty and
interest      26        6           3           31            --           66
income from
investees

Interest      2         1           1           --            --           4
income

Segment EBIT  160       108         61          61            (10      )   380

Three months
ended
December 31,
2007

External      $ 1,862   $ 645       $ 542       $ 467         $ --         $ 3,516
sales

Intersegment    293       195         235         1             (724   )     --
sales

Total sales     2,155     840         777         468           (724   )     3,516

Depreciation
and           44        11          16          3             ―          74
amortization
(2)

Research,
development
and           63        9           21          ―           ―          93
engineering
expense

Equity,
royalty and
interest      26        5           3           25            --           59
income from
investees

Interest      6         2           1           --            --           9
income

Segment EBIT  120       86          47          56            15           324

For the year
ended
December 31,
2008

External      $ 7,432   $ 2,601     $ 2,154     $ 2,155       $ --         $ 14,342
sales

Intersegment    1,378     899         998         9             (3,284 )     --
sales

Total sales     8,810     3,500       3,152       2,164         (3,284 )     14,342

Depreciation
and           180       41          65          25            ―          311
amortization
(2)

Research,
development
and           286       41          95          ―           ―          422
engineering
expense

Equity,
royalty and
interest      99        23          14          117           --           253
income from
investees

Restructuring ―       ―         ―         ―           37           37
charges

Interest      10        3           3           2             --           18
income

Segment EBIT  600       376         177         242           (102     )   1,293

For the year
ended
December 31,
2007

External      $ 7,129   $ 2,375     $ 2,007     $ 1,537       $ --         $ 13,048
sales

Intersegment    1,053     685         925         3             (2,666 )     --
sales

Total sales     8,182     3,060       2,932       1,540         (2,666 )     13,048

Depreciation
and           176       42          59          11            ―          288
amortization
(2)

Research,
development
and           222       34          73          ―           ―          329
engineering
expense

Equity,
royalty and
interest      92        17          4           92            --           205
income from
investees

Interest      26        6           3           1             --           36
income

Segment EBIT  589       334         153         187           (36      )   1,227



(1) Includes intercompany eliminations and unallocated corporate expenses. For the three months ended and the year ended December 31, 2008, Non-segment includes a $36 million decrease in cash surrender value in corporate owned life insurance (COLI).

(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 Financial Statements is shown in the table below:

           Three months ended                         For the years ended

           December 31,  September 28,  December 31,  December 31,  December 31,

           2008          2008           2007          2008          2007

           in millions

Segment    $ 129         $ 380          $ 324         $ 1,293       $ 1,227
EBIT

Less:

Interest   9             10             14            42            58
expense

Income
before
income     $ 120         $ 370          $ 310         $ 1,251       $ 1,169
taxes and
minority
interests




FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Earnings before interest, taxes and minority interests (EBIT)

We define EBIT as earnings before interest expense, income tax expense and
minority interests in income of consolidated subsidiaries. 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 our consolidated net
income, for each of the applicable periods:

              Three Months Ended                For the years ended

              December   September   December   December 31,   December 31,
              31,        28,         31,

              2008       2008        2007       2008           2007

              in millions

Earnings
before
interest,     $ 129      $ 380       $ 324      $ 1,293        $ 1,227
income taxes
and minority
interests

EBIT as a
percentage    3.9      % 10.3      % 9.2      % 9.0          % 9.4          %
of net sales

Less:

Interest      9          10          14         42             58
expense

Income tax    15         123         97         387            381
expense

Minority
interests in
income of     16         18          15         63             49
consolidated
subsidiaries

Net income    $ 89       $ 229       $ 198      $ 801          $ 739

Net income
as a          2.7      % 6.2       % 5.6      % 5.6          % 5.7          %
percentage
of net sales



We believe EBIT is a useful measure of our operating performance for the periods presented as it illustrates our operating performance without regard to financing methods, capital structure or income taxes. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data.


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 was as follows:

              Three months ended                   For the years ended

              December   September   December 31,  December 31,  December 31,
              31,        28,

              2008       2008        2007          2008          2007

  in millions

North
American      $ 28       $ 26        $ 24          $ 100         $ 83
distributors

Dongfeng
Cummins
Engine        5          16          12            55            41
Company,
Ltd.

Chongqing
Cummins
Engine        7          9           7             30            22
Company,
Ltd.

Shanghai
Fleetguard    1          2           2             8             6
Filter Co.
Ltd.

Tata Cummins  ―        ―         4             7             13
Ltd.

Cummins
MerCruiser    (2       ) (1        ) 2             3             11
Diesel
Marine LLC

All others    6          9           4             28            16

Cummins
share of net  45         61          55            231           192
income

Royalty and
interest      6          5           4             22            13
income

Equity,
royalty and
interest      $ 51       $ 66        $ 59          $ 253         $ 205
income from
investees



NOTE 2. RESTRUCTURING CHARGES

We have executed restructuring actions primarily in the form of voluntary and involuntary separation programs in the fourth quarter of 2008. These actions were in response to the continued deterioration we saw in our U.S. businesses and most key markets around the world in the second half of 2008, as well as a reduction in orders in most U.S. and global markets for 2009. We reduced our worldwide professional workforce by approximately 650 employees. We offered a voluntary retirement package to certain active professional employees in the United States based on a clearly defined set of criteria. We also took involuntary actions which included certain hourly employees. The compensation packages contained salary and continuation of benefits, including health care, life insurance and outplacement services. The voluntary retirement package was accepted by approximately 150 employees. The remaining reductions of approximately 500 employees were involuntary. The expenses recorded during the year ended December 31, 2008 included severance costs related to both voluntary and involuntary terminations. During 2008, we incurred total pretax expenses related to the restructuring initiative of approximately $37 million.

Employee termination and severance costs were recorded based on approved plans developed by the businesses and corporate management which specified positions to be eliminated, benefits to be paid under existing severance plans or statutory requirements and the expected timetable for completion of the plan. Estimates of restructuring were made based on information available at the time charges were recorded. Due to the inherent uncertainty involved, actual amounts paid for such activities may differ from amounts initially recorded and we may need to revise previous estimates.


CUMMINS INC. AND SUBSIDIARIES

SELECTED FOOTNOTE DATA

(Unaudited)

NOTE 3. OTHER (EXPENSE) INCOME

Other (expense) income included the following:

           Three months ended                         For the years ended

           December 31,    September    December 31,  December 31,  December 31,
                           28,

           2008            2008         2007          2008          2007

          in millions

Other
(expense)
income:

Change in
cash
surrender
value of

corporate
owned      $ (36        )  $ ―        $ ―         $ (36 )       $ ―
life
insurance

Foreign
currency   (23          )  (10       )  12            (46   )       28
(losses)
gains

Other,     9               3            1             12            5
net

Total
other
(expense)  $  (50       )  $ (7      )  $  13         $ (70 )       $ 33
income,
net



NOTE 4. INCOME TAXES

Our effective tax rate in the fourth quarter of 2008 was 12.5 percent compared to 31.3 percent for 2007. The decrease is primarily due to greater foreign earnings in 2008, which are subject to lower tax rates. The fourth quarter effective tax rate also includes a $10 million (0.8 percent) reduction due to the legislative reinstatement of the U.S. research tax credit. The full-year 2008 effective tax rate was 30.9 percent and we expect our full-year 2009 effective tax rate to be sustained at approximately 31 percent.

NOTE 5. DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense included in operating activities of the Condensed Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007 was $314 million and $290 million, respectively.


Sales

 $Millions                     Q1        Q2        Q3        Q4        YTD

 2008

 Engine Business

              Heavy-Duty       536       672       630       470       2,308
              Truck

              Medium Duty      397       422       406       325       1,550
              Truck+Bus

              Light Duty       275       205       170       154       804
              Auto+RV

              Industrial       733       804       788       704       3,029

              Stationary       268       283       285       283       1,119
              Power

              TOTAL ENGINE     2,209     2,386     2,279     1,936     8,810
              BUSINESS

 Power Generation              787       938       888       887       3,500

 Components                    820       855       801       676       3,152

 Distributors                  445       581       581       557       2,164

 Eliminations                  (787    ) (873    ) (856    ) (768    ) (3,284  )

              TOTAL            3,474     3,887     3,693     3,288     14,342

 2007

 Engine Business

              Heavy-Duty       424       473       520       531       1,948
              Truck

              Medium Duty      206       320       359       399       1,284
              Truck+Bus

              Light Duty       288       418       388       246       1,340
              Auto+RV

              Industrial       617       665       661       733       2,676

              Stationary       230       233       225       246       934
              Power

              TOTAL ENGINE     1,765     2,109     2,153     2,155     8,182
              BUSINESS

 Power Generation              675       769       776       840       3,060

 Components                    657       757       741       777       2,932

 Distributors                  309       368       395       468       1,540

 Eliminations                  (589    ) (660    ) (693    ) (724    ) (2,666  )

              TOTAL            2,817     3,343     3,372     3,516     13,048

Engine
Shipments

 Units                         Q1        Q2        Q3        Q4        YTD

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

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

 2007

              Midrange         107,200   133,500   130,500   115,600   486,800

              Heavy-duty       19,000    23,800    24,800    23,800    91,400

              High Horsepower  4,300     4,700     4,600     4,900     18,500

 TOTAL                         130,500   162,000   159,900   144,300   596,700




    Source: Cummins Inc.