Exhibit 99.1

                        Susan Hanafee, Exec. Director
                        Corporate Communications
                        812-377-0494

For Immediate Release
January 27, 2004

Cummins Reports Fourth Quarter and Full-Year 2003 Earnings

Momentum Gained in Second Half of the Year

            COLUMBUS, Ind. -- Cummins Inc. (NYSE: CMI) today reported fourth-quarter 2003 sales of $1.74 billion and earnings before interest, income taxes, minority interest and preferred dividends (EBIT) of $84 million, compared with sales of $1.41 billion and EBIT of $20 million a year ago.  Net earnings for the quarter before the cumulative effect of an accounting change were $47 million, or $1.07 per share, compared with net earnings of $46 million, or $1.10 per share, in the year ago quarter.  Total sales for 2003 were $6.30 billion with EBIT of $181 million, compared to sales of $5.85 billion and EBIT of $139 million in 2002.  Net earnings before the cumulative effect of accounting changes were $54 million, or $1.36 per share, in 2003 compared with $79 million, or $2.06 per share, in 2002.

            The fourth quarter and full-year 2003 net earnings, as reported, were $43 million, or $1.00 per share, and $50 million, or $1.27 per share, respectively, which include a $4 million charge for the cumulative effect of an accounting change resulting from the consolidation of a financing variable interest entity as of December 31, 2003.  Full year 2002 earnings, as reported, were $82 million, or $2.13 per share, which included a $3 million benefit from the cumulative effect of an accounting change.  The fourth-quarter and full-year 2002 earnings included a one-time positive income tax adjustment of $57 million for the year.

            "2003 was a good year for Cummins, characterized by marked improvement with each successive quarter," said Tim Solso, Chairman and Chief Executive Officer, Cummins.  "After a slow start, our markets finally showed signs of improvement following a very tough three-year recession. For the second half of the year, all of our businesses were generating a profit, which was largely due to increased sales in most markets and our ongoing cost-reduction efforts."    


 

            "Our ability to win new business based on our quality products and strong brand image, combined with our effective partnerships and global presence, gives me optimism about 2004," Solso added.

            Solso cited several recent business developments that provide momentum for 2004.


 

Corporate Overview

            The 2003 fourth quarter produced record sales for the Filtration Business and record sales and profitability for International Distributors Business. Automotive and industrial markets improved in both quarter-over-quarter and year-over-year comparisons, particularly in the heavy-duty and medium-duty trucks, bus and construction equipment markets. 2003 was a record sales year for the Dodge Ram pickup, with Cummins shipping 128,200 engines - a 28 percent increase over 2002.  The Power Generation Business reported earnings of $14 million in the quarter, returning to profitability on the strength of higher volume and cost-reduction improvements.  Strong sales in China helped boost income from joint ventures and alliances to a record $70 million for 2003, more than three times the income earned in the previous year.  Cummins received cash of $22 million from joint ventures in 2003 and expects to receive nearly twice that amount in 2004 as a result of established dividend distribution policies.  Free cash flow for the quarter was $94 million.

Business Unit Results

Engine

            Total sales for the Engine Business in the fourth quarter were $984 million, a 27 percent increase from sales of $776 million a year ago.  Engine Business segment EBIT was $32 million for the quarter versus a loss of $1 million in the fourth quarter a year ago. 

            Automotive market sales were up 32 percent, compared with the fourth quarter of  2002. The North American heavy-duty truck markets and global medium-duty truck markets were particularly strong.  Broad-based growth in Cummins industrial markets drove a 16 percent year-over-year revenue increase, driven by a 19 percent increase in sales for construction equipment and an 18 percent increase in sales for mining equipment.

Power Generation

            The Power Generation Business reported fourth-quarter sales of  $392 million, up 21 percent from a year ago. Profitability improved substantially with quarterly segment EBIT of $14 million compared with a loss of $11 million in the fourth quarter last year.

            Sales of commercial gensets and engines sold to other genset manufacturers were responsible for nearly half of the sales increase from the year-ago quarter.  The consumer segment of Power Generation also performed extremely well, with record sales and profits that reflected continuing strength in the recreational vehicle market. The higher volume combined with continued focus on cost reduction initiatives provided the strong improvement in segment performance.


 

Filtration and Other

            The Filtration and Other segment had record sales of $282 million for the quarter, a 16 percent increase compared with the fourth quarter of 2002. 

            North American Emissions Solutions first-fit automotive sales and aftermarket sales in the Middle East, Eastern Europe and Africa contributed to the year-over-year revenue increase, as did an overall favorable currency impact. 

            The Filtration Business reported segment EBIT of  $25 million, compared with $28 million a year ago, as this business continues to fund growth initiatives, including its long-term sales agreements, distribution and logistics improvements and the Emissions Solutions business.

International Distributors

            The 2003 fourth quarter set records for both sales and profitability for the International Distributor Business, with demand improvement across nearly all territories.  Sales were $190 million in the fourth quarter - an increase of 24 percent compared with sales of $153 million in last year's quarter.  Segment EBIT for the quarter was $13 million, compared with $12 million a year ago.

2004 Guidance

            The Company expects annual earnings per share in 2004 to be in the range of $3.20 to $3.40, with a first quarter 2004 earnings expectation of $.40 to $.50 per share.  Capital expenditures for 2004 are forecasted to be in the range of $125 to $135 million.

            The Company's earnings projections are based on expectations of a substantial recovery in the North American heavy-duty and global medium-duty truck markets and solid increases in most industrial markets; double-digit revenue growth in International Distributors, with growth in nearly all regions; double-digit revenue growth in the Filtration and Other segment coming from Emission Solutions and OEM growth through the Company's long-term sales agreements; and, double-digit sales growth in its Power Generation Business through both organic growth and increased penetration due to new products for multiple markets.


 

Presentation of Non-GAAP Financial Information

            Non-GAAP financial measures used in this release include EBIT and Free Cash Flow.  These measures are defined and reconciliations to what management believes to be the most comparable GAAP measures are included in a schedule attached to this release.  Cummins presents this information as it believes the data is useful to understanding the Company's operating performance and they are measures used internally to assess the performance of the operating units.

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 its customers through more than 680 company-owned and independent distributor locations in 137 countries and territories. Cummins also provides service through a vast dealer network of more than 5,000 facilities in 197 countries. With  over 23,000 employees worldwide, Cummins reported sales of $6.3 billion in 2003. Press releases can be found by accessing the Cummins home page at www.cummins.com.

Forward Looking Statement Disclosure

            Information provided in this release that is not purely historical is considered to be 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.
CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)

 

Fourth Quarter

Twelve Months

Third Quarter

Millions, except per share amounts

2003

2002

2003

2002

2003

 

Net sales..............................................................................

$1,736

$1,414

$6,296

$5,853

$1,634

Cost of goods sold.............................................................

  1,400

  1,192

  5,173

  4,808

  1,341

Gross margin......................................................................

     336

     222

  1,123

  1,045

     293

Selling and administrative expenses.................................

     227

     172

     830

     736

     208

Research and engineering expenses................................

       52

       37

     200

     201

       51

Equity, royalty and other income from investees..........

       (26)

        (6)

       (70)

       (22)

       (20)

Restructuring, asset impairment and other......................

         -

      (10)

         -

         (8)

         -

Interest expense...................................................................

       25

       17

       90

       61

       25

Loss on early retirement of debt........................................

         -

         8

         -

         8

         -

Other (income) expense, net...............................................

         (1)

         1

       (18)

         (9)

         (7)

Earnings before income taxes, minority interest,
dividends on preferred securities of subsidiary trust
and cumulative effect of change in accounting principles

       59

         3

       91

       78

       36

Provision (benefit) for income taxes ................................

         7

       (53)

       12

       (38)

         9

Minority interest..................................................................

         5

         5

       14

       16

         3

Dividends on preferred securities of subsidiary trust...

         -

         5

       11

       21

         -

Earnings before cumulative effect of change in
 accounting principle...........................................................

      47

       46

       54

       79

      24

Cumulative effect of change in accounting
 principle, net of tax..............................................................

        (4)

         -

         (4)

         3

         -

Net earnings ........................................................................

$     43

$     46

$     50

$     82

$     24

====

====

====

====

====

Earning Per Share

   Basic

      Earnings before cumulative effect of change in
        accounting principle...................................................

$   1.17

$   1.20

$   1.37

$   2.06

$     .62

      Cumulative effect of change in accounting
        principle, net of tax......................................................

       (.09)

         -

       (.09)

        .07

         -

      Net earnings ..................................................................

$   1.08

$   1.20

$   1.28

$   2.13

$     .62

====

====

====

====

====

   Diluted

      Earnings before cumulative effect of change in
        accounting principle...................................................

$   1.07

$   1.10

$   1.36

$   2.06

$     .60

      Cumulative effect of change in accounting
        principle, net of tax.....................................................

       (.07)

         -

       (.09)

        .07

         -

      Net earnings .................................................................

$   1.00

$   1.10

$   1.27

$   2.13

$     .60

====

====

====

====

====

Cash dividends declared per share................................

$     .30

$     .30

$     1.20

$     1.20

$     .30

           
     Weighted average shares (millions)          
                 Basic 40.1 38.9  39.3 38.6 39.4
                 Diluted  46.7 45.2 39.5 38.8 45.9
           

 

 



CUMMINS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)

 

Millions

Dec. 31, 2003

Dec. 31, 2002

 

 

 

Assets
Current assets:

 

 

 Cash and cash equivalents..................................................................

$   108

$   224

 Marketable securities............................................................................

       87

       74

 Receivables, net ....................................................................................

    929

     805

 Inventories..............................................................................................

     733

     641

 Other current assets...............................................................................

     273

     238

 2,130

  1,982

Property, plant and equipment..............................................................

  1,347

  1,305

Investments.............................................................................................

     339

     264

Goodwill....................................................................................................

     344

     343

Other intangibles and deferred charges...............................................

       92

       96

Deferred income taxes.............................................................................

     663

     640

Other non current assets........................................................................

     211

     207

Total assets..............................................................................................

$5,126

$4,837

====

====

Liabilities and shareholders' equity

 

 

Current liabilities:

 

 

 Loans payable.........................................................................................

$     28

$     19

 Current maturities of long-term debt....................................................

       21

     119

 Accounts payable...................................................................................

     557

     427

 Accrued product coverage and marketing expenses.........................

     246

     233

 Other accrued expenses.........................................................................

     539

     531

 1,391

   1,329

Long-term debt.........................................................................................

 1,088

     999

Cummins-obligated mandatorily redeemable convertible
 preferred securities of subsidiary trust holding solely
 convertible subordinated debentures of Cummins...........................

     292

         -

Other long-term liabilities.......................................................................

 1,283

  1,285

Minority interest......................................................................................

     123

       92

Cummins-obligated mandatorily redeemable convertible
 preferred securities of subsidiary trust holding solely
 convertible subordinated debentures of Cummins...........................

         -

     291

 

 

 

Shareholders' equity:

 

 

 Common stock, $2.50 par value, 48.3 and 48.6 shares issued..........

      121

       121

 Additional contributed capital.............................................................

   1,113

    1,115

 Retained earnings...................................................................................

       569

       569

 Accumulated other comprehensive income.......................................

     (492)

     (527)

 Common stock in treasury, at cost, 5.6 and 7.0 shares.....................

     (225)

     (280)

 Common stock held in trust for
    employee benefit plans, 2.3 and 2.6 shares.....................................

     (113)

     (128)

 Unearned compensation.......................................................................

      (24)

       (29)

     949

     841

Total liabilities and shareholders' equity..........................................

$5,126

$4,837

====

====

 



CUMMINS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

For the Year Ended Dec. 31,

Millions

 2003

 2002

 

 

 

Cash flows from operating activities:

 

 

 Net earnings ...........................................................................................

$    50

$    82

 Adjustments to reconcile net earnings to net cash
    from operating activities:
      Cumulative effect of change in accounting principle..................

        4

        (3)

      Loss on early extinguishment of debt............................................

        -

        8

      Depreciation and amortization........................................................

    223

    219

      Restructuring and other...................................................................

        -

      (21)

      Equity in earnings of investees .......... ..........................................

     (54)

        (9)

      Minority interest...............................................................................

      14

      16

      Non-cash compensation expense..................................................

      24

      19

      Amortization of gain on swap unwind.........................................

        (7)

       (4)

      Translation and hedging activities...............................................

      (18)

        2

 Changes in assets and liabilities:
      Receivables.......................................................................................

      (64)

      (87)

      Proceeds (repayments) from sale of receivables. .......................

        -

      (55)

      Inventories........................................................................................

      (63)

      46

      Accounts payable and accrued expenses...................................

        3

      (40)

      Other..................................................................................................

      46

      20

     Total adjustments.............................................................................

    108

      111

 Net cash provided by operating activities........................................

    158

      193

Cash flows from investing activities:
 Property, plant and equipment:
    Capital expenditures...........................................................................

    (111)

      (90)

    Investments in internal use software...............................................

      (29)

      (20)

    Proceeds from disposals...................................................................

      13

      16

 Investments in and advances to joint ventures and alliances.......

        (4)

      (60)

 Acquisitions and dispositions of business activities, net..............

        -

      32

 Purchases of marketable securities.....................................................

    (137)

      (116)

 Sales of marketable securities..............................................................

    134

      86

 Other........................................................................................................

        (1)

        -

 Net cash used in investing activities..................................................

    (135)

    (152)

Net cash provided by operating and investing activities

      23

      41

Cash flows from financing activities:
 Proceeds from borrowings..................................................................

      19

    258

 Payments on borrowings.....................................................................

    (150)

      (87)

 Net borrowings (payments) under short-term credit agreements..

        7

        (4)

 Issuance of common stock...................................................................

      52

      15

 Dividend payments on common stock...............................................

      (50)

      (50)

 Other.........................................................................................................

      (23)

        (1)

 Net cash (used in) provided by financing activities.........................

    (145)

      131

 Effect of exchange rate changes on cash and cash equivalents.....

        6

        2

 
Net change in cash and cash equivalents...........................................

    (116)

    174

Cash and cash equivalents at the beginning of year........................

    224

      50

Cash and cash equivalents at  end of year..........................................

$ 108

$ 224

 

====

====

 



CUMMINS INC.
SEGMENT INFORMATION
(Unaudited)

 

Millions

 

Engine

Power
Generation

Filtration
And Other

International
Distributor

 

Eliminations

 

Total

 
Fourth Quarter Ended Dec. 31, 2003
Net sales

$  984

$  392

$  282

$  190

$  (112)

$1,736

             
Segment EBIT

      32

      14

      25

      13

         -

      84

Net assets

 1,061

    499

    644

    180

        -

2,384

 
Fourth Quarter Ended Dec. 31, 2002

 

 

Net sales

$  776

$  324

$  244

$  153

$    (83)

$1,414

             
Segment EBIT

        (1)

      (11)

      28

      12

        -

      28

Net assets

    909

    522

    645

    168

        -

2,244

 
Year Ended Dec. 31, 2003
Net sales

$3,631

$1,329

$1,056

$  669

$  (389)

$6,296

             
Segment EBIT

      70

      (15)

      86

      40

        -

    181

Year Ended Dec.31, 2002
Net sales

$3,435

$1,226

$  951

$  574

$  (333)

$5,853

             
Segment EBIT

      49

      (25)

      94

      29

        -

    147

 



NON-GAAP FINANCIAL MEASURES
Unaudited

Earnings before interest, taxes, minority interests and preferred dividends (EBIT)

We define EBIT as earnings before interest, taxes, minority interest, preferred dividends and the cumulative effect of any accounting changes.  We use EBIT to assess and measure the operating performance of our business and our business 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 earnings, a GAAP measure, for each of the applicable periods:

Millions                                                        Fourth Quarter                                    Full Year

December 31, 2003

December 31,    2002

December31,    2003

December 31, 2002

EBIT

$   84

$   20

$ 181

$ 139

         
Interest

     25

    17

    90

    61

         
Taxes

      7

   (53)

    12

    (38)

         
Minority interests

      5

     5

    14

    16

         
Preferred dividends

      -

      5

    11

    21

         
Cumulative effect of an accounting change


      4


     -


      4


      (3)

Net earnings

$   43

$   46

$   50

$   82

Free cash flow

We use free cash flow as a measure of our business segments ability to generate cash.  In addition, we have provided guidance to the investment community on our expectations of free cash flow for 2003.  We define free cash flow as the sum of cash flows from operating and investing activities, both of which are GAAP measures included in our Statements of Cash Flows, adjusted to exclude cash flows from the acquisition or disposition of certain business activities, receivable transactions, sales-leaseback transactions and transactions related to marketable securities, none of which we consider to be within the control of our business segment management.  Below is a reconciliation of the GAAP measures of cash flows from operating activities and cash flows from investing activities to the non-GAAP measure of free cash flow.

Quarter Ended

Millions

Dec. 31, 2003

Cash flows provided by operating activities

$  145

Cash flows used in investing activities

      (49)

   Net cash provided by operating and investing activities

      96

Adjustments:
   Net sales of (proceeds from) investments in marketable securities

        (2)

Free cash flow

      94

Cash flows used in financing activities

$    (71)

 



Product Revenues as Percent of Total Sales

% of Consolidated Sales

Q1

Q2

Q3

Q4

YTD

2003:
   Engines 45  44  45  44  44 
   Non-Engine Products 55  56  55  56  56 
2002:          
   Engines 44  46  50  41  45 
   Non-Engine Products 56  54  50  59  55 

Sales

$Millions

Q1

Q2

Q3

Q4

YTD

2003:
  Engine Business
   Heavy-Duty Truck  236 

266 

278  320   1,100 
   Medium Duty Truck+Bus  122 

141 

140  157      560 
   Light Duty Auto+RV  222 

228 

264  221      935 
   Industrial  236 

254 

260  286   1,036 
       Total Engine Business  816 

889 

942  984   3,631 
 Power Generation  267 

307 

363  392   1,329 
  Filtration / Other  254 

265 

255  282   1,056 
 Int'l. Distributors  136 

169 

174  190      669 
  Eliminations    (86)

(91)

(100) (112)     (389)
   TOTAL 1,387 

 1,539 

 1,634   1,736   6,296 
2002:
  Engine Business
   Heavy-Duty Truck  219   265   378  207  1,069 
   Medium Duty Truck+Bus  138   157   191  113   599 
   Light Duty Auto+RV  157   179   236  209   781 
   Industrial  262   249   228  247     986 
       Total Engine Business  776   850  1,033  776  3,435 
 Power Generation  283   304   315  324  1,226 
  Filtration / Other  228   243   236  244   951 
 Int'l. Distributors  124   145   152  153   574 
  Eliminations    (78)    (84)    (88) (83)  (333)
   TOTAL 1,333  1,458  1,648   1,414      5,853 

Engine Shipments

Units

Q1

Q2

Q3

Q4

YTD

2003:
   Midrange

66,300 

69,800 

73,800 

70,900 

280,800 

   Heavy-duty

10,700 

12,800 

13,200 

16,000 

 52,700 

   High Horsepower

 1,900 

 2,000 

 2,400 

 2,500 

 8,800 

TOTAL

78,900 

84,600 

89,400 

89,400 

342,300 

2002:
   Midrange

60,500 

67,000 

71,800 

65,800 

265,100 

   Heavy-duty

11,100 

14,800 

22,700 

 9,300 

 57,900 

   High Horsepower

 2,100 

 2,100 

 2,200 

 2,500 

 8,900 

TOTAL

73,700 

83,900 

96,700 

77,600 

331,900