Cummins Reports Strong Third Quarter Revenues and Earnings; Reaffirms Guidance for Record Profit in 2007



    COLUMBUS, IND., October 25 /CNW/ - Cummins Inc. (NYSE:  CMI) today reported
record revenues and higher earnings for the third quarter, led by
quarterly-best sales in three of its four business segments. Given the
Company's performance through the first nine months of 2007 and the outlook
for the fourth quarter, Cummins remains on pace to meet its earnings guidance
of $7.15-$7.65 a share, which would make 2007 the most profitable year in
company history.

    Sales grew 20 percent to $3.37 billion, from $2.81 billion during the
same period in 2006, eclipsing the Company's previous high mark set in the
second quarter of 2007. Net income for the third quarter increased 7.6 percent
to $184 million, or $1.84 per diluted share, from $171 million, or $1.69 per
diluted share in the third quarter last year.

    Earnings Before Interest and Taxes (EBIT) rose 3.4 percent to $306
million, or 9.1 percent of sales, from $296 million, or 10.5 percent of sales,
in the same period in 2006. Earnings growth was moderated by a downturn at
some OEM customers, and the expected higher costs associated with the
introduction of new emissions-related products.

    "We continue to experience significant growth in most of our markets
around the world, and are well-positioned to take advantage of many
opportunities for future growth," said Cummins Chairman and Chief Executive
Officer Tim Solso. "Our technology leadership has resulted in a sustainable
competitive advantage for Cummins, and we remain focused on producing
profitable growth for all our stakeholders."

    In the Company's Engine business, gains in many markets - most notably in
the light-duty automotive, medium-duty truck, construction and mining markets
- propelled the segment to a 17 percent sales increase compared to the same
period last year. That increase came despite continued weakness in the North
America heavy-duty truck engine market related to emission regulation changes.
The industry forecast for trucks in that market is now approximately 180,000
units for the full year 2007, down almost 50 percent from 2006.

    Even though this market is down significantly from the prior year, the
Company continues to gain market share, reflecting customer preference for
Cummins' emissions-compliant products. Through August, the Company held a
market-leading 36 percent share of the North America Class 8 truck engine
market, compared to 27 percent at the end of 2006.

    The Company's Power Generation business reported record sales of $776
million in the quarter, a 24 percent increase from the third quarter of 2006,
and saw Segment EBIT jump 46 percent over the same period, on strong volumes
and improved pricing.

    The Distribution Business reported record sales and Segment EBIT in the
third quarter, with sales increasing 14 percent to $395 million and Segment
EBIT growing 21 percent from the third quarter of 2006.

    The Components segment - which includes the filtration, exhaust
aftertreatment, turbocharger and fuel systems businesses - reported
significantly improved profitability and higher sales compared to the third
quarter of 2006. Segment sales increased 31 percent from 2006, while segment
EBIT increased 79 percent over last year. Gross margins for the segment were
affected by the costs associated with the introduction of new
emissions-compliant products, but emphasis on cost reduction across the
segment resulted in stronger EBIT performance.

    The Company's strong performance and improved working capital management
resulted in increased cash flow from operations in the third quarter, compared
to both the previous quarter and the same period in 2006. Cummins purchased
1.5 million shares of its common stock at a cost of $174 million as part of
the stock repurchase program authorized by the Company in July 2006. Cummins
also continued to invest in growth opportunities during the third quarter and
expects to spend $320 million to $340 million on capital projects in 2007.

    The Company shared its growth message and financial targets at a
conference for financial analysts in September at the Company's Jamestown
(N.Y.) Engine Plant. During that conference, the Company outlined its plans to
achieve continued profitable growth over the next several years, with an
overall revenue growth target of 12 percent and EBIT target of 10 percent of
sales.

    The Company also expects to spend $2.5 billion on capital expenditures in
the next five years to meet the demand for current and future products, and
with its partners, invest another $1 billion into growing joint venture
operations around the world.

    Also, this month J.D. Power and Associates gave Cummins its highest award
for customer satisfaction in the vocational truck engine category. The Cummins
ISX and ISM heavy-duty engines, manufactured at the Jamestown Engine Plant,
comprise almost all the Cummins models in this market segment.

    Third quarter details

    Engine Segment

    Sales rose 17 percent to a record $2.15 billion. Segment EBIT of $155
million, or 7.2 percent of sales, was 15 percent lower than $183 million (9.9
percent of sales) for the same period in 2006. Segment EBIT was negatively
affected by higher material costs and warranty costs for new
emissions-compliant engines.

    Shipments to the light-duty automotive markets grew 38 percent for the
quarter, while global medium-duty truck engines shipments increased 23
percent. Joint venture income related to engine sales also increased, due to
strength at Dongfeng Cummins Engine Co. in China.

    Power Generation Segment

    The segment continued its extremely strong performance in the third
quarter, with sales increasing 24 percent from a year ago to a record $776
million. Segment EBIT rose 46 percent to $83 million, or 10.7 percent of
sales, compared to $57 million, or 9.1 percent of sales.

    Sales in the Company's Commercial business - the segment's largest - rose
34 percent, with North America, Latin America and Europe driving the growth.
Alternator sales grew 40 percent, led by sales in Europe, China and India. The
Company's consumer business grew by 10 percent, driven by strength in portable
generator sets to international markets and gains in marine and commercial
mobile sales.

    Distribution Segment

    Sales increased 14 percent from the same period in 2006 to $395 million.
Segment EBIT of $46 million, or 11.6 percent of sales, was a quarterly record
and a 21.1 percent increase from $38 million, or 11 percent of sales, for the
same period in 2006. Power generation sales in the Middle East, engine and
parts sales in Europe and strong growth at the Company's North American
distributor joint ventures were key drivers of the business' performance in
the quarter.

    Components Segment

    Sales grew 31 percent from the same period in 2006 to $741 million, with
Turbo Technologies increasing 46 percent, Emission Solutions increasing 220
percent and Filtration reporting an 8 percent increase in sales, compared to
the third quarter of 2006.

    Segment EBIT rose 79 percent to $34 million, or 4.6 percent of sales,
compared to $19 million, or 3.4 percent of sales last year.

    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.

    Presentation of Non-GAAP Financial Information

    EBIT is a non-GAAP measure used in this release. EBIT 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. Management also believes that certain other non-GAAP
measures, such as net income excluding one-time tax benefits and cash flow
from operations excluding pension contributions, can provide meaningful
reflection of underlying trends of the business because they provide a
comparison of historical information that excludes certain items that affect
the overall comparability.

    Forward-looking statements disclosure

    Information provided in this release and on the webcast 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.

    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 more
than 160 countries through its network of 550 Company-owned and independent
distributor facilities and more than 5,000 dealer locations. Cummins reported
net income of $715 million on sales of $11.4 billion in 2006. Press releases
can be found on the Web at www.cummins.com.

    
                  CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                               (Unaudited) (a)

                                 Three months ended     Nine months ended
                             -------------------------- ------------------
                             Sept. 30, Oct. 1,  July 1, Sept. 30, Oct. 1,
                               2007      2006    2007     2007      2006
                             --------- -------- ------- --------- --------
                                               Millions
                                      (except per share amounts)
    Net sales                   $3,372  $2,809   $3,343    $9,532  $8,329
    Cost of sales                2,720   2,192    2,673     7,658   6,500
                             --------- -------- ------- --------- --------
    Gross margin                   652     617      670     1,874   1,829

    Operating expenses and
     income
      Selling and
       administrative
       expenses                    340     291      314       937     853
      Research and
       engineering expenses         82      81       74       236     243
      Investee equity,
       royalty and other
       income                       58      37       52       146     105
      Other operating income
       (expenses), net               1      (4)       7         6      (3)
                             --------- -------- ------- --------- --------

    Operating earnings             289     278      341       853     835

    Interest income                  9      14        7        27      33
    Interest expense                14      23       14        44      76
    Other income, net                8       4        6        23       8
                             --------- -------- ------- --------- --------
    Earnings before income
     taxes and minority
     interests                     292     273      340       859     800

    Provision for income
     taxes                          97      92      112       284     244
    Minority interests in
     earnings of
     consolidated
     subsidiaries                   11      10       14        34      30
                             --------- -------- ------- --------- --------
    Net earnings                $  184  $  171   $  214    $  541  $  526
                             ---------- ------- ------- ---------- -------

    Earnings per common
     share (b)
      Basic                     $ 1.86  $ 1.70   $ 2.14    $ 5.43  $ 5.62
      Diluted                   $ 1.84  $ 1.69   $ 2.13    $ 5.39  $ 5.23

    Cash dividends declared
     per share                  $ 0.25  $ 0.18   $ 0.18    $ 0.61  $ 0.48

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

    (b) All per share amounts reflect the two-for-one stock split
     distributed April 9, 2007.

        Certain reclassifications have been made to 2006 amounts to
         conform to the 2007 presentation.
    

    
                  CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited) (a)

                                              September 30,  December 31,
                                                   2007          2006
                                              -------------- -------------
                                                        Millions
                                                   (except par value)
    ASSETS
    Current assets
      Cash and cash equivalents                      $  624       $   840
      Marketable securities                             120            95
      Receivables, net                                2,025         1,767
      Inventories                                     1,770         1,393
      Other current assets                              408           393
                                              -------------- -------------
       Total current assets                           4,947         4,488
    Long-term assets
      Property, plant and equipment, net              1,544         1,574
      Investments in and advances to equity
       investees                                        448           345
      Goodwill                                          371           356
      Other intangible assets, net                      160           128
      Other assets                                      562           574
                                              -------------- -------------
       Total assets                                  $8,032       $ 7,465
                                              -------------- -------------

    LIABILITIES
    Current liabilities
      Short-term borrowings                          $  115       $   164
      Accounts payable                                1,345         1,104
      Other accrued expenses                          1,244         1,131
                                              -------------- -------------
       Total current liabilities                      2,704         2,399
    Long-term liabilities
      Long-term debt                                    549           647
      Other liabilities                               1,309         1,363
                                              -------------- -------------
       Total liabilities                              4,562         4,409
                                              -------------- -------------

    MINORITY INTERESTS                                  275           254
                                              -------------- -------------
    SHAREHOLDERS' EQUITY (b)
      Common stock, $2.50 par value, 300
       shares authorized, 110.2 and 110.0
       shares issued
                                                        276           137
      Additional paid-in capital                      1,426         1,500
      Retained earnings                               2,488         2,009
      Treasury stock, at cost, 8.1 and 5.8
       shares                                          (469)         (212)
      Common stock held in trust for employee
       benefit plans, 3.4 and 3.8 shares                (82)          (92)
      Unearned compensation                             (12)          (14)
      Accumulated other comprehensive loss             (432)         (526)
                                              -------------- -------------
       Total shareholders' equity                     3,195         2,802
                                              -------------- -------------
    Total liabilities, minority interests and
     shareholders' equity                            $8,032       $ 7,465
                                              -------------- -------------

    (a)  Prepared on an unaudited basis in accordance with accounting
     principles generally accepted in the United States of America.
    (b)  All share amounts reflect the two-for-one stock split distributed
     April 9, 2007.
    

    
                  CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Unaudited) (a)

                                                    Nine months ended
                                                --------------------------
                                                September 30,  October 1,
                                                     2007         2006
                                                -------------- -----------
                                                         Millions
    Net cash provided by operating activities          $  523      $  613
                                                -------------- -----------

    Cash flows from investing activities
     Capital expenditures                                (182)       (152)
     Investments in internal use software                 (46)        (33)
     Proceeds from the disposal of property,
      plant and equipment                                  33          32
     Investments in and advances to equity
      investees                                           (27)        (10)
     Acquisition of businesses, net of cash
      acquired                                            (20)         --
     Investments in marketable securities--
      acquisitions                                       (307)       (180)
     Investments in marketable securities--
      liquidations                                        295         159
     Purchases of other investments                       (52)         --
     Other, net                                           (17)         (1)
                                                -------------- -----------
    Net cash used in investing activities                (323)       (185)
                                                -------------- -----------
    Cash flows from financing activities
     Proceeds from borrowings                               3          80
     Payments on borrowings and capital lease
      obligations                                        (122)       (132)
     Dividend payments on common stock                    (63)        (47)
     Proceeds from issuing common stock                     3           8
     Repurchases of common stock                         (210)        (76)
     Other, net                                           (38)        (16)
                                                -------------- -----------
    Net cash used in financing activities                (427)       (183)
                                                -------------- -----------
    Effect of exchange rate changes on cash and
     cash equivalents                                      11           3
                                                -------------- -----------
    Net (decrease) increase in cash and cash
     equivalents                                         (216)        248
    Cash and cash equivalents at beginning of
     year                                                 840         779
                                                -------------- -----------
    Cash and cash equivalents at end of period         $  624      $1,027
                                                -------------- -----------

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

    
                  CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
                             SEGMENT INFORMATION
                                 (Unaudited)

                                                            Non-
                        Power                              segment
               Engine Generation Components  Distribution  items(1) Total
               ------ ---------- ---------- ------------- --------- ------
                                        Millions
    Three
     months
     ended
     September
     30, 2007
    External
     sales     $1,890    $  594     $  494        $  394   $    --  $3,372
    Inter-
     segment
      sales       263       182        247             1      (693)     --
               ------    ------     -------       ------   -------- ------
       Net
        sales   2,153       776        741           395      (693)  3,372
    Investee
     equity,
     royalty
     and other
     income        24         5          3            26        --      58
    Interest
     income         6         1          1             1        --       9
    Segment
     EBIT         155        83         34            46       (12)    306

    Three
     months
     ended
     October 1,
     2006
    External
     sales     $1,619    $  487     $  361        $  342   $    --  $2,809
    Inter-
     segment
      sales       223       137        203             4      (567)     --
               ------    ------     -------       ------   -------- ------
       Net
        sales   1,842       624        564           346      (567)  2,809
    Investee
     equity,
     royalty
     and other
     income        16         4          2            15        --      37
    Interest
     income        11         2          1            --        --      14
    Segment
     EBIT         183        57         19            38        (1)    296

    Three
     months
     ended July
     1, 2007
    External
     sales     $1,855    $  605     $  516        $  367   $    --  $3,343
    Inter-
     segment
      sales       254       164        241             1      (660)     --
               ------    ------     -------       ------   -------- ------
       Net
        sales   2,109       769        757           368      (660)  3,343
    Investee
     equity,
     royalty
     and other
     income        25         4         (1)           24        --      52
    Interest
     income         6         1         --            --        --       7
    Segment
     EBIT         186        88         48            46       (14)    354

    Nine months
     ended
     September
     30, 2007
    External
     sales     $5,267    $1,730     $1,465        $1,070   $    --  $9,532
    Inter-
     segment
      sales       760       490        690             2    (1,942)     --
               ------    ------     -------       ------   -------- ------
       Net
        sales   6,027     2,220      2,155         1,072    (1,942)  9,532
    Investee
     equity,
     royalty
     and other
     income        66        12          1            67        --     146
    Interest
     income        20         4          2             1        --      27
    Segment
     EBIT         469       248        106           131       (51)    903

    Nine months
     ended
     October 1,
     2006
    External
     sales     $4,898    $1,365     $1,079        $  987   $    --  $8,329
    Inter-
     segment
      sales       661       393        603            12    (1,669)     --
               ------    ------     -------       ------   -------- ------
       Net
        sales   5,559     1,758      1,682           999    (1,669)  8,329
    Investee
     equity,
     royalty
     and other
     income        51        10          6            38        --     105
    Interest
     income        25         5          1             2        --      33
    Segment
     EBIT         552       158         84           105       (23)    876

    (1) Includes intercompany eliminations and unallocated corporate
     expenses.
    

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

                        Three months ended           Nine months ended
                 -------------------------------- ------------------------
                 September 30, October 1, July 1, September 30, October 1,
                     2007         2006     2007       2007         2006
                 ------------- ---------- ------- ------------- ----------
                                         Millions
    Segment EBIT          $306       $296    $354          $903       $876
    Less:
      Interest
       expense              14         23      14            44         76
                 ------------- ---------- ------- ------------- ----------
    Earnings
     before
     income
     taxes and
     minority
     interests            $292       $273    $340          $859       $800
                 ------------- ---------- ------- ------------- ----------
    

    
                  CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
                   FINANCIAL MEASURES THAT SUPPLEMENT GAAP
                                 (Unaudited)

    Earnings before interest, taxes and minority interests (EBIT)

    We define EBIT as earnings before interest expense, provision for
     income taxes and minority interests in earnings 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 earnings, for
     each of the applicable periods:

                                 Three Months Ended     Nine Months Ended
                              ------------------------- -----------------
                              Sept. 30, Oct. 1, July 1, Sept. 30, Oct. 1,
                                2007     2006    2007     2007     2006
                              --------- ------- ------- --------- -------
                                               Millions
    Earnings before interest
     expense, income taxes
     and minority interests        $306    $296    $354      $903    $876

    EBIT as a percentage of
     net sales                      9.1%   10.5%   10.6%      9.5%   10.5%

    Less:
      Interest expense               14      23      14        44      76
      Provision for income
       taxes                         97      92     112       284     244
      Minority interests in
       earnings of
       consolidated
       subsidiaries                  11      10      14        34      30
                              --------- ------- ------- --------- -------
    Net earnings                   $184    $171    $214      $541    $526
                              --------- ------- ------- --------- -------

    Net earnings as a
     percentage of net sales        5.5%    6.1%    6.4%      5.7%    6.3%

    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.
    

    
    Cash from operations excluding pension contributions

                                                For the nine months ended
                                               ---------------------------
                                               September 30,   October 1,
                                                    2007          2006
                                               -------------- ------------
    Cash provided by operations                          $523         $613
    Add back: pension contributions                       144          154
                                               -------------- ------------
    Cash provided by operations excluding
     pension contributions                               $667         $767
                                               -------------- ------------

    We believe cash provided by operations excluding pension contributions
     is a useful measure of our operating performance for the periods
     presented as it illustrates our operating performance without regard
     to funding decisions.  This measure is not in accordance with, or an
     alternative for, GAAP and may not be consistent with measures used by
     other companies.  It should be considered supplemental data.
    

    
                  CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
                            SELECTED FOOTNOTE DATA
                                 (Unaudited)

    NOTE 1.  EARNINGS PER SHARE

    The following is a reconciliation of net earnings and weighted-average
     common shares outstanding for purposes of calculating basic and
     diluted net earnings per share:

                                  Three months ended     Nine months ended
                               ------------------------- -----------------
                               Sept. 30, Oct. 1, July 1, Sept. 30, Oct. 1,
                                 2007     2006    2007     2007     2006
                               --------- ------- ------- --------- -------
                                                Millions
                                       (except per share amounts)
    Net earnings for basic EPS     $ 184   $ 171   $ 214     $ 541   $ 526
      Interest on junior
       convertible
       subordinated
       debentures, net of tax         --      --      --        --       6
                               --------- ------- ------- --------- -------
    Net earnings for diluted
     EPS                           $ 184   $ 171   $ 214     $ 541   $ 532
                               --------- ------- ------- --------- -------
    Weighted-average common
     shares outstanding:
      Basic                         99.1   100.7   100.0      99.7    93.6
      Dilutive effect of stock
       compensation awards           0.8     0.8     0.6       0.6     0.8
      Dilutive effect of
       junior convertible
       subordinated debentures        --      --      --        --     7.3
                               --------- ------- ------- --------- -------
      Diluted                       99.9   101.5   100.6     100.3   101.7
                               --------- ------- ------- --------- -------
    Earnings per common share:
      Basic                        $1.86   $1.70   $2.14     $5.43   $5.62
      Diluted                      $1.84   $1.69   $2.13     $5.39   $5.23

    The Board of Directors authorized a two-for-one split of Cummins stock
     on March 8, 2007, which was distributed on April 9, 2007, to
     shareholders of record as of March 26, 2007. All share and per share
     amounts have been adjusted to reflect the two-for-one stock split.
    

    
    NOTE 2. INVESTEE EQUITY, ROYALTY AND OTHER INCOME

    Investee equity, royalty and other income included in our Condensed
     Consolidated Statements of Earnings for the interim reporting periods
     was as follows:

                                  Three months ended     Nine months ended
                               ------------------------- -----------------
                               Sept. 30, Oct. 1, July 1, Sept. 30, Oct. 1,
                                 2007     2006    2007     2007     2006
                               --------- ------- ------- --------- -------
                                       Millions
    North American
     distributors                    $22     $13     $22      $ 59    $ 34
    Dongfeng Cummins Engine
     Company, Ltd.                    12       4      11        29      16
    Chongqing Cummins Engine
     Company, Ltd.                     5       6       5        15      13
    Cummins MerCruiser Diesel
     Marine LLC.                       2      --       4         9       4
    Tata Cummins Limited               3       2       4         9       8
    Fleetguard Shanghai Filter
     Co. Ltd.                          1       2       2         4       4
    All others                         9       2       2        12      10
                               --------- ------- ------- --------- -------
    Cummins share of net
     earnings                         54      29      50       137      89
    Royalty and other income           4       8       2         9      16
    Investee equity, royalty
     and other income                $58     $37     $52      $146    $105
                               --------- ------- -------  --------  ------

    NOTE 3. PROVISION FOR INCOME TAXES

    Our tax rates are generally less than the 35 percent U.S. income tax
     rate primarily because of lower taxes on foreign earnings, export tax
     benefits and research tax credits.

    Our effective tax rate for the three and nine months ended September
     30, 2007, was 33 percent.  Our 2006 provision was reduced in the
     second quarter by $28 million due to the favorable resolution of tax
     uncertainties related to prior years. In addition, our 2006 provision
     was increased in the first quarter by $12 million for the effect of
     new Indiana tax legislation. As a result, our effective tax rate for
     the three and nine months ended October 1, 2006, was 34 percent and
     31 percent, respectively.

    NOTE 4. DEPRECIATION AND AMORTIZATION

    Depreciation and amortization expense included in operating activities
     of the Condensed Consolidated Statements of Cash Flows for the nine
     months ended September 30, 2007 and October 1, 2006, was $215 million
     and $222 million, respectively.

    NOTE 5. SHIPPING AND HANDLING COSTS

    Our shipping and handling costs are expensed as incurred. Those
     shipping and handling costs associated with operations of our
     inventory distribution centers and warehouse facilities were
     previously classified as "Selling and administrative expenses" in our
     Condensed Consolidated Statements of Earnings. In accordance with
     Emerging Issues Task Force (EITF) Issue No. 00-10 "Accounting for
     Shipping and Handling Fees and Costs," we previously disclosed the
     amount of shipping and handling costs included as "Selling and
     administrative expenses" in the notes to our consolidated financial
     statements.  Beginning January 1, 2007, we revised our accounting
     policy and all shipping and handling costs are now classified as
     "Cost of sales."  This presentation is more consistent with current
     industry practice.  For purposes of comparability, the $37 million
     and $96 million previously classified as "Selling and administrative
     expenses" in the three and nine months ended October 1, 2006, has
     been adjusted retrospectively to apply the new method.  This change
     had no impact on operating earnings, EBIT, net earnings, or earnings
     per share.
    

    
                  CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
               SUPPLEMENTAL STATEMENTS OF EARNINGS INFORMATION
                                 (Unaudited)

    Shipping and handling costs associated with operations of our
     inventory distribution centers and warehouse facilities were
     previously classified as "Selling and administrative expenses" in our
     Consolidated Statements of Earnings.  In accordance with Emerging
     Issues Task Force (EITF) Issue No. 00-10 "Accounting for Shipping and
     Handling Fees and Costs," we previously disclosed the amount of
     shipping and handling costs included as "Selling and administrative
     expenses" in the notes to our consolidated financial statements.
     Beginning January 1, 2007, we revised our accounting policy and all
     shipping and handling costs are classified as "Cost of sales." This
     presentation is more consistent with current industry practice. For
     purposes of comparability, amounts previously classified as "Selling
     and administrative expenses" in previous periods have been adjusted
     retrospectively to apply the new method. The Consolidated Statements
     of Earnings for each of the quarterly periods in 2006 and for the
     2006 and 2005 annual periods with all shipping and handling costs
     included in "Cost of sales" follows:

                                  For the three             For the years
                                   months ended                 ended
                         --------------------------------- ---------------
                         April 2, July 2, Oct. 1, Dec. 31,    Dec. 31,
                           2006    2006    2006     2006    2006    2005
                         -------- ------- ------- -------- ------- -------
                                             Millions
    Net sales             $2,678   $2,842 $2,809   $3,033  $11,362 $9,918
    Cost of sales          2,112    2,196  2,192    2,397    8,897  7,874
                         -------- ------- ------- -------- ------- -------

    Gross margin             566      646    617      636    2,465  2,044

    Operating expenses
     and income
      Selling and
       administrative
       expenses              268      294    291      300    1,153  1,003
      Research and
       engineering
       expenses               82       80     81       78      321    278
      Investee equity,
       royalty and other
       income                 31       37     37       35      140    131
      Other operating
       income
       (expenses), net         1       --     (4)       3       --     --
                         -------- ------- ------- -------- ------- -------

    Operating earnings       248      309    278      296    1,131    894

    Interest income            9       10     14       14       47     24
    Interest expense          27       26     23       20       96    109
    Other (expenses)
     income, net              (2)       6      4       (7)       1    (11)
                         -------- ------- ------- -------- ------- -------

    Earnings before
     income taxes and
     minority interests      228      299    273      283    1,083    798

    Provision for income
     taxes                    85       67     92       80      324    216
    Minority interests
     in earnings of
     consolidated
     subsidiaries              8       12     10       14       44     32
                         -------- ------- ------- -------- ------- -------

    Net earnings          $  135   $  220 $  171   $  189  $   715 $  550
                         -------- ------- ------- -------- ------- -------


    Note:
    Amounts reclassified
     from "Selling and
     administrative
     expenses" to "Cost
     of sales"            $   33   $   26 $   37   $   34  $   130 $  142
    

    
    Supplemental Data

    Sales
     $Millions                   Q1       Q2       Q3       Q4      YTD
                              -------- -------- -------- -------- --------

     2007
      Engine Business
              Heavy-Duty Truck    424      473      520             1,417
              Medium Duty
               Truck+Bus          206      320      359               885
              Light Duty
               Auto+RV            288      418      388             1,094
              Industrial          617      665      661             1,943
              Stationary Power    230      233      225               688
                              -------- -------- -------- -------- --------
              TOTAL ENGINE
               BUSINESS         1,765    2,109    2,153        0    6,027
      Power Generation            675      769      776             2,220
      Components                  657      757      741             2,155
      Distributors                309      368      395             1,072
      Eliminations               (589)    (660)    (693)           (1,942)
                              -------- -------- -------- -------- --------
              TOTAL             2,817    3,343    3,372        0    9,532
                              -------- -------- -------- -------- --------


     2006
      Engine Business
              Heavy-Duty Truck    608      618      632      640    2,498
              Medium Duty
               Truck+Bus          215      247      253      256      971
              Light Duty
               Auto+RV            331      341      267      322    1,261
              Industrial          481      516      507      559    2,063
              Stationary Power    186      174      183      175      718
                              -------- -------- -------- -------- --------
              TOTAL ENGINE
               BUSINESS         1,821    1,896    1,842    1,952    7,511
      Power Generation            536      598      624      658    2,416
      Components                  555      563      564      599    2,281
      Distributors                317      336      346      386    1,385
      Eliminations               (551)    (551)    (567)    (562)  (2,231)
                              -------- -------- -------- -------- --------
              TOTAL             2,678    2,842    2,809    3,033   11,362
                              -------- -------- -------- -------- --------

    ----------------------------------------------------------------------


    ----------------------------------------------------------------------

    Engine Shipments
     Units                       Q1       Q2       Q3       Q4      YTD
                              -------- -------- -------- -------- --------

     2007
              Midrange        107,200  133,500  130,500           371,200
              Heavy-duty       19,000   23,800   24,800            67,600
              High Horsepower   4,300    4,700    4,600            13,600
                              -------- -------- -------- -------- --------
     TOTAL                    130,500  162,000  159,900        0  452,400
                              -------- -------- -------- -------- --------

     2006
              Midrange        114,500  121,800  104,800  118,800  459,900
              Heavy-duty       30,100   31,400   31,000   30,900  123,400
              High Horsepower   3,700    4,000    4,100    4,500   16,300
                              -------- -------- -------- -------- --------
     TOTAL                    148,300  157,200  139,900  154,200  599,600
                              -------- -------- -------- -------- --------
    




For further information:

For further information: Cummins Inc. Mark Land, 317-610-2456 Director
of Public Relations mark.d.land@cummins.com

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