Contact:

Mark Land
Executive Director - Corporate Communications
(317) 610-2456
mark.d.land@cummins.com

February 2, 2010
For Immediate Release

 2010 forecast of $11 billion in sales and 7 percent EBIT in line with 2009 performance

COLUMBUS, IN – Cummins Inc. (NYSE: CMI) today reported that the fourth quarter 2009 was the most profitable fourth quarter in Company history, eclipsing the previous mark set in 2007.

Sales of $3.40 billion grew 3 percent from $3.29 billion in the fourth quarter 2008, while net income attributable to Cummins Inc. increased to $270 million, or $1.36 a share, from $43 million, or 22 cents a share, a year ago.

Earnings Before Interest and Taxes (EBIT) was $383 million or 11.3 percent of sales, compared to $56 million, or 1.7 percent of sales in the fourth quarter 2008. The fourth quarter 2009 results include a pre-tax charge of $4 million to cover the costs associated with restructuring, while the 2008 results included a $37 million pre-tax charge for similar actions. Excluding these charges, fourth quarter 2009 EBIT was $387 million, or 11.4 percent of sales, compared to $93 million, or 2.8 percent of sales in the same period in 2008.

For all of 2009, the Company reported revenues of $10.8 billion, down 25 percent from $14.3 billion in 2008 as a result of the deep global recession that reduced demand in most markets throughout the year. Despite the downturn, Cummins reported solid profit and significant positive cash flow in 2009 as the Company’s results improved on a quarter-to-quarter basis throughout 2009.

EBIT before restructuring and other charges was $774 million, or 7.2 percent of sales – compared to EBIT before restructuring and other charges of $1.26 billion, or 8.8 percent of sales in 2008. Net income attributable to Cummins Inc. in 2009 declined by 43 percent to $428 million, or $2.16 a share, compared to $755 million, or $3.84 a share in 2008. Excluding the restructuring and other charges, full year 2009 earnings per share was $2.49.

The Company reported an increase in cash of $244 million in the fourth quarter and approximately $500 million for all of 2009, driven by broad-based efforts to lower costs, align manufacturing capacity with demand and reduce inventory levels across all its businesses. The Company had $930 million in cash at the end of 2009.

“Given the extraordinarily challenging economic climate throughout much of the year, we are extremely pleased with our financial results for both the fourth quarter and all of 2009,” said Cummins Chairman and Chief Executive Officer Tim Solso. “By taking decisive action early in the recession to bring our costs in line with real demand for our products, and through the hard work of all our people worldwide, we delivered as we promised in 2009: “We earned a solid profit during the deepest recession in decades and generated a significant amount of cash while continuing to invest in technologies and programs critical to our success.”

In addition to its strong financial performance, the Company invested significantly in new products in 2009, delivering engines and components that will allow Cummins to meet the most stringent emissions standards in the world and enter new product markets in China and other growing regions. 

The Company’s fourth quarter results were driven by continued strength in China, India and Brazil, along with a significant increase for on-highway truck engines and components in North America in advance of new emissions standards that took effect at the beginning of 2010.

Engine segment sales in the fourth quarter jumped by 12 percent compared to the same period in 2008, while Components sales – which are closely tied to engine volumes – grew 8 percent.  When compared to the third quarter of 2009, the gains were even more dramatic: Engine sales increased 51 percent and Components sales were up 24 percent.

At the same time, Cummins’ strong presence in China, India and Brazil continued to play an important role in the Company’s performance in the fourth quarter. The economies in all three countries have rebounded from the recession much more quickly than more mature markets such as the United States and Western Europe. The Company expects revenue in China and India to return to pre-recession levels in 2010, with solid growth also expected in Brazil.

As a result of its fourth quarter performance, Cummins continued its trend of quarter-to-quarter profit gains in 2009, as reflected in the significant increase in EBIT as a percentage of sales over the course of the year. EBIT, excluding restructuring and other charges, has increased each of the past four quarters, growing from 2.8 percent of sales in the fourth quarter 2008 to 11.4 percent of sales in the fourth quarter 2009.

Despite the strong fourth quarter results and the expected continued improvement in large emerging markets, Cummins expects the first half of 2010 to be extremely challenging, especially in the United States and Europe.  The increase in truck engine and components sales in the United States during the fourth quarter was largely the result of OEM customers buying 2009 engines in advance of the EPA emissions regulations, which took effect on Jan. 1, 2010.

Based on current orders and forecasts for the first part of this year, North American truck and bus engine shipments could fall by as much as 80 percent in the first half of 2010, compared to the second half of 2009.  This translates into a 50 percent drop in externally reported revenue for heavy-duty truck and medium-duty truck and bus in the first half of 2010 compared to the second half of 2009.

That weakness also will affect the Company’s components businesses, although higher Cummins component content on the 2010 engines and improved truck sales in emerging markets will partially offset this drop in demand.

In addition, the Company is expecting its Power Generation business to perform at levels consistent with 2009. This late-cycle segment bottomed out in the third quarter of 2009 but has yet to resume strong growth.

The weakness in these segments will be offset by continued strong growth in the Company’s distribution business and further improvement in China, India and Brazil. Cummins also expects to see growth across all its business segments in the second half of the year, compared to the first six months.

“In many ways, the first half of 2010 will be more challenging than the environment we faced in the early part of the recession,” said Cummins President and Chief Operating Officer Tom Linebarger. “We will continue to manage our business very conservatively to ensure that we stay focused on our priorities of earning a solid profit throughout the entire downturn, investing in our future and demonstrating that we care about our customers more than anyone else in the industry.”

Based on its current forecasts, Cummins expects 2010 sales and earnings to be similar to its 2009 performance. The Company’s current full-year guidance calls for sales of $11 billion for the year, with an EBIT of 7 percent of sales.

The Company also expects to continue to generate positive cash flow, and intends to significantly increase its capital investment in 2010. Cummins is forecasting capital spending of approximately $400 million in 2010, an increase of nearly 30 percent from 2009, to fund projects critical to the Company’s long-term growth.

The Company will share more details of its long-term growth strategy at a half-day meeting with investment analysts in New York City on March 16.

“We have worked hard to position Cummins to emerge from the current downturn an even stronger company,” Solso said. “The Company is in the best financial condition in its history. I am confident we have the plans and the people in place to resume our strong growth in 2011 and sustain it well into the future.”

Fourth quarter details (all comparisons are to same period in 2008 unless otherwise noted)

Engine Segment

• Sales - $2.17 billion, up 12 percent
• Segment EBIT - $211 million (9.7 percent of sales), compared to a loss of $40 million 
• Total on-highway sales increased 58 percent
• Revenues in worldwide heavy-duty truck rose 52 percent; medium-duty truck and bus grew 44 percent; sales to the light-duty automotive and RV markets increased 106 percent on the launch of 2010 model year Dodge Ram pickup
• Sales down significantly in most off-highway markets
• Construction sales down 24 percent; commercial marine down 37 percent; Mining down 12 percent; stationary power down 43 percent
  

Power Generation

• Sales - $601 million, down 32 percent
• Segment EBIT - $34 million (5.7 percent of sales), down 55 percent from $75 million (8.5 percent of sales
• Commercial product sales down 36 percent; commercial projects down 26 percent; Consumer products down 11 percent; Alternators down 34 percent; Power Electronics down 8 percent
• All major geographic markets declined from previous year, except India, where sales increased 19 percent
• Despite continued weakness compared to previous year, sales increased 9 percent and segment EBIT improved from 4.2 percent of sales to 5.7 compared to third quarter

Components

• Sales - $732 million, up 8  percent
• Segment EBIT - $73 million (10 percent of sales), up from a loss of $6 million
  Turbocharger sales up 25 percent; Filtration down 12 percent; Emission Solutions up 14 percent; Fuel Systems up 26 percent
• Drop in Filtration sales almost entirely result of shift of exhaust business to Emission Solutions
• Fuel systems and Turbocharger sales led by large increases in volumes in North America as result of on-highway engine purchase in advance of 2010 EPA emissions changes

Distribution

• Sales - $486 million, down 13 percent
• Segment EBIT - $67 million (13.8 percent of sales), up 5 percent from $64 million (11.5 percent of sales)
• Stable JV Income, favorable foreign currency movements and lower spending helped lead to improved segment EBIT, despite lower sales.

Joint Ventures

• Total income - $67 million, up 31 percent from $51 million
• Engine JVs accounted for all the gain from previous year, led by China JVs
• China heavy- and medium-duty truck engine end market sales increased a combined 136 percent in the fourth quarter.

Click  here to read the 2009 Q4 financial statement.

Presentation of Non-GAAP Financial Information
EBIT and net income attributable to Cummins Inc. excluding restructuring and other charges are non-GAAP measures used in this release.  Each is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units.
 
Webcast information
Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

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

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