Cummins Reports Strong Third Quarter 2007 Revenues, Earnings

Cummins Reaffirms Guidance for Record Profit in 2007

October 25, 2007, COLUMBUS, IND. - 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. Click here to view the financial schedules. 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.

Source: Cummins Inc.

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