Cummins_070726

Second Quarter 2007 Earnings Teleconference

July 26, 2007

2

Participants

Director – Investor RelationsDean Cantrell

President – Cummins Power GenerationTom Linebarger

Chief Operating OfficerJoe Loughrey

Chief Financial OfficerJean Blackwell

Chairman and Chief Executive OfficerTim Solso

3

Disclosure Regarding Forward-Looking Statements & non-GAAP Financial Measures

This presentation contains certain forward-looking information. Any forward-looking statement involves risk and uncertainty. The Company’s future results may be affected by changes in general economic conditions and by the actions of customers and competitors. Actual outcomes may differ materially from what is expressed in any forward-looking statement. A more complete disclosure about forward-looking statements begins on page 61 of our 2006 Form 10-K, and it applies to this presentation.

This presentation contains certain non-GAAP financial measures such as earnings before interest and taxes (EBIT). Please refer to our website (www.cummins.com) for the reconciliation of those measures to GAAP financial measures.

4

Power GenerationSegmentSelected Financial Data

9.4%11.4%% of Sales

Commercial generator sets and alternator equipment strength in North America, India, the Middle East, and EuropeConsumer growth as portables, commercial mobile, recreational marine, and auxiliary power units offset softness in recreational vehiclesEnergy Solutions business sales growth in EuropeStrong price realization for commercial generator sets and alternators

57%325688EBIT29%171598769Sales

Change Percent

Change AmountQ206Q207$ Millions

Long-term Targets*Sales growth: 8-10%EBIT margin: 7-9%

*Targets represent averages across the economic cycle

5

Engine SegmentSelected Financial Data

10.0%8.8%% of Sales

On-highway revenue flat as medium-duty truck & bus and light-duty automotive offset the North American heavy-duty truck market declineIndustrial revenue up 29% with growth in nearly all marketsLower gross margins due to higher initial new product costs and higher warranty accrual typical for new product introductionsInvesting in new growth opportunities and additional capacity

(2%)(4)190186EBIT11%2131,8962,109Sales

Change Percent

Change AmountQ206Q207$ Millions

Long-term Targets*Sales growth: 6-8%EBIT margin: 7-10%

*Targets represent averages across the economic cycle

6

Engine SegmentSales by Market – On-highway

1%51,2061,211Total on-highway

22%77341418Light-duty automotive/RV

Global heavy-duty truck shipments down 32%; the decrease was limited by a strong export market and market share gains in North AmericaMedium-duty truck shipments up 22% with strength in North America, Brazil, and EuropeBus shipments up 69% on strength in Europe, India, and North AmericaLight-duty automotive/RV shipments up slightly with strong revenue growth on new engine technology; shipments increased to the North American pick-up truck market; market share gains in RV

30%73247320Medium-duty truck and bus(24%)(145)618473Heavy-duty truck

Change Percent

Change AmountQ206Q207$ Millions

7

Engine SegmentSales by Market – Industrial

Total shipments up 9% with double-digit growth in nearly all marketsConstruction equipment shipments up 9% from strength in international marketsShipments for mining up 26% with growth in China, India, Latin America, and AustraliaOil & Gas revenue growing faster than volume with growth in high-horsepower enginesIncreasing high-horsepower capacity 15% by mid 2008

29%149516665Total Industrial

Change Percent

Change AmountQ206Q207$ Millions

8

Distribution SegmentSelected Financial Data

10.7%12.5%% of Sales

Sales up 24%, excluding the reporting change of a North Americandistributor, driven primarily by Europe and the Middle EastEarnings from joint ventures accounted for more than 50% of segment EBIT on strength of sales of power generation equipment in North AmericaPositive trends in key end markets will drive strong year over year growth in revenue and keep EBIT margins about targeted range

28%103646EBIT10%32336368Sales

Change Percent

Change AmountQ206Q207$ Millions

Long-term Targets*Sales growth: 10%EBIT margin: 8-10%

*Targets represent averages across the economic cycle

9

Components SegmentSelected Financial Data

6.0%6.3%% of Sales

Growth in all businesses, particularly Emission Solutions (up $88M) and Turbo Technologies (up $69M) on sales of new products to meet emission standardsFiltration revenue up $30M on OE sales in Europe, Middle East, and Africa, and sales of 2007 emission-related products in North AmericaNew product introduction, metal market cost increases, and aggressive production ramp provided challenges for each of the businesses

41%143448EBIT34%194563757Sales

Change Percent

Change AmountQ206Q207$ Millions

Long-term Targets*Sales growth: 8-10%EBIT margin: 7-9%

*Targets represent averages across the economic cycle

10

Cummins Inc.Selected Income Statement Data

220214Net Earnings ($M)$2.19$2.13Earnings Per Share

Earnings before interest and taxes (EBIT) at 10.6% of sales, above our targeted range of 7 to 10 percentQ206 results included a $28 million credit for the resolution of prior year tax uncertaintiesGross margins lower due to initial new product costs, partially offset by higher pricing for new productsCompany leveraged slower growth in SAR to improve profitability.

2.9%3.1%Product Coverage (% of Net Sales)

13.2%11.6%SAR (% of Net Sales)22.7%20.0%Gross Margin (% of Net Sales)

Q206Q207

11

Joint Venture Income

24Rec. Marine

45Off-highway

1216On-highway

34Power Generation

3752Total JV Income2(1)Components

Engine joint venture income up primarily due to seasonal strengthening in the Chinese on-highway truck marketDistribution increased 71% on strength of power generation equipment sales in North America

1424Distribution

1825EngineQ206Q207$ Millions

12

Cash Flow

4241Pension Funding ($M)

17.1%17.9%Working Capital (% of Net Sales)26

50337

Q206

Cash flow strategy to maintain a strong balance sheet, including funding our liabilities; investing in profitable growth; and returning value to our shareholdersWorking capital net cash outflow of $116 million in Q207 compared to net cash outflow of $66 million in Q206Operating cash flow in Q207 includes $97 million higher cash expenditures for income taxes than in Q206

60Capital Expenditures ($M)

23Share Repurchase ($M)

269Operating Cash Flow ($M)Q207

13

Guidance for 2007Consolidated Results

$230 to $240Global Pension Funding ($M)

$7.15 to $7.65Earning per Share

Up 20 to 25%Joint Venture Earnings

$320 to $350Capital Expenditures ($M)33%Effective Tax Rate

Up 12 to 15%Revenue

Full Year GuidanceItem

14

Guidance for 2007Segment Results

Above top end of target

range

Up ~17%

Up 21-26%

PowerGeneration

In target range in Q4

Slight loss

Up 22-27%

Components

Solidly within target

range

Up 9%

Up 5-7%

Engine

Up ~60%Joint Venture Earnings

Above top end of target

range

EBIT Relative to Target Range

Up 17-22%Revenue

DistributionItem

15

Confident in our ability to perform in 2007 and beyond

Global and end-market revenue

diversification

Longer-term trends that are not cyclical

Infrastructure investments around the world

16

Revenue from International Markets offset Decline in US & Canada

5,520

6,160

(98)

+383

+111

+244

5,200

5,400

5,600

5,800

6,000

6,200

6,400

Q2 '06 YTD US &Canada

EMEA LatinAmerica &

Mexico

Asia &Australia

Q2 '07 YTD

Rev

enue

($ M

)

17

Global adoption of known emission regulations in On-highway markets

US / CanadaEPA ‘10

US / CanadaEPA ’07

Mexico AustraliaEPA ’04

2010200920082007

IndiaChinaEuro III

China India – metro

BrazilBeijing Mexico

AustraliaEuro IV

BeijingEuropeEuro V

18

Thank You for Your Interest in Cummins

We will now take your questions.

Contact Information:Dean Cantrell

Director – Investor Relations(812) 377-3121

[email protected]

Appendix

20

Cummins Inc.Selected Financial Data

26%21%ROE

11.4%10.6%% of Sales31%29%ROANA

Global customer demand leading to growth in nearly every marketImproved cost structure results in all profitability targets met or exceededInvesting in profitable growth opportunities in each operating segment, and in domestic and international markets

9%29325354EBIT18%5012,8423,343Sales

Change Percent

Change AmountQ206Q207$ Millions

Long-term Targets*Sales growth: 8-10%EBIT margin: 7-10%ROANA: 22%ROE: 18%

*Targets represent averages across the economic cycle

21

Cummins Inc.

Q2 2007 – Great QuarterStrong global demand for our productYear-over-year growth in revenue and earningsInvesting in profitable growth opportunities

ComponentsSegment 18%

EngineSegment 53%

Power GenSegment 19%

DistributionSegment 10%

Q2 2007 LTM DataSales: $12.0 billionEBIT: $1,196 millionEBIT Margin: 10.0% (Target: 7-10%)

Q2 2007 LTM Revenue by Segment

22

Cummins Inc.

Mexico/Latin America

8%

Africa/Middle East6%Canada

5%

United States48%

Asia/Australia17%

Europe/CIS16%

Q2 2007 LTM Revenue by Marketing Territory

International revenue is 53% of year-to-date consolidated revenue in 2007Most international areas growing at double digit rateDemonstrates our geographic diversity

23

Cummins – Historical Performance

$181

$543

$907

$1,179 $1,196

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2003 2004 2005 2006 Q2 '07LTM

$ M

illon

s

$6,296

$8,438

$9,918

$11,362

$12,002

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2003 2004 2005 2006 Q2 '07LTM

$ M

illon

s

EBITSales

24

Engine Segment

Emission regulations create opportunitiesAftermarket revenue creates stable earningsEmerging marketsStrategic OEM partnerships High

Horsepower(19-91L) 16%

Midrange(3-9L) 38%

Heavy-Duty(10-15L) 25%

Parts andService 21%

Q2 2007 LTM Segment DataSales: $7.7 billionEBIT: $678 millionEBIT Margin: 8.8% (Target: 7-10%)

Q2 2007 LTM Revenue by Product

25

Engine Segment

Heavy-duty Truck demand remains strongShare gains in Medium-duty Truck & BusIndustrial markets supported by non-residential construction and commodity markets

Light-duty Automotive & RV 17%

Heavy-dutytruck 28%

Medium-dutyTruck & bus 14%

StationaryPower 11%

Q2 2007 LTM Revenue by Market Application

Construction& Ag 16%

Mining/RailGovt/O&G

Marine 14%

Q2 2007 LTM Segment DataSales: $7.7 billionEBIT: $678 millionEBIT Margin: 8.8% (Target: 7-10%)

26

Engines – Historical Performance

$62

$328

$582

$733$678

$0

$100

$200

$300

$400

$500

$600

$700

$800

2003 2004 2005 2006 Q2 '07LTM

$ M

$3,582

$5,424

$6,657

$7,511 $7,668

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

2003 2004 2005 2006 Q2 '07LTM

$ M

Segment EBITSales

27

Power Generation Segment

Commercial57%

Alternators20%

Rental2%

Consumer12%

PowerElectronics

5%Energy

Solutions4%

Q2 2007 LTM Revenue by Product

Turnaround completeStrengthening marketsExpanding market shareConsumer growth opportunitiesGrowing project business capability

Q2 2007 LTM Segment DataSales: $2.7 billionEBIT: $287 millionEBIT Margin: 10.4% (Target: 7-9%)

28

Power Generation – Historical Performance

($19)

$60

$145

$220

$287

($50)

$0

$50

$100

$150

$200

$250

$300

$350

2003 2004 2005 2006 Q2 '07LTM

$ M$1,329

$1,842$1,999

$2,416

$2,726

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2003 2004 2005 2006 Q2 '07LTM

$ M

Segment EBITSales

29

Components Segment

Strategic advantage in emissions complianceSignificant future growth in revenue and earningsMultiple new product introductionsWinning non-CMI business

SpecialtyFiltration

6%Air IntakeSystems

10% Turbocharger28%

FuelSystems

15%Engine

Filtration19%

AcousticExhaust

11%

Q2 2007 LTM Segment DataSales: $2.6 billionEBIT: $114 millionEBIT Margin: 4.4% (Target: 7-9%)

Q2 2007 LTM Revenue by Product

CatalyticExhaust

11%

30

Components – Historical Performance

$86 $84$89

$107$114

$0

$20

$40

$60

$80

$100

$120

2003 2004 2005 2006 Q2 '07LTM

$ M

$1,292

$1,783$2,000

$2,281

$2,577

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2003 2004 2005 2006 Q2 '07LTM

$ M

Segment EBITSales

31

Distribution Segment

Broadening product offeringExpanding global coverageIncreasing equity ownershipExcelling in customer support

Parts,Filters, &

Consumables36%

Service18%

Engines20%

PowerGeneration

26%

Q2 2007 LTM Revenue by Product

Q2 2007 LTM Segment DataSales: $1.4 billionEBIT: $162 millionEBIT Margin: 11.5% (Target: 8-10%)

32

Distribution – Historical Performance

$51

$79

$107

$144

$162

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

2003 2004 2005 2006 Q2 '07LTM

$ M

$669

$973

$1,191

$1,385 $1,409

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2003 2004 2005 2006 Q2 '07LTM

$ M

Segment EBITSales

Non-GAAP Reconciliations

34

Non-GAAP Reconciliation – 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. The table above reconciles EBIT, a non-GAAP financial measure, to our consolidated earnings before income taxes and minority interests, for each of the applicable periods.

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.

$ 227$ 299$ 340Earnings before income taxes and minority interests

$ 16$ 26$ 14Less: Interest Expense

$ 243$ 325$ 354Segment EBIT

April 1, 2007

July 2, 2006

July 1, 2007

Millions

Three Months Ended

35

Non-GAAP Reconciliation – EBITDA

$ 311$ 399$ 428EBITDA

$ 68$ 74$ 74Less: Depreciation & Amortization

$ 243$ 325$ 354Segment EBIT

April 1, 2007

July 2, 2006

July 1, 2007

Millions

Three Months Ended

We define EBITDA as earnings before interest expense, provision for income taxes, minority interests in earnings of consolidated subsidiaries and depreciation and amortization expense. 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, income taxes or depreciation methods. 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.

36

Non-GAAP Reconciliation – Cash From Operations Excluding Pension Contributions

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.

Three Months Ended

$ 379$ 310Cash provided by operations excluding pension contributions

$ 42$ 41Add back: pension contributions

$ 337$ 269Cash provided by operations

July 2, 2006July 1, 2007Millions

37

Non-GAAP Reconciliation – Net Assets

-(824)Pension and other postretirement liabilities

$ 7,337$ 7,844Total assets

2526Debt-related costs not allocated to segments

777662Deferred tax assets not allocated to segments

(837)-Minimum pension liability excluded from net assets

3,5153,695Liabilities deducted in computing net assets

$ 3,857$ 4,285Net assets for operating segments

July 2, 2006

July 1, 2007

Millions

A reconciliation of net assets for operating segments to total assets in our Consolidated Financial Statements is shown in the table above.

38

Non-GAAP Reconciliation – Equity Used for Return on Equity Calculation

-527less Defined benefit pension plans

$ 2,503$ 3,159Total shareholder’s equity

523-less Minimum pension liability adjustment

-9less Defined other postretirement benefits

$ 3,026$ 3,695Equity used for return on equity calculation

July 2, 2006

July 1, 2007

Millions

A reconciliation of equity used for return on equity calculation to total shareholder’s equity in our Consolidated Financial Statements is shown in the table above.