Cummins (CMI) 10-K 26 Feb 10 2009 FY Annual report Financial data

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data	12 Months Ended Dec. 31, 2009		12 Months Ended Dec. 31, 2008		12 Months Ended Dec. 31, 2007
CONSOLIDATED STATEMENTS OF INCOME
NET SALES	$10,800	[1]	$14,342	[1]	$13,048	[1]
Cost of sales	8,631		11,402		10,492
GROSS MARGIN	2,169		2,940		2,556
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	1,239		1,450		1,296
Research, development and engineering expenses	362		422		329
Equity, royalty and interest income from investees (Note 2)	214		253		205
Restructuring and other charges (Note 3)	99		37
Other operating (expense) income, net	(1)		(12)		22
OPERATING INCOME	682		1,272		1,158
Interest income	8		18		36
Interest expense (Note 10)	35		42		58
Other (expense) income, net (Note 24)	(15)		(70)		33
INCOME BEFORE INCOME TAXES	640		1,178		1,169
Income tax expense (Note 4)	156		360		381
NET INCOME	484		818		788
Less: Net income attributable to noncontrolling interests	56		63		49
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$428		$755		$739
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. (Note 19)
Basic (in dollars per share)	2.17		3.87		3.72
Diluted (in dollars per share)	2.16		3.84		3.7
[1](a) Includes sales to nonconsolidated equity investees of $1,830, $2,217 and $1,816 for the years ended December 31, 2009, 2008 and 2007, respectively.

1_CONSOLIDATED STATEMENTS OF IN

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
CONSOLIDATED STATEMENTS OF INCOME
Sales to nonconsolidated equity investees	$1,830	$2,217	$1,816

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
Current assets
Cash and cash equivalents	$930	$426
Marketable securities (Note 5)	190	77
Accounts and notes receivable, net
Trade and other	1,730	1,551
Nonconsolidated equity investees	274	231
Inventories (Note 7)	1,341	1,783
Deferred income taxes (Note 4)	295	347
Prepaid expenses and other current assets	243	298
Total current assets	5,003	4,713
Long-term assets
Property, plant and equipment, net (Note 8)	1,886	1,841
Investments and advances related to equity method investees (Note 2)	574	588
Goodwill (Note 9)	364	362
Other intangible assets, net (Note 9)	228	223
Deferred income taxes (Note 4)	436	491
Other assets	325	301
Total assets	8,816	8,519
Current liabilities
Loans payable (Note 10)	37	39
Accounts payable (principally trade)	957	1,009
Current portion of accrued product warranty (Note 11)	426	427
Accrued compensation, benefits and retirement costs	366	364
Deferred revenue	128	122
Taxes payable (including taxes on income)	94	179
Other accrued expenses	424	499
Total current liabilities	2,432	2,639
Long-term liabilities
Long-term debt (Note 10)	637	629
Pensions (Note 12)	514	574
Postretirement benefits other than pensions (Note 12)	453	452
Other liabilities and deferred revenue (Note 13)	760	745
Total liabilities	4,796	5,039
Cummins Inc. shareholders' equity (Note 15)
Common stock, $2.50 par value, 500 shares authorized, 222.0 and 221.7 shares issued	1,861	1,793
Retained earnings	3,575	3,288
Treasury stock, at cost, 20.7 and 20.4 shares	(731)	(715)
Common stock held by employee benefits trust, at cost, 3.0 and 5.1 shares	(36)	(61)
Unearned compensation	(1)	(5)
Accumulated other comprehensive loss
Defined benefit postretirement plans	(788)	(798)
Other	(107)	(268)
Total accumulated other comprehensive loss	(895)	(1,066)
Total Cummins Inc. shareholders' equity	3,773	3,234
Noncontrolling interests (Note 18)	247	246
Total equity	4,020	3,480
Total liabilities and equity	$8,816	$8,519

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Share data in Millions, except Per Share data	Dec. 31, 2009	Dec. 31, 2008
CONSOLIDATED BALANCE SHEETS
Common stock, par value (in dollars per share)	2.5	2.5
Common stock, shares authorized	500	500
Common stock, shares issued	222	221.7
Treasury stock, shares	20.7	20.4
Common stock held by employee benefits trust, shares	3	5.1

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$484	$818	$788
Adjustments to reconcile net income to net cash provided by operating activities:
Restructuring charges, net	16	34
Depreciation and amortization	326	314	290
Loss on investments		45
Deferred income tax provision (benefit)	5	(1)	60
Equity in income of investees, net of dividends	23	(45)	(75)
Pension expense, net of pension contributions	(36)	(31)	(152)
Other post-retirement benefits expense, net of cash payments	(24)	(35)	(28)
Stock-based compensation expense	20	28	28
Excess tax deficiencies (benefits) on stock-based awards	1	(13)	(11)
Translation and hedging activities	41	(10)	(24)
Changes in current assets and liabilities, net of acquisitions and dispositions (Note 1)	127	(267)	(139)
Changes in long-term liabilities	155	109	95
Other, net	(1)	41	(22)
Net cash provided by operating activities	1,137	987	810
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(310)	(543)	(353)
Investments in internal use software	(35)	(82)	(67)
Proceeds from disposals of property, plant and equipment	10	29	44
Investments in and advances to equity investees	(3)	(89)	(66)
Acquisitions of businesses, net of cash acquired	(2)	(142)	(20)
Proceeds from the sale of businesses		64	35
Investments in marketable securities-acquisitions	(431)	(390)	(405)
Investments in marketable securities-liquidations	335	409	395
Cash flows from derivatives not designated as hedges	(18)	(53)	(14)
Purchase of other investments	(62)	(62)	(57)
Other, net	7	11	(7)
Net cash used in investing activities	(509)	(848)	(515)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	76	76	15
Payments on borrowings and capital lease obligations	(97)	(152)	(144)
Net (payments) borrowings under short-term credit agreements	(2)	33	(12)
Distributions to noncontrolling interests	(34)	(24)	(18)
Dividend payments on common stock	(141)	(122)	(89)
Proceeds from sale of common stock held by employee benefits trust	72	63	13
Repurchases of common stock	(20)	(128)	(335)
Excess tax (deficiencies) benefits on stock-based awards	(1)	13	11
Other, net	6	4	(17)
Net cash used in financing activities	(141)	(237)	(576)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	17	(53)	18
Net increase (decrease) in cash and cash equivalents	504	(151)	(263)
Cash and cash equivalents at beginning of year	426	577	840
CASH AND CASH EQUIVALENTS AT END OF YEAR	$930	$426	$577

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)
In Millions	Total Cummins Inc. Shareholders' Equity	Common Stock	Additional paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss		Treasury Stock	Common Stock Held in Trust	Unearned Compensation	Noncontrolling Interests	Total
BALANCE at Dec. 31, 2006	$2,803	$137	$1,500	$2,009	($525)		($212)	($92)	($14)	$253	$3,056
Comprehensive income:
Net income	739			739						49	788
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities	1				1					3	4
Unrealized gain (loss) on derivatives	(5)				(5)						(5)
Foreign currency translation adjustments	110				110					15	125
Change in pensions and other postretirement defined benefit plans	133				133						133
Total comprehensive income	978									67	1,045
Issuance of shares	15	1	8				6				15
Stock splits		413	(413)
Employee benefits trust activity	13		52				(52)	13			13
Acquisition of shares	(335)						(335)				(335)
Reduction of noncontrolling interests										(11)	(11)
Cash dividends on common stock	(89)			(89)							(89)
Distributions to noncontrolling interests										(18)	(18)
Stock option exercises	1		1								1
Other shareholder transactions	24		20	1					3	1	25
BALANCE at Dec. 31, 2007	3,410	551	1,168	2,660	(286)		(593)	(79)	(11)	292	3,702
Comprehensive income:
Net income	755			755						63	818
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities	(1)				(1)					(2)	(3)
Unrealized gain (loss) on derivatives	(70)				(70)						(70)
Foreign currency translation adjustments	(289)				(289)					(34)	(323)
Change in pensions and other postretirement defined benefit plans	(418)				(418)						(418)
Total comprehensive income	(23)									27	4
Effect of changing pension plan measurement date	(7)			(5)	(2)						(7)
Issuance of shares	7	3	4							9	16
Employee benefits trust activity	64		46					18			64
Acquisition of shares	(128)						(128)				(128)
Reduction of noncontrolling interests										(54)	(54)
Cash dividends on common stock	(122)			(122)							(122)
Distributions to noncontrolling interests										(24)	(24)
Stock option exercises	5		(1)				6				5
Other shareholder transactions	28		22						6	(4)	24
BALANCE at Dec. 31, 2008	3,234	554	1,239	3,288	(1,066)		(715)	(61)	(5)	246	3,480
Comprehensive income:
Net income	428			428						56	484
Other comprehensive income (loss):
Unrealized gain (loss) on derivatives	75				75						75
Foreign currency translation adjustments	86				86					14	100
Change in pensions and other postretirement defined benefit plans	10				10						10
Total comprehensive income	599									70	669
Issuance of shares	7	1	6								7
Employee benefits trust activity	86		61					25			86
Acquisition of shares	(20)						(20)				(20)
Cash dividends on common stock	(141)			(141)							(141)
Distributions to noncontrolling interests										(34)	(34)
Stock option exercises	2		(2)				4				2
Conversion to capital lease (Note 14)										(35)	(35)
Other shareholder transactions	6		2						4		6
BALANCE at Dec. 31, 2009	$3,773	$555	$1,306	$3,575	($895)	[1]	($731)	($36)	($1)	$247	$4,020
[1](1) Comprised of defined benefit postretirement plans of $(788) million, foreign currency translation adjustments of $(117) million, unrealized gain on marketable securities of $2 million and unrealized gain on derivatives of $8 million.

2_CONSOLIDATED STATEMENTS OF CH

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Parenthetical) (USD $)
In Millions	12/31/2009
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Defined benefit postretirement plans	($788)
Foreign currency translation adjustments	(117)
Unrealized gain on marketable securities	2
Unrealized gain on derivatives	$8

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations CumminsInc. (Cummins, the Company, we, our, or us) is a leading global power provider that designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems and engine-related component products, including filtration and emissions solutions, fuel systems, controls and air handling systems. We were founded in 1919 as one of the first manufacturers of diesel engines and are headquartered in Columbus, Indiana. We sell our products to original equipment manufacturers (OEMs), distributors and other customers worldwide. We serve our customers through a network of more than 500 company-owned and independent distributor locations and approximately 5,200 dealer locations in more than 190 countries and territories. Principles of Consolidation Our Consolidated Financial Statements include the accounts of all wholly-owned and majority-owned domestic and foreign subsidiaries where our ownership is more than 50percent of common stock except for majority-owned subsidiaries that are considered Variable Interest Entities (VIEs) where we are not deemed the primary beneficiary. In addition, we also consolidate, regardless of our ownership percentage, VIEs for which we are deemed to be the primary beneficiary. Intercompany balances and transactions are eliminated in consolidation. Where our ownership interest is less than 100percent, the noncontrolling ownership interests are reported in our Consolidated Balance Sheets. The noncontrolling ownership interest in our income, net of tax, is classified as "net income attributable to noncontrolling interests" in our Consolidated Statements of Income. Certain amounts for 2008 and 2007 have been reclassified to conform to the current classifications. All share amounts and per share amounts have been adjusted for the impact of a two-for-one stock split on April9, 2007 and an additional two-for-one stock split on January2, 2008. Investments in Equity Investees We use the equity method to account for our investments in joint ventures, affiliated companies and alliances in which we have the ability to exercise significant influence, generally represented by common stock ownership or partnership equity of at least 20percent but not more than 50percent. Generally, under the equity method, original investments in these entities are recorded at cost and subsequently adjusted by our share of equity in income or losses after the date of acquisition. Investment amounts in excess of our share of an investee's assets are amortized over the life of the related asset creating the excess. If the excess is goodwill, then it is not amortized. Equity in income or losses of each investee is recorded according to our level of ownership; if losses accumulate, we record our share of losses until our investment has been fully depleted. If our investment has been fully depleted, we recognize additional losses only when we are the primary funding source. We eliminate (to the extent of our ownership percentage) in our Consolidated Financial Statements the profit in inventory held by our equity method inve

INVESTMENTS IN EQUITY INVESTEES

INVESTMENTS IN EQUITY INVESTEES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVESTMENTS IN EQUITY INVESTEES	NOTE 2. INVESTMENTS IN EQUITY INVESTEES Investments in and advances to equity investees and our ownership percentage is as follows: December31, In millions Ownership % 2009 2008 North American distributors 30%-50% $ 112 $ 113 Dongfeng Cummins EngineCompany,Ltd. 50% 85 106 Beijing Foton Cummins EngineCo.,Ltd. 50% 52 56 Cummins-Scania XPI Manufacturing,LLC 50% 52 55 Chongqing Cummins Engine Company Ltd. 50% 50 57 Komatsu alliances 20%-50% 48 41 Tata CumminsLtd. 50% 40 35 Shanghai Fleetguard FilterCo.,Ltd. 50% 19 18 Other Various 116 107 Total $ 574 $ 588 Equity, royalty and interest income from investees, net of applicable taxes, was as follows: For the years ended December31, In millions 2009 2008 2007 Distribution Entities North American distributors $ 100 $ 100 $ 83 Komatsu Cummins Chile,Ltda. 12 7 4 All other distributors 3 5 2 Manufacturing Entities Chongqing Cummins Engine Company,Ltd. $ 36 $ 30 $ 22 Dongfeng Cummins Engine Company,Ltd. 33 55 41 Valvoline Cummins,Ltd. 7 2 1 Shanghai Fleetguard FilterCo.,Ltd. 7 8 6 Tata CumminsLtd. 5 7 13 Cummins MerCruiser Diesel Marine,LLC (10 ) 3 11 All other manufacturers 3 14 9 Cummins share of net income 196 231 192 Royalty and interest income 18 22 13 Equity, royalty and interest income from investees $ 214 $ 253 $ 205 Distribution Entities We have an extensive worldwide distributor and dealer network through which we sell and distribute our products and services. Generally, our distributors are divided by geographic region with some of our distributors being wholly-owned by Cummins, some partially-owned and the majority independently owned. We consolidate all wholly-owned distributors and partially-owned distributors where we are the primary beneficiary and account for other partially-owned distributors using the equity method of accounting. North American Distributors Our distribution channel in North America includes 13 partially-owned distributors. Our equity interests in these nonconsolidated entities range from 30percent to 50percent. While each distributor is a separate legal entity, the business of each is the same as that of our wholly-owned distributors based in other parts of the world. All of our distributors, irrespective of their legal structure or ownership, offer the full range of our products and services to customers and end-users in their respective markets. Komatsu Cummins Chile,Ltda. Komatsu Cummins Chile,Ltda. is a joint venture with Komatsu America Corporation. The joint venture is a distributor that offers the full range of our products and services to customers and end-users in the Chilean market. We also have 50percent equity interests in three other int

RESTRUCTURING AND OTHER CHARGES

RESTRUCTURING AND OTHER CHARGES
	12 Months Ended Dec. 31, 2008 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESTRUCTURING AND OTHER CHARGES	NOTE 3. RESTRUCTURING AND OTHER CHARGES 2009 Restructuring Actions In 2009, we executed restructuring actions in response to a reduction in orders in most of our U.S. and foreign markets due to the continuing deterioration in the global economy. We reduced our global workforce by approximately 1,000 professional employees. In addition, we took numerous employee actions at many of our manufacturing locations, including approximately 3,200hourly employees, significant downsizing at numerous facilities and complete closure of several facilities and branch distributor locations. Employee termination and severance costs were recorded based on approved plans developed by the businesses and corporate management which specified positions to be eliminated, benefits to be paid under existing severance plans, union contracts or statutory requirements and the expected timetable for completion of the plan. Estimates of restructuring were made based on information available at the time charges were recorded. Due to the inherent uncertainty involved, actual amounts paid for such activities may differ from amounts initially recorded and we may need to revise previous estimates. We incurred $2million of restructuring expenses for lease terminations and $5million of restructuring expenses for asset impairments in response to closures and downsizing noted above. During 2009, we recorded a total pre-tax restructuring charge of $85million, comprising $90million of charges related to 2009 actions net of the $3million favorable change in estimate related to 2008 actions and the $2million favorable change in estimate related to earlier 2009 actions, in "Restructuring and other charges" in our Consolidated Statements of Income. These restructuring actions included: In millions Year ended December31, 2009 Workforce reductions $ 81 Exit activities 7 Other 2 Changes in estimate (5 ) Total restructuring charges 85 Curtailment loss 14 Total restructuring and other charges $ 99 In addition, as a result of the restructuring actions described above, we also recorded a $14million curtailment loss in our pension and other postretirement plans. See Note12 for additional detail. At December31, 2009, of the approximately 4,200 employees affected by this plan, all terminations were substantially complete. The following table summarizes the balance of accrued restructuring charges by expense type and the changes in the accrued amounts for the applicable periods. The restructuring related accruals were recorded in "Other accrued expenses" in our Consolidated Balance Sheets. In millions Severance Costs Exit Activities Other Total 2009 Restructuring charges $ 81 $ 7 $ 2 $ 90 Cash payments for 2009 actions (70 ) (1 ) (71 ) Noncash items (5 ) (2 ) (7 ) Changes in estimates (2 ) (2 ) Translation 1 1 Balance at December31, 2009 $ 10 $ 1 $ $ 11 We do not include restructuring and other charges in our operat

INCOME TAXES

INCOME TAXES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES	NOTE 4. INCOME TAXES Years ended December31, In millions 2009 2008 2007 Income (loss) before income taxes: U.S. income $ (47 ) $ (25 ) $ 391 Foreign income 687 1,203 778 $ 640 $ 1,178 $ 1,169 The provision (benefit) for income taxes consists of the following: Years ended December31, In millions 2009 2008 2007 Current: U.S. federal and state $ 4 $ 16 $ 137 Foreign 147 345 184 Total current 151 361 321 Deferred: U.S. federal and state (38 ) (26 ) 1 Foreign 43 25 59 Total deferred 5 (1 ) 60 Income tax expense $ 156 $ 360 $ 381 A reconciliation of the income tax provision at the U.S. federal income tax rate of 35percent to the actual effective tax rate is as follows: Years ended December31, 2009 2008 2007 U.S. federal statutory rate 35.0 % 35.0 % 35.0 % State income tax, net of federal effect (0.3 ) 1.4 Research tax credits (2.4 ) (0.8 ) (1.3 ) Differences in rates and taxability of foreign subsidiaries and joint ventures (5.5 ) (4.3 ) (2.4 ) Settlement of tax audits (0.1 ) Other, net (2.4 ) 0.8 (0.1 ) Effective tax rate 24.4 % 30.6 % 32.6 % Except for the United Kingdom (U.K.) group, we provide for the additional taxes that would be due upon the dividend distribution of the income of our foreign subsidiaries and joint ventures assuming the full utilization of foreign tax credits. The unremitted income of the U.K. group is considered to be permanently reinvested and the determination of the deferred tax liability, if any, that might be due should that income be distributed is not practicable. During 2009, we released $19million of deferred U.S. tax liabilities related to prior years unremitted income of the Singapore subsidiaries of our U.K. group now considered to also be permanently reinvested. Income before income taxes includes equity income of foreign joint ventures of $117million, $140million and $118million for the years ended December31, 2009, 2008 and 2007, respectively. This equity income is recorded net of foreign taxes. Additional U.S. income taxes of $31million, $30million and $18million for the years ended December31, 2009, 2008 and 2007, respectively, were provided for the additional U.S. taxes that will ultimately be due upon the distribution of the foreign joint venture equity income. Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets are as follows: December31, In millions 2009 2008 Deferred tax assets: U.S. federal and state carryforward benefits $ 131 $ 27 Foreign carryforward benefits 20 13 Employee benefit plans 429 474 Warranty

MARKETABLE SECURITIES

MARKETABLE SECURITIES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARKETABLE SECURITIES	NOTE 5. MARKETABLE SECURITIES A summary of marketable securities, all of which are classified as current, is as follows: December31, 2009 2008 In millions Cost Gross unrealized gains/(losses) Estimated fair value Cost Gross unrealized gains/(losses) Estimated fair value Available-for-sale: Debt mutual funds $ 123 $ $ 123 $ 63 $ $ 63 Bank debentures 34 34 Certificates of deposit 21 21 Government debt securitiesnon-U.S. 4 (1 ) 3 5 5 Corporate debt securities 2 2 6 6 Equity securities and other 7 7 3 3 Total marketable securities $ 184 $ 6 $ 190 $ 74 $ 3 $ 77 Proceeds from sales and maturities of marketable securities were $335million, $409million and $395million in 2009, 2008 and 2007, respectively. Gross realized gains from the sale of available-for-sale securities were $2million in the year ended 2009 and $1million for each of the years ended 2008 and 2007. Gross realized losses from the sale of available-for-sale securities were less than $1million in 2009, 2008 and 2007. At December31, 2009, the fair value of available-for-sale investments in debt securities by contractual maturity is as follows: Maturity date Fair value In millions 1year or less $ 34 1-5years 2 5-10years 2 After 10years 1 Total $ 39

FAIR VALUE OF FINANCIAL INSTRUM

FAIR VALUE OF FINANCIAL INSTRUMENTS
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS	NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS In September 2006, the FASB amended its existing fair value standards, which defines fair value, establishes a market-based framework for measuring fair value and expands disclosures about fair value measurements. The amended standards are applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. The amended standards do not expand or require any new fair value measures. The standards are effective for financial assets and financial liabilities for fiscal years beginning after November15, 2007. The FASB issued a partial deferral of the effective date of the amended standards that deferred the effective date for most non-financial assets and non-financial liabilities to fiscal years beginning after November15, 2008. We adopted the amended standards prospectively for our fiscal year beginning January1, 2008, except for non-financial assets and non-financial liabilities as deferred until January1, 2009. The amended standards do not require retroactive restatement of prior periods. The adoption did not materially impact our Consolidated Financial Statements. As defined by the amended standards, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. We primarily apply the market approach for recurring fair value measurements and utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The company is able to classify fair value balances based on the observability of those inputs. The amended standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level1 measurement) and the lowest priority to unobservable inputs (level3 measurement). The three levels of the fair value hierarchy defined by GAAP are as follows: Level1Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level1 primarily consists of financial instruments such as listed equities and publicly traded bonds. Level2Pricing inputs are other than quoted prices in active markets included in level1, which are either directly or indirectly observable as of the reported date. Level2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various a

INVENTORIES

INVENTORIES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVENTORIES	NOTE 7. INVENTORIES Inventories include the following: December31, In millions 2009 2008 Finished products $ 785 $ 860 Work-in-process and raw materials 638 1,021 Inventories at FIFO cost 1,423 1,881 Excess of FIFO over LIFO (82 ) (98 ) Total inventories $ 1,341 $ 1,783

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PROPERTY, PLANT AND EQUIPMENT	NOTE 8. PROPERTY, PLANT AND EQUIPMENT Details of our property, plant and equipment balance are as follows: December31, In millions 2009 2008 Land and buildings $ 868 $ 799 Machinery, equipment and fixtures 3,494 3,265 Construction in process 403 (1) 475 4,765 4,539 Less: accumulated depreciation (2,879 ) (2,698 ) Property, plant and equipment, net $ 1,886 $ 1,841 (1) Construction in process includes $216million related to our future light-duty diesel engine platform. We concluded that events and circumstances indicated that these assets should be reviewed for possible impairment. Our review indicated that these assets are recoverable as of December31, 2009.

GOODWILL AND OTHER INTANGIBLE A

GOODWILL AND OTHER INTANGIBLE ASSETS
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GOODWILL AND OTHER INTANGIBLE ASSETS	NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS The following table summarizes the changes in the carrying amount of goodwill for 2009 and 2008: In millions Components Power Generation Engine Distribution Total Goodwill at December31, 2007 $ 339 $ 13 $ 6 $ 7 $ 365 Additions Dispositions Translation and other (3 ) (3 ) Goodwill at December31, 2008 336 13 6 7 362 Additions Dispositions Translation and other 1 1 2 Goodwill at December31, 2009 $ 337 $ 13 $ 6 $ 8 $ 364 We have elected to perform the annual impairment test of our recorded goodwill as required by GAAP as of the end of our third quarter. The results of this annual impairment test indicated that the fair value of each of our reporting units as of September27, 2009 and September28, 2008, exceeded their carrying, or book value, including goodwill, and therefore our recorded goodwill was not subject to impairment. The fair value was determined utilizing the expected present value of future cash flows. Intangible assets that have finite useful lives are amortized over their estimated useful lives. The following table summarizes our other intangible assets with finite useful lives that are subject to amortization: December31, In millions 2009 2008 Software $ 407 $ 343 Accumulated amortization (190 ) (138 ) Net software 217 205 Trademarks, patents and other 34 34 Accumulated amortization (23 ) (16 ) Net trademarks, patents and other 11 18 Total $ 228 $ 223 Amortization expense for software and other intangibles totaled $55million, $50million and $31million for the years ended December31, 2009, 2008 and 2007, respectively. Internal and external software costs (excluding those related to research, re-engineering and training), trademarks and patents are amortized generally over a three to five-year period. The following table represents the projected amortization expense of our intangible assets, assuming no further acquisitions or dispositions. For the years ended In millions 2010 2011 2012 2013 2014 Projected amortization expense $ 68 $ 60 $ 49 $ 34 $ 13

DEBT

DEBT
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEBT	NOTE 10. DEBT Loans Payable Loans payable at December31, 2009 and 2008 were $37million and $39million, respectively, and consist primarily of notes payable to financial institutions. The weighted-average interest rate for notes payable, bank overdrafts and current maturities of long-term debt at December31, 2009, 2008 and 2007, was as follows: December31, 2009 2008 2007 Weighted average interest rate 5.61 7.03 7.43 For the years ended December31, 2009, 2008 and 2007, total interest incurred was $41million, $53million and $63million, respectively. For the same respective periods, interest capitalized was $6million, $11million and $5million. Revolving Credit Facility On June30, 2008, we entered into a three-year revolving credit agreement with a syndicate of lenders. The credit agreement provides us with a $1.1billion senior unsecured revolving credit facility, the proceeds of which are to be used by us for working capital or other general corporate purposes. The credit facility matures on June30, 2011. Amounts payable under our revolving credit facility will rank pro rata with all of our other unsecured, unsubordinated indebtedness. Up to $100million under our credit facility is available for swingline loans denominated in U.S. dollars. Advances under the facility bear interest at (i)a base rate or (ii)a rate equal to LIBOR plus an applicable margin based on the credit ratings of our outstanding senior unsecured long-term debt. Based on our current long-term debt ratings, the applicable margin on LIBOR loans was 0.75percent per annum as of December31, 2009. Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs. The credit agreement includes various covenants, including, among others, maintaining a leverage ratio of no more than 3.0 to 1.0 and maintaining fixed charge coverage ratio of at least 1.5 to 1.0. As of December31, 2009, we were in compliance with all such covenants, including our leverage ratio of 0.6 to 1.0 and our fixed charge coverage ratio of 22.5 to 1.0. The table below is a reconciliation of the maximum capacity of our revolver to the amount available under the facility as of December31, 2009 and 2008. There were no outstanding borrowings under this facility at December31, 2009. Revolving Credit Capacity at December31, In millions 2009 2008 Maximum credit capacity of the revolving credit facility $ 1,100 $ 1,100 Less: Letters of credit against revolving credit facility 35 39 Amount available for borrowing under the revolving credit facility $ 1,065 $ 1,061 As of December31, 2009, we also had $229million available for borrowings under our international and other domestic short-term credit facilities. Commitments against the other domestic and international facilities were $37million as of December31, 2009 and $39million at the end of 2008. Long-term Debt December31, In millions 2009 2008 Long-term debt: Export financing loan, 4.5%, due 2012 $ 49 $

PRODUCT WARRANTY LIABILITY

PRODUCT WARRANTY LIABILITY
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRODUCT WARRANTY LIABILITY	NOTE 11. PRODUCT WARRANTY LIABILITY A summary of the activity in our warranty liability account, which includes warranty provisions and payments, changes in our estimates for pre-existing warranties and changes in our deferred revenue balances associated with extended warranty programs is as follows: December31, In millions 2009 2008 Balance, beginning of year $ 962 $ 749 Provision for warranties issued 364 413 Deferred revenue on extended warranty contracts sold 109 103 Payments (472 ) (383 ) Amortization of deferred revenue on extended warranty contracts (72 ) (64 ) Changes in estimates for pre-existing warranties 84 177 Foreign currency translation 14 (33 ) Balance, end of year $ 989 $ 962 The current portion of our warranty balance is presented as "Current portion of accrued product warranty." The deferred revenue related to extended warranty programs at December31, 2009 and 2008, was $262million and $224million, respectively. The current portion of deferred revenue is included in "Deferred revenue" and the long-term portion is included in "Other liabilities and deferred revenue" in our Consolidated Balance Sheets. During 2008 and 2009, actual cost trends for certain midrange engine products, including product launched in 2007 and for which warranty periods can extend to five years, indicated higher per claim repair cost than the product on which the initial accrual rate was developed. These products include more electronic parts than historical models contributing to the higher cost per claim. In addition, certain products introduced in 2003 and sold prior to 2007 for which the warranty period extended five years also demonstrated a higher cost per claim than that of predecessor products. We increased our liability in 2008 and 2009 as these experience trends became evident.

PENSION AND OTHER POSTRETIREMEN

PENSION AND OTHER POSTRETIREMENT BENEFITS
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PENSION AND OTHER POSTRETIREMENT BENEFITS	NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFITS PENSION PLANS We sponsor several contributory and noncontributory pension plans covering substantially all employees. Generally, hourly employee pension benefits are earned based on years of service and compensation during active employment while future benefits for salaried employees are determined using a cash balance formula. However, the level of benefits and terms of vesting may vary among plans. Pension plan assets are administered by trustees and are principally invested in equity securities and fixed income securities. It is our policy to make contributions to our various qualified plans in accordance with statutory and contractual funding requirements and any additional contributions we determine are appropriate. Obligations, Assets and Funded Status The following tables present the changes in the benefit obligations and the various plan assets, the funded status of the plans, and the amounts recognized in our Consolidated Balance Sheets for our significant pension plans. Non-U.S. plans represent plans sponsored in the U.K. Benefit obligation balances presented below reflect the projected benefit obligation (PBO) for our pension plans. U.S. Plans Non-U.S. Plans In millions 2009 2008 2009 2008 Change in benefit obligation Benefit obligation at beginning of year $ 1,949 $ 1,959 $ 861 $ 1,155 Service cost 47 52 18 28 Interest cost 115 124 57 70 Plan participants' contributions 1 1 Actuarial losses (gains) 120 (27 ) 108 (25 ) Benefits paid from fund (176 ) (153 ) (58 ) (43 ) Benefits paid directly by Company (8 ) (6 ) Exchange rate changes 99 (325 ) Curtailment loss (gain) 5 (10 ) Other 1 (1 ) Benefit obligation at end of year $ 2,053 $ 1,949 $ 1,075 $ 861 Change in plan assets Fair value of plan assets at beginning of year $ 1,484 $ 1,949 $ 745 $ 1,217 Actual return on plan assets 269 (383 ) 134 (175 ) Company contributions 100 70 21 36 Plan participants' contributions 1 1 Benefits paid (176 ) (153 ) (58 ) (43 ) Exchange rate changes 86 (291 ) Other 1 Fair value of plan assets at end of year $ 1,677 $ 1,484 $ 929 $ 745 Funded status (including underfunded and nonfunded plans) at end of year $ (376 ) $ (465 ) $ (146 ) $ (116 ) Amounts recognized in consolidated balance sheets Accrued compensation, benefits and retirement costscurrent liabilities $ (8 ) $ (7 ) $ $ Pensionslong-term liabilities (368 ) (458 ) (146 ) (116 ) Net amount recognized $ (376 ) $ (465 ) $ (146 ) $ (116 ) Amounts recognized in accumulated other comprehensive

OTHER LIABILITIES AND DEFERRED

OTHER LIABILITIES AND DEFERRED REVENUE
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER LIABILITIES AND DEFERRED REVENUE	NOTE 13. OTHER LIABILITIES AND DEFERRED REVENUE Other liabilities and deferred revenue include the following: December31, In millions 2009 2008 Accrued warranty $ 301 $ 311 Deferred revenue 215 173 Accrued compensation 104 108 Other long-term liabilities 140 153 Other liabilities and deferred revenue $ 760 $ 745

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES	NOTE 14. COMMITMENTS AND CONTINGENCIES We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites, as more fully described in Item1 of this Form10-K under "Environmental ComplianceOther Environmental Statutes and Regulations." We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operation, financial condition or cash flows. In June 2008, four of our sites in Southern Indiana, including our Technical Center, experienced extensive flood damage. We have submitted a claim for $237million to our insurance carriers, which includes a claim for business interruption. Our insurance carriers have disputed certain aspects of our claim and each party has filed suit against the other. Although we believe that we should be insured against the full amount of such claim, there can be no assurance that we will be successful in pursuing these claims. U.S. Distributor Commitments We had an agreement with a financial institution that provided financing to certain independent Cummins and Cummins Power Generation distributors in the U.S., and to certain distributors in which we own an equity interest. Under this agreement, if any distributor defaulted under its financing arrangement with the financial institution, and the maturity of amounts owed under the agreement were accelerated, then we were required to purchase from the financial institution, at amounts approximating fair market value, certain property, inventory and rental generator sets manufactured by Cummins that are secured by the distributor's financing agreement. In May 2009, the financing agreement with t

CUMMINS INC. SHAREHOLDERS' EQUI

CUMMINS INC. SHAREHOLDERS' EQUITY
	12 Months Ended Dec. 31, 2008 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CUMMINS INC. SHAREHOLDERS' EQUITY	NOTE 15. CUMMINSINC. SHAREHOLDERS' EQUITY Preferred and Preference Stock We are authorized to issue one million shares each of zero par value preferred and preference stock with preferred shares being senior to preference shares. We can determine the number of shares of each series, and the rights, preferences and limitations of each series. At December31, 2009, there was no preferred or preference stock outstanding. Common Stock During the second quarter of 2008, our shareholders ratified a proposal to increase our common stock authorization to 500million shares. The Board of Directors authorized a pair of two-for-one splits of Cummins stock in 2007, which were distributed on April9, 2007 and January2, 2008, to shareholders of record as of March26, 2007 and December21, 2007, respectively. All share and per share amounts in this Form10-K have been adjusted to reflect the two-for-one stock splits. Changes in shares of common stock, treasury stock and common stock held in trust for employee benefit plans are as follows: In millions Common Stock Treasury Stock Common Stock Held in Trust Balance at December31, 2006 220.0 11.6 7.6 Shares acquired 6.0 Shares issued 0.8 (0.2 ) Employee benefits trust activity 0.8 (1.1 ) Other shareholder transactions (0.4 ) Balance at December31, 2007 220.4 18.2 6.5 Shares acquired 2.3 Shares issued 1.6 (0.1 ) Employee benefits trust activity (1.4 ) Other shareholder transactions (0.3 ) Balance at December31, 2008 221.7 20.4 5.1 Shares acquired 0.4 Shares issued 0.9 (0.1 ) Employee benefits trust activity (2.1 ) Other shareholder transactions (0.6 ) Balance at December31, 2009 222.0 20.7 3.0 Cash Dividends In July 2008, the Board of Directors voted to increase the quarterly cash dividend per common share by 40percent and increased cash dividends to $0.175 per common share in the third and fourth quarters of 2008. In July 2007, the Board of Directors voted to increase the quarterly cash dividend per share by 39percent and increased cash dividends to $0.125 per common share in the third and fourth quarters of 2007. Dividends per share paid to common shareholders for the years ended December31, were as follows: Quarterly Dividends 2009 2008 2007 First quarter $ 0.175 $ 0.125 $ 0.09 Second quarter 0.175 0.125 0.09 Third quarter 0.175 0.175 0.125 Fourth quarter 0.175 0.175 0.125 Total dividends paid to common shareholders for the years ended December31, 2009, 2008 and 2007 were $141million, $122million, and $89million, respectively. Declaration and payment of dividends in the future depends upon income and liquidity position, among other factors. Treasury Stock Shares of common stock repurchased by us are recorded at cost as treasury stock and res

OTHER COMPREHENSIVE INCOME

OTHER COMPREHENSIVE INCOME (LOSS)
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER COMPREHENSIVE INCOME (LOSS)	NOTE 16. OTHER COMPREHENSIVE INCOME (LOSS) Following are the items included in other comprehensive income (loss) and the related tax effects: In millions Before Tax Amount Tax (Provision) Benefit After Tax Amount Year ended December31, 2009 Change in pensions and other postretirement defined benefit plans $ 14 $ (4 ) $ 10 Foreign currency translation adjustments 95 (9 ) 86 Unrealized (loss) gain on marketable securities: Holding gain 2 (1 ) 1 Reclassification of realized gain to net income (2 ) 1 (1 ) Net unrealized (loss) gain Unrealized gain on derivatives: Holding gain 81 (25 ) 56 Reclassification of realized loss to net income 25 (6 ) 19 Net unrealized gain 106 (31 ) 75 Other comprehensive income attributable to CumminsInc. 215 (44 ) 171 Noncontrolling interests 14 14 Total other comprehensive income $ 229 $ (44 ) $ 185 Year ended December31, 2008 Change in pensions and other postretirement defined benefit plans $ (643 ) $ 225 $ (418 ) Foreign currency translation adjustments (312 ) 23 (289 ) Unrealized loss on marketable securities: Holding gain 1 1 Reclassification of realized gain to net income (2 ) (2 ) Net unrealized loss (1 ) (1 ) Unrealized loss on derivatives: Holding loss (92 ) 25 (67 ) Reclassification of realized gain to net income (5 ) 2 (3 ) Net unrealized loss (97 ) 27 (70 ) Other comprehensive loss attributable to CumminsInc. (1,053 ) 275 (778 ) Noncontrolling interests (37 ) 1 (36 ) Total other comprehensive loss $ (1,090 ) $ 276 $ (814 ) Year ended December31, 2007 Change in pensions and other postretirement defined benefit plans $ 225 $ (92 ) $ 133 Foreign currency translation adjustments 138 (28 ) 110 Unrealized gain on marketable securities: Holding gain 3 (1 ) 2 Reclassification of realized gain to net income (1 ) (1 ) Net unrealized gain 2 (1 ) 1 Unrealized loss on derivatives: Holding gain 19 (7 ) 12 Reclassification of realized gain to net income (26 ) 9 (17 ) Net unrealized loss (7 ) 2 (5 ) Other comprehensive income attributable to CumminsInc. 358 (119 ) 239 Noncontrolling interests 19 (1 ) 18 Total other comprehensive income $ 377 $ (120 ) $ 257

STOCK INCENTIVE AND STOCK OPTIO

STOCK INCENTIVE AND STOCK OPTION PLANS
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK INCENTIVE AND STOCK OPTION PLANS	NOTE 17. STOCK INCENTIVE AND STOCK OPTION PLANS In September 2003, our shareholders approved the 2003 Stock Incentive Plan (The Plan), which replaced and succeeded the 1993 Stock Incentive Plan. The Plan, as amended February 2009, allows for the granting of up to $13.5million stock-based awards to executives and employees, of which one-half must be in the form of stock options. Awards available for grant under the plan include, but are not limited to, stock options, stock appreciation rights, performance shares, restricted stock and other stock awards. Stock options are generally granted with a strike price equal to the fair market value of the stock on the date of grant, a life of 10years and a two-year vesting period. Compensation expense is recorded on a straight-line basis over the vesting period beginning on the grant date. The compensation expense is based on the fair value of each option grant using the Black-Scholes option pricing model. Options granted to employees eligible for retirement under the Company's retirement plan are fully expensed as of the grant date. Stock options are also awarded through the Key Employee Stock Investment Plan (KESIP) which allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit. Fifty stock options are granted for every even block of 100 KESIP shares purchased by the employee. The options granted through the KESIP program are considered awards under The Plan and are vested immediately. Compensation expense for stock options granted through the KESIP program is recorded based on the fair value of each option grant using the Black-Scholes option pricing model. Performance shares are granted as target awards and are earned based on our return on equity (ROE) performance. A payout factor has been established ranging from zero to 200percent of the target award based on the actual ROE performance during the two-year period. Any shares earned are then restricted for one additional year. Employees leaving the company prior to the end of the restriction period forfeit their shares. Compensation expense is recorded ratably over the period beginning on the grant date until the shares become unrestricted and is based on the amount of the award that is expected to be earned under the plan formula, adjusted each reporting period based on current information. Restricted common stock is awarded from time to time at no cost to certain employees. Participants are entitled to cash dividends and voting rights. Restrictions limit the sale or transfer of the shares during a defined period. Generally, one-third of the shares are released after two years and one-third of the shares issued are released each year thereafter on the anniversary of the grant date, provided the participant remains an employee. Compensation expense is determined at the grant date and is recognized over the four-year restriction period on a straight-line basis. Compensation expense (net of estimated forfeitures) related to our share-based plans for the year ended December31, 2009, 2008 and 2007 was approximately $20million, $28million and $28mill

NONCONTROLLING INTERESTS

NONCONTROLLING INTERESTS
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NONCONTROLLING INTERESTS	NOTE 18. NONCONTROLLING INTERESTS Noncontrolling interests in the equity of consolidated subsidiaries are as follows: December31, In millions 2009 2008 Cummins IndiaLtd. $ 185 $ 157 Wuxi Cummins Turbo TechnologiesCo.Ltd. 36 31 Other 26 58 Total $ 247 $ 246

EARNINGS PER SHARE

EARNINGS PER SHARE
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER SHARE	NOTE 19. EARNINGS PER SHARE We calculate basic earnings per share (EPS) of common stock by dividing net income attributable to CumminsInc. by the weighted-average number of common shares outstanding for the period. The calculation of diluted EPS assumes the issuance of common stock for all potentially dilutive share equivalents outstanding. We exclude shares of common stock held in the EBT (see Note15) from the calculation of the weighted-average common shares outstanding until those shares are distributed from the EBT to the RSP. Following are the computations for basic and diluted earnings per share: Years ended December31, Dollars in millions, except per share amounts 2009 2008 2007 Net income attributable to CumminsInc. $ 428 $ 755 $ 739 Weighted-average common shares outstanding: Basic 197,445,998 194,958,370 198,443,501 Dilutive effect of stock compensation awards 249,126 1,572,178 1,454,153 Diluted 197,695,124 196,530,548 199,897,654 Earnings per common share attributable to CumminsInc.: Basic $ 2.17 $ 3.87 $ 3.72 Diluted 2.16 3.84 3.70 The weighted-average diluted common shares outstanding for 2009 and 2008 excludes the effect of approximately 53,750 and 16,020 weighted-average shares, respectively, of common stock options, since such options had an exercise price in excess of the monthly average market value of our common stock during that year.

DERIVATIVES

DERIVATIVES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DERIVATIVES	NOTE 20. DERIVATIVES We are exposed to financial risk resulting from volatility in foreign exchange rates, commodity prices and interest rates. This risk is closely monitored and managed through the use of financial derivative instruments including foreign currency forward contracts, commodity swap contracts and interest rate swaps. As stated in our policies and procedures, financial derivatives are used expressly for hedging purposes, and under no circumstances are they used for speculative purposes. When material, we adjust the value of our derivative contracts for counter-party or our credit risk. The results and status of our hedging transactions are reported to senior management on a monthly and quarterly basis. Foreign Exchange Rates As a result of our international business presence, we are exposed to foreign currency exchange risks. We transact business in foreign currencies and, as a result our income experiences some volatility related to movements in foreign currency exchange rates. To help manage our exposure to exchange rate volatility, we use foreign exchange forward contracts on a regular basis to hedge forecasted intercompany and third-party sales and purchases denominated in non-functional currencies. Our internal policy allows for managing anticipated foreign currency cash flow for up to one year. These foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges under GAAP. The effective portion of the unrealized gain or loss on the forward contract is deferred and reported as a component of "Accumulated other comprehensive loss" (AOCL). When the hedged forecasted transaction (sale or purchase) occurs, the unrealized gain or loss is reclassified into income in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects income. The ineffective portion of the hedge, unrealized gain or loss, if any, is recognized in current income during the period of change. As of December31, 2009, the amount expected to be reclassified to income over the next year is not material. For the years ended December31, 2009 and 2008, there were no circumstances that would have resulted in the discontinuance of a cash flow hedge. To minimize the income volatility resulting from the remeasurement of net monetary assets and payables denominated in a currency other than the functional currency, we enter into foreign currency forward contracts, which are considered economic hedges. The objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract. These derivative instruments are not designated as hedges under GAAP. The table below summarizes our outstanding foreign currency forward contracts. The currencies in this table represent 93percent of the notional amounts of contracts outstanding as of December31, 2009. Currency Denomination In millions Currency December31, 2009 United States Dollar (USD) 107 British Pound Sterling (GBP) 70 Euro (EUR) 12 Singapore Dollar (SGD) 15 Indian Rupee (INR)

SALES OF ACCOUNTS RECEIVABLE

SALES OF ACCOUNTS RECEIVABLE
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SALES OF ACCOUNTS RECEIVABLE	NOTE 21. SALES OF ACCOUNTS RECEIVABLE In January 2004, we entered into a three-year facility agreement with a financial institution to sell a designated pool of trade receivables to Cummins Trade Receivables,LLC (CTR), a wholly-owned special purpose subsidiary. In July 2007, we amended the agreement to extend the facility until July 2010, and raised the purchase limitation from $200million to $400million. The agreement also provides us with an option to increase the purchase limitation up to $500million upon approval. As necessary, CTR may transfer a direct interest in its receivables, without recourse, to the financial institution. To maintain a balance in the designated pools of receivables sold, we sell new receivables to CTR as existing receivables are collected. Receivables sold to CTR in which an interest is not transferred to the financial institution are included in "Receivables, net" on our Consolidated Balance Sheets. The maximum interest in sold receivables that can be outstanding at any point in time is limited to the lesser of $400million or the amount of eligible receivables held by CTR. There are no provisions in this agreement that require us to maintain a minimum investment credit rating; however, the terms of the agreement contain the same financial covenants as our revolving credit facility (see Note10). As of December31, 2009, the amount available under this program was $154million. As of December31, 2009 and 2008, there were no amounts outstanding under this program. No accounts receivable sold to CTR were written off during 2009, 2008 or 2007. The sold receivables servicing portfolio, which is included in receivables and the proceeds from the sale of receivables and other related cash flows are as follows: As of and for the years ended December31, In millions 2009 2008 2007 Sold receivables servicing portfolio $ 806 $ 652 $ 759 Receivables sold to special purpose subsidiary 5,424 6,694 6,615 Collections reinvested in special purpose subsidiary 5,270 6,801 6,575 Servicing fees and interest 3 1 1

ACQUISITIONS AND DIVESTITURES

ACQUISITIONS AND DIVESTITURES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACQUISITIONS AND DIVESTITURES	NOTE 22. ACQUISITIONS AND DIVESTITURES During 2008, we purchased a majority interest in three previously independent North American distributors in order to increase our ownership interests in key portions of the distribution channel. The acquisitions were accounted for under the purchase method of accounting and resulted in an aggregate purchase price of $81million which we funded with $54million of borrowings and $27million of cash. The assets of the acquired businesses were primarily accounts receivable, inventory and fixed assets. There was less than $1million of goodwill generated from these transactions. During the first three months of 2007, we purchased the remaining interest in a manufacturing joint venture and acquired ownership of an international independent distributor for approximately $20million. We recorded goodwill of $13million for these two transactions. In July 2008, we entered into a transaction with two Fiat group companies to (1)sell our one-third interest in the European Engine Alliance (EEA) joint venture and simultaneously (2)purchase the remaining 50percent interest in CDC. As a result, we now own 100percent of CDC and no longer have an ownership interest in EEA. CDC was previously included in our consolidated results as we were considered the primary beneficiary under GAAP. We sold our remaining interest in EEA for $64million and subsequently purchased the remaining interest in CDC for $61million, however, because the transactions were entered into simultaneously with the same counterparty, it is considered a non-monetary exchange for accounting purposes. Thus, we accounted for the transactions at fair value in accordance with GAAP accounting for exchanges of nonmonetary assets. Because fair value and book value were reasonably close, there was no material gain or loss recorded on the sale of EEA. In addition, there were no significant adjustments from book value for any assets or liabilities of CDC recorded upon the acquisition of the remaining 50percent interest.

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
VARIABLE INTEREST ENTITIES	NOTE 23. VARIABLE INTEREST ENTITIES We consolidate certain VIEs if we are deemed to be the primary beneficiary, defined in FASB standards for consolidation of variable interest entities, as the entity that absorbs a majority of the VIEs' expected losses, receives a majority of the VIEs' expected residual returns, or both. We have variable interests in certain businesses accounted for under the equity method of accounting that are deemed VIEs and are subject to the provisions of GAAP accounting for variable interest entities. During 2001, we entered into a sale-leaseback transaction with a financial institution with regard to certain heavy-duty engine manufacturing equipment. The accounting for the original sale-leaseback transaction is discussed in Note14. The financial institution created a grantor trust to act as the lessor in the arrangement. The financial institution owns 100percent of the equity in the trust. The grantor trust has no assets other than the equipment and its rights to the lease agreement with us. On the initial sale, we received $125million from the financial institution which was financed with $99million of non-recourse debt and $26million of equity. Our obligations to the grantor trust consist of the payments due under the lease and a $9million guarantee of the residual value of the equipment. In addition, we had a fixed price purchase option that was exercisable on January14, 2009, for approximately $35million; however, we decided not to exercise this option as discussed in Note14. We had previously determined that the grantor trust is a VIE under GAAP and due primarily to the existence of the residual value guarantee, we determined that we were the primary beneficiary of the VIE. As a result, we began consolidating the grantor trust as of December31, 2003, even though we do not own any of its equity. In April 2008, we made the final payment on the non-recourse debt. As further discussed in Note14, we amended our lease agreement in January 2009 to remove the residual value guarantee and as a result, determined that we were no longer the primary beneficiary of the trust. Cummins Komatsu Engine Corporation (CKEC) is an engine manufacturing entity jointly owned and operated by us and our equity partner. We were deemed the primary beneficiary of this VIE due to the pricing arrangements of purchases and the substantial volume of purchases we made from the VIE. As of December31, 2009, CKEC has no unsecured debt. Creditors of this entity have no recourse to our general credit. Conversely, our creditors have no recourse to the assets of CKEC. Results of CKEC for the year ended December31, 2009, are included in our Consolidated Statements of Income and a significant amount of their sales is eliminated in consolidation. The table below shows the amount of assets and liabilities from CKEC included in our consolidated results, after eliminating intercompany items, as of December31, 2009: In millions Current assets (Primarily receivables and inventory) $ 9 Long-term assets 10 Current liabilities 3 We also have variable interests in two North American distributors that were

OTHER

OTHER (EXPENSE) INCOME
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER (EXPENSE) INCOME	NOTE 24. OTHER (EXPENSE) INCOME Other (expense) income included the following: Years ended December31, In millions 2009 2008 2007 Foreign currency (losses) gains $ (20 ) $ (46 ) $ 28 Bank charges (14 ) (12 ) (12 ) Change in cash surrender value of corporate owned life insurance(1) (4 ) (36 ) Dividend income 5 6 5 Other, net 18 18 12 Total other (expense) income, net $ (15 ) $ (70 ) $ 33 (1) The change in the cash surrender value of corporate owned life insurance was due to market deterioration, especially in the fourth quarter of 2008, which included the write down of certain investments to zero.

OPERATING SEGMENTS

OPERATING SEGMENTS
	12 Months Ended Dec. 31, 2009 USD / shares
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OPERATING SEGMENTS	NOTE 25. OPERATING SEGMENTS Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Cummins chief operating decision-maker (CODM) is the Chief Executive Officer. Our reportable operating segments consist of the following: Engine, Power Generation, Components and Distribution. This reporting structure is organized according to the products and markets each segment serves and allows management to focus its efforts on providing enhanced service to a wide range of customers. The Engine segment produces engines and parts for sale to customers in on-highway and various industrial markets. The engines are used in trucks of all sizes, buses and recreational vehicles, as well as various industrial applications including construction, mining, agriculture, marine, oil and gas, rail and military. The Power Generation segment is an integrated provider of power systems which sells engines, generator sets and alternators and rents power equipment for both standby and prime power uses. The Components segment includes sales of filtration products, exhaust and aftertreatment systems, turbochargers and fuel systems. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets, and service parts, as well as performing service and repair activities on our products and maintaining relationships with various original equipment manufacturers. We use segment EBIT (defined as earnings before interest expense, taxes and noncontrolling interests) as a primary basis for the CODM to evaluate the performance of each of our operating segments. Segment amounts exclude certain expenses not specifically identifiable to segments. The accounting policies of our operating segments are the same as those applied in the Consolidated Financial Statements. We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We have allocated certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as information technology, human resources, legal and finance. We also do not allocate debt-related items, actuarial gains and losses, prior service costs or credits, restructuring and other charges, investment gains or losses, flood damage gains or losses or income taxes to individual segments. Segment EBIT may not be consistent with measures used by other companies. Summarized financial information regarding our reportable operating segments at December31, is shown in the table below: In millions Engine Power Generation Components Distribution Non-segment items(1) Total 2009

Document and Entity Information

Document and Entity Information (USD $)
In Billions, except Share data	12 Months Ended Dec. 31, 2009	Jan. 29, 2010	Jun. 28, 2009
Document and Entity Information
Entity Registrant Name	CUMMINS INC
Entity Central Index Key	0000026172
Document Type	10-K
Document Period End Date	2009-12-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$7
Entity Common Stock, Shares Outstanding		201,359,036