Cummins (CMI) 10-Q 29 Apr 10 2010 Q1 Quarterly report Financial data

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 28, 2010		3 Months Ended Mar. 29, 2009
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NET SALES	$2,478	[1]	$2,439	[1]
Cost of sales	1,877		1,994
GROSS MARGIN	601		445
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	335		300
Research, development and engineering expenses	92		85
Equity, royalty and interest income from investees (Note 4)	76		33
Restructuring and other charges (Note 12)			66
Other operating (expense) income, net	(4)		2
OPERATING INCOME	246		29
Interest income	3		2
Interest expense	9		7
Other income (expense), net	17		(3)
INCOME BEFORE INCOME TAXES	257		21
Income tax expense	87		7
CONSOLIDATED NET INCOME	170		14
Less: net income attributable to noncontrolling interests	21		7
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$149		$7
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic (in dollars per share)	0.75		0.04
Diluted (in dollars per share)	0.75		0.04
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic (in shares)	198.4		196.8
Dilutive effect of stock compensation awards (in shares)	0.3		0.2
Diluted (in shares)	198.7		197
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share)	0.175		0.175
[1](a) Includes sales to nonconsolidated equity investees of $428 million and $429 million for the three months ended March 28, 2010 and March 29, 2009, respectively.

1_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) (USD $)
In Millions	3 Months Ended Mar. 28, 2010	3 Months Ended Mar. 29, 2009
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sales to nonconsolidated equity investees	$428	$429

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	3 Months Ended Mar. 28, 2010	12 Months Ended Dec. 31, 2009
Current assets
Cash and cash equivalents	$885	$930
Marketable securities	217	190
Accounts and notes receivable, net
Trade and other	1,502	1,730
Nonconsolidated equity investees	225	274
Inventories (Note 6)	1,549	1,341
Deferred income taxes	302	295
Prepaid expenses and other current assets	240	243
Total current assets	4,920	5,003
Long-term assets
Property, plant and equipment	4,696	4,765
Accumulated depreciation	(2,834)	(2,879)
Property, plant and equipment, net	1,862	1,886
Investments and advances related to equity method investees	638	574
Goodwill	365	364
Other intangible assets, net	239	228
Deferred income taxes	413	436
Other assets	332	325
Total assets	8,769	8,816
Current liabilities
Loans payable	95	37
Accounts payable (principally trade)	1,030	957
Current portion of accrued product warranty (Note 7)	387	426
Accrued compensation, benefits and retirement costs	308	366
Deferred revenue	144	128
Other accrued expenses	522	518
Total current liabilities	2,486	2,432
Long-term liabilities
Long-term debt	640	637
Pensions	406	514
Postretirement benefits other than pensions	466	453
Other liabilities and deferred revenue	719	760
Total liabilities	4,717	4,796
Commitments and contingencies (Note 8)
Cummins Inc. shareholders' equity
Common stock, $2.50 par value, 500 shares authorized, 221.9 and 222.0 shares issued	1,862	1,860
Retained earnings	3,689	3,575
Treasury stock, at cost, 21.3 and 20.7 shares	(769)	(731)
Common stock held by employee benefits trust, at cost, 3.0 and 3.0 shares	(36)	(36)
Accumulated other comprehensive loss
Defined benefit postretirement plans	(794)	(788)
Other	(161)	(107)
Total accumulated other comprehensive loss	(955)	(895)
Total Cummins Inc. shareholders' equity	3,791	3,773
Noncontrolling interests	261	247
Total equity	4,052	4,020
Total liabilities and equity	$8,769	$8,816

2_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Share data in Millions, except Per Share data	Mar. 28, 2010	Dec. 31, 2009
CONDENSED 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	221.9	222
Treasury stock, shares	21.3	20.7
Common stock held by employee benefits trust, shares	3	3

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 28, 2010	3 Months Ended Mar. 29, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$170	$14
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Restructuring charges, net of cash payments		48
Depreciation and amortization	79	76
Gain on fair value adjustment for consolidated investee (Note 13)	(12)
Deferred income tax provision (benefit)	13	(21)
Equity in income of investees, net of dividends	(53)	52
Pension expense, net of pension contributions	(93)	15
Other post-retirement benefits expense, net of cash payments	(1)	(8)
Stock-based compensation expense	6	6
Translation and hedging activities	(9)	19
Changes in current assets and liabilities, net of acquisitions and divestitures:
Accounts and notes receivable	275	49
Inventories	(189)	44
Other current assets	3	9
Accounts payable	54	(103)
Accrued expenses	(154)	(173)
Changes in long-term liabilities	29	36
Other, net	8	13
Net cash provided by operating activities	126	76
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(47)	(64)
Investments in internal use software	(17)	(11)
Proceeds from disposals of property, plant and equipment	38	6
Investments in and advances (to) from equity investees	(11)	5
Acquisition of businesses, net of cash acquired (Note 13)	(71)	(2)
Investments in marketable securities-acquisitions	(133)	(69)
Investments in marketable securities-liquidations	108	78
Cash flows from derivatives not designated as hedges	(11)	(33)
Net cash used in investing activities	(144)	(90)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	70	7
Payments on borrowings and capital lease obligations	(20)	(19)
Net borrowings under short-term credit agreements	5	4
Distributions to noncontrolling interests	(1)	(9)
Dividend payments on common stock	(35)	(35)
Repurchases of common stock	(39)
Other, net	13	(1)
Net cash used in financing activities	(7)	(53)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(20)	(6)
Net decrease in cash and cash equivalents	(45)	(73)
Cash and cash equivalents at beginning of year	930	426
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$885	$353

4_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN 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, 2008	$3,234	$554	$1,239	$3,288	($1,066)		($715)	($61)	($5)	$246	$3,480
Comprehensive income:
Net income	7			7						7	14
Other comprehensive income (loss) (Note 11)	14				14					(5)	9
Total comprehensive income	21									2	23
Issuance of shares	1	1									1
Cash dividends on common stock	(35)			(35)							(35)
Distribution to noncontrolling interests										(9)	(9)
Stock option exercises			(1)				1
Conversion to capital lease										(35)	(35)
Other shareholder transactions	2		(3)					3	2		2
Balance at Mar. 29, 2009	3,223	555	1,235	3,260	(1,052)		(714)	(58)	(3)	204	3,427
Balance at Dec. 31, 2009	3,773	555	1,306	3,575	(895)		(731)	(36)	(1)	247	4,020
Comprehensive income:
Net income	149			149						21	170
Other comprehensive income (loss) (Note 11)	(60)				(60)					4	(56)
Total comprehensive income	89									25	114
Issuance of shares	1		1								1
Employee benefits trust activity	6		6								6
Acquisition of shares	(39)						(39)				(39)
Cash dividends on common stock	(35)			(35)							(35)
Distribution to noncontrolling interests										(1)	(1)
Stock option exercises	1						1				1
Deconsolidation of variable interest entity (Note 3)										(11)	(11)
Other shareholder transactions	(5)		(6)						1	1	(4)
Balance at Mar. 28, 2010	$3,791	$555	$1,307	$3,689	($955)	[1]	($769)	($36)		$261	$4,052
[1]Comprised of defined benefit postretirement plans of $(794) million, foreign currency translation adjustments of $(166) million, unrealized gain on marketable securities of $2 million and unrealized gain on derivatives of $3 million.

5_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) (USD $)
In Millions	Mar. 28, 2010
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Defined benefit postretirement plans	($794)
Foreign currency translation adjustments	(166)
Unrealized gain on marketable securities	2
Unrealized gain on derivatives	$3

NATURE OF OPERATIONS

NATURE OF OPERATIONS
	3 Months Ended Mar. 28, 2010
NATURE OF OPERATIONS
NATURE OF OPERATIONS	NOTE 1. 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.

BASIS OF PRESENTATION

BASIS OF PRESENTATION
	3 Months Ended Mar. 28, 2010
BASIS OF PRESENTATION
BASIS OF PRESENTATION	NOTE 2. BASIS OF PRESENTATION The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements have been prepared pursuant to the rulesand regulations of the Securities and Exchange Commission (SEC) and in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rulesand regulations. Certain reclassifications have been made to prior period amounts to conform to the presentation of the current period condensed financial statements. Our reporting period ends on the Sunday closest to the last day of the quarterly calendar period. The first quarters of 2010 and 2009 ended on March28, and March29, respectively. The interim periods for both 2010 and 2009 contain 13 weeks, respectively. Our fiscal year ends on December31, regardless of the day of the week on which December31 falls. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the Condensed Consolidated Financial Statements. Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount and other rate assumptions for pension and other postretirement benefit expenses, restructuring costs, income taxes and deferred tax valuation allowances, lease classifications and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. In preparing our Condensed Consolidated Financial Statements, we evaluated subsequent events through the date our quarterly report was filed with the Securities and Exchange Commission. The weighted-average diluted common shares outstanding exclude the anti-dilutive effect of certain stock options since such options had an exercise price in excess of the monthly average market value of our common stock. The options excluded from diluted earnings per share for the three month periods ended March28, 2010, and March29, 2009, were as follows: Three months ended March28, 2010 March29, 2009 Options excluded 18,638 58,050 You should read these interim condensed financial statements in conjunction with the Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended December31, 2009. Our interim period financial results for the three month interim periods presented are not neces

RECENTLY ADOPTED AND RECENTLY I

RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
	3 Months Ended Mar. 28, 2010
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS	NOTE 3. RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Recently Adopted In January2010, the Financial Accounting Standards Board (FASB) amended its standards related to fair value measurements and disclosures, which are effective for interim and annual fiscal periods beginning after December15, 2009, except for disclosures about certain Level 3 activity which will not become effective until interim and annual periods beginning after December15, 2010. The new standard requires us to disclose transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers as well as activity in Level 3 fair value measurements. The new standard also requires a more detailed level of disaggregation of the assets and liabilities being measured as well as increased disclosures regarding inputs and valuation techniques of the fair value measurements. Our disclosures related to the new standard are included in Note 9. In June2009, the FASB amended its standards for accounting for transfers of financial assets, which was effective for interim and annual fiscal periods beginning after November15, 2009. The new standard removes the concept of a qualifying special-purpose entity from GAAP. The new standard modifies the financial components approach used in previous standards and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized. The new standard also requires enhanced disclosure regarding transfers of financial interests and a transferors continuing involvement with transferred assets. The new standard requires us to report any activity under our receivable sales program as secured borrowings. As of March28, 2010, there were no outstanding amounts under our receivable sales program and there was no significant activity during the quarter. In June2009, the FASB amended its existing standards related to the consolidation of variable interest entities, which was effective for interim and annual fiscal periods beginning after November15, 2009. The new standard requires entities to analyze whether their variable interests give it a controlling financial interest of a variable interest entity (VIE) and outlines what defines a primary beneficiary. The new standard amends GAAP by: (a)changing certain rulesfor determining whether an entity is a VIE; (b)replacing the quantitative approach previously required for determining the primary beneficiary with a more qualitative approach; and (c)requiring entities to continuously analyze whether they are the primary beneficiary of a VIE among other amendments. The new standard also requires enhanced disclosures regarding an entitys involvement in a VIE. The only significant impact of the adoption of this standard was to deconsolidate Cummins Komatsu Engine Corporation (CKEC) as of January1, 2010 and to account for CKEC under GAAP accounting for equity method investees. The impact of the deconsolidation on our Condensed Consolidated Statements of Income was minimal as all sales were eliminated in consolidation in the past. The most significant impacts on our Condensed Consolidat

EQUITY, ROYALTY AND INTEREST IN

EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
	3 Months Ended Mar. 28, 2010
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES	NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the interim reporting periods was as follows: Three months ended March28, March29, In millions 2010 2009 Distribution Entities North American distributors $ 23 $ 26 Komatsu Cummins Chile, Ltda. 3 2 All other distributors 1 1 Manufacturing Entities Dongfeng Cummins Engine Company, Ltd. 18 Chongqing Cummins Engine Company, Ltd. 10 8 Tata Cummins Ltd. 4 (2 ) All other manufacturers 10 (5 ) Cummins share of net income 69 30 Royalty and interest income 7 3 Equity, royalty and interest income from investees $ 76 $ 33

PENSION AND OTHER POSTRETIREMEN

PENSION AND OTHER POSTRETIREMENT BENEFITS
	3 Months Ended Mar. 28, 2010
PENSION AND OTHER POSTRETIREMENT BENEFITS
PENSION AND OTHER POSTRETIREMENT BENEFITS	NOTE 5. PENSION AND OTHER POSTRETIREMENT BENEFITS We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement plans. Cash contributions to these plans were as follows: Three months ended March28, March29, In millions 2010 2009 Defined benefit pension and other postretirement plans: Voluntary pension $ 60 $ Mandatory pension 51 7 Defined benefit pension contributions 111 7 Other postretirement plans 6 14 Total defined benefit plans $ 117 $ 21 Defined contribution pension plans $ 11 $ 16 We presently anticipate contributing approximately $170 million to our defined benefit pension plans in 2010 and paying approximately $53 million in claims and premiums for other postretirement benefits. The $170 million of contributions for the full year include voluntary contributions of approximately $107 million. These contributions and payments include payments from our funds either to increase pension assets or to make direct payments to plan participants. The components of net periodic pension and other postretirement benefit cost under our plans consisted of the following: Pension Other U.S. Plans Non-U.S. Plans Postretirement Benefits Three months ended March28, March29, March28, March29, March28, March29, In millions 2010 2009 2010 2009 2010 2009 Service cost $ 11 $ 11 $ 5 $ 4 $ $ Interest cost 28 29 15 13 7 7 Expected return on plan assets (37 ) (35 ) (18 ) (14 ) Amortization of prior service cost (credit) 1 1 (2 ) (2 ) Recognized net actuarial loss 9 8 4 5 Net periodic benefit cost $ 11 $ 13 $ 7 $ 9 $ 5 $ 5

INVENTORIES

INVENTORIES
	3 Months Ended Mar. 28, 2010
INVENTORIES
INVENTORIES	NOTE 6. INVENTORIES Inventories included the following: March28, December31, In millions 2010 2009 Finished products $ 857 $ 785 Work-in-process and raw materials 771 638 Inventories at FIFO cost 1,628 1,423 Excess of FIFO over LIFO (79 ) (82 ) Total inventories $ 1,549 $ 1,341

PRODUCT WARRANTY LIABILITY

PRODUCT WARRANTY LIABILITY
	3 Months Ended Mar. 28, 2010
PRODUCT WARRANTY LIABILITY
PRODUCT WARRANTY LIABILITY	NOTE 7. PRODUCT WARRANTY LIABILITY We charge the estimated costs of warranty programs, other than product recalls, to income at the time products are shipped to customers. We use historical claims experience to develop the estimated liability. We review product recall programs on a quarterly basis and, if necessary, record a liability when we commit to an action. We also sell extended warranty coverage on several engines. The following is a tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage: Three months ended March28, March29, In millions 2010 2009 Balance, beginning of period $ 989 $ 962 Provision for warranties issued 62 77 Deferred revenue on extended warranty contracts sold 25 26 Payments (115 ) (117 ) Amortization of deferred revenue on extended warranty contracts (21 ) (18 ) Changes in estimates for pre-existing warranties (20 ) 29 Foreign currency translation (5 ) Balance, end of period $ 915 $ 959 Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability on our March28, 2010 balance sheet were as follows: In millions March28, 2010 Balance Sheet Location Deferred revenue related to extended coverage programs: Current portion $ 82 Deferred revenue Long-term portion 182 Other liabilities and deferred revenue Total $ 264 Receivables related to estimated supplier recoveries: Current portion $ 5 Trade and other receivables Long-term portion 3 Other assets Total $ 8 Long-term portion of warranty liability $ 264 Other liabilities and deferred revenue

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES
	3 Months Ended Mar. 28, 2010
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES	NOTE 8. 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. 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 operations, financial condition or cash flows. In June2008, four of our sites in Southern Indiana, including our Technical Center, experienced extensive flood damage. We have submitted a claim for $237 million to our insurance carriers, which includes a claim for business interruption. As of March28, 2010, we have received $91 million in recoveries from the insurance carriers. Our insurance carriers have disputed certain aspects of our claim and the parties have filed suit against each other. Although we believe that we are insured against the full amount of our claim, there is no assurance that we will be successful recovering the amounts we believe are due under the policies. U.S. Distributor Commitments Our distribution agreements with independent and partially-owned distributors generally have a three-year term and are restricted to specified territories. Our distributors develop and maintain a network of dealers with which we have no direct relationship. The distributors are permitted to sell other, noncompetitive products only with our consent. We license all of our distributors to use our name and logo in connection with the sale and service of our products, with no right to assign or sublicense the trademarks, except to authorized dealers, without our consent. Products are sold to the distributors at standard domestic or international distributor net prices, as applicable. Net prices are wholes

FAIR VALUE OF FINANCIAL INSTRUM

FAIR VALUE OF FINANCIAL INSTRUMENTS
	3 Months Ended Mar. 28, 2010
FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS	NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS The majority of the assets and liabilities we carry at fair value are available-for-sale (AFS) securities and derivatives. AFS securities are derived from level 1 or level 2 inputs. Derivative assets and liabilities are derived from level 2 inputs. The predominance of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. When material, we adjust the values of our derivative contracts for counter-party or our credit risk. There were no transfers into or out of Levels 2 or 3 in the first quarter of 2010. The following table summarizes our financial instruments recorded at fair value in our Condensed Consolidated Balance Sheets at March28, 2010: Fair Value Measurements Using In millions Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs(Level 3) Total Available-for-sale debt securities: Debt mutual funds $ 125 $ 13 $ $ 138 Bank debentures 34 34 Certificates of deposit 33 33 Government debt securities-non-U.S. 3 3 Corporate debt securities 2 2 Total available-for-sale debt securities 125 85 210 Available-for-sale equity securities: Financial services industry 7 7 Total available-for-sale equity securities 7 7 Derivative assets: Commodity swap contracts 17 17 Interest rate contracts 25 25 Total derivative assets 42 42 Derivative liabilities: Foreign currency forward contracts (8 ) (8 ) Total derivative liabilities (8 ) (8 ) Total $ 132 $ 119 $ $ 251 The substantial majority of our assets were valued utilizing a market approach. A description of the valuation techniques and inputs used for our level 2 fair value measures are as follows: Debt mutual funds Assets in level 2 consist of exchange traded mutual funds that lack sufficient trading volume to be classified at level 1. The fair value measure for these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this level 2 input. Bank debentures and Certificates of deposit These investments provide us with a fixed rate of return and generally range in maturity from six months to one year. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by Cummins with the respective financial institution, our fair value measure is the financial institutions month-end statement. Government debt securities-non-U.S. and Corporate debt securities The fair value measure for these securities are broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on

DERIVATIVES

DERIVATIVES
	3 Months Ended Mar. 28, 2010
DERIVATIVES
DERIVATIVES	NOTE 10. 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 flows 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 March28, 2010, we expect to reclassify an unrealized net loss of $6 million from AOCL to income over the next year. For the three month periods ended March28, 2010 and March29, 2009, there were no circumstances that would have resulted in the discontinuance of a foreign currency 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 96 percent and 95 percent of the notional amounts of contracts outstanding as of March28, 2010 and December31, 2009, respectively. Notional amount in millions Currency denomination March28, 2010 December31, 2009 United States Dollar (USD) 83 107 Bri

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME
	3 Months Ended Mar. 28, 2010
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME	NOTE 11. COMPREHENSIVE INCOME The table below represents a reconciliation of our net income to comprehensive income for the three month periods ended March28, 2010 and March29, 2009. Three months ended March28, 2010 March29, 2009 Attributable to Attributable to Noncontrolling Total Attributable to Attributable to Noncontrolling Total In millions Cummins Inc. Interests Consolidated Cummins Inc. Interests Consolidated Net income $ 149 $ 21 $ 170 $ 7 $ 7 $ 14 Other comprehensive income (loss), net of tax Unrealized (loss) gain on derivatives (5 ) (5 ) 29 29 Foreign currency translation adjustments (49 ) 4 (45 ) (12 ) (5 ) (17 ) Change in pensions and other postretirement defined benefit plans (6 ) (6 ) (3 ) (3 ) Total other comprehensive income (loss) (60 ) 4 (56 ) 14 (5 ) 9 Total comprehensive income $ 89 $ 25 $ 114 $ 21 $ 2 $ 23

RESTRUCTURING AND OTHER CHARGES

RESTRUCTURING AND OTHER CHARGES
	3 Months Ended Mar. 28, 2010
RESTRUCTURING AND OTHER CHARGES
RESTRUCTURING AND OTHER CHARGES	NOTE 12. RESTRUCTURING AND OTHER CHARGES 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 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 3,200 hourly 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. At March28, 2010, of the approximately 4,200 employees affected by this plan, all terminations were substantially complete. During the first quarter of 2009 we recorded a total pre-tax restructuring charge of $66 million in Restructuring and other charges in the Condensed Consolidated Statements of Income related to the 2009 actions. We do not include restructuring charges in our operating segment results. The pretax impact of allocating restructuring charges to the segment results would have been as follows: Inmillions 2009Charges Engine $ 31 Power Generation 3 Components 24 Distribution 4 Non-segment 4 Total restructuring charges $ 66 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 Condensed Consolidated Balance Sheets. In millions Severance Costs Exit Activities Total Balance at December31, 2009 $ 10 $ 1 $ 11 Cash payments for 2009 actions (3 ) (3 ) Balance at March28, 2010 $ 7 $ 1 $ 8

ACQUISITIONS

ACQUISITIONS
	3 Months Ended Mar. 28, 2010
ACQUISITIONS
ACQUISITIONS	NOTE 13. ACQUISITIONS On January4, 2010, we acquired the remaining 70 percent interest in Cummins Western Canada (CWC) from our former principal for consideration of approximately $71 million. We formed a new partnership with a new distributor principal where we own 80 percent of CWC and the new distributor principal owns 20 percent. The acquisition was effective on January1, 2010. The $71 million of consideration consisted of: In millions Borrowings under credit revolver $ 44 Capital contributed by Cummins Inc. 10 Capital contributed by new principal, as described below 8 Funded from first quarter operations 9 Total consideration $ 71 The purchase price was approximately $97 million as presented below. The intangible assets are primarily customer related and are being amortized over periods ranging from one to three years. The acquisition of CWC was accounted for as a business combination, with the results of the acquired entity and the goodwill included in the Distribution operating segment as of the acquisition date. Distribution segment results also include a $12 million gain for the three months ended March28, 2010, as we were required to re-measure our pre-existing 30 percent ownership interest in CWC to fair value in accordance with GAAP. Net sales for CWC were $206 million for the twelve months ended December31, 2009, which represents less than 2 percent of Cummins Inc. consolidated sales for same period. The purchase price was allocated as follows: In millions Accounts receivable $ 31 Inventory 48 Fixed assets 45 Intangible assets 11 Goodwill 2 Other assets 2 Current liabilities (42 ) Total purchase price $ 97 Fair value of pre-existing 30 percent interest (26 ) Consideration given $ 71 We provided a loan to our partner of approximately $8 million to fund the purchase of his 20 percent interest. The purchase transaction resulted in $8 million of noncontrolling interest (representing our partners 20 percent interest) which was completely offset by the $8 million receivable from our partner, reducing the noncontrolling interest impact to zero as of the acquisition date. The interest-bearing loan is expected to be repaid over a period of 3-5 years. The partner also has periodic options to purchase an additional 10 to 15 percent interest in CWC up to a maximum of an additional 30 percent (total ownership not to exceed 50 percent). At March29, 2009, we had one minor acquisition with consideration of approximately $2 million.

OPERATING SEGMENTS

OPERATING SEGMENTS
	3 Months Ended Mar. 28, 2010
OPERATING SEGMENTS
OPERATING SEGMENTS	NOTE 14. OPERATING SEGMENTS 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. We use segment EBIT (defined as earnings or loss before interest expense, income taxes and noncontrolling interests) as the primary basis for the chief operating decision-maker to evaluate the performance of each operating segment. A summary of operating results by segment for the three month periods is shown below: In millions Engine Power Generation Components Distribution(1) Non-segment items(2) Total Three months ended March28, 2010 External sales $ 1,173 $ 378 $ 453 $ 474 $ $ 2,478 Intersegment sales 250 139 177 2 (568 ) Total sales 1,423 517 630 476 (568 ) 2,478 Depreciation and amortization(3) 41 10 20 7 78 Research, development and engineering expenses 60 7 25 92 Equity, royalty and interest income from investees 35 6 5 30 76 Interest income 2 1 3 Segment EBIT 133 34 57 72 (30 ) 266 Three months ended March29, 2009 External sales $ 1,205 $ 477 $ 346 $ 411 $ $ 2,439 Intersegment sales 287 180 184 2 (653 ) Total sales 1,492 657 530 413 (653 ) 2,439 Depreciation and amortization(3) 41 11 18 5 75 Research, development and engineering expenses 58 8 19 85 Equity, royalty and interest income (loss) from investees (3 ) 5 1 30 33 Restructuring charges 66 66 Interest income 1 1 2 Segment EBIT (16 ) 69 1 58 (84 ) 28 (1) Total assets for our Distribution segment materially increased due to the acquisition of Cummins Western Canada. See Note 13 for further information. (2) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended March28, 2010. For the three months ended March29, 2009, unallocated corporate expenses included $66 million of restructuring charges and a $6 million gain related to flood damage recoveries. (3) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount that is included in the Condensed Consolidated Statements of Income as interest expense. A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below: Three months ended March28, March29, In millions 2010 2009 Segment EBIT $ 266 $ 28 Less: Interest expense 9 7 Income before income taxes $ 257 $ 21

SUBSEQUENT EVENT

SUBSEQUENT EVENT
	3 Months Ended Mar. 28, 2010
SUBSEQUENT EVENT
SUBSEQUENT EVENT	NOTE 15. SUBSEQUENT EVENT In April2010, we terminated our existing facility and entered into a new 364-day agreement (subject to renewal) with a financial institution to sell a designated pool of trade receivables to Cummins Trade Receivables, LLC (CTR), a wholly-owned subsidiary. The purchase limitation of the agreement is $250 million. As necessary, CTR may transfer a direct interest in its receivables, without recourse, to a commercial paper conduit. 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 conduit 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 $250 million 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. As of April26, 2010, (the day of closing) the amount available under this program was $72 million. CTR is a separate legal entity from Cummins and its assets and credit are not available to satisfy the debts and obligations of Cummins. CTRs assets are listed separately on its balance sheet on a stand-alone basis. CTRs assets will be available first and foremost to satisfy claims of its creditors.

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 28, 2010
Document and Entity Information
Entity Registrant Name	CUMMINS INC
Entity Central Index Key	0000026172
Document Type	10-Q
Document Period End Date	2010-03-28
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	200,579,461
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1