Financial Overview

(in million dollars)

	FY2010	FY2009	Rate of change (%)	Factors
Engine
Sales	7,888	6,405	23.2	1)
Component
Sales	3,046	2,355	29.3	2)

Factors
1)
Engine segment
-Engine segment sales increased versus 2009, due to improved sales in most markets, especially the industrial, stationary power, light-duty automotive and medium-duty truck markets, which were partially offset by decreases in the North American heavy-duty truck market. The following are the primary drivers by market:

-Industrial market sales increased primarily due to a 154 percent improvement in international construction engine shipments driven by the economic recovery and infrastructure investment in emerging markets and a 123 percent improvement in units sold in the international mining markets due to increased coal and commodity demands.
-Stationary power engine sales increased primarily due to higher demand in power generation markets, particularly for high-horse power engines.
-Light-duty automotive sales increased significantly due to a 77 percent improvement in units sold to Chrysler as the result of shut-downs in 2009 as part of its reorganization efforts.
-Medium-duty truck engine sales increased due to a 78 percent increase in international units sold, primarily due to higher demand in the Brazilian truck market driven by a growing economy and government incentives.

-Total on-highway-related sales for 2010 were 50 percent of total engine segment sales, compared to 61 percent in 2009.

2)
Components segment
-Components segment sales increased in all businesses versus 2009. The following are the primary regional drivers by business:

-Emission solutions business sales increased due to higher technology content and increased sales of North American EPA 2010 aftertreatment systems and higher European demand for aftertreatment systems for the first fit market, which was partially offset by decreased sales of our EPA 2007 aftertreatment systems.

-Turbo technologies business sales increased due to improved original equipment demand in Europe and China and significant global aftermarket recovery.

-Filtration business sales increased in all regions primarily due to global aftermarket recovery and improved global original equipment sales.

-Fuel systems business sales increased primarily due to improved OEM first fit sales in China and the aftermarket recovery in North America, which was partially offset by decreased first fit sales in North America.

Contracts

-The Company will supply crankcase ventilation systems to US-based truck and engine manufacturer Navistar for its 2010 MaxxForce 7 V-8 turbodiesel engines. (From a press release on June 16, 2010)

-The Company announced a multiyear engine contract for Chrysler trucks. It will supply 6.7-liter turbo diesel engines for Dodge Ram Heavy Duty pickups and Chassis Cab trucks. The company has produced over 1.7 million turbo diesel engines for Dodge Ram trucks since 1989. Today, over 80 percent of Ram customers purchase their truck with Cummins turbo diesel. (From a press release on February 3, 2010)

R&D Expenditure

(in million dollars)

	FY2010	FY2009	FY2008
Overall	414	362	422
Engine	263	241	286
Components	114	88	95

R&D Structure

-The Company operates 17 technical centers around the world.

Technological Partnership

-The Company has agreed to team with US-based VanDyne SuperTurbo, Inc. in the Super Truck program. VanDyne develops and produces SuperTurbochargers for the automotive market. Under the agreement, the Company and VanDyne together, will work to develop a VanDyne SuperTurbocharger for a Cummins engine. The Company was awarded 39 million USD from the Department of Energy (DOE) under the program to develop engines for more fuel-efficient Heavy Duty Class 8 trucks. (From a press release on August 16, 2010)

-The Company reached a basic agreement with Russian truck manufacturer KAMAZ to license its Euro VI emissions technology to ZAO Cummins KAMA - their joint venture in Russia. The deal will allow ZAO Cummins KAMA to produce the Company's engines to meet Euro 6 emissions standards for its market in Russia. By 2018 Euro VI standards will take effect in the nation. The Company and KAMAZ entered into the 50-50 joint venture in 2006. The joint venture currently produces about 1,000 diesel engines a month at its facility in Chelny, Tartarstan. These engines are sold to KAMAZ and other Russian OEMs. (From a press release on June 24, 2010)

-Eaton announced that Cummins chose Eaton to participate in the SuperTruck program. The program focuses on the development of efficient and clean diesel engines for Class 8 trucks. Cummins already secured 39 million dollars in funding from the Department of Energy (DOE) to engage in the project with a truck manufacturer Peterbilt Motors Company, a division of PACCAR. Eaton will supply automated transmissions for this project. (From a press release on January 22, 2010)

-The Company Cummins has secured nearly 54 million USD in funding from the Department of Energy (DOE). Under the Super Truck program, the Company will receive nearly 39 million USD in funding. The Company will partner with Peterbilt Motors Company, a division of PACCAR, to develop efficient and clean diesel engines for heavy-duty Class 8 trucks. Under the ATP-LD program the Company will receive an additional 15 million USD in funding to support powertrains for fuel efficient light-duty vehicles. (From a press release on January 11, 2010)

Capital Expenditure

(in million dollars)

	FY2010	FY2009	FY2008
Engine	197	207	331
Power Generation	53	34	57
Components	78	59	139
Distribution	36	10	16
Total	364	310	543

Investment Outside USA

-The Company announced that it will break ground in early 2011 on a manufacturing site at the Aegean Free Trade Zone in Izmir, Turkey. The company plans to first build a filtration manufacturing plant and follow with a facility to produce alternators for its power generation business. Production is expected to begin at the 1 million square foot site in early 2012 and the Company expects to employ 800 people in Turkey within five years. The company is investing 70 million USD in the facility and related production equipment, with 85 percent of the products made in Turkey to be exported to the Company's customers across Europe, the Middle East, Asia and Africa. (From a press release on December 8, 2010)

-Cummins Turbo Technologies Limited (CTT), a subsidiary of the Company, has consolidated its Charleston-area production into a single facility in Palmetto, South Carolina, USA. As turbocharger production has been consolidated over the past 18 months, CTT has expanded the Palmetto facility and added a new 2.7 million USD turbo assembly line. The new and expanded Palmetto facility can produce 700,000 turbochargers every year. (From a press release on October 21, 2010)