Cummins Inc. 2004 Annual Report

Cummins Inc., a global power leader,is a corporation of complementarybusiness units that design, manufacture, distribute and serviceengines and related technologies,including fuel systems, controls,air handling, filtration, emission solutions and electrical power generation systems.

Headquartered in Columbus,Indiana, (USA), Cummins servescustomers in more than 160 countries and territories through itsnetwork of 550 Company-ownedand independent distributor locations and more than 5,000 dealer locations. With more than28,100 employees worldwide,Cummins reported sales of $8.4 billion in 2004.

Table of Contents2 Financial Summary4 Letter to Shareholders8 Business Unit Review 20 Board of Directors, Executives

and Officers22 Worldwide Locations24 Shareholder Information

Form 10-K Follows Page 24

The Engine Business manufactures and markets a broadrange of diesel and natural gasengines and aftermarket productsfor automotive, industrial and powergeneration applications. Cumminsengines can be found in medium-and heavy-duty trucks, buses,recreational vehicles, lightcommercial vehicles and pickuptrucks in on-highway applications,and in equipment in theconstruction, mining, agriculture,marine, rail and government markets.

The Power Generation Businessis a global provider of powergeneration systems, componentsand services in standby power,distributed power generation, aswell as auxiliary power in mobileapplications to meet the needs of adiversified customer base.

The Filtration and Other Businessincludes Fleetguard filtrationsystems, Nelson acoustic exhaustand silencing systems and EmissionSolutions aftertreatment systems, as well as Holset turbochargers.

The International DistributorBusiness consists of 17 Company-owned distributors andone joint venture that provideCummins products, parts andservice to our customers through116 locations in 77 countries andterritories worldwide.

Left: Cummins corporate headquartersin Columbus, Indiana.

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Financial Summary

Cummins financial performance in2004 was very strong, as shown inthe charts to the right. Net earnings,net sales, earnings before interestand taxes (EBIT) and net cashprovided by operating and investingactivities were all records for theCompany. In 2004, return on equityreached its highest level in adecade. Earnings per diluted shareof $7.39 were the second highest in Cummins history.

The Company is highly diversified inboth product range and globalpresence. In 2004, the EngineBusiness accounted for 57 percentof revenues, while PowerGeneration was 19 percent,Filtration and Other was 15 percentand International Distributorsrepresented 9 percent.*

Forty-eight percent of 2004revenues were generated outsidethe United States, with the largestcontributions coming fromAsia/Australia (17 percent), Europe(14 percent) and Mexico/LatinAmerica (7 percent). Since 2000, the compound annual growth rate of our international sales has beenmore than 21/2 times that of oursales in the United States.

2000 2001 2002 2003 2004

$200

$400

$300

$100

$0

($200)

($100)

Net Earnings ($ in millions)

$14

$(103)

$50

$350

$82

2000 2001 2002 2003 2004

$400

$600

$500

$300

$200

$100

$0

($100)

EBIT*** ($ in millions)

$95

$(44)

$181

$545

$139

30%

20%

10%

0.0%

(0.10%)

Return on Equity (%)

2000 2001 2002 2003 2004

1.1%

(8.6%)

3.8%

21%

6.9%

2000 2001 2002 2003 2004

$400

$300

$500

$200

$100

$0

Cash from Operating and Investing Activities** ($ in millions)

$62

$12 $23

$425

$41

2000 2001 2002 2003 2004

$10

$8

$6

$4

$2

$0

Net Sales ($ in billions)

$6.60

$5.68

$6.30

$8.44

$5.85

Calculated before intercompanyeliminations.

Non-GAAP measure, defined asthe net cash provided by operatingactivities minus the net cash usedin investing activities. See Consolidated Statements ofCash Flows in the Form 10-K.

Non-GAAP measure, fully definedin table on Page 3.

*

**

***

3

Selected Financial Data

$ Millions, except per share, shareholder and employee data 2004 2003 2002 2001 2000

Statements of earnings data

Net sales $8,438 $6,296 $5,853 $5,681 $6,597Cost of sales 6,758 5,173 4,808 4,668 5,330Gross margin 1,680 1,123 1,045 1,013 1,267Selling and administrative expenses 1,015 830 736 721 773Research and engineering expenses 241 200 201 220 246Equity, royalty and other income from investees (111) (70) (22) (10) (7)Other (income) expense, net (10) (18) (9) – 6Restructuring, impairment and other changes and (credits) – – (8) 126 154Loss on early retirement of debt – – 8 – –Earnings (loss) before interest, income taxes,

minority interest, preferred dividends and cumulative

effect of change in accounting principles (EBIT) 545 181 139 (44) 95Interest expense 113 90 61 77 87Provision (benefit) for income taxes 56 12 (38) (44) (20)Minority interests in earnings of consolidated subsidiaries 26 14 16 15 14Dividends on preferred securities of subsidiary trust – 11 21 11 –Net earnings (loss) before cumulative effect

of change in accounting principles 350 54 79 (103) 14Cumulative effect of change in accounting principles, net of tax* – (4) 3 – –Net earnings (loss)** $ 350 $ 50 $ 82 $ (103) $ 14

Basic earnings (loss) per shareNet earnings (loss) before cumulative effect of change

in accounting principles $ 8.30 $ 1.37 $ 2.06 $ (2.70) $ 0.35Cumulative effect of change in accounting principles, net of tax – (.09) 0.07 – –Net earnings (loss) $ 8.30 $ 1.28 $ 2.13 $ (2.70) $ 0.35

Diluted earnings (loss) per shareNet earnings (loss) before cumulative effect of change

in accounting principles $ 7.39 $ 1.36 $ 2.06 $ (2.70) $ 0.35Cumulative effect of change in accounting principles, net of tax – (.09) 0.07 – –Net earnings (loss) $ 7.39 $ 1.27 $ 2.13 $ (2.70) $ 0.35

Number of shares for earnings (loss) per share (in millions): Basic 42.2 39.3 38.6 38.3 38.2Diluted 49.2 39.5 38.8 38.3 38.2

Balance sheet data

Working capital $1,076 $ 735 $ 653 $ 557 $ 589Property, plant and equipment, net 1,648 1,347 1,305 1,405 1,596Total assets 6,527 5,126 4,837 4,311 4,448Total debt 1,645 1,429 1,137 945 1,197Preferred securities of subsidiary trust *** – – 291 291 –Shareholders’ equity 1,401 949 841 983 1,280

Other data

Capital expenditures $ 151 $ 111 $ 90 $ 206 $ 228Depreciation and amortization 272 223 219 229 240Cash dividends per share $ 1.20 $ 1.20 $ 1.20 $ 1.20 $ 1.20Shareholders of record 4,000 4,200 4,300 4,600 4,800Number of employees 28,100 24,000 23,700 24,900 28,000

* A charge of $4 million, or $(0.09) per share, related to the adoption of a new accounting standard for variable interest entities in 2003 and a credit of $3 million, or $0.07 per share, in 2002 related to an accounting change regarding the measurement date of our benefit plans.

** Net earnings include income tax benefits of $61 million in 2004 from non-recurring tax benefits and $57 million in 2002 due to settlement of prior-year tax audits.

***Included in total debt beginning in 2003.

This past year was the best inCummins history. Record-settingresults translated into an excellenttotal return for shareholders of 74.6percent. The result was almost fivetimes greater than the total returnearned by our peer group and nearlyseven times greater than the S&P500 Index. When combined with ourstock performance in 2003, totalreturn for the last two yearsaveraged 77.4 percent.

Meanwhile, our market capitalization– or stock price times outstandingshares – more than tripled in thepast two years to $3.8 billion.

Cummins businesses set an annualsales record of $8.4 billion, toppingour prior peak in 1999 by 27percent. Earnings before interestand taxes, net earnings and cashflow from operations were alsorecord-setting. Earnings per sharewere $7.39.

These results were particularlygratifying because only two yearsago, we were mired in one of theworst recessions I can remember in my 33 years with the Company. Two of our four businesses werelosing money, our share price haddropped to $19, our debt was

Business highlights include thefollowing:

� We produced more than 700,000 diesel engines worldwide, including shipments from consolidated and unconsolidated entities and record shipments of the popular turbo diesel engine forthe Dodge Ram pickup truck.

� In the North American heavy-duty truck market, we experienced our most significant year-over-year share growth in the last 20 years.

� Our share of global joint venture earnings totaled $111 million – an increase of 59 percentover 2003.

� Dongfeng Cummins Engine Company in China provided us with a total return on investment in excess of 145 percent over the last 20 months.

� Consolidated and unconsolidated sales in China reached $1 billion in 2004, a year ahead of schedule.

downgraded to below investmentgrade and we were experiencingsignificant decreases in productdemand.

The difference between then andnow rests largely with the actionstaken by the people of Cummins.Once again, they illustrated that thepower of our Company is not justour products, but the ideas, energyand passion of our employees. Inthe face of troubling financial times,they made a commitment tosharpen their cost-reduction skills, to pursue efficiency and processimprovement and to rethink theCompany's go-to-market strategies.

This focus on execution, combinedwith a superior line of new productsand an extensive service anddistribution network, put Cumminsin position to take advantage of theresurgence in the U.S. economy, aswell as growing internationalopportunities.

And we did. Business Unitperformance for 2004 is reviewed,beginning on Page 8.

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Letter to Shareholders ...the power of our

Company is not just our

products, but the ideas,

energy and passion of

our employees.”

“

� Power Generation completed a turnaround year during which its earnings before interest and taxes grew from a $15-million loss in 2003 to $69 million of income in 2004.

� The International Distributor Business had record sales and earnings before interest and taxes, reflecting our strategic focus on less cyclical businesses.

� After being named to the Business Ethics magazine's top 100 companies the previous five years, we were named No. 1 for 2005 – a particularly gratifying honor.

The coming years hold similarpromise for Cummins. We expectour markets to remain strong for the next several years, and we are implementing strategies that will not only maximize our successduring good times, but also help us weather the next business cycle downturn.

We will follow a strategy thatfocuses on being the low costproducer, taking advantage ofgrowth opportunities, building onexisting businesses and creating an

environment that both attracts andretains outstanding people andmotivates them to deliver superiorperformance.

Our successful Six Sigma programwill continue to drive cost savingsand quality improvements, whileserving as a leadership developmenttool for employees. We also willexpand our global sourcing efforts.

We will take advantage of ourimproved balance sheet andstrengthened markets by investingwisely in growth opportunitiesaround the world. Theseinvestments will be strategic andwill cut across all of our businesses.

We will build on our already strongpresence outside the United States.In particular, China and India remainfertile ground for our operations –our second largest customer is inChina and third largest is in India.More than 6,000 Cumminsemployees work in those twocountries. We also opened atechnical center in Pune, India, inJanuary 2004 and later in the yearannounced plans for a technicalcenter in Wuhan, China.

Tim Solso enjoys spending time with ayoung student while visiting Cumminsaward-winning Child Development Center inColumbus, Indiana. Community involvementis one of the reasons the Company washonored by Business Ethics magazine asthe 2005 “Top Corporate Citizen.” Cumminswas selected for the award from among the nation's top 1,000 companies for itscommitment to shareholders, communities,minorities and women, environment, non-U.S. stakeholders, customers andemployees.

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Other opportunities for profitablegrowth include retail distribution,aftermarket sales and service, light-duty automotive, emission solutionsand generators in underdevelopedinternational markets.

While we look to the future, we willretain the solid framework of ourpast. For 85 years, the Cumminsbrand has stood for innovation,honesty and dependability. We have always placed a premium onintegrity and fairness in dealingswith all of our stakeholders. That will not change.

The genesis of the Cumminspersonality can be traced to oneman – Joseph Irwin Miller. AlthoughMr. Miller passed away in 2004, hislegacy will continue to form thebuilding blocks of our success. A tribute to Mr. Miller appears onthe opposite page.

Tim SolsoChairman and Chief Executive OfficerCummins Inc.

I would like to express my deepgratitude to Bill Ruckelshaus, who isleaving our Board of Directors after30 years of service to Cumminsshareholders and the Company. Mr. Ruckelshaus has had aremarkable career, combining law,public service and corporateleadership. His reasoned approachand counsel were greatlyappreciated at Cummins. His thoughtful perspectives andinsights will be missed.

In conclusion, let me thank you, ourCummins shareholders, for yourinvestment and confidence in thebusiness. I also want to express mygratitude to the members of theBoard of Directors for their valuedservice and counsel, to ouremployees around the world fortheir commitment to excellence, tothe many business partners whohave contributed to our success andto our customers for the opportunityto provide them with outstandingproducts and services.

6

Transparency Test. Mr. Miller'stheory was that if an individual waswilling to explain to the localminister what he or she was doing,then it passed the transparency testand could “stand the light of day.” It was a good guide for gettingthrough tough times.

His commitment to Cummins islegendary. He was named Presidentin 1945 and Chairman of the Boardin 1951. Under his direction, theCompany set a high priority onresearch that would come up withnew diesel technology, reducingcosts while maintaining high productstandards and creating a network ofindependent distributors throughwhich it could develop and maintaina close relationship with customers. Cummins strong presence in Chinatoday began when Mr. Millerjourneyed there in 1975.

In May 1964, he made a speech toCummins distributors. It was typicalof his feelings about the business.He said:

“I am not in it just to survive. I could survive more easily and effectively by selling out, diversifying and taking life a good deal easier …But I am not selling, because I think there exists a first-class opportunity for Cummins to become the number one producer in every market it serves – worldwide – and I should like to see us achieve this together.”

It goes without saying that he willbe missed. However, his presencewill continue to be felt in thisCompany well into the future, and rightly so. His principles ofproducing quality products, oftreating others with respect, ofoperating with integrity and ofembracing diversity are core to theongoing success of the CompanyMr. Miller helped build.

Joseph Irwin Miller – businessleader, social activist andphilanthropist – built Cummins froma family business into a Fortune 500company with more than 28,100employees in 160 countries andterritories and more than $8.4 billionin annual sales.

He embraced social reform. Aspresident of the National Council ofChurches from 1960 to 1963, heshaped the council into one of thestrongest supporters of the civilrights movement. He helpedorganize the 1963 civil rights marchon Washington and was one ofthree church leaders to organize theNational Conference on Race andReligion that same year.

He advised Presidents both in theUnited States and abroad, fromJohn F. Kennedy to Nelson Mandela.He received more than 20 honorarydegrees from some of the mostprestigious universities in thecountry and numerous awards. In1967, Esquire ran his profile on themagazine's cover with the headline:This man ought to be the nextPresident of the United States.”

For tens of thousands of Cumminsemployees, Mr. Miller'schampioning of fairness and equal opportunity may be hisgreatest legacy.

Employees are still trained in thesimple ethical philosophy of “doingthe right thing.” When it was firsttalked about in the 1970s, it wasdescribed as the Irwin Miller

In MemoriumMr. J. I. Miller

1909 – 2004

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“

8

Business Unit Review

EEnnggiinnee BBuussiinneessss

The Engine Business achievedrecord sales of $5.5 billion, a 51 percent increase over 2003.Earnings before interest and taxeswere $341 million, compared to $70 million the previous year.

New engines in all marketsperformed extremely well as judgedby our customers, establishing newstandards for dependability. Thiscontributed to gains in market shareand continued reduction in productcoverage costs. We achieved recordsales in many markets includingrecreational marine, commercialmarine, mining and pickup trucks. Inthe North American heavy-duty truckmarket, we went from 21.5 percentshare in 2003 to 26.7 percent sharein 2004 – the largest one year sharegain in more than 20 years.Customers widely recognizeCummins as the fuel economy andreliability leader in these markets.

This Dodge Ram heavy-dutypickup truck features the

5.9-liter Cummins 610 TurboDiesel. 2004 engine

shipments for the Ramwere at record levels.

The Cummins ISC-poweredPeterbilt 335 has gained

increasing popularitythanks to day-in,

day-out dependability.

9

Sales of our HolsetTurbocharger product line –part of the Filtration andOther Business – were verystrong in 2004, especially inNorth America and China.

In 2004, the Engine Businessgenerated significant savings byapplying Six Sigma methods toreduce the variation in ourprocesses. At the same time, we are realizing measurableimprovements in the quality of our products.

Achieving excellence in customersupport remains a critical strategyfor all Cummins businesses. We are driven to become the mostdependable, worldwide supplier of superior products as measured by our customers. In 2004, we began to do Six Sigma projects with customers to jointly focus onthe improvements that mattered to them.

We are confident that we will deliver to our customers the bestproducts at the 2007 and Tier 3emission standards. Our technicalproductivity initiatives are resultingin sizeable reductions indevelopment costs for these newengines. We are leveraging ourcomputer-aided design capability in India to provide low-cost, high-quality engineering analysis work to accomplish these objectives and are reducing the time to bring newproducts to market.

10

Cummins shipments of turbo dieselengines for the Dodge Ram pickuptruck increased 20 percent over theprevious year, setting a newproduction record. The enginepowering the Dodge Ram has morehorsepower and torque than itscompetitors and remains extremelypopular among owners whodemand a durable and dependablediesel engine.

The Engine Business achieved costreduction targets through continuedfocus on Six Sigma, global sourcingand improvements in technicalproductivity. Effective use of jointventure assets, the increase in jointventure income and theconsolidation of two heavy-dutyengine assembly plants into a singlelocation continue to contribute tooverall profitability.

Volumes in most markets grewrapidly in 2004, creatingopportunities to further leverage our improved cost structure. Wesuccessfully executed our plan toemerge strongly from the downturn.

We are driven to become the most

dependable, worldwide supplier of

superior products as measured by

our customers.”

Joe Loughrey, President, Engine Business

“ Drivers of the Peterbilt 379like the performance and

reliability of the truck’sCummins engine.

11

The Engine Business designs andmanufactures a complete line ofdiesel- and natural gas-poweredengines for on-highway and off-highway markets. These engines are used throughout the world inheavy, medium and light-duty trucks, buses and recreationalvehicles. In off-highway applications,Cummins engines powerequipment including agricultural,construction, mining, recreationalmarine, commercial marine, oil andgas, power generation, rail andgovernment equipment.

PPoowweerr GGeenneerraattiioonn BBuussiinneessss

The Power Generation Businessexperienced a major turnaround in2004. Sales rebounded significantlyfrom a two-year downturn to hit arecord $1.9 billion – an increase of41 percent over the previous year.

The Kenworth T800 withthe Cummins ISM offersthe rugged durabilityrequired for severe service.

The Hyster reach stacker for container handling ispowered by the CumminsQSM heavy-duty engine and operates in ports throughout the world.

12

Earnings before interest and taxeswere $69 million, compared to aloss of $15 million in 2003. As partof our turnaround, we led a broadcost reduction effort thatsignificantly contributed to ourimproved financial performance. Wereorganized into a global structure,which positioned us to capturegrowth in markets around the world.We also strengthened our productlines to give us leading positions ineach of our major markets. Inaddition, we implemented priceincreases in nearly every marketaround the world.

Almost all of our product marketsstrengthened over 2003, particularlythe Commercial, Consumer andAlternator segments of thebusiness. Our strong globalpresence allowed us to takeadvantage of the economic reboundacross the world.

Sales to the Commercial markets,which make up more than half oftotal power generation sales, wereup 45 percent over 2003. Sales ofPower Electronics also increased as customers purchased moreintegrated power systems andsolutions. Robust markets in China,the Middle East, India and parts of

Two Cummins generator setsprovide standby power to light

the beautiful Sichuan JiuzhaiParadise Hotel in China.

Cummins Diesel Sales and Service (Korea) Ltd.

provides support tocustomers throughoutSouth Korea, primarily for power generation,

commercial marine and rail applications.

China is predicted to be the world's

third largest economy by 2007.

Cummins opportunity there is

enormous, and we intend to take

advantage of our deep and diverse

market presence and the strategic

relationships we have established

over the past 30 years.”

John Watkins, Managing Director, Cummins East Asia

“

13

A mechanic in the Cumminsdistributorship in Russiarebuilds a K2000E engineused primarily in miningapplications.

Photography by Chen Chunlin

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the U.S. were significantcontributors to the sales rebound. In North America, non-residentialconstruction spending increased,which drove demand for generatorsto its highest level in three years.

Consumer markets, includingrecreational vehicles, specialtyvehicles, marine and residentialapplications, reported record salesand profits for the second year in arow. Sales increased by more than20 percent, and we continued toimprove our market position byleveraging our excellent products,strong Onan brand name andexceptional customer support.

Sales of Newage Alternatorproducts doubled, reflecting strongdemand in Asia and new accountgrowth in Europe. This business,which markets primarily under theStamford, Markon and AVK brands,met heavier demand by leveragingour manufacturing presence in low-cost regions such as China, Indiaand Romania.

We also completed several majorpower projects in our Rental andEnergy Solutions markets.

Power Generation is on the way to achieving targeted profitability levels, as well as establishing aleadership position in our majormarkets and reaching our strategicobjective of becoming the low cost producer.

Power Generation had a turnaround

year after losing money the previous

two years.We are well on our way to

restoring the business to targeted

profitability levels.”

Tom Linebarger, President Cummins Power Generation

“

15

FFiillttrraattiioonn aanndd OOtthheerr BBuussiinneessss

The Filtration and Other Businesshad record sales of $1.5 billion – anincrease of 41 percent from theprevious year – and provided 15percent of Cummins total sales for2004. This was accomplishedthrough growth across all of ourbusiness, market and geographicsegments. Earnings before interestand taxes were $84 million.

Beyond economic recovery in our key markets, growth driversincluded the results of long-termagreements with key customers and demand for Emission Solutionsproducts. However, our profitabilitywas affected by a challenging supplychain environment and rising costsfor raw materials, particularly steel.

Looking to the future, we believewe are in a good position to takeadvantage of growth opportunitiesacross our product lines andmarkets. We participate in strategicpartnerships that provide access to technology and minimize ourinvestment. We are developing new products to meet EmissionSolutions customer requirements,and the product line is achieving itsoperating targets.

An Onan generator lights upthe night, providing electricityfor recreational enthusiastswho take their towabletrailers to remote locations.

The Cummins Northeastdistributor installed thisgrid-independent, co-generation project,which provides electricity,heating and cooling to the Fonda-Fultonville School District campus in upstate New York.

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Fleetguard is a leading designer and manufacturer of filters, filtration and exhaust systems foron- and off-highway applicationsranging from diesel-poweredequipment to small, gasoline engineapplications. Fleetguard also makesfilters for the industrial filtration,emissions and noise silencingmarket through our Kuss andUniversal Silencer subsidiaries. In addition, we offer service, partsand maintenance programs througha diversified base of customers anddistribution channels.

Fleetguard products are producedand sold in global markets, includingNorth America, South America,Europe, India, China, South Africa,Australia and the Far East.

Fleetguard ranks as the top brandpreference for diesel engine air, oil,fuel and coolant filtration products in independent market studies. These same studies show thatFleetguard is the fastest growingbrand among our competitors ininternational markets.

Fleetguard develops systems tohelp customers meet increasinglystringent global emissions standardsas well as noise reductionregulations. In 2004, projectgroundwork was completed for anew emission and exhaustmanufacturing facility in South Africathat will be operational this year.

The Filtration Business is a prime

example of the benefits derived

from Cummins business synergies.

We have access to the best

engine technology available and

we have common customers that

allow us access to broad

international markets.”

Rick Mills, President, Filtration Business

A workshop technicianat Cummins Sales and

Service Philippinesgrinds valves.

“

Holset is the leader in commercialdiesel engine turbochargertechnology and has been part ofCummins since 1973.

In 2004, Holset experiencedsignificant growth in all its keymarkets. A significant percentage ofturbocharger production came fromtwo successful world-class jointventures, Tata Holset in India andWuxi Holset in China. In the comingyears, we will continue to pursuegrowth in sales and market shareand a successful strategy of bringingnew technology to the market ahead of competitors.

International DistributorBusiness

International Distributor sales grew28 percent in 2004 to $856 million.Earnings before interest and taxeswere $51 million, compared to $40 million in 2003.

All of our distributors had strongersales in 2004 compared to theprevious year. This increase was also reflected in higher sales acrossthe business segments, includingengines, power generation, parts,service, packages and solutions.

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Hydraulic system fluidscleaned by Fleetguardfilters help keep customers'equipment running atoptimal performance.

One of Fleetguard's specialties is mediatechnology, such as the multi-layermedia being pleated into hydraulic filtersat the Specialty Filtration Plant in LakeMills, Iowa.

In 2004, the International DistributorBusiness began operating in severalnew markets, including Austria,Poland, The Czech Republic,Hungary and Rio de Janeiro, Brazil.In addition, we expanded ourservice capability by adding newbranches in China and making otherfacility improvements.

The distribution business providesstable and growing revenues due tobroad diversification in our productand service segments, geographicmarkets and customer base.

While their markets demandcompetitive pricing, our distributorsdeliver strong returns due to modestfixed asset investment and strongworking capital management. Byfocusing on distribution as abusiness unit, we leverage commonsystems, best practices, sharedresources and Six Sigma to reducecost and improve our service levels.

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The International DistributorBusiness provides retail distributionof Cummins branded products,related services and broadersolutions. We serve our diversecustomer base through a network of 17 Company-owned distributorsand one joint venture operating in116 locations in 77 countries andterritories worldwide. Distributorsare located in the key geographicmarkets of China, India, Russia/CIS,Japan, Korea, Southeast Asia,Australia, Europe, Africa, the MiddleEast and Latin America.

In addition to selling Cumminsproducts and parts, our highly skilledpersonnel offer full-service solutionsto our customers. Maintenancecontracts, engineering services andintegrated products are customizedto meet specific end userrequirements. Our customersinclude end users, equipmentowners, dealers and local or regionaloriginal equipment manufacturers.

The distribution business provides

stable and growing revenues due to

broad diversification in our product

and service segments, geographic

markets and customer base.”

Steve Chapman, President International Distributor Business

Cummins diesels propelcommercial marine vessels,

such as this tugboat nearVancouver. Cummins

commercial marine engine salesaveraged a 16 percent growth

rate over the past 6 years.

“

19

Guff Muench, our principaldistributor in Vancouver,

uses a Cummins-poweredRV to host customer and

employee appreciationevents. Cummins

distributors worldwidefocus on excellentcustomer support.

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Board of Directors, Executives and Officers

Tim Solso

William I. Miller Carl Ware

Robert J. Darnall Alexis M. Herman

William D. Ruckelshaus J. Lawrence WilsonGeorgia R. Nelson

John M. Deutch

Tim Solso (g) Chairman and Chief Executive Officer of Cummins Inc.

Robert J. Darnall (a,b,c,e) Retired Chairman and Chief Executive Officer, Inland Steel Industries Inc., basic steel manufacturer, processor and materials distributor

John M. Deutch (b,d) Institute Professor, Massachusetts Institute of Technology

Alexis M. Herman (a,c,d,e) Chairman and Chief Executive Officer, New Ventures, Inc., an independent consulting firm

William I. Miller (b,d,e,g) Chairman, Irwin Financial Corporation, a financial services company

Georgia R. Nelson (a,b,d,e) President of Midwest Generation EME LLC

William D. Ruckelshaus (a,c,d,e) Strategic Partner, Madrona Venture Group, LLC

Carl Ware (a,b,d,e) Retired Coca-Cola executive and a former Atlanta councilman

J. Lawrence Wilson (a,b,c,e,f,g ) Retired Chairman and Chief Executive Officer, Rohm and Haas Company, a specialty chemical manufacturing company

(a) Audit Committee(b) Finance Committee (c) Compensation Committee(d) Technology and Environment Committee (e) Governance and Nominating Committee(f) Lead Director(g) Executive Committee

Directors

Committees

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Policy Committee

Tim Solso Chairman and Chief Executive OfficerJean Blackwell Vice President, Chief Financial Officer and Chief of StaffSteve Chapman Vice President, International and President, International Distributor BusinessTom Linebarger Vice President and President, Power Generation BusinessJoe Loughrey Executive Vice President and President, Engine BusinessRick Mills Vice President and President, Filtration and Fleetguard Inc.John Wall Vice President and Chief Technical Officer

Corporate

Jean Blackwell Vice President, Chief Financial Officer and Chief of StaffJill Cook Vice President, Human ResourcesMark Gerstle Vice President, Corporate/CBS Services and Corporate QualityRichard Harris Vice President, TreasurerMarsha Hunt Vice President, Corporate ControllerSteve May Vice President, Government RelationsMarya Rose Vice President, General Counsel and Corporate SecretaryDonald Trapp Vice President, Business Development

Engine Business

Joe Loughrey President, Engine BusinessIain Barrowman Vice President, High-Horsepower ManufacturingDave Crompton Vice President, MidRange Engine SalesRich Freeland Vice President and General Manager, PowerCare and DistributionIgnacio Garcia Vice President, Global Purchasing and Manufacturing SupportSam Hires Vice President, Heavy Duty EngineeringJeff Jones Vice President, Sales and SupportJim Kelly Vice President and General Manager, MidRange and Heavy Duty Engine BusinessMark Levett Vice President and General Manager, High-Horsepower Engine BusinessJim Lyons Vice President, MidRange and Heavy Duty ManufacturingSean Milloy Vice President, MidRange Engineering Ed Pence Vice President, Automotive BusinessGlyn Price Vice President and ControllerJohn Stang Vice President, Light Duty AutomotiveJim Trueblood Vice President, High-Horsepower EngineeringBharat Vedak Vice President, Industrial Customer EngineeringChristine Vujovich Vice President, Marketing and Environmental Policy John Wall Vice President and Chief Technical OfficerBob Weimer Vice President, Quality, Heavy Duty Business

Power Generation Business

Tom Linebarger President, Power Generation BusinessPaul Ibbotson Vice President and Managing Director, Holset Engineering Co. Ltd.Tony Satterthwaite Vice President, Generator Set BusinessBob Sonntag Vice President, Power Generation Operations and Supply

Filtration and Other Business

Rick Mills President, Filtration and Fleetguard, Inc.Pamela Carter Vice President, Global Filtration/Coolant BusinessMike Cross Vice President, Global Exhaust/Emission SolutionsJeff Hamilton Vice President and CTO, Engineering and Technology

International Distributor Business

Steve Chapman Vice President, International and President, International Distributor BusinessAmy Adams Managing Director, Northeast and Southeast AsiaGino Butera Managing Director, South PacificMike Green Managing Director, Central AreaAnant Talaulicar Managing Director, IndiaJohn Watkins Managing Director, East Asia

All positions effective March 1, 2005

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Worldwide Locations

Operations Location Products

BMC Sanayi ve Ticares A.S.** Izmir, Turkey B3.9/5.9 C8.3Chongqing Cummins Engine Company Ltd.* Chongqing, China M11 NT K19/38/50 Generator setsColumbus Engine Plant Columbus, Indiana ISX cylinder blocks and heads Columbus MidRange Engine Plant Columbus, Indiana ISL ISBConsolidated Diesel Company* Rocky Mount, North Carolina B3.9/4.5/5.9 C8.3 ISB ISC ISL QSB QSC

QSLCummins Engine Beijing Co. Ltd. Beijing, China Generator setsCummins Brasil Ltda. São Paulo, Brazil B3.9/5.9 C8.3 NT/N14 ISB ISM

generator setsCummins India Ltd. Pune, India N14/NT K19 V28 K38/50 QSK60 CCummins India Ltd. Daman, India Generator sets and natural gas enginesCummins Industrial Center Seymour, Indiana K19 V903 QSK19Cummins Komatsu Engine Co.* Seymour, Indiana QST30 Cummins Marine Charleston Charleston, South Carolina Marine propulsion K19 to QSK60, marine

auxiliary engines B3.9 to QSK60, marine generator sets

Cummins MerCruiser Diesel* Charleston, South Carolina B3.9/5.9 C8.3 QSB5.9 QSC8.3 QSL9 QSM11 N14 sterndrives

Cummins Natural Gas Engines, Inc. Clovis, New Mexico G/GTA5.9, 8.3 and 855 GTA14, 19, 2838 and 50

Cummins Power Generation Fridley, Minnesota Generator sets and electronic controlsCummins Power Generation Singapore Generator sets and electronic controlsCummins Power Generation Ltd. Ramsgate, England Generator sets and electronic controlsCummins S. de R. L. de C. V. San Luis Potosi, Mexico L10 N14Darlington Engine Plant Darlington, England B.3/5.9 B4.5/6.7 C8.3 ISB ISC ISL QSB QSCDaventry Engine Plant Daventry, England K38/50 QSK45/60 QSK45/60-G QSK78

QSV81/91-G QSK19 rail powerpacksDongfeng Cummins Engine Co. Ltd.* Xiangfan, China B3.9/B5.9 C8.3 Jamestown Engine Plant Jamestown, New York ISM L10 G-L10 ISXKomatsu Cummins Engine Company Ltd.* Oyama, Japan B3.3 B3.9/5.9 C8.3Cummins Scania Fuel Systems* Columbus, Indiana HPI fuel systemsTata Cummins Limited* Jamshedpur, India B3.9/5.9

Technical Center LocationsColumbus, IndianaCookeville, TennesseeDarlington, EnglandDaventry, EnglandFridley, MinnesotaHuddersfield, EnglandJamestown, New YorkOyama, Japan*Pune, IndiaQuimper, FranceRamsgate, EnglandSão Paulo, Brazil Seymour, IndianaStamford, EnglandStoughton, WisconsinWuxi, China

Regional Parts Distribution CentersChoenan, KoreaHebron, KentuckyMechelen, BelgiumMemphis, TennesseePune, IndiaQuimper, FranceSalt Lake City, UtahSan Luis Potosi, MexicoSão Paulo, Brazil Scoresby, AustraliaShanghai, ChinaSingaporeSparta, Tennessee

Sales and ServiceMore than 550 Distributorships and Branches Worldwide

International DistributorsChoenan, KoreaBeijing, ChinaBrussels, BelgiumBuenos Aires, ArgentinaDubai, United Arab EmiratesGross-Gerau, GermanyHong Kong, ChinaJohannesburg, South AfricaManila, PhilippinesMilan, ItalyMoscow, RussiaPune, IndiaSantiago, Chile*São Paulo, BrazilScoresby, AustraliaSingaporeTokyo, JapanWellingborough, England

*Joint Venture**Licensee

All locations effective March 1, 2005

23

Operations Location Products

AVK Electroputere AVK, Craiova, Romania AlternatorsAVK Holding GmbH & Co KG* AVK, Ingolstadt, Germany AlternatorsSEG GmbH* SEG, Kempen, Germany Power systemsCBM Technologies Pty. Ltd. Adelaide, Australia Industrial radiatorsCummins Auto Services Ltd. Pune, India Commercial vehicle parts sales and service Cummins Brasil Ltda. São Paulo, Brazil Engine components and remanufactured engines Cummins Engine Company Pty. Ltd. Scoresby, Australia Engine components and remanufactured engines

and componentsCummins India Ltd. Pune, India Generator sets, electronic controls and engine

componentsCummins S. de R. L. de C. V. San Luis Potosi, Mexico Engine components and remanufactured enginesDiesel ReCon Company Memphis, Tennessee Remanufactured engines and componentsDiesel ReCon Company OER Toronto, Canada Remanufactured engines and componentsDiesel ReCon Company Cumbernauld, Scotland Remanufactured engines and componentsDiesel ReCon de Mexico S.A. de C.V. Ciudad Juarez, Mexico Remanufactured engines and componentsFleetguard Kilsyth, Australia Filtration systemsFleetguard Bonsucesso, Brazil Filtration and exhaust systemsFleetguard Quimper, France Filtration systemsFleetguard Cookeville, Tennessee Filtration systemsFleetguard Lake Mills, Iowa Filtration systemsFleetguard Pietermaritzburg, South Africa Filtration systemsFleetguard Hinckley, England Exhaust systemsFleetguard Stoughton, Wisconsin Filtration and exhaust systemsFleetguard Arcadia, Wisconsin Exhaust systemsFleetguard Black River Falls, Wisconsin Exhaust systemsFleetguard Bloomer, Wisconsin Filtration systemsFleetguard Mineral Point, Wisconsin Filtration and exhaust systemsFleetguard Neillsville, Wisconsin Filtration and exhaust systemsFleetguard Viroqua, Wisconsin Exhaust systemsFleetguard Wautoma, Wisconsin Exhaust systemsFleetguard Waynesboro, Georgia Exhaust systemsFleetguard Piqua, Ohio Exhaust systemsFleetguard Filters Ltd.* Pune, India Filtration systemsFleetguard Nelson Mexico S. de R. L. de C. V. San Luis Potosi, Mexico Filtration and exhaust systemsFuel Systems Business Columbus, Indiana Fuel system design and manufactureHolset São Paulo, Brazil TurbochargersHolset Charleston, South Carolina TurbochargersHolset Memphis, Tennessee Turbocharger aftermarket distribution centerHolset Engineering Company Ltd. Huddersfield, England TurbochargersKuss Filtration Findlay, Ohio Filtration systemsMarkon Sawafuji Ltd.* Oakham, England AlternatorsNelson Engine Systems India Ltd.* Daman, India Exhaust systemsNewage Electrical India Ltd. Ahmednagar, India AlternatorsNewage International Ltd. Stamford, England AlternatorsShanghai Fleetguard Ltd.* Shanghai, China Filtration systemsStamford Mexico S. de R.L. de C.V. San Luis Potosi, Mexico AlternatorsTata Holset Ltd.* Dewas, India TurbochargersTubengineers Pty. Ltd. Scoresby, Australia Exhaust systemsTurbo Europa Amersfoort, Netherlands Turbocharger aftermarket distribution centerUniversal Silencer Stoughton, Wisconsin Filtration and silencing systemsUniversal Silencer Muscoda, Wisconsin Filtration and silencing systemsUniversal Silencer Mexico SA DE San Luis Potosi, Mexico Filtration and silencing systemsWuxi Holset Engineering Company* Wuxi, China TurbochargersWuxi Newage Alternators Ltd. Wuxi, China Alternators

Shareholder Contacts and Services

Stock Transfer Agent, Registrar and Dividend Disbursing Agent

Wells Fargo Shareowner Services is theCompany’s stock transfer agent andregistrar. Wells Fargo maintains theCompany’s shareholder records,disburses dividend checks andadministers the Company’s DividendReinvestment Program.

General correspondence, addresschange, name change, notification of lost securities, transfers, inquiriesabout transfer requirements andcorrespondence relating to the Dividend Reinvestment Programshould be directed to Wells Fargo.

By Mail

Wells Fargo Shareowner ServicesP. O. Box 64854St. Paul, MN 55164-0854

By Hand or Overnight

Wells Fargo Shareowner Services161 North Concord ExchangeSouth St. Paul, MN 55075

By Phone

800-468-9716651-450-4064

By Fax

651-450-4033

By Email

Contact Wells Fargo through a securewebsite, www.wellsfargo.com/com/shareownerservices. Click on ‘registeredshareholders,’ then click on ‘contact us.’

Shareholder InformationCommon Stock:

The common stock of Cummins istraded on the New York Stock Exchangeand the Pacific Stock Exchange underthe symbol CMI.

Annual Meeting:The 2005 Annual Meeting ofShareholders will be held at 11 a.m.(EST) on Tuesday, May 10, 2005, at theCummins Technical Center, 1900McKinley Avenue in Columbus, Indiana.

Shareholders may vote their shares bymail, toll-free telephone number orInternet. Please refer to the simpleinstructions on the proxy card.

Financial Information:Through the Cummins website,www.cummins.com, shareholders may access Webcasts ofCompany events including managementpresentations, quarterly earningsteleconferences and the AnnualMeeting. Shareholders may also accessSEC filings, press releases, stockquotes and other information, as well asrequest printed copies of reports andemail alerts of Company events.

Analyst and Investor Contacts

Analysts and investors seekinginformation about Cummins shouldcontact:Karen A. BattinExecutive Director, Investor RelationsCummins Inc.Box 3005 (Mail Code 60115)Columbus, IN 47202-3005Phone: 812-377-3121Fax: 812-377-4937Investor_relations@cummins.com

Quarterly Earnings Reporting

For 2005, Cummins quarterly earningsare anticipated to be announced thelatter part of April, July, October andJanuary 2006.

DividendsCommon stock dividends are payablequarterly upon authorization of theBoard of Directors on or about the 1st of March, June, September andDecember to shareholders of record on or about the 15th day of the previous month.

Dividend ReinvestmentAs an added service to shareholders,Cummins has a Dividend ReinvestmentPlan administered by Wells FargoShareowner Services. This plan givesshareholders of record the option ofhaving their cash dividends and optionalcash payments applied toward thepurchase of additional shares.Shareholders desiring information aboutthis plan may contact Wells FargoShareowner Services (see above), orrequest information from Cumminsthrough our website,www.cummins.com.

Direct Deposit of DividendsAutomatic direct deposit of quarterlydividends is offered to our shareholders,at no charge, and provides secure andtimely access to their funds. For furtherinformation, please call 800-468-9716.

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Shareholder Information

Cummins Products and Services

Investors and customers can learnmore about Cummins products andservices by going towww.cummins.com and selecting theCummins company of interest fromthe drop-down menu.

Other specific websites

www.everytime.cummins.comEngine Business specific information

www.fleetguard.comComplete filtration product informationand catalog

www.cumminspower.comA source for power generation products and services

www.onan.comwww.funroads.comRecreational vehicle lifestyle websiteand the home of the Onan online store

www.newage-avkseg.comComplete information for alternatorsranging in output from 0.6 kVa to30,000 kVa

www.holset.co.uk.comComplete information on Holset turbochargers

Forward-looking Statements

This summary annual report containscertain forward-looking statements that are based on current expectations, estimates and projections about theindustries in which we operate andmanagement’s beliefs and assumptions. These statements arenot guarantees of future performanceand involve certain risks, uncertaintiesand assumptions that are difficult topredict. Actual outcomes may differmaterially from what is expressed inany forward-looking statement.Cummins undertakes no obligation toupdate publically any forward-lookingstatements, whether as a result ofnew information, future events or otherwise. A more complete disclosure about forward-looking statements may be found in our 2004 Form 10-K.

Five-year Total Return to Shareholders:

Cummins Inc.December 31, 1999 to December 31, 2004 (assume reinvestment of all dividends)

Five-year Compound Average Annual Total Return

Cummins Inc. 14.8%S&P 500 Index (2.3%)Dow Jones Indus. Avg. 0.6%

Common Stock Price (Closing)

2004 2003 2002 2001 2000High $84.42 $52.30 $50.19 $45.32 $49.63Low $48.70 $22.21 $19.69 $29.31 $27.23Close $83.79 $48.94 $28.13 $38.54 $37.94

-30-40

-20-10

0102030405060708090

100

Cummins Inc.S&P 500 IndexDow Jones Industrial Avg.

Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04

Cummins Inc.500 Jackson StreetColumbus, IN 47201 USA

www.cummins.com

Design: J. Michael Hayes, JMH DesignFeature Photography: John FleckAdditional Photography: Steve Chapman and Shawn SpencePrinting: The Merrick Printing CompanyProduced by: Cummins Corporate Communications