1. CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
(Unaudited)
Earnings before interest, taxes and minority interests (EBIT)
We define EBIT as earnings before interest expense, provision for income t axes and minority interests in earnings o f
consolidated subsidiaries. We use EBIT to assess and measure the perform ance of our operating segments and also as a component
in measuring our variable compens ation programs. Below is a reconciliation of EBIT, a non-GAAP financi al measure, to our
consolidated net earnings, for each of the applicable periods:
Three Months Ended Six Months Ended
June 26, June 27, March 27, June 26, June 27,
Millions 2005 2004 2005 2005 2004
Earnings before interest, income taxes and minority interests. $ 235 $ 148 $ 163 $ 398 $ 226
EBIT as a percentage of net sales..................................... 9.4% 7.0% 7.4% 8.5% 5.8%
Less:
Interest expense.......................................................... 28 27 28 56 54
Provision for income taxes ........................................... 58 34 34 92 48
Minority interests in earnings of consolidated subsidiaries . 8 5 4 12 9
$ 141 $ 82 $ 97 $ 238 $ 115
Net earnings .................................................................
Net earnings as a percentage of net sales........................... 5.7% 3.9% 4.4% 5.1% 3.0%
• We believe EBIT is a useful measure of our operating performance for the periods presented as it illustrates our operati ng
perform ance without regard to financing methods, capital structure or income taxes. This measure is not in accordance with, or
an alternative for, accounting principles generally accepted in the United States of Am erica (GAAP) and may not be consistent
with measures used by other companies. It should be considered supplemental data.