UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

CUMMINS INC.

CUMMINS INC.

     For the Quarter Ended September 23, 2001            Commission File Number 1-4949

Indiana 35-0257090
               (State or Other Jurisdiction of                  (IRS Employer Identification No.)
               Incorporation or Organization)

500 Jackson Street, Box 300547202-3005
Columbus, Indiana                                               (Zip Code)
       (Address of Principal Executive Offices)                  

812-377-5000
                                                   (Registrant's(Registrants Telephone Number)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 12 months and (2) has been subject to such filing requirements for the past 90 days:

      Yes [x]
       No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

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TABLEPART 1.   FINANCIAL INFORMATION

Item 1.  Financial Statements

CUMMINS INC.
CONSOLIDATED STATEMENT OF CONTENTSEARNINGS 
(Unaudited) 

The accompanying notes are an integral part of the consolidated financial statements.

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CUMMINS INC.
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THIRD QUARTER AND NINE MONTHS
ENDED SEPTEMBER 23, 2001 AND SEPTEMBER 24, 2000
Uaudited

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CUMMINS INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION *
(Unaudited)

*Unaudited except for December 31, 2000 amountsDerived from audited financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

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CUMMINS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited

The accompanying notes are an integral part of the consolidated financial statements.

Page 65

CUMMINS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1.  Summary of Accounting Policies:  

The Consolidated Financial Statementsforconsolidated financial statementsfor the interim periods ended September 23,March 31, 2002 and March 25, 2001 and September 24, 2000 have been prepared in accordanceconformity with the accounting policies describedprinciples generally accepted in the Company's Annual Report to ShareholdersUnited States. The interim period financial statements include estimates and Form 10-K.assumptions that affect reported amounts based upon currently available information and management's judgment of current conditions and circumstances. Management believes the statements and disclosures include all adjustments of a normal recurring nature necessary to present fairly the financial position, results of operations and cash flows for the interim periods.  Inventory values atperiods presented. It is recommended interim reporting datesfinancial statements be read in conjunction with the consolidated financial statements that are based upon estimates ofincluded in the adjustments forCompany's annual physical inventory andreport on Form 10-K for the fiscal year ended December 31, 2001. Certain amounts for prior periods have been reclassified to conform to the current period financial statements. Results for the interim periods presented are not necessarily indicative of those to be expected for the fiscal year.

Income Tax Accounting:

The Company determines its provision for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax benefits of tax loss and credit carryforwards are also recognized as deferred tax assets. Deferred tax assets are reduced by a valuation allowance to the extent the Company concludes there is uncertainty as to their ultimate realization. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in cost of LIFO inventories.

Note 2.  Income Taxes:  Income tax expenserates is recognized in income in the period that the change is enacted. The provision for income taxes during interim reporting periods is based upon the estimated annual effective tax rate for the taxable jurisdictions in which the Company operates.

Note 3.  

Inventories:

Inventories are stated at the lower of cost or net realizable value. At December 31, 2001, approximately 22 percent of domestic inventories (primarily heavy-duty and high-horsepower engines and parts) were valued using the last-in, first-out (LIFO) cost method. Other inventories are generally valued using the first-in, first-out (FIFO) cost method. Inventories at interim reporting dates include estimates for adjustments related to the Company's annual physical inventory and for the change in the cost of inventories valued using the LIFO cost method.

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Goodwill and Other Intangible Assets - Recently Adopted Accounting Standard:

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets" concurrent with SFAS No. 141, "Business Combinations". SFAS No. 142 addresses financial accounting and reporting for goodwill and intangible assets. The Statement requires Cummins to discontinue the amortization of goodwill and other intangible assets having indefinite useful lives and establishes criteria in which existing goodwill is reallocated to applicable reporting units for purposes of performing annual impairment tests using a fair-value-based analysis.

As required by SFAS No. 142, the Company applied this new accounting standard on January 1, 2002 to its previously recognized goodwill and intangible assets. At December 31, 2001, the Company's net goodwill related to consolidated entities was approximately $343 million. For purposes of impairment testing, goodwill was assigned to the following reporting units: $332 million to a component within the Filtration and Other reporting segment, $6 million to a component within the Engine Business reporting segment and $5 million to the International Distributor reporting segment. During the first quarter 2002, the Company engaged the services of an independent appraisal firm to provide valuation services for its reporting units and to perform transitional goodwill impairment tests required by SFAS No. 142. Based upon the results of the appraisal, the Company has concluded that the fair value of each of the reporting units exceeded its carrying, or book value, including goodwill, and no impa irment existed at the time of adopting SFAS No. 142. As a result, the Company has not recognized any transitional impairment loss. The provisions of SFAS No. 142 that apply to other intangible assets were not material to the Company.

The effect on the Company's net earnings and earnings per share of excluding amortization of goodwill expense is shown in the table below:

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Earnings perPer Share:

Basic earnings per share (EPS) of common stock areis computed by dividing net earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding duringfor the period. Diluted earnings per share are computed by dividing net earnings byEPS reflects the weighted-average number of shares, assuming the exercise ofpotential dilution that could occur if options or securities were exercised or converted into common stock options and conversion of mandatorily redeemable preferred securities when the effect of theirthe exercise isor conversion was dilutive. Shares of common stock held by the employee benefits trustCompany's Retirement Savings Plan are not included inexcluded from weighted average shares outstanding shares for EPS computationcalculation until distributed from the trust.trust.

For the three months ended March 31, 2002, and March 25, 2001, approximately .2 million and .1 million shares, respectively, attributable to the exercise of outstanding common stock options were excluded from the calculation of diluted EPS because the effect was antidilutive. In addition, 6.3 million shares attributable to the conversion of the Company's Preferred Securities of Subsidiary Trust, issued in June 2001, were also excluded from the calculation of diluted EPS for the three months ended March 31, 2002 because the effect was antidilutive.

Note 4.  Comprehensive Income:  Comprehensive income, net

The weighted average diluted common shares outstanding for March 31, 2002 and March 25, 2001 excludes the effect of tax, which includes net earnings (loss)approximately 2.6 million and all other non-owner changes5.9 million common stock options, respectively, since such options have an exercise price in equity, is as follows:

Page 7excess of the average market value of Cummins common stock for the quarters ending March 31, 2002 and March 25, 2001.

Note 5.  Segment Information:  Operating segment information is as follows:

Reconciliation to Consolidated Financial Statements:

Note 6.2.  Restructuring, Asset Impairment and Other Special Charges:  In

During the secondfourth quarter of 20012000, the company recorded charges of $125 million ($84 million after tax, or $2.20 per share) reflectingCompany announced restructuring actions, asset impairments and other activities largely focused in the Engine Business.  These actions were takenplans in response to the downturn in the North American heavy-duty truck market and related conditions.  The charges included $110 million attributable to the termination of the development of a new engine platform, $14 million attributable to workforce reduction actionsconditions and $1 million attributed to the divestiture of a small business operation.

Of the $125 million in charges, $118 million was associated with the Engine Business, $5 million to the Power Generation Business and $2 million to the Filtration Business and Other.

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The asset impairment charge of $110 million, calculated in accordance with SFAS No. 121, was for equipment, tooling and related investment supporting an engine development program cancelled during the quarter.  The charge included the investment in equipment previously capitalized and cancellation charges for outstanding purchase commitments.  The expected recovery value for equipment to be disposed of was based upon estimated salvage value and reduced the amount of the charge.

Workforce reduction actions included overall reductions in staffing levels plus the impact of divesting a small business operation.  Restructuring charges included severance costs and related benefits of terminating 400 salaried employees and 150 hourly employees.  Costs were based on amounts pursuant to benefit programs or statutory requirements of the affected operations.

Therecorded restructuring actions will be completed in 2001 and 2002, with the majority of the cash outflow in 2001.  Of the second quarter 2001 charges associated with the restructuring activities, net cash outflow will approximate $50 million.  The associated annual savings are estimated at $35 million upon completion of the actions.  Approximately $86 million, primarily related to the write-down of the impaired equipment, has been charged to the restructuring liabilities as of September 23, 2001.

Activity in the major components of these provisions is as follows:

In the fourth quarter of 2000, the Company recorded charges of $160 million reflecting restructuring actions,($103 million after tax). The charges included workforce reduction costs of $42 million related to approximately 1,430 employees, $102 million for asset impairments and other activities largely focused in the Engine Business.  The actions included $42 million to reduce the worldwide workforce by 600 salaried employees and 830 hourly employees, $72 million for impairment of equipment and other assets,(including $30 million for impairment of softwareinternally developed for internal use where the software programs were cancelled prior to implementationsoftware) and $16 million associated with exit costs to close or consolidate a number of small business operations.

The Company is continuing the restructuring plan implemented in In the fourth quarter 2001, the Company realigned its workforce reduction plan and reallocated $3 million of 2000.excess liabilities for workforce reduction actions to recent workforce reduction actions committed during that quarter. As of September 23, 2001, approximately $96March 31, 2002, $23 million has been charged against theof restructuring provisions.

Activitycharges remained in the major components of these provisions is as follows:

accrued liabilities. The Company is concluding theexpects to complete this restructuring plan implementedaction in the third quarter of 1998.  As of September 23, 2001, the remaining balance associated with the 1998 restructuring plan is $2 million.  The actions to be completed consist primarily of severance payment commitments to terminated employees in 2001.2002.

Note 7.  Sale and Leaseback:  In the second quarter of 2001, the Company entered into a sale and leaseback transaction for certain heavy-duty engine manufacturing equipment.  Proceeds from the transaction were $119 million, compared to the equipment net book value of $104 million.  The $15 million gain has been deferred for the entire lease term due to a residual value guarantee by the Company.

Note 8.  Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of Subsidiary Trust Holding Solely Convertible Subordinated Debentures of the Parent:  In June 2001, Cummins Capital Trust I (the "Trust"), a wholly-owned subsidiary trust of the Company, issued 6 million shares of 7% convertible quarterly income preferred securities (the "Preferred Securities"), with a liquidation preference of $50 per share (for a total liquidation value of $300 million).  The Preferred Securities represent an undivided beneficial ownership interest in the assets of the Trust.  The payment of distributions out of assets held by the Trust and payments on liquidation of the Trust or the redemption of the Preferred Securities are guaranteed by the Company to the extent the Trust has assets available therefor.  This guarantee, when taken together with the Company's obligations under the indenture pursuant to which the Debentures (defined below) were issued, the Debentures, and the Company's obligations under the Trust Agreement, provides a full, irrevocable and unconditional guarantee of all of the Trust's obligations under the Preferred Securities.

Proceeds from the issuance of the Preferred Securities were invested in 7% Convertible Subordinated Debentures (the "Debentures") due June 15, 2031 issued by the Company.  The Trust exists solely to issue the Preferred Securities and its own common securities and to invest the proceeds therefrom in the Debentures, which is its sole asset.

Each of the Preferred Securities and the related Debentures are convertible at the option of the holder into shares of the Company's common stock at the rate of 1.0519 shares per Preferred Security (equivalent to a conversion price of $47.53 per share of Company common stock).  The Trust will only convert Debentures pursuant to a notice of conversion by a holder of Preferred Securities.

Holders of the Preferred Securities are entitled to receive preferential cumulative cash distributions at an annual rate of 7% accruing from the date of original issue, commencing September 15, 2001, and payable quarterly in arrears thereafter.  The distribution rate and the distribution dates for the Preferred Securities will correspond to the interest rate and interest payment dates on the Debentures.  The Company may defer interest payments on the Debentures for a period not to exceed 20 consecutive quarters.  If the Company defers interest payments on the Debentures, the Trust will defer distributions on the Preferred Securities for a corresponding period.  In this case, distributions on the Preferred Securities will continue to accrue, and the Company will not be permitted to declare or pay any cash distributions with respect to its capital stock or debt securities that rank equally with or junior to the Debentures.

Subject to certain restrictions, the Preferred Securities are redeemable at par value at the Trust's option upon any redemption by the Company of the Debentures after June 15, 2006.  Upon repayment at maturity of the Debentures or as a result of the accelerationcontinuing downturn in the North American heavy-duty truck market and related conditions, the Company announced further restructuring actions and recorded charges of $125 million ($84 million after tax). The charges included $14 million attributable to workforce reduction actions, $110 million for asset impairment and $1 million attributed to the divestiture of a small business operation. Of this charge, $118 million was associated with the Engine Business, $5 million with the Power Generation Business and $2 million with the Filtration and Other Business. The asset impairment charge was for equipment, tooling and related investment supporting a new engine development program that was cancelled during the quarter. The charges included the investment in manufacturing equipment previously capitalized and cancellation charges for outstanding capital and tooling purchase commitments. The charge was reduced by the estimated salvage valu e related to the planned equipment disposals. Workforce reduction actions included overall reductions in staffing levels and the impact of divesting a small business operation. The charges included severance costs and related benefits of terminating approximately 400 salaried and 150 hourly employees and were based on amounts pursuant to established benefit programs or statutory requirements of the Debentures uponaffected operations. As of March 31, 2002, $2 million remained in accrued liabilities for this action. The Company expects to complete this restructuring in 2002.

The table below summarizes the occurrencemajor components and activity of a default,these restructuring actions from the Preferred Securities are subject to mandatory redemption.fourth quarter, 2000 through March 31, 2002:

Note 9.  Recently Issued Accounting Standards:  3.  Other (Income) Expense:

The major components of other (income) expense included in theConsolidated Statement of Earnings are shown below:

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Note 4.  Derivatives and other Financial Instruments:

The Company is 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 contracts. As stated in the Company's policies and procedures, financial derivatives are used expressly for hedging purposes, and under no circumstances are they used for speculation or trading. Transactions are entered into only with banking institutions that have strong credit ratings, and thus the credit risk associated with these contracts is not considered significant. The status and results of hedging program activities are reported to senior management on a periodic basis. The following table summarizes the Company's outstanding derivatives by risk category and instrument type:

Foreign Exchange Contracts

Due to its international business presence, Cummins uses foreign exchange forward contracts to manage its exposure to exchange rate volatility. Foreign exchange net monetary balance sheet exposures are aggregated and hedged at the corporate level. These derivative contracts are not designated as hedges under SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". The fair value gains or losses from these foreign currency derivatives are recognized directly in earnings, and generally offset foreign exchange gains or losses on the exposures being managed. Maturities on these instruments generally fall within the one-month and six-month range. As of March 31, 2002, approximately 88 percent of the notional amount of the forward contracts shown in the table above were attributable to three currencies, the British Pound (35 percent), the Euro (19 percent) and the Australian Dollar (34 percent). As of March 25, 2001, approximately 91 percent of the contracts were attrib utable to the same currencies, the British Pound (60 percent), the Euro (24 percent) and the Australian Dollar (7 percent).

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Interest Rate Swaps

The Company manages its exposure to interest rate fluctuations through the use of interest rate swaps. The objective of the swaps is to more effectively balance borrowing costs, interest rate risk and reduce financing costs. Currently, the Company has in place one interest rate swap relating to Cummins 6.45% Notes that mature in 2005. The swap converts $225 million notional amount from fixed rate debt into floating rate debt and matures in 2005. The interest rate swap is designated as a fair value hedge of the fixed rate debt. As the critical terms of the swap and the debt are the same, the swap is assumed to be 100 percent effective and the fair value gains on the swap are completely offset by the fair value adjustment to the underlying debt.

In JuneMarch 2001, the Financial Accounting Standards Board (FASB) issued StatementCompany terminated three fixed-to-floating interest rate swap agreements related to Cummins 6.25% Notes with principal amount of Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations"$125 million due in 2003 and SFAS 142 "Goodwill6.45% Notes with principal amount of $225 million due in 2005. The termination of these swaps resulted in a $9 million gain. The gain is being amortized to earnings as a reduction of interest expense over the remaining life of the debt. The amount of gain recognized in first quarter, 2002 and for the year ended December 31, 2001 was $.7 million and $2.5 million, respectively.

Commodity Price Swaps

Cummins is exposed to fluctuations in commodity prices due to contractual agreements with component suppliers. In order to protect itself against future price volatility and, consequently, fluctuations in gross margins, the Company enters into fixed price swaps with certain designated banks. All such derivative contracts are designated as cash flow hedges and the ineffective portion of the hedge is recognized in earnings.

Note 5.  Business Segments and Geographic Information:

The Company has four reportable business segments: Engine, Power Generation, Filtration and Other Intangible Assets." SFAS 141and International Distributor. This reporting structure is effective June 30, 2001organized according to the products and requires the purchase methodmarkets each segment serves and allows management to focus efforts on providing enhanced service to a wide range of accounting be used for all business combinations. The Company does not believe this statement will have a material effect on its financial statements. SFAS 142 requires that goodwill and intangible assets with indefinite lives will no longer be subject to amortization but will be subject to annual assessment for impairment. As required, the Company will adopt this new standard January 1, 2002. In 2000, the Company recorded $11 million in goodwill amortization.customers. In the thirdfourth quarter and the first nine months of 2001, the Company recorded goodwill amortizationrealigned its reporting structure and created a new business segment, International Distributor. As a result, certain historical business segment data has been reclassified to reflect this change.

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A reconciliation of $3 millionthe segment information to the corresponding amounts in the Consolidated Financial Statements is shown in the table below:

Note 6.  Comprehensive loss:

Comprehensive loss, which includes all changes in shareholders' investment during the period except transactions with shareholders, was as follows:

Note 7.  Contingencies and $8 million, respectively. Environmental Compliance

The Company is currently reviewing the provisionsand its subsidiaries are defendants in a number of SFAS 142pending legal actions, including actions related to use and has not yet determined the impactperformance of the new standardCompany's products. The Company's engine products are also subject to extensive statutory and regulatory requirements that directly or indirectly impose standards with respect to emissions and noise. A more complete description of Cummins legal contingencies and environmental compliance is disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. The Company has reviewed the status of the disclosures contained in its financial statements.

PAGE 10Form 10-K and believes there are no material changes except for the following:

SFAS 143 "AccountingOn April 1, 2002 the Company received certification from the U.S. Environmental Protection Agency (EPA) for Asset Retirement Obligations" wasits ISX diesel truck engine. The certification affirms Cummins compliance with stringent new emission standards that become effective October 1, 2002. The standards were established in a consent decree entered into by Cummins and other diesel engine manufacturers in October 1998. In issuing the certification, the EPA also issuedaffirmed the use of Auxiliary Emissions Control Devices (AECD) as submitted by Cummins. Existing law permits the use of AECD's when engine protection is necessary under certain operating conditions. AECD's are used in June 2001. This statement requires obligations associated with retirement of long-lived assets to be capitalizedengines throughout the industry today and are approved as part of the carrying value of the related asset. The Company does not believe this statement will have a material effect on its financial statements. In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 sets forth a single accounting model for the accountingEPA regulations and reporting for the impairment or disposal of long-lived assets and is effective January 1, 2002 for the Company. The Company is currently reviewing the provisions of SFAS 144 to determine the effect, if any, on the Company's financial statements.certification process.

Page 1112

CUMMINS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS, CASH FLOW AND FINANCIAL CONDITIONItem 2.  Management's Discussion and Analysis of Financial Conditions and Results of Operations

Overview

NetCummins first quarter, 2002 net sales were $1.41 billionslightly lower and its net loss slightly higher compared to year-earlier levels. Consolidated net sales in the thirdfirst quarter were $1.33 billion compared to $1.35 billion reported for the first quarter 2001. The Company reported a loss before interest and taxes of 2001,$15 million for the first quarter 2002 compared to a decreaseloss of 10 percent from the third quarter of 2000.  Earnings$6 million before interest and taxes in the thirdfirst quarter 2001. After minority interest and preferred dividends, a net loss of 2001 were $30$29 million or 2.1 percent of sales.  This compares to earnings before interest and taxes of $61 million, or 3.9 percent of sales, in the third quarter of 2000.  Net earnings were $3 million, or $.08$(.75) per share compared to net earnings of $61 million, or $.66 per share, in the third quarter of 2000.  Net earningsdiluted common stock was reported for the first nine months of 2001, excluding second quarter restructuring charges, were2002 compared to a net loss of $21$26 million or $(.54)$(.68) per share.  Net earningsshare diluted common stock for the first nine months of 2001 were a loss of $105 million, or $(2.74) per share, compared to earnings of $128 million, or $3.36 per share, in the first nine months of 2000.quarter 2001.

Results of Operations

Net Sales:Sales Summary

Net sales for the Engine Business were $776 million in the first quarter 2002, up slightly over sales of $768 million reported in the first quarter 2001. Power Generation sales were $195$283 million, down $26 million, or 8 percent compared to first quarter 2001, primarily as a result of lower economic activity and higher inventory levels in the third quartermarketplace. Sales of 2001 compared to the third quarterFiltration and Other Business were $228 million, an increase of 2000.  Power Generation Business sales increased $37$13 million compared to a year ago.  The Filtrationearlier levels, due to increased domestic demand for filtration products and increased sales of turbochargers, up 12 percent. Sales for the International Distributor Business and Other sales were virtually flat$124 million, down $9 million compared to a year ago.  Salesfirst quarter 2001 sales.

Net sales for each of the Company's key businessesbusiness segments during the comparative interim periods were as follows:

Engine Business:

In the third quarter of 2001,The Company's Engine Business revenues decreased 20shipped 68,400 engines in the first quarter 2002, a decrease of 1,300 units or 2 percent, as compared to first quarter 2001. While heavy-duty and high-horsepower engine shipments declined 22 and 27 percent, respectively, as a result of the third quarter of 2000, primarily due to declinescontinuing weakness in the North American automotive markets.  Enginetrucking and construction markets, shipments of midrange engines were up 3 percent, primarily due to increased demand from DaimlerChrysler AG for Dodge Ram truck engines, up 4,500 units or 29 percent compared to a year earlier.

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A summary of unit shipments for the comparative periods were as follows:

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Automotive Markets:

Sales for automotive markets were $522 millionEngine Business by engine classification is shown in the third quartertable below:

A summary of 2001, down $171 million, or 25 percent, compared tonet sales for the third quarter of 2000.  Company's Engine Business by market application follows:

Heavy-Duty Truck

Sales to the heavy-duty truck market were $219 million in the first quarter of 2002, down 27$17 million, or 7 percent, compared to the thirdfirst quarter of 2000, with engine unit2001. Unit shipments were 7,700 in the first quarter, 2002 compared to 10,300 for the comparable period a year ago, a decline of 2,600 units, or 25 percent. Sales to the heavy-duty truck market have been depressed over the past two years as a result of the economic downturn in North America down 45 percent while unit shipmentsresulting in lower freight tonnage and high inventory levels of used trucks. Shipments of the Company's new ISX engine continues to other markets declined 31 percent.increase as demand shifts away from the N14 engine.

Medium-duty Truck and Bus

Medium-duty truck and bus revenues decreased 23$6 million, or 4 percent, below sales levels a year ago. Revenues for the medium-duty truck market were essentially flat compared to the prior year while total unit shipments declined 5 percent. Unit shipments to the North American medium-duty truck market were down 30 percent compared to a year ago while medium-duty shipments to international markets increased 12 percent, primarily in the UK and Brazil. Bus engine sales declined 11 percent compared to the prior year with most of the decline a result of lower demand from North American OEMs (Original Equipment Manufacturers). Shipments to the international bus markets were down 7 percent compared to the comparable period a year ago, with increased shipments to China offset by lower shipments to India and Mexico.

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Light-duty Automotive

Revenues from the thirdlight-duty automotive market increased $36 million compared to first quarter of 2000.  Medium-duty truck engine2001 sales. Total unit shipments were down 35up 28 percent compared to the prior years quarter with most of the increase attributable to DaimlerChrysler AG. Total shipments to DaimlerChrysler for the Dodge Ram truck were 19,800, an increase of 4,500 units, or 29 percent higher than first quarter a year ago. Engine sales to the recreational vehicle market also increased in North America, while international shipments were down 20first quarter 2002, up 38 percent duecompared to market weakness in China and Latin America.  Bus engine shipments were down 3 percent,first quarter 2001 with a 39 percent dropincrease in North America offset by strong international demandengine shipments. While some recovery is evident in India and China.

Revenues of the light-duty automotive and recreational vehicle business were 22 percent lower than the third quarter of 2000.  In the third quarter of 2001, Cummins shipped 22,000 engines to DaimlerChrysler, 29 percent lower than in the third quarter of 2000.  Engine shipments for the recreational vehicle markets were up 10 percent, reflecting manufacturer inventory corrections in a weak market.

Industrial and Other Markets:

Sales to mining markets increased 14 percent compared to the third quarter of 2000, reflecting furtherindustry, Cummins market share gains in a weak market.  Third quarter sales to the rail sector were up 60 percent from the third quarter of 2000, primarilyhas increased as a result of strong sales in Chinafavorable product acceptance and Europe.OEM realignments.

Industrial

Sales to the construction, marine and agriculture markets were 26 percent lower than inessentially flat compared to the thirdfirst quarter of 2000.2001. Worldwide sales in the construction equipment market were down 197 percent from the thirdfirst quarter of 20002001 with unit shipments of engines into North America down 3214 percent, and shipments of engines to international markets down 2420 percent. Sales of Cummins new B3.3 series engine continues to increase in this market as OEMs begin to engineer it into their product lines. Revenues in the marine markets were down 9up 7 percent whileover first quarter 2001, primarily due to a shift in sales mix from midrange to heavy-duty engines. Sales to the agricultural equipment market were down 19increased 56 percent compared to the third quarter of 2000.

Power Generation Business:

In the thirdfirst quarter of 2001, as unit shipments to the North American market increased 7 percent while shipments to international markets more than doubled, with large sales forincreases to Europe and Latin America manufacturers.

High-horsepower Industrial

Cummins sales to mining markets declined 13 percent compared to first quarter 2001 sales, reflecting some softening in the market after three consecutive quarters of increased sales and market share penetration. First quarter sales to the rail sector, which is primarily international markets, were flat compared to the first quarter of 2001. High-horsepower sales to government markets, primarily military applications, were unchanged compared to first quarter 2001 with a slight decline in domestic shipments offset by increases in international shipments.

Power Generation Business

Sales in the Company's Power Generation Business of $371were $283 million increased 11in the first quarter, 2002, down $26 million, or 8 percent, compared to the third quartersales of 2000.  The higher revenues resulted from growth in North America, Latin America and Europe.  The power shortage in Brazil produced increased demand for power generation equipment.  The North American rental business was strong$309 million in the thirdfirst quarter 2001. Total engine units shipped for the generator drive and generator set markets were 5,400 units, down 600 units, or 10 percent lower than the comparable quarter a year ago.

A summary of 2001, which helped offsetunit shipments by engine classification for the continued impactPower Generation business follows:

Page 15

Total engine shipments to other generator drive assemblers were 57 percent of total engines shipped in the North American economic slowdown on the recreational vehicle market and the telecommunications sector.  Genset revenues were up 19 percentfirst quarter 2002, unchanged from a year ago as the change in genset mixago. Total shipments of generator drive units decreased 10 percent compared to higher kWfirst quarter 2001. Shipments for heavy-duty and high-horsepower gen drive units offset volume declines.  Alternator revenues were down 720 and 24 percent, fromrespectively, compared to a year ago while shipments of midrange powered gen drive units increased slightly. Total revenue for gen drives units decreased 28 percent as a result of the change in sales mix from heavy-duty and high-horsepower drive units to the lower priced midrange units. Gen drive shipments to the North America and Indian markets increased 6 percent and 5 percent, respectively on lower revenues. Shipments of enginesgen drives units to other genset original equipment manufacturersEurope/CIS and Mexico/Latin America also decreased while shipments to Asia/Australia were relatively flat compared to a year ago.

Total shipments for generator sets were 11 percent lower than the prior year's quarter as heavy-duty units declined 17 percent, high-horsepower units decreased 21 percent and midrange units were down slightly. Total revenues from generator sets decreased 22 percent compared to first quarter 2001 revenues, most significantly in North America where high inventory levels and soft market conditions prevailed. Revenues from generator sets increased in the Europe/CIS market and Latin America. Alternator sales increased 5 percent compared to first quarter 2001 and generator sales to the mobile/RV market remained strong during the first quarter 2002, up 9 percent over the prior year's quarter.

Filtration and Other Business

Revenues in the Filtrationand Other Business were up $13 million, or 6 percent, compared to first quarter 2001 sales levels. Revenues from the sale of filtration products were up $9 million over the comparable quarter a year ago, primarily due to increases in the North American aftermarket and OEM businesses, specifically customers in the heavy-duty truck, agriculture and construction markets. Sales to European OEMs in first quarter 2002 were essentially flat compared to first quarter 2001. Revenues from the Holset turbocharger business were up 12 percent comparedover first quarter 2001 with increased shipments to joint ventures and Chinese and European OEMs.

International Distributor Business

Revenues from the third quarter of 2000.

FiltrationInternational Distributor Business and Other:

FiltrationBusiness and Other sales of $270were $124 million, in the third quarter of 2001 were down 2$9 million, or 7 percent, compared to year earlier levels. Approximately $15 million of the thirddecrease is attributable to reclassifying certain OEM engine sales, which are now reported as revenues in the Engine Business. Excluding the effects of this reporting change, first quarter of 2000.  Within the filtration business,2002 sales decreased 4 percent compared to the third quarter of 2000 due to reductions in demand from North American on-highway and off-highway original equipment manufacturers.  Sales to European original equipment manufacturers were also down compared to a year ago.  Third quarter sales at company-owned distributors were downincreased approximately $6 million, primarily in AustraliaAsia and Southeast Asia.  Sales at the Holset turbocharger business increased slightly fromSouth Pacific territories, partially offset by lower sales in Argentina as a year ago, with market share gains in Europe and China.result of the peso devaluation.

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Geographic Markets

International Markets:

In total,Sales to international markets represented 4746 percent of the Company's revenues in the thirdfirst quarter of 2002 and 2001. InternationalTotal international sales in totalwere relatively flat, down $6 million, or approximately 1 percent below 2001 sales levels. Heavy-duty truck engine shipments to international markets were down 333 percent from the third quarter of 2000.  The predominant reason for the decline in international sales from a year ago was lower heavy-duty truck production in Canada and Mexico.  All other international markets remain relatively stable to modestly lower compared to a year ago while international midrange engine shipments increased 12 percent. Total engine shipments to the international bus market were down 7 percent compared to a year ago, primarily in India and Korea with sales flat to bus OEMs in Mexico. Bus engine shipments to China OEMs remain strong, up 500 units over the comparable quarter a year ago. Presently, Cummins engines power over 2,000 buses in Beijing, China.

Sales to Europethe Asia/Australia region increased $7 million, or 3 percent, compared to first quarter 2001, primarily from increased demand for bus engines partially offset by lower shipments to Korean bus and the construction OEMs. Sales to Europe/CIS, representing 15 percent of the Company's sales in the thirdfirst quarter of 2001,2002, were 3down 4 percent lower thancompared to the prior year's quarter.quarter, mostly in the heavy-duty and medium-duty truck markets in the UK. Business in Mexico, Brazil and Latin America representedwas 8 percent of total sales in the first quarter 2002, with revenues up 4 percent, primarily from medium-duty and light-duty automotive sales to Brazil and Venezuela. Sales to Canada, representing 5 percent of sales in the thirdfirst quarter of2002, were down 7 percent compared to first quarter 2001 with revenues 8 percentdue to lower than the year-ago levels.  Asia and Australian markets, in total, represented 15 percent ofheavy-duty truck production.

The Company's net sales in the third quarter of 2001, decreasing 3 percent from the prior year's quarter.  Sales to Canada, representing 6 percent of sales in the third quarter of 2001, were 25 percent lower than the third quarter of 2000.by geographic region during comparative interim periods were:

Gross Margin:

The Company's gross margin percentage was 18.1$226 million, or 17.0 percent of net sales, in the first quarter of 2002, compared to $232 million, or 17.2 percent, in the thirdfirst quarter of 2001, compared to 19.7 percent in the prior year's quarter.2001. The decrease in gross margin percentage was dueattributable to modestly lower volumes resulting in unabsorbed manufacturing costs, duethe adverse effects of product mix caused by higher midrange engine shipments compared to lower volumesheavy-duty engine shipments and the impact of foreign currency exchange rates, from foreign currencies, primarily the Australian dollarin Latin America and the Brazilian Real partially offset byUK. Partially offsetting the British Pound.decrease in margin were improvements in product coverage costs, which were 3.5 percent of net sales in first quarter 2002, compared to 3.8 percent of net sales in first quarter 2001.

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Operating Expenses:Expenses

Selling, Administrative, Research and Engineering Expenses

Total selling, administrative and research and engineering expenses were 12.6$242 million, or 18.2 percent of net sales, compared to $236 million, or 17.5 percent of sales, in the thirdfirst quarter of 2001, compared to 12.4 percent2001. The overall increase in the third quarter of 2000, while total expenses decreased $18 million.  Researchselling, administrative, research and engineering expenses were 3.8 percent of salesis partially attributable to incremental expenses associated with an additional work week in first quarter 2002 compared to first quarter 2001. The additional week increased payroll expenses and other expenses in the thirdfirst quarter of 20012002 compared to 3.9 percentthe comparable quarter a year ago. While research and engineering expenses related to engineering development costs for 2002 emission projects and product development costs for joint ventures also increased, the increase was offset by ongoing cost reduction efforts and the elimination of costs from the Dakota engine development program which was cancelled in the thirdsecond quarter 2001.

Results of 2000, while total expenses decreased $9 million.Joint Ventures and Alliances

The Company's incomeearnings from joint ventures and alliances was essentially break-even in first quarter 2002 compared to $2 million income in the thirdfirst quarter of 2001 as compared to $3 million in the third quarter of 2000.2001.

Other:

Interest Expense

Interest expense was $15$14 million in the thirdfirst quarter of 2001,2002, $9 million lower than the comparable quarter last year. The reduction in interest expense was a result of lower borrowing levels primarily from the issuance of preferred securities and debt refinancing facilitated by sale and leaseback transactions.

Other (Income) Expense

Other (income) expense was $1 million income in the first quarter 2002 compared to $22$4 million expense in first quarter 2001, or a $5 million increase over the prior year. Approximately $3 million of the increase resulted from the adoption of a new accounting standard that required Cummins to discontinue the amortization of goodwill effective January 1, 2002. (See Note 1 to the Consolidated Financial Statements for the effect of this change). The major components of other (income) expense are disclosed in Note 3 to the Consolidated Financial Statements.

Restructuring, Asset Impairment and Other Charges

The Company is continuing its restructuring actions taken in the fourth quarter of 2000 and the second quarter of 2001. During the first quarter 2002, approximately $7 million was charged against the liabilities for these restructuring actions. The Company expects to complete its restructuring actions during 2002 and does not anticipate any significant changes to the original liabilities recorded for these actions. Note 2 to the Consolidated Financial Statements includes detailed information regarding the components and activity of the Company's restructuring actions.

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Provision for Income Taxes

The Company recorded an income tax benefit of $9 million in the thirdfirst quarter of 2000. The decrease in interest expense is primarily due2002 compared to a decline$7 million tax benefit recorded in the weighted average interestfirst quarter of 2001. The first quarter 2002 income tax benefit reflects an estimated annual effective tax rate of short-term borrowings and25 percent on earnings (loss) before income taxes after deducting dividends on the use of other financing alternatives. Other incomeCompany's preferred securities.

Minority Interest

Cummins minority interest from consolidated operations was $3 million in the thirdfirst quarter 2001,of 2002 compared to $5$4 million in the thirdfirst quarter 2000.of 2001, a decrease of $1 million, due to lower earnings at Cummins India Limited.

Liquidity and Capital Resources

Restructuring, Asset ImpairmentCummins operations have historically generated sufficient cash to fund its businesses, capital expenditures and Other Special Charges:dividend payments. At certain times, the Company's cash provided by operations is subject to seasonal fluctuations and changes in business conditions, and as a result, periodic borrowings are used to finance working capital requirements. The Company has available various short and long-term bank credit arrangements which are more fully disclosed in Note 6 of the Consolidated Financial Statements of the Company's Form 10-K for the year ending December 31, 2001.

The second quarter 2001 results included charges of $125 million ($84 million after tax, or $2.20 per share) reflecting restructuring actions, asset impairments

These credit arrangements, the Company's accounts receivable securitization program and other activities largely focusedcertain lease obligations contain financial covenants that require the Company to maintain certain financial ratios and minimum net worth levels as defined in the Engine Business.  These actions were takenagreements. In addition, the Company must also maintain minimum credit ratings, as defined in responsethe agreements, relating to the downturnCompany's long-term, unsecured debt. Some of the agreements covering bank loans, credit agreements and certain lease obligations contain "rating triggers", which typically provide creditors with certain rights in the event that Cummins credit ratings change to predetermined levels. These rights include, but are not limited to, increases in loan pricing and requirements to provide letters of credit.

Financial Covenants and Credit Rating

In April 2002, the Company received notification from Moody's Investors Services, one of two major credit rating agencies, that its long-term and short-term debt ratings were being lowered primarily as a result of the continuing weakness in the North American heavy-duty truck market and related conditions.market. Moody's lowered the Company's long-term debt rating from Baa3 to Ba1. The charges include $110 million attributabledowngrade applies to the terminationCompany's long-term notes and debentures, senior unsecured medium-term notes and revolving credit agreement. The short-term rating, which applies to the Company's short-term borrowings, was lowered from Prime-3 to Not-Prime. Standard & Poor's, the other major credit rating agency, has reaffirmed its rating of Cummins debt at BBB-, the lower end of the developmentinvestment grade category and expects the Company's liquidity and credit protection measures to remain satisfactory for the current rating.

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Following is a discussion regarding the impact of the Moody's credit rating downgrade on the Company's financial arrangements and credit agreements.

Accounts receivable securitization program - This short-term financing arrangement in which Cummins sells an interest in its trade receivables to a special purpose subsidiary requires Cummins to maintain a minimum investment grade credit rating for its long-term unsecured debt. As a result of the recent Moody's downgrade, the Company renegotiated the terms of the securitization agreement to amend the requirement to allow a credit rating below investment grade. The terms of the new agreement provide for an increase in the interest rate and fees under the securitization program. The estimated impact of the increase at current business levels is approximately $.5 million annually. As of March 31, 2002 the Company had $90 million outstanding under the securitization program.

Financing arrangements for independent distributors - Cummins is a guarantor of revolving loans, term loans and leases in excess of a new engine platform, $14 million attributablespecified borrowing base for certain of its independent domestic distributors. The financing arrangement for U.S. distributors requires Cummins to employee severance actionsmaintain a minimum investment grade credit rating for its long-term unsecured debt. As a result of the recent downgrade, the Company has entered into discussions with the financial institution to renegotiate the terms of its financing arrangement and $1 million attributedamend the requirement to maintain a minimum investment grade credit rating. In the interim, the financial institution is continuing to fund this program. The Company expects that the terms of the amendment will result in an increase in fees related to the divestitureguarantee. As of March 31, 2002, Cummins had guaranteed $30 million of financing arrangements for its U.S. distributors.

Revolving credit agreement - Cummins maintains a small business operation.$500 million revolving credit agreement with a group of banks. The interest rate applicable to borrowings under the agreement is based upon a split credit rating involving both credit rating agencies. As a result, the interest rate on the revolving credit agreement remains unchanged and was not affected by the Moody's downgrade. The interest rate will continue to be based on the higher rating of the two agencies credit ratings, i.e., Standard and Poor's. The amount of borrowings outstanding under the revolving credit agreement at March 31, 2002 was $65 million. The credit agreement expires in January 2003, however, the Company expects to renegotiate a new agreement with the participating banks by the end of the second quarter 2002.

Of

Equipment sales-leaseback - In 2001, the $125 millionCompany entered into a sale-leaseback agreement whereby it sold certain manufacturing equipment and leased it back under an operating lease. The lease agreement requires Cummins to maintain a minimum investment grade credit rating. As a result of the recent downgrade in charges, $118 million was attributablethe Company's credit rating, the Company is required to obtain irrevocable, unconditional standby letters of credit for $25 million. The letters of credit will be posted to the Engine Business, $5 million tobenefit of the Power Generation Businessequipment lessor and $2 million tocertain lenders and will remain in effect until the Filtration Business and Other.Company has maintained a minimum investment grade credit rating for twelve consecutive months.

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The asset impairment chargeCompany's debt agreements contain several restrictive covenants, which require the Company to maintain a certain level of $110 million, calculated in accordance with SFAS No. 121, was for equipment, toolingnet worth and related investment supporting an engine development program cancelled during the quarter.  The charge included investment in equipment previously capitalized and cancellation charges for outstanding purchase commitments.  The expected recovery value for equipment to be disposed of was based upon estimated salvage value and reducedmaintain a minimum leverage ratio which restricts the amount of additional debt the charge.

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Workforce reduction actions included overall cutbacksCompany may incur. The most restrictive of these covenants applies to the ESOP Trust Notes. As of March 31, 2002, the Company was in staffing levels plus the impacts of divesting of a smaller operation.  Restructuring charges for workforce reductions included the severance costs and related benefits of terminating 400 salaried employees and 150 hourly employees.  Costs for workforce reductions were based on amounts pursuant to benefit programs or statutory requirementscompliance with all of the affected operations.covenants under its borrowing agreements.

The restructuring actions will be completed in 2001 and 2002 with the majority of the cash outflow in 2001.  Of the total charges associated with the restructuring activities, cash outflows will approximate $50 million.  The associated annual savings are estimated at $35 million upon completion of the actions.  Approximately $86 million, primarily related to the write-down of the impaired equipment, has been charged to the restructuring liabilities as of September 23, 2001.

Provision for Income Taxes:

The Company's income tax provision in the third quarter of 2001 was $2 million, reflecting an estimated effective tax rate of 25 percent for the year from operations and an effective tax rate of 33 percent from special charges.

Cash Flow and Financial ConditionFlows

Key elements of the Company's cash flows were:during the interim periods follow:

In the first nine months of 2001, net cash provided byquarter 2002, operating activities was $57 million.  Theused $43 million in cash compared to first quarter 2001 when operating activities provided $43 million in cash. While the Company's net losses from operating activities were offset by the non-cash effect of depreciation and amortization.  Increasesin both periods, working capital items consumed $68 million of cash in the first quarter 2002 while providing $20 million of cash in the first quarter of 2001. Compared to a year ago, most of the change in cash provided by working capital resulted from larger increases in accounts receivable, ($58 million) and decreases in income taxes payable were partially offset by decreases in inventoryinventories ($28 million) and increasesa decrease in accounts payable and accrued expenses.  The Company is fundingexpenses ($48 million), offset by an increase in proceeds from the cash requirements for restructuring actions using cash generated from operations, withsale of receivables ($61 million) under the majorityCompany's securitization program. Most of the increase in receivables occurred in the Company's Engine Business, primarily OEMs and distributors, while receivables in the Power Generation Business increased slightly. During the first q uarter 2002, the Company generated $35 million in cash requirement expected to occurthrough the sale of receivables in 2001.  its securitization program. The increase in inventories utilized $31 million of cash in the first quarter 2002 while the increase in accounts payable and accrued expenses provided $45 million of cash.

Net cash used in investing activities included $158was $22 million in the first quarter 2002 compared to $83 million a year ago, a decrease of planned$61 million. A majority of the decrease ($44 million) was a result of significant capital expenditures and $22for the Dakota engine project in the first quarter 2001. The Company's investment in capital expenditures for the year 2002 is expected to be approximately $150 million, related to$56 million lower than its 2001 investment as a result of overall reductions in planned spending. The remainder of the decrease in net cash used in investing activities was a reduction in investments and advances into joint ventures and alliances, offset by $140down $17 million inflow from disposals, including $119 million relatedcompared to a sale/leaseback of manufacturing equipment.  year ago.

Net cash provided by financing activities was $67 million in the first nine monthsquarter 2002, $5 million lower than first quarter 2001 as a result of 2001lower borrowings.

The overall net change in cash and cash equivalents for the first quarter 2002, was $1 million increase compared to $32 million increase in the first quarter 2001.

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Critical Accounting Policies

A summary of Cummins significant accounting policies is included net proceedsin the notes to consolidated financial statements contained in the annual report on Form 10-K for the year ended December 31, 2001. Management believes the application of these accounting policies on a consistent basis enables the Company to provide financial statement users with useful, reliable and timely information about the Company's operating results and financial condition.

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts presented and disclosed in the financial statements. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors that management believes to be reasonable under the circumstances. In any given reporting period, actual results could differ from the issue of mandatorily redeemable preferred securities of $291 millionestimates and assumptions used primarily to reduce short-term credit agreements of $215 million and for dividend payments of $37 million.

It isin preparing the Company's opinionfinancial statements.

Critical accounting policies are those that currenthave a material impact on Cummins financial statements and forecasted cash flowsalso require management to exercise significant judgment due to a high degree of uncertainty at the time the estimate is made. Cummins critical accounting policies include those addressing the recoverability and useful lives of assets, estimation of liabilities for product coverage programs, income taxes and pensions and postretirement benefits.

Cummins investment in engine manufacturing equipment is depreciated using a modified units-of-production method. The cost of all other equipment is depreciated using the straight-line method. Under the modified units-of-production method, the service life of an asset is measured in terms of units of product produced rather than the passage of time. Depreciation expense under the modified units-of-production method is likewise measured in terms of units of product produced subject to a minimum level or floor. The assumptions and estimates regarding asset service life, estimated residual values and units-of-production are based on a number of factors, including but not limited to, wear and tear, deterioration, and obsolescence. Actual results could differ from operations as well as benefits from previously announced restructuring actionsthese estimates due to changes in retirement or maintenance practices, the introduction of new technology and new products or other financing arrangements will be sufficient to meet current debtchanges in the expected service requirements and fund anticipated capital expenditureslives of the assets. The Company evaluates the carrying value of its long-lived assets, including goodwill, by performing impairment tests whenever events or changes in circumstances indicate possible impairment.

Environmental Compliance:

The Company's productsestimates of liabilities for product coverage programs are subjectbased on payment experience and reflect management's best estimate of expected costs at the time the product is sold and subsequent adjustment to extensive global statutorythose expected costs when actual costs differ. Future events and regulatory requirements that directly or indirectly impose standards with respectcircumstances related to emissions.  The Company's engines comply with emissions standards established by all regulatory agencies around the world where the Company sells its products.  Emissions standards imposed in the U.S. by the Environmental Protection Agency (EPA) are among the more significant standards to which the Company is subject.  In 1998, the Company and other heavy-duty diesel engine manufacturers entered into a Consent Decree with the EPA, the U.S. Department of Justice (DOJ)product failure rates, repair costs, and the California Air Resources Board regarding diesel engine emissions, imposing standards for lower emissions beginning in October 2002.  In June 2001, the EPA and DOJ reaffirmed the U.S. government's intention to enforce the termstime of the Consent Decrees entered into in 1998.  The Company confirmed that it would meet the Consent Decree requirements.  In addition, the Company expects to meet emissions standards for all markets in which the Company elects to participate.  In the event the Company fails to comply withfailure could materially change these standards, future financial results could be adversely affected.estimates.

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FORWARD-LOOKING STATEMENTS

When used herein, the terms "expect, plan, anticipate, believe" or similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements.22

The Company has included certain forward-looking statementsdetermines its provision for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Future tax benefits of tax loss and credit carryforwards are also recognized as deferred tax assets. Deferred tax assets are reduced by a valuation allowance to the extent the company concludes there is uncertainty as to their ultimate realization. Changes in this Management's Discussionfuture tax benefits may be affected by the passage of new tax laws, changes in taxable income and Analysisthe resolution of Resultstax audit issues.

The accounting for Cummins pension and other postretirement benefit programs are based on a number of Operations, Cash Flowassumptions that are reviewed periodically by management. These include a weighted average discount rate, an expected return on plan assets rate, a future compensation increase rate, a health care cost trend rate and assumptions regarding retirement age. The assumptions are affected by changes in interest rates, actual performance of invested plan assets, changes in the Company's compensation levels or policies, actual heath care costs and actual retirement age, respectively.

Disclosure Regarding Forward Looking Financial ConditionStatements

This interim report and in the Company's press releases, teleconferences and other external communications.  Thesecommunications contain forward-looking statements that are based on current expectations, estimates and projections about the industries in which the CompanyCummins operates and management's beliefs and variousassumptions. Words, such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions made by management("Future Factors") which are difficult to predict. Among the factors that could affect the outcome of the statements are general industry and market conditions and growth rates.  Therefore, actual outcomes and their impact on the Companyresults may differ materially from what is expressed or forecasted.  The Companyforecasted in such forward-looking statements. Cummins undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Future Factors include increasing price and product competition by foreign and domestic competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products on a timely, cost-effective basis; the mix of products; the achievement of lower costs and expenses; domestic and foreign governmental and public policy changes, including environmental regulations; protection and validity of patent and other intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in increasing use of large, multi-year contracts; the cyclical nature of Cummins business; the outcome of pending and future litigation and governmental proceedings; and continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support Cummins future business.

These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations, and other Future Factors.

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23

PART II.  OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

The Company held its annual meeting of security holders on April 2, 2002 at which security holders elected nine directors of the Company for the ensuing year.

Results of the voting in connection with the election of directors were as follows:

Voting on Directors

With regard to the election of directors, votes were cast in favor of or withheld from each nominee; votes that were withheld were excluded entirely from the vote and had no effect. Under the rules of the New York Stock Exchange, brokers who held shares in street names had the authority to vote on certain items when they did not receive instructions from beneficial owners. Brokers who did not receive instructions were entitled to vote on the election of directors. Under applicable Indiana law, a broker non-vote had no effect on the outcome of the election of directors.

Item 5.  Other Information:

None

Item 6.  Exhibits and Reports on Form 8-K:

(a)    No exhibits are included in this filing.

Exhibits

         None.

(b)    No reportsReports on Form 8-K were filed during the third quarter of 2001.

        Current Report on Form 8-K dated April 3, 2002 (Item 4).

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CUMMINS INC.

By:    /s/Robert C. CraneSusan K. Carter
          Robert C. CraneSusan K. Carter                                                                        May 15, 2002
          Vice President - Corporate Controller
          (Chief Accounting Officer)                                                       November 5, 2001