812-377-5000
(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:

          As of June 30, 2002, there were 41.3 million shares of $2.50 par value common stock outstanding.

We believe the statements and disclosures include all adjustments of a normal recurring nature necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. We recommend that you read our interim financial statements in conjunction with the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2001. Our interim period financial results for the three and six month periods presented are not necessarily indicative of results to be expected for the entire year.

We have reclassified certain amounts in prior period financial statements to conform to the presentation of the current period financial statements.

Our consolidated financial statements include the accounts of all majority-owned subsidiaries. All significant intercompany balances and transactions with majority-owned subsidiaries are eliminated in our consolidated financial statements. Joint ventures, affiliated companies and alliances in which we have significant influence, generally represented by common stock ownership or partnership equity of at least 20 percent and not more than 50 percent, are accounted for under the equity method. Our share of the results from joint ventures, affiliated companies and alliances is reported in our Consolidated Statement of Earnings as "Joint ventures and alliances income." Significant transactions with equity investees have been eliminated. The consolidated financial statements include the results of other entities where we own more than 50 percent but less than 100 percent and whose minority ownership is shown on our Consolidated Statement of Financial Position. The minorit y ownership portion of net earnings (loss) from such entities reduces the amount reported in our consolidated results and is reported as Minority Interest in our Consolidated Statement of Earnings.

We recognize revenues on the sale of our products, net of estimated costs of returns, allowances and sales incentives, when our products are shipped to customers and title and risk of ownership transfers. Products are generally sold on open account under credit terms customary to the geographic region of distribution. We perform ongoing credit evaluations of our customers and generally do not require collateral to secure our accounts receivables. Sales of engines, service parts, service tools and other items to independent distributors and distributors accounted for under the equity method are recorded when title and risk of ownership transfers. This transfer is based on the agreement in effect with the respective distributor and in the United States and most international locations, occurs generally when the products are shipped. We record a provision for estimated sales returns from distributors at the time of sale based on historical experience of product returns and establish ed maximum allowances for returned product.

Our shipping and handling costs are expensed as incurred. A majority of these costs are associated with operations of our inventory distribution centers and warehouse facilities and are classified in our Consolidated Statement of Earnings as selling and administrative expenses. In the second quarter and the first half of 2002, respectively, these costs were estimated at $21 million and $42 million. In the second quarter and the first half of 2001, respectively, these costs were estimated at $22 million and $44 million, respectively.

We use a special purpose entity, Cummins Receivable Corporation in connection with the sale of our trade accounts receivable. Cummins Receivable Corporation is a wholly-owned, bankruptcy-remote special purpose subsidiary that transfers an interest in our receivables, without recourse, to limited purpose receivable securitization entities (conduits) that are established and managed by an independent financial institution. Following the transfer of the sold receivables to the conduits, receivables are no longer assets of Cummins and the sold receivables no longer appear on our balance sheet. The use of this financing arrangement enables Cummins to access the highly liquid and efficient markets for the sale of our receivables when they are packaged in this type of structure.

In June 2001, we issued 6 million shares of convertible quarterly income preferred securities through Cummins Capital Trust, a Delaware special purpose trust and wholly-owned subsidiary of Cummins. The proceeds from the issuance of the preferred securities of $291 million were invested by the Trust in convertible subordinated debentures issued by Cummins. The sole assets of the Trust are the debentures.

None of our officers, directors or employees of Cummins or their affiliates hold any direct or indirect equity interests in either SPE other than holdings of Cummins common stock.

In 2001, we entered into a lease agreement where we sold and leased back certain heavy-duty engine manufacturing equipment with a nationally prominent, creditworthy lessor who had an established SPE to facilitate the financing of the equipment for Cummins. The use of the SPE allows the parties providing the lease financing to isolate particular assets in a single entity and thereby syndicate the financing to multiple third parties. This is a conventional financing technique used to lower the cost of borrowing and thus, the lease cost to Cummins. There is a well-established market in which financial institutions participate in the financing of such property through their purchase of interests in such SPE's. The SPE established to facilitate the equipment lease to Cummins is owned by an institution, which is truly independent and not affiliated with Cummins. The financial institution maintains a substantial equity investment in the SPE.

Our provision for income taxes is determined 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. We also recognize future tax benefits associated with tax loss and credit carryforwards as deferred tax assets. Our deferred tax assets are reduced by a valuation allowance to the extent there is uncertainty as to their ultimate realization. We measure deferred tax assets and liabilities using enacted tax rates in effect for the year in which we expect to recover or settle the temporary differences. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted. During interim reporting periods our income tax provision is based upon the estimated annual effective tax rate of those taxable jurisdictions where we conduct busi ness. For the three month and six month periods ending June 30, 2002, our effective tax rate was 25 percent on earnings (loss) before income taxes after deducting dividends on our preferred securities and 33 percent for restructuring and other charges.

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

Inventories are as follows:

We calculate basic earnings per share (EPS) of common stock by dividing net earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that occurs if options or securities are exercised or converted into common stock and the effect of the exercise or conversion reduces EPS.

For the three months ended June 24, 2001, we excluded approximately .2 million shares attributable to the exercise of outstanding common stock options from the calculation of diluted EPS because the effect was antidilutive. For the first half ended June 30, 2002 and June 24, 2001, we excluded .3 million shares and .2 million shares, respectively from the calculation of diluted EPS because the effect was antidilutive.

In addition, we also excluded 6.3 million shares attributable to the conversion of the Company's Preferred Securities of Subsidiary Trust, issued in June 2001, from the calculation of diluted EPS for the second quarter and first half ended June 30, 2002 and June 24, 2001 because the effect was antidilutive.

Shares of common stock held by our employee benefits trust are not included in the calculation of EPS until the shares are distributed from the plan.

The weighted average diluted common shares outstanding for June 30, 2002 and June 24, 2001 excludes the effect of approximately 2.5 million and 2.7 million common stock options, respectively, since such options have an exercise price in excess of the average market value of Cummins common stock for the respective periods.

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. Under SFAS 142, goodwill and certain other intangible assets having indefinite useful lives are no longer amortized but are reallocated to applicable reporting units for purposes of performing annual impairment tests using a fair-value-based analysis.

As required by SFAS No. 142, we applied this new accounting standard on January 1, 2002 to our previously recognized goodwill and intangible assets. At December 31, 2001, our net goodwill related to consolidated entities was approximately $343 million. For purposes of impairment testing, we assigned $332 million of goodwill 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, we completed the first step of the transitional goodwill impairment test which required us to compare the fair value of our reporting units to the carrying value of the net assets of our reporting units as of January 1, 2002. For each of our reporting units, the estimated fair value was determined utilizing the expected present value of the future cash flows of the units. Based on this analysis, we concluded that the fair value of eac h of our reporting units exceeded their carrying, or book value, including goodwill, and therefore we did not recognize any write-down of goodwill.

As required by SFAS No. 142, our Consolidated Statement of Earnings for periods prior to its adoption have not been restated. However, the effect on our net earnings and earnings per share of excluding goodwill amortization is shown in the table below:

The following table summarizes other intangible assets with finite useful lives that are subject to amortization at the dates indicated.

Amortization expense for other intangibles totaled $17 million and $16 million for the six months ended June 30, 2002 and June 24, 2001, respectively. Amortization for the twelve months ended December 31, 2001, totaled $34 million. Internal and external software costs (excluding those related to research, reengineering and training) and trademarks and patents are amortized generally over a five year period. The projected amortization expense of our intangible assets, assuming no further acquisitions or dispositions, is approximately $33 million in 2002, $27 million in 2003, $22 million in 2004, $12 million in 2005 and $5 million in 2006.

We have continued a restructuring program initiated in 1998 to improve the Company's cost structure. The charges related to this program include staffing reorganizations and reductions in various business segments, asset impairment write-downs for manufacturing equipment, facility closure and consolidation costs, dissolution costs and restructuring actions related to joint venture operations, cancellation of a new engine development program and exit costs related to several small business operations. As of December 31, 2001 all activities associated with the 1998 and 1999 restructuring actions were complete. The 2000 and 2001 actions were a result of the downturn in the North American heavy-duty truck market and several other end-markets and were taken in order to achieve lower production costs and improve operating efficiencies under difficult economic conditions. A detailed discussion of the restructuring charges incurred during 2000 through 2002 acco mpanied by schedules that present, by major cost component and by year of provision, activity related to the restructuring charges for 2000, 2001, and 2002, including adjustments to the original charges follow:

During the fourth quarter of 2000, we announced restructuring plans in response to the downturn in the North American heavy-duty truck market where our shipments had declined 35 percent from 1999 and recorded a restructuring charge of $160 million. Of this amount, $131 million was associated with our Engine Business, $19 million with our Power Generation Business and $10 million with our Filtration and Other Business. The charges included workforce reduction costs of $42 million, $102 million for asset impairments (including $30 million for software developed for internal use) and $16 million associated with exit costs to close or consolidate a number of small business operations.

The workforce reduction actions included overall reductions in staffing levels and the impact of divesting a small business operation. The charges included severance and benefit costs of terminating approximately 600 salaried and 830 hourly employees and were based on amounts pursuant to established benefit programs or statutory requirements of the affected operations. In the fourth quarter 2001, we realigned our workforce reduction plans and reallocated $3 million of excess liabilities for termination benefits to recent workforce reduction actions committed to during that quarter. All employees affected by this workforce reduction plan have been separated or terminated by June 30, 2002 and we expect to pay remaining severance costs and related benefits before the end of 2002. Approximately 660 salaried and 725 hourly employees were affected by the workforce reduction actions associated with this plan.

The asset impairment charge of $102 million was calculated in accordance with the provisions of SFAS 121.  Of this charge, $30 million consisted of capitalized software-in-process related to manufacturing, financial and administrative information technology programs that were cancelled during program development and prior to implementation. The remaining $72 million included $38 million for engine assembly and fuel system manufacturing equipment to be disposed of upon closure or consolidation of production operations. The equipment is expected to continue in use and be depreciated for approximately two years prior to closure or consolidation. The expected recovery value of the equipment was based on estimated salvage value and was excluded from the impairment charge. The charge also included $11 million for equipment available for disposal, $6 million for properties available for disposal, $10 million for investments, and $7 million for intangibles and minority interest p ositions related to divesting smaller operations and investments. The carrying value of assets held for disposal and the effect of suspending depreciation on such assets is not significant.

In the second quarter 2002, we cancelled plans to close a filtration manufacturing plant, transferred impaired power generation equipment that was previously slated for disposal to a foreign operation and realigned our workforce reduction plan. These actions resulting in a reversal of $12 million in excess charges related to this plan. As of June 30, 2002, $9 million of restructuring charges remained in accrued liabilities. We expect to complete this restructuring action by the end of 2002.

In the second quarter of 2001, as a result of the continuing downturn in the North American heavy-duty truck market and several other end-markets, we announced further restructuring actions and recorded restructuring charges of $125 million. 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 workforce reduction actions included overall reductions in staffing levels and the impact of divesting a small business operation. The charges included severance and benefit costs of terminating approximately 400 salaried and 150 hourly employees and were based on amounts pursuant to established benefit programs or statutory requirements of the affected operations. All employees affected by this workforce reduction plan and the subsequent fourth quarter 2001 realignment plan will have been terminated by the end of the fourth quarter 2002 and remaining severance costs and related benefits will be paid through the end of the first quarter 2003. As of June 30, 2002 a total of 360 salaried and 125 hourly employees have been separated or terminated under the workforce reduction actions of this plan.

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 capital and tooling purchase commitments. The charge was reduced by the estimated salvage value related to the planned equipment disposals. In the second quarter 2002, we recovered $8 million of salvage proceeds on planned equipment disposals, of which $5 million was in excess of previously estimated recoveries and was reversed against the original restructuring charge.

As of June 30, 2002 $5 million of restructuring charges related to unpaid severance costs and termination benefits remained in accrued liabilities. We expect to complete all activities associated with this restructuring plan in the fourth quarter 2002.

In the second quarter 2002, we took further restructuring actions precipitated by continued weak market conditions across most of our businesses and recorded a restructuring charge of $16 million. The charge was partially offset by a $12 million reversal of excess 2000 restructuring reserves and a $5 million reversal of excess 2001 restructuring reserves. The charge included $11 million attributable to workforce reduction actions, $3 million for asset impairment and $2 million related to facility closures and consolidations. Of this charge, $ 5 million was associated with the Engine Business, $4 million with Power Generation, $3 million with Filtration and Other and $4 million with the International Distributor Business.

The charges included severance cost and benefit costs of terminating approximately 220 salaried and 350 hourly employees and were based on amounts pursuant to established benefit programs or statutory requirements of the affected operations. These actions reflect overall reductions in staffing levels due to closing operations and moving production to locations with available capacity. As of June 30, 2002 approximately 170 salaried and 150 hourly employees had been separated or terminated under this plan. We expect to complete all workforce reduction actions associated with this action by the end of the first quarter 2003.

The asset impairment charge related to equipment available for disposal. The carrying value of the equipment and the effect of suspending depreciation on the equipment was not significant.

As of June 30, 2002, $7 million of restructuring charges remained in accrued liabilities. We expect to complete this restructuring action in the first quarter 2003 and related cash payments to be disbursed by the end of second quarter 2003.

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

We are exposed to financial risk resulting from volatility in foreign exchange rates, interest rates and commodity prices. This risk is closely monitored and managed through the use of financial derivative contracts. As stated in our policies and procedures, financial derivatives are used expressly for hedging purposes, and under no circumstances are they used for speculation or trading. Our derivative 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 our hedging program activities are reported to senior management on a periodic basis. The following table summarizes our outstanding derivatives by risk category and instrument type:

Due to our international business presence, we are exposed to foreign currency exchange risks. We transact business extensively in foreign currencies and as a result, our earnings experience some volatility related to movements in foreign currency exchange rates. To help manage our exposure to exchange rate volatility, we use foreign exchange forward contracts.

In April 2002, we began hedging our foreign currency exposure to variability in the functional currency equivalent cash flows associated with anticipated transactions. These derivative contracts are designated and qualify as cash flow hedges under SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities". The effective portion of the unrealized gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income and reclassified into earnings in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the unrealized gain or loss on the derivative instrument, if any, is recognized in "Other Income" in current earnings during the period of change. For derivative instruments not designated as hedging instruments, the fair value gains or losses from these foreign currency derivatives are recognized directly in earnings. Our internal policy allows for managing anticipated foreign currency cash flow for up to one year. As of June 30, 2002, approximately 92 percent of the notional amount of the forward contracts shown in the table above were attributable to three currencies, the British Pound (48 percent), the Australia Dollar (27 percent) and the Euro (17 percent). As of June 24, 2001, approximately 88 percent of the contracts were attributable to the same currencies, the British Pound (35 percent), the Euro (19 percent) and the Australian Dollar (34 percent).

Interest Rate Swaps

We are exposed to market risk from fluctuations in interest rates. We manage our exposure to interest rate fluctuations through the use of interest rate swaps. The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk and reduce financing costs. Currently, we have one interest rate swap relating to our 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 our 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 March 2001, the Company terminated three fixed-to-floating interest rate swap agreements related to Cummins 6.25% Notes with principal amount of $125 million due in 2003 and 6.45% 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 second quarter 2002 was $.7 million and for the first half 2002 $1.4 million.

Commodity Price Swaps

We have $125 million of 6.25% Notes maturing on March 1, 2003. We have classified the notes as current maturities of long-term debt as of March 31, 2002 based upon their maturity date. In addition, we have a five-year revolving credit agreement with a group of banks that provides for borrowings up to $500 million that expires in January 2003. As of June 30, 2002, outstanding borrowings under the revolving credit agreement were $40 million and are classified as loans payable based upon our intent to repay the borrowings prior to the expiration date of the agreement. We are currently renegotiating the terms of our revolving credit agreement with our lenders and expect to enter into a new agreement in the third quarter 2002.

Our debt and credit agreements contain several restrictive financial covenants. Under the most restrictive of these provisions, we are required to maintain a debt to capital ratio of 55 percent and a minimum net worth level (as defined in the agreement) of $1.149 million as of June 30, 2002. The agreement also limits our subsidiary borrowings and sale lease back transactions to $200 million or less. As of June 30, 2002, we were in compliance with all of the covenants and restrictions under our borrowing agreements.

We have four reportable business segments: Engine, Power Generation, Filtration and Other and International Distributor. Our business segments are organized according to the products and markets each segment serves. This type of reporting structure allows management to focus their efforts on providing enhanced service to a wide range of customers. Profit before interest and taxes and other nonrecurring charges and return on average net assets excluding debt, taxes and nonrecurring accruals are the primary basis for the chief operating decision maker, our Chairman and Chief Executive Officer, to evaluate the performance of each of our business segments. In the fourth quarter of 2001, we realigned our reporting structure and created a new business segment, International Distributor. As a result, we have reclassified certain historical business segment data to reflect this change. A summary of operating results by segment for the three month and six month periods is shown below: