CUMMINS INC - 10-Q Quarterly Report

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No X

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b‑2 of the Act). Yes X No 

As of June 29, 2003 there were 41.5 million shares of $2.50 par value per share common stock outstanding.

Cummins Inc. is filing this Quarterly Report on Form 10‑Q to reflect the unaudited Consolidated Financial Statements for the periods ended June 29, 2003 and the unaudited restatement of its Consolidated Financial Statements for the periods ended June 30, 2002.

The unaudited Consolidated Financial Statements contained in this quarterly report for the three months and six months ended June 30, 2002 supersede the unaudited Consolidated Financial Statements contained in our Quarterly Report on Form 10-Q that was previously filed on August 14, 2002 (Original Filing). The unaudited Consolidated Financial Statements and financial information contained in the Original Filing have been revised herein to reflect the restatement adjustments described in Note 2 of the Consolidated Financial Statements. We do not intend to amend our Quarterly Reports on Form 10-Q for the periods affected by the restatement that ended prior to December 31, 2002. As a result, the financial statements and related information contained in such reports referenced above should no longer be relied upon.

	Three Months		Six Months
	Restated		Restated
(Unaudited)	June 29	June 30	June 29	June 30
$ Millions, except per share amounts	2003	2002	2003	2002

Net sales (include sales to related parties of $244, $239, $433 and $427, respectively)	$1,539	$1,458	$2,926	$2,791
Cost of goods sold (include purchases from related parties of $134, $145, $254 and $277, respectively)	1,263	1,181	2,432	2,281
Gross margin	276	277	494	510
Selling and administrative expenses	200	186	395	375
Research and engineering expenses	50	55	97	111
Joint ventures and alliances income	(17)	(7)	(24)	(7)
Restructuring, asset impairment and other charges	-	2	-	2
Interest expense	20	15	40	29
Other (income) expense, net	(3)	(7)	(10)	(7)
Earnings (loss) before income taxes, minority interest, dividends on preferred securities of subsidiary trust and cumulative effect of change in accounting principle	26	33	(4)	7
Provision (benefit) for income taxes	5	7	(4)	(1)
Minority interest	2	5	6	8
Dividends on preferred securities of subsidiary trust	5	5	11	11
Earnings (loss) before cumulative effect of change in accounting principle	14	16	(17)	(11)
Cumulative effect of change in accounting principle, net of tax of $1	-	-	-	3
Net Earnings (loss)	$ 14	$ 16	$ (17)	$ (8)


Earnings Per Share
Basic
Earnings (loss) before cumulative effect of change in accounting principle	$ .34	$ .41	$ (.45)	$ (.28)
Cumulative effect of change in accounting principle, net of tax	-	-	-	.07
Net earnings (loss)	$ .34	$ .41	$ (.45)	$ (.21)
Diluted
Earnings (loss) before cumulative effect of change in accounting principle	$ .34	$ .40	$ (.45)	$ (.28)
Cumulative effect of change in accounting principle, net of tax	-	-	-	.07
Net earnings (loss)	$ .34	$ .40	$ (.45)	$ (.21)

Cash dividends declared per share	$ .30	$ .30	$.60	$.60

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


(Unaudited)	June 29	December 31*
$ Millions	2003	2002
Assets
Current assets
Cash and cash equivalents	$ 59	$ 224
Marketable securities	71	74
Receivables, net	784	676
Receivables from related parties	120	129
Inventories	726	641
Other current assets	280	238
	2,040	1,982

Property, plant and equipment	2,920	2,952
Less accumulated depreciation	1,664	1,647
	1,256	1,305
Investments in and advances to joint ventures and alliances	303	264
Goodwill	343	343
Other intangibles and deferred charges	93	96
Deferred income taxes	640	640
Other noncurrent assets	210	207
Total assets	$ 4,885	$ 4,837

Liabilities and shareholders' investment
Current liabilities
Loans payable	$ 36	$ 19
Current maturities of long-term debt	5	119
Accounts payable	543	427
Accrued product coverage and marketing expenses	234	233
Other accrued expenses	504	531
	1,322	1,329

Long-term debt	1,035	999
Other long-term liabilities	1,300	1,285
Minority interest	91	92
Cummins obligated mandatorily redeemable convertible preferred securities of subsidiary trust holding solely convertible subordinated debentures of Cummins	291	291

Shareholders' investment
Common stock, $2.50 par value, 150 million shares authorized
48.5 and 48.6 million shares issued	121	121
Additional contributed capital	1,111	1,115
Retained earnings	526	569
Accumulated other comprehensive income	(488)	(527)
Common stock in treasury, at cost, 7.0 and 7.0 million shares	(280)	(280)
Common stock held in trust for employee
benefit plans, 2.5 and 2.6 million shares	(119)	(128)
Unearned compensation	(25)	(29)
	846	841
Total liabilities and shareholders' investment	$ 4,885	$ 4,837

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

	Six Months Ended
		Restated
(Unaudited)	June 29	June 30
$ Millions	2003	2002
Cash flows from operating activities
Net earnings (loss)	$ (17)	$ (8)
Adjustments to reconcile net earnings (loss) to net
cash flows from operating activities:
Cumulative effect of change in accounting principle	-	(3)
Depreciation and amortization	109	107
Restructuring and other charges	-	(16)
Equity in (earnings) losses of joint ventures and alliances	(20)

Indiana (State of Incorporation)	35‑0257090 (IRS Employer Identification No.)
500 Jackson Street Box 3005 Columbus, Indiana 47202-3005 (Address of principal executive offices)

Telephone (812) 377-5000

Title of each class	Name of each exchange on which registered
Common Stock, $2.50 par value	New York Stock Exchange Pacific Stock Exchange

		Page
	Introductory Note	3

	PART I. FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Statements of Earnings for the three months and six months ended June 29, 2003 and June 30, 2002	4
	Consolidated Statements of Financial Position at June 29, 2003 and December 31, 2002	5
	Consolidated Statements of Cash Flows for the six months ended June 29, 2003 and June 30, 2002	6
	Notes to the Consolidated Financial Statements	7

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4	Controls and Procedures	36

	PART II. OTHER INFORMATION
Item 1	Legal Proceedings	37

Item 5	Other Information	38

Item 6.	Exhibits and Reports on Form 8‑K	38

	Signatures	38