Cummins Inc. Reports Earnings For The First Quarter 2002-Not Good

    COLUMBUS, Ind.--April 25, 2002--Today Cummins Inc. reported a first quarter loss of $.75 per share, or $29 million loss after taxes, on sales of $1.33 billion. This compares to a loss of $.68 per share or $26 million in the first quarter of 2001 on sales of $1.35 billion.
    "As we forecasted in January, the majority of our end markets declined further from what were already extremely low levels, leading to a significant impact on our earnings," said Chairman and Chief Executive Officer Tim Solso. "While I am disappointed in the loss, earnings did beat our estimates and we made strides in several areas as a result of our continuous focus on cost reduction and quality improvements."
    "The first quarter is historically difficult for our industry, however, we believe demand has hit a trough in most of our markets and should gradually improve going forward," he continued. "We are well positioned to take advantage of an eventual upturn and substantially improve profitability."
    A break down of results for Cummins four business units is listed below, including the newly formed International Distributor Business Unit.

    Filtration Business and Other

    Revenues for the Filtration and Other segment of $228 million improved 6 percent compared to the first quarter of 2001. Filtration business revenue increased in North America as some of its markets have begun a slow recovery. Revenues at the Holset Turbocharger business increased from first quarter 2001, helped in part by higher sales in China.

    Engine Business

    Total sales in the Engine Business in the first quarter were $776 million, essentially flat with sales of $768 million a year ago. Revenues in automotive markets were up 3 percent year over year, due in part by increases in the light duty automotive and RV businesses. Demand in the heavy duty and medium duty truck markets was still low, however the company believes these markets have finally bottomed, and are showing some signs of a modest improvement. Overall revenue from Industrial markets was down slightly year-over-year, with decreases in construction and mining sales, partially compensated by improved sales in agricultural and marine markets.
    In April, the Cummins ISX became the first engine to be certified by the Environmental Protection Agency (EPA) for the October 2002 emission standards. The Engine Business is well positioned for a market upturn and stands to grow share as well as improve profitability.

    Power Generation

    Revenues of $283 million in Power Generation were down 8 percent from the first quarter of 2001. Markets were down more than expected as demand fell in the commercial genset business primarily due to lower economic activity, a mild winter in North America, and high inventory levels in the marketplace. Revenues also decreased in Europe and India, but increased in Latin America, primarily driven by the continued energy crisis in Brazil.

    International Distributor Business

    Sales for the International Distributor Business were $124 million in the first quarter of 2002, a decrease of $9 million from last year. The majority of the decrease resulted from certain OEM sales now being reported in the Engine Business. Excluding the effect of this change, sales for the segment increased by 6 percent, with higher sales in Asia and Australia partially offset by reduced sales in Argentina due to the devaluation of the peso.

    Outlook

    "As we look forward to the remainder of 2002, we believe the worst is behind us, but we do not expect significant broad recovery in the near term," said Solso. "Through our cost reduction efforts, we have substantially improved our cost structure and lowered our breakeven point. This will continue to benefit us in the near term and positions us well for the market upturn."
    Cummins expects earnings per share of approximately $.20 for the second quarter 2002. Guidance for 2002 remains in the previously announced range of $.70 to $.80 cents per share, though it is now expected to be at the lower end of the range. The company expects the Power Generation markets to remain low as excess inventory continues to be used up, leading to flat to down 5 percent sales levels for 2002. The company expects this to be offset by the Engine Business as preliminary signs of improvement in some markets indicate modest sales growth in the 5 to 10 percent range for the year. The stable growth in the International Distributor Business and the Filtration and Other Business, coupled with the continued emphasis on cost reduction in all units will also contribute toward the company's expectations of full year profitability.
    A global power leader, Cummins Inc., is a corporation of complementary business units that design, manufacture, distribute, and service electrical power generation systems, engines, and related technologies, including fuel systems, controls, air handling, filtration, and emissions solutions. Headquartered in Columbus, Indiana (USA), Cummins serves its customers through more than 500 company-owned and independent distributor locations in 131 countries and territories. With 24,900 employees worldwide, Cummins reported sales of $5.7 billion in 2001. Press releases by fax can be requested by calling News On Demand (toll free) at 888-329-2305. Cummins home page can be found at www.cummins.com.
    Information provided and statements made on the webcast and in this release that are nor purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs, and intentions on strategies regarding the future. Its is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including but not limited to general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility, and other risks detailed from time to time in Cummins Securities and Exchange Commission Filings.


                             Cummins Inc.
                ($ Millions, except per share amounts)
                               Unaudited


For The First Quarter Ended      March 31, 2002  March 25, 2001
                                 --------------  --------------
Net sales                           $   1,333    $   1,349
Earnings (loss) before interest
 and income taxes                         (15)          (6)
Net earnings (loss)                       (29)         (26)
Amortization of goodwill expense         --              3
Net earnings (loss) adjusted              (29)         (23)

Basic earnings (loss) per share     $    (.75)   $    (.68)
Amortization of goodwill expense         --            .07
As adjusted                              (.75)        (.61)

Diluted earnings (loss) per share        (.75)        (.68)
Amortization of goodwill expense         --            .07
As adjusted                              (.75)        (.61)

Weighted-average number of
 shares outstanding
     Basic EPS                           38.5         38.2
     Diluted EPS                         38.5         38.2


                             Cummins Inc.
                  Consolidated Statement Of Earnings
                               Unaudited

$ Millions, except per share amounts  
                                     First Quarter   Fourth Quarter
                                     --------------  --------------
                                     2002      2001       2001
                                   -------    -------    -------
Net sales                          $ 1,333    $ 1,349    $ 1,463
Cost of goods sold                   1,107      1,117      1,198
                                   -------    -------    -------
Gross margin                           226        232        265
Operating expenses:
   Selling and administrative
    expenses                           186        183        185
   Research and engineering
    expenses                            56         53         56
   Income from joint ventures
    and alliances                     --           (2)        (3)
   Amortization of goodwill expense   --            3          2
   Other (income) expense, net          (1)         1         (3)
                                   -------    -------    -------
Earnings (loss) before interest 
 and income taxes                      (15)        (6)        28
Interest expense                        14         23         15
Provision (benefit) for income taxes    (9)        (7)         2
Minority interest                        3          4          3
Dividends on preferred
 securities of subsidiary trust          6       --            5
                                   -------    -------    -------
Net earnings (loss)                $   (29)   $   (26)   $     3
                                   ========   ========   =======

Basic earnings (loss) per share    $  (.75)   $  (.68)   $   .08
Diluted earnings (loss) per share     (.75)      (.68)       .08
Diluted earnings (loss)
 per share adjusted(a)                (.75)      (.61)       .14
Average number of shares:
  Basic EPS                           38.5       38.2       38.4
  Diluted EPS                         38.5       38.2       38.5

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

(a) Reflects Cummins 2001 earnings (loss) adjusted for
non-amortization of goodwill.


                             Cummins Inc.
             Consolidated Statement Of Financial Position
                               Unaudited


$ Millions                            Mar. 31, 2002  Dec. 31, 2001
                                      -------------  -------------
Assets
Current assets:
  Cash and cash equivalents                $    93    $    92
  Receivables, net of allowance
   of $9 and $9                                742        656
  Inventories                                  708        688
  Other current assets                         199        199
                                           -------    -------
                                             1,742      1,635
Investments and other assets
  Investment in and advances to
   joint ventures and alliances                214        216
  Other assets                                 118        125
                                           -------    -------
                                               332        341
Property, plant and equipment                2,980      3,008
  Less accumulated depreciation              1,612      1,603
                                           -------    -------
                                             1,368      1,405
Goodwill, net of amortization
 of $51 and $51                                343        343
Deferred income taxes                          422        422
Other intangibles and deferred charges         184        189
                                           -------    -------
Total assets                               $ 4,391    $ 4,335
                                           =======    =======

Liabilities and shareholders' investment 
 Current liabilities:
  Loans payable                            $   101    $    21
  Current maturities of long-term debt         134          9
  Accounts payable                             433        366
  Other accrued expenses                       522        574
                                           -------    -------
                                             1,190        970

Long-term debt                                 784        915
                                           -------    -------
Other liabilities                            1,053      1,051
                                           -------    -------
Minority interest                               85         83
                                           -------    -------
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,
   48.4 and 48.6 million shares issued         121        121
  Additional contributed capital             1,125      1,131
  Retained earnings                            525        567
  Accumulated other comprehensive income      (331)      (326)
  Common stock in treasury, at cost,
   7.0 and 7.2 million shares                 (281)      (289)
  Common stock held in trust for
   employee benefit plans, 2.8
   and 2.9 million shares                     (137)      (140)
  Unearned compensation                        (34)       (39)
                                           -------    -------
                                               988      1,025
                                           -------    -------
Total liabilities and
 shareholders' investment                  $ 4,391    $ 4,335
                                           =======    =======


                             Cummins Inc.
                 Consolidated Statement Of Cash Flows
                               Unaudited

                                    First Quarter Ended
                                ------------------------------
$ Millions                      March 31, 2002  March 25, 2001
                                --------------  --------------
Cash flows from operating activities:
  Net earnings (loss)                  $ (29)   $ (26)
                                       ------   ------
  Adjustments to reconcile net
   earnings (loss) to net cash
   flows from operating activities:
      Depreciation and amortization       54       59
      Restructuring and other
       non-recurring actions              (7)     (12)
      Equity in losses of joint
       ventures and alliances              7        2
  Changes in assets and liabilities:
      Receivables                       (105)     (47)
      Proceeds (repayments) from
       sale of receivables                35      (26)
      Inventories                        (31)      (3)
      Accounts payable and accrued
       expenses                           45       93
      Income taxes payable               (18)     (10)
      Other                                6       13
                                       ------   ------
  Net cash provided by (used in)
   operating activities                  (43)      43
                                       ------   ------

Cash flows provided by (used in)
 investing activities:
  Property, plant and equipment:
    Additions                            (18)     (62)
    Disposals                              2        1
  Investments in and advances to
   joint ventures and alliances           (6)     (23)
  Other                                 --          1
                                       ------   ------
  Net cash used in investing
   activities                            (22)     (83)
                                       ------   ------

Net cash used in operating and
 investing activities                    (65)     (40)
                                       ------   ------

Cash flows provided by (used in)
 financing activities:
  Payments on borrowings                  (1)      (4)
  Net borrowings under short term
   credit agreements                      81       96
  Dividend payments on common stock      (12)     (12)
  Other                                   (1)      (8)
                                       ------   ------
  Net cash provided by financing
   activities                             67       72
                                       ------   ------
  Effect of exchange rate changes
   on cash and cash equivalents           (1)    --
                                       ------   ------

Net change in cash and cash equivalents    1       32
Cash and cash equivalents at the
 beginning of the year                    92       62
                                       ------   ------
Cash and cash equivalents at the
 end of the quarter                    $  93    $  94
                                       =====    =====


                             Cummins Inc.
                          Segment Information
                               Unaudited


                                Filtration 
                       Power       and   International  Elimin- 
$ Millions    Engine Generation   Other   Distributor   ations  Total
              ------ ----------  ------- ------------- ------- -------
First Quarter 
Ended March 31, 
2002:
Net sales     $   776  $   283   $   228   $   124   $   (78) $ 1,333
Earnings  
 (loss)
 before 
 interest
 and income 
 taxes            (19)     (15)       18         1      --        (15)
Net assets        761      332       639       170      --      1,902

First Quarter
Ended March 25,
2001:
Net sales     $   768  $   309   $   215   $   133       (76) $ 1,349
Earnings 
 (loss)
 before 
 interest
 and income 
 taxes            (34)       8        16         4      --         (6)
Net assets      1,069      486       699       216      --      2,470


Product Revenues as Percent of Total Sales
------------------------------------------

% of Consolidated Sales     Q1        Q2        Q3        Q4      YTD
2002:
  Engines                   44                                     44
  Non-Engine Products       56                                     56
2001:
  Engines                   47        46        45        43       45
  Non-Engine Products       53        54        55        57       55

Sales
-----

$Millions                   Q1        Q2        Q3        Q4      YTD
2002:
  Engine Business
    Heavy-Duty Truck       219                                    219
    Medium Duty Truck+Bus  138                                    138
    Light Duty Auto+RV     157                                    157
    Industrial             262                                    262
      Total Engine
       Business            776                                    776
  Power Generation         283                                    283
  Int'l. Distributors      124                                    124
  Filtration / Other       228                                    228
  Eliminations             (78)                                   (78)
    TOTAL                1,333                                  1,333
2001:
  Engine Business
    Heavy-Duty Truck       236       235       222       247      940
    Medium Duty Truck+Bus  144       147       135       151      577
    Light Duty Auto+RV     121       151       165       139      576
    Industrial             267       253       245       263    1,028
      Total Engine
       Business            768       786       767       800    3,121
  Power Generation         309       384       371       358    1,422
  Int'l. Distributors      133       143       136       150      562
  Filtration / Other       215       225       211       238      889
  Eliminations             (76)      (77)      (77)      (83)    (313)
    TOTAL                1,349     1,461     1,408     1,463    5,681

Engine Shipments
----------------

Units                       Q1        Q2        Q3        Q4      YTD
-----                       --        --        --        --      ---
2002:
  Midrange              60,500                                 60,500
  Heavy-duty            11,200                                 11,200
  High Horsepower        2,100                                  2,100
TOTAL                   73,800                                 73,800
2001:
  Midrange              58,300    66,500    61,500    57,200  243,500
  Heavy-duty            14,600    14,400    14,000    14,400   57,400
  High Horsepower        2,800     2,800     2,800     2,600   11,000
TOTAL                   75,700    83,700    78,300    74,200  311,900


    
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