Cummins Inc. 2001 Annual Report

Cummins Inc. 20

01 Annual Repor

A global power leader,

Cummins Inc. is a corporation

of complementary business

units that design, manufacture,

distribute and service electric

power generation systems,

engines and related products,

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 world-

wide, Cummins reported sales

of $5.7 billion in 2001. Cummins

home page can be found at

www.cummins.com.

Table of Contents
21
1 Highlights
3 Letter to the Shareholders
5 Engine Business
7 Power Generation Business
9 Filtration and Other Business 
11 International Distributor Business
13 Financial Summary
15 Directors and Committees
17 Executives and Officers
19 Cummins Worldwide Locations
21  Cummins Worldwide Locations Map
23 Shareholder Information
3
5
11
9
7

Highlights

Engine Business

Leading supplier of diesel- and alternate-fueled engines for heavy-duty

trucks, medium-duty trucks, buses, motorhomes, and specialty

on-highway vehicles

Exclusive supplier of diesel engines for the Dodge Ram pickup truck

Leading global supplier of diesel engines for the agriculture, construction,

government, marine, mining, rail, and oil and gas markets

Products/Services

■ Power Systems

Diesel- and natural gas-powered generator sets, digital control

systems, transfer switches, and paralleling switchgear

■ Mobile Systems

Onan gasoline-,

liquefied propane-, and diesel-fueled auxiliary generator

sets from 3kW to 12.5kW and associated controls

■ Alternators

Newage synchronous

AC alternators and associated control systems

Customers and Markets

■ Public and investor-owned utilities, telecommunications providers,

self-generating manufacturers, and any business or public facility with

a need for self-generated or standby power

■ RV, specialty vehicle, and marine pleasurecraft Original Equipment

Manufacturers

■ Alternators for industrial, marine, commercial, construction,

telecommunications, mining, and other standby or continuous

power applications

Products/Services

■ Medium-duty Engines

ISB and ISC for light commercial automotive, truck, school, transit

and shuttle bus, motorhomes, and specialty vehicles. Automotive

applications are available in diesel-fueled versions from 175 to 350

horsepower and in alternate-fueled versions from our Cummins

Westport joint venture. For agriculture, construction, and marine

applications, the B3.3, B3.9, B5.9, QSB and QSC engines are

available from 60 to 340 horsepower

■ Heavy-duty Engines

ISL, ISM, N14, ISX and Signature Series for trucking applications

from 280 to 600 horsepower. QSM, M11, N14 and QSX for

construction, mining, marine, and agriculture applications from

225 to 600 horsepower. For marine applications, the QSM and

N14 engines are available from 360 to 635 horsepower

■ High-horsepower Engines

QSK19, V903, QST30, K38/50, QSK45, QSK60 and QSK78 for

marine, rail, mining, government, and oil and gas applications

from 295 to 3500 horsepower

Customers and Markets

■ Original Equipment Manufacturers who install Cummins engines

in their vehicles and equipment

■ Customers who use Cummins-powered equipment

in their business endeavors

■ Dealers and distributors

Power Generation Business

Global supplier of diesel- and natural gas-powered generator sets and

generator set components from 3kW to multi-megawatt installations

Worldwide market leader in auxiliary generator sets for recreational

vehicles

(RV

s) and diesel-powered recreational marine applications

International Distributor Business

Retail distributor of Cummins products and provider of related services

and broader solutions that enhance the end users’ overall experience

with Cummins

Network of 17 Company-owned retail distributors and three joint

ventures with a total of 111 sites that provide products, services, and

solutions to end users in 50 countries and territories

Products/Services

■ Heavy-duty Systems

Air intake filtration, emission and noise reduction, engine filtration,

and mobile hydraulic filtration systems

■ Small Engine Systems

Air intake filtration, engine filtration, and exhaust systems

■ Other Systems

Air intake and silencing systems for gas turbine applications,

in-tank filtration for passenger cars, hydraulic filtration for

industrial applications, and aftertreatment systems

■ Turbocharging Systems

Holset variable geometry turbocharging, wastegate solutions, and

power turbine, high pressure ratio and, multi-stage solutions

Customers and Markets

■ Original Equipment Manufacturers, distributors, dealers and end

users of heavy-duty on- and off-highway diesel-powered equipment

■ Original Equipment Manufacturers of both gasoline- and

diesel-powered small engine systems for lawn and garden

and recreational equipment

■ Original Equipment Manufacturers of gas turbine generators, industrial

machinery, passenger cars, and industrial hydraulic equipment

■ Cummins joint ventures and selected Original Equipment

Manufacturer customers

■ Distributors and dealers

Products/Services

■ Product Distribution

Retail distribution of Cummins power generation, engine, filtration,

turbocharging, and related consumable products

■ Service

Product repair and overhaul, maintenance, and repair contracts

■ Integrated Packages

Locally integrated packages of engines or generator sets plus

related components and services engineered into a single package,

includes fire pump packages, wind machines, repower packages

for used equipment, flood and irrigation pump packages, small

powerhouses that supply standby electricity for a factory or

industrial zone, and auxiliary lighting equipment

■ Solutions

Comprehensive business solutions that manage portions of end

user businesses using engine-powered equipment, including rental,

operation and maintenance of small independent power plants,

and service of end user equipment

Customers and Markets

■ Customers who use Cummins-powered equipment

in their business endeavors

■ Dealers

■ Local and regional Original Equipment Manufacturers

producing in lower volumes

Filtration and Other Business

Global leader of advanced integrated filtration systems for heavy-duty

equipment, both on- and off-highway

Leading North American supplier of filtration and silencing systems for

gas turbine, industrial, small engine, and passenger car applications

Holset, is a global provider and leading technologist of turbochargers

for a wide range of applications

Fellow Shareholders

As it was for almost everyone, 2001 was a difficult and

demanding year for Cummins.

Despite the worst market conditions in the Company’s

82-year history, Cummins delivered an operating profit

in each of the final three quarters of 2001, due to an

aggressive and ongoing cost reduction program.

These results reflect Cummins commitment to producing

solid financial results for our shareholders in tough

times as well as good times.

In 2001, the Company’s name changed to Cummins

Inc., highlighting Cummins successful efforts to diversify

the business. Cummins is a global power leader. Our

strength comes from the synergies and relationships in

the businesses that make up Cummins: the Engine

Business, the Power Generation Business, the

Filtration and Other Business, and the newly formed

International Distributor Business.

Cummins brings unique value to meet customer

power needs across the globe by leveraging our

brands, our leadership position in the markets we

serve, our innovative technology, and our global

presence.

Focus on Continued Cost Reduction,

Cash Management

Our focus in 2001 remained on cost reduction and

cash management. The cornerstone of our cost reduction

effort is Six Sigma, a quality improvement program

that uses statistical tools and a disciplined approach to

drive rapid process improvement. Since the program

began in 2000, more than 700 Cummins employees

trained as “belts” have delivered $100 million of

savings with substantial improvements in product

and service quality. A comprehensive material cost

reduction program initiated in 2000 has saved over

$275 million. In 2001, selling, administrative and

research spending was reduced by $72 million.

Restructuring activities and lower product coverage

also improved operating costs.

Similarly, a corporate initiative on cash management

resulted in significant reductions in working capital

and capital spending while enabling Cummins to fund

important projects that will enhance our future

technological leadership and competitiveness.

Business Highlights

In 2002, the International Distributor Business

becomes the fourth business unit. This collection of

Company-owned distributors will enable us to grow

profitability with only a modest capital investment.

In our Engine Business, we made unprecedented

decisions over the course of the past year, including

a significant strategy shift in our heavy-duty engine

business. The Engine Business implemented long-term

supply agreements with three North American

Original Equipment Manufacturers that establish the

framework to fundamentally change the way Cummins

operates in the heavy-duty truck market.

Cummins was the first engine manufacturer to

announce that we would have an engine ready to

meet the Environmental Protection Agency’s emissions

standards for 2002. Cummins leadership in engine

technology addresses customer needs while meeting

emissions requirements and Cummins longstanding

commitment to clean air.

Filtration’s emission solutions business will provide

new growth opportunities in meeting customer needs

for exhaust aftertreatment solutions.

Cummins Power Generation’s strategic expansion

into areas such as power electronics, the result of an

alliance with AvK/SEG, will provide opportunities

to offer customers fully integrated solutions

for more reliable power.

2002 and Beyond

We believe that our business will be as challenging in

2002 as it was in 2001. However, Cummins has never

been better positioned to take advantage of the economic

rebound when it does occur. Cummins is a recognized

global power leader, with market leadership in our

major markets. Our growing portfolio of businesses

will enable us to meet customer demands and create

value for our shareholders.

We are pleased to welcome a new Board member, the

Honorable Alexis Herman, former Secretary of Labor

under President Clinton. We have already begun to

benefit from Secretary Herman’s perspective and

contributions. Jim Johnson, a Board member since

1999, has informed the Board that he will not stand for

re-election in 2002. We appreciate his contributions

and service to Cummins. I would also like to extend

our warmest wishes to Hanna Gray upon her retirement

from the Board. We will miss her wisdom, experience

and counsel and want to thank her for 25 years of

dedicated service to Cummins.

Tim Solso

Chairman and Chief Executive Officer

Cummins Inc.

February 28, 2002

Members of the Policy Committee

Front row: Tim Solso, Jean Blackwell, John Wall

Second Row: Joe Loughrey, Tom Linebarger,

Jack Edwards, Steve Chapman, Rick Mills

Engine Business

The Engine Business designs, manufactures and sells

diesel and natural gas engines ranging in size from 60

to 3500 horsepower. Markets include mining, construction,

agriculture, rail, oil and gas, heavy-duty trucks, medium-

duty trucks, buses, motorhomes, and the Dodge Ram

pickup truck. In 2001, the Engine Business reported sales

of $3.1 billion, which represented 52 percent of Cummins

business unit sales.

The Engine Business is focused on the following:

• Developing strategic partnerships

• Leveraging critical technologies

• Aggressive cost improvement

Developing Strategic Partnerships

Cummins has supplied diesel engines for the Dodge

Ram pickup truck since the 1989 model year. It has been

a terrific partnership for both companies. As a result of

continuous improvement in quality, cost and performance,

DaimlerChrysler chose Cummins to continue as the

exclusive supplier of diesel engines for the Dodge Ram

pickup truck through the 2007 model year.

Komatsu, a longtime strategic partner, chose Cummins

to be the exclusive engine supplier for its mining equipment.

In addition, an agreement was reached to expand our

joint venture, Komatsu Cummins Engine Corporation

(KCEC), to include our C series engine and to jointly

develop it to meet future emissions standards. As a

result of this agreement, the C series will be the

exclusive engine for Komatsu machines in this power

range worldwide.

Strategic long-term agreements were signed with three

North American Original Equipment Manufacturers.

These agreements have enabled Cummins to make

significant changes in how it goes to market and

collaborates on future product development.

In early 2001, Cummins and Westport Innovations formed

a joint venture, Cummins Westport Inc., to develop,

manufacture and sell a broad range of natural gas-fueled

engines used in applications such as the buses for the

2002 Winter Olympics, featured in the photograph on the

opposite page. The technology developed by the joint

venture allows these engines to reach the same power

and performance levels of a diesel while reducing

emissions, which makes them an attractive alternative

for certain customers.

Leveraging Critical Technologies

As a result of long-term investments in air handling, fuel

systems, combustion research, and electronic controls

technologies, Cummins is uniquely positioned to meet

the stringent 2.5 gram NOx+NMHC emissions standard

for on-highway truck engines in North America beginning

in October 2002. The development of cooled exhaust gas

recirculation (EGR) required careful integration of these

technologies. We leverage these technologies for both

on-highway and off-highway markets to determine the

right solution to meet the tough expectations of customers

and the appropriate emissions and noise standards for

each market.

Cummins was awarded a U.S. Department of Energy

contract to develop a light-duty automotive engine suitable

for use in light pickup and sport utility vehicles. Progress

has been steady and prototypes are being field-tested.

Cummins is well positioned to take advantage of the

growing interest in diesels for these vehicles.

Aggressive Cost Improvement

The steep drop in Engine Business sales from 2000 to

2001 required a relentless focus on cost reduction and

cash flow improvement. Significant reductions in working

capital, material costs, warranty expenses, and overhead

were achieved during the year. Six Sigma improvement

projects and techniques are critical to our continued

success in cost and quality improvement.

At mid-year, we restructured the Engine Business into

four worldwide product groups: midrange, heavy-duty,

and high-horsepower engines and fuel systems in order

to focus on increasing our return on assets while reducing

future capital spending. This approach enables us to

better leverage the joint ventures and suppliers we have

in China, Brazil and India in order to further reduce costs.

This relentless focus on cost reduction will continue

throughout 2002 as we prepare for the economic rebound.

Joe Loughrey

Executive Vice President

President, Engine Business

Cummins Power Generation Business, headquartered

in London, England, provides generator sets, components,

and power solutions to a range of businesses, governments,

and consumers around the world. Cummins Power

Generation revenues in 2001 were $1.4 billion, representing

24 percent of Cummins business unit sales.

Cummins Power Generation designs and manufactures

the critical components of a generator set: engines,

controls, alternators, and specialized containers.

The components are integrated into an energy solution

by combining the hardware with local installation and

aftermarket support. This integration is what we call,

“THE POWER OF ONE,” one company providing complete

energy solutions to meet our customers’ needs.

Cummins Power Generation is focused on:

• Leadership in technology

• Expanding services

• Leveraging opportunities to lower product costs

Leadership in Technology

Cummins Power Generation continues to demonstrate

leadership in the integration of generator sets into

customer facilities using advanced control systems,

transfer switches, and switchgear. These systems allow

for simple connections of power stations to the grid,

making our solutions popular with engineers and electrical

contractors. Our solutions also facilitate remote monitoring,

whether across the parking lot or across the world, which

is attractive to utilities, industrial and commercial

customers. Through an alliance with AvK/SEG , we have

strengthened our position in both power station controls

and variable speed controls which are used in wind

turbines and uninterruptible power supply systems.

In 2001, Cummins announced two major initiatives to

expand the range of technologies powering our generator

sets. Cummins and its technology partner, McDermott,

were awarded a major grant from the U.S. Department

of Energy to develop and commercialize fuel cells for

small generator sets. Fuel cells offer exciting possibilities

for clean and quiet power. Cummins plans to be at the

forefront in offering these innovative new power

solutions to our customers. In addition, the development

of generator sets powered by Capstone microturbines

will offer clean and quite power to customers.

Using Cummins efficient natural gas and diesel engines

allows Cummins Power Generation to offer the lowest

lifecycle cost solutions, which is especially important to

customers who operate power stations continuously.

In the consumer markets of recreational vehicles, yachts,

and home standby, Onan extended its market leadership

position by applying technology to reduce weight,

package size, and noise.

Expanding Services Globally

Cummins outstanding global network of distributors

is rapidly expanding the range of power generation

products and services it offers. A good example is the

Cummins PowerRent program.

Cummins PowerRent expanded its fleet size 200 percent

to accommodate global markets in addition to its proven

base in North America. Responding to customer demand

for flexible energy solutions, and building on Cummins

global distribution system, Cummins PowerRent

established fleets in Australia, Brazil, India, Mexico,

Saudi Arabia and Singapore. For instance, the expanded

rental fleet enabled an energy sale contract in Australia

for 20 megawatts for five years as featured in the photo

on the opposite page. Other contracts include a 30 month

contract in Brazil and projects in the United States where

over 500 megawatts were rented for summer peaking.

Lowering Product Costs

While customers want a broader menu of energy

solutions, they also want continuous improvement in

cost. Cummins Power Generation exceeded cost

reduction targets in 2001 through the continued success

of our material cost reduction program. As part of this

program, we leveraged Cummins presence in the three

largest developing economies of India, Brazil and China.

In these countries, high local content in engines and

components, due to Cummins 30 year systematic strategy

of building local manufacturing, has helped us build a

cost leadership position. Our market share leadership in

both generator sets and alternators in these countries

increases our economies of scale.

Jack K. Edwards

Executive Vice President

President, Power Generation

Power Generation Business

The Filtration Business, headquartered in Nashville,

Tennessee, designs and manufactures filtration and

exhaust systems for diesel-powered equipment.

In 2001, the Filtration and Other Business had sales

of $889 million, representing 15 percent of Cummins

business unit sales.

The widely recognized brands of Fleetguard and Nelson

are manufactured in 23 plants in nine countries, including

three international joint ventures, and distributed via 16

distribution centers on six continents. Three subsidiaries

serve related markets including automotive fuel filtration,

noise control and air filtration for power generation

equipment, and industrial hydraulic filtration.

The Filtration Business continues its solid per-

formance by leveraging the following capabilities:

• Award-winning quality

• Leadership in technology

• Global growth

Award-Winning Quality

PACCAR awarded Fleetguard its “Aftermarket Excellence

Award” for 2001 in recognition of outstanding quality

parts and service support. Fleetguard also won Volvo’s

“Aftermarket Supplier of the Year” award. Penske

Leasing, a leading national truck rental and leasing

fleet, named Fleetguard “Supplier of the Year” in the

accessories category for the fifth consecutive year.

Six Sigma continued to provide an impressive track

record of improving quality while reducing costs. For

example, one project in the accounts receivable area

generated both significant process improvements and

cash flow benefits. Tripling the number of black belts to

24 will greatly increase efforts for future Six Sigma benefits.

Leadership in Technology

As a Cummins business, Filtration has a strong

knowledge of diesel engine technology and applications

as well as subsystems integration. In addition, the

Filtration Business holds numerous patents in filter

media technology and has world-class analytical tools

and testing capabilities. These technologies enabled

the Filtration Business to provide the best solutions

for our customers.

The synergies between Fleetguard and Nelson provide

benefits to customers, such as a broader product line

of systems and components, Original Equipment

Manufacturer and aftermarket product and service

support, and a global reach.

Leveraging Market Growth

Developing economies, such as India, China and Brazil,

provide growth opportunities for products like air systems,

engine filtration and exhaust emission systems due to

higher growth rates and Cummins strong market position.

Filtration can leverage Cummins global presence to enter

these markets quickly and cost effectively.

More stringent emissions regulations in the U.S. and

around the world provide opportunities for growth in

exhaust aftertreatment for first-fit Original Equipment

Manufacturer applications and retrofitting vehicles

already in service, such as refuse trucks in New York

City, pictured on the opposite page.

In response to these requirements, a new Emission

Solutions business was created to focus on this exciting

global opportunity. This business will integrate

aftertreatment technology and product development,

and be responsible for commercializing the broader

emission solutions opportunities.

Other

Included in the Filtration and Other Business is

the Holset Turbocharger business, headquartered in

Huddersfield, England. Holset designs, develops, and

manufactures turbochargers for diesel engines and is

the market leader in the midrange, heavy-duty, and

high-horsepower engine sector with a worldwide market

share of over 30 percent.

The turbocharger business is focused on:

• Maintaining the No. 1 or No. 2 position in our markets

• Technical leadership in systems solutions

at competitive prices

• Expanding our global presence

• Growing the parts and service business

Holset was the first to market with heavy-duty variable

geometry turbochargers, titanium compressors, and

power turbines, all required to help our customers meet

the world’s ever more stringent emissions requirements,

while improving engine performance.

Rick Mills

Vice President

President, Filtration and Fleetguard, Inc.

Filtration and Other Business

The International Distributor Business consists of 17

Company-owned and three joint venture distributors

with 111 locations that provide Cummins products and

related services to end users in 50 countries and

territories. In 2001, the International Distributor Business

reported sales of $562 million, which represented nine

percent of Cummins business unit sales.

A separate business unit has been created in response

to the growing size and importance of retail sales and

service to Cummins and the significant difference

from the product businesses. The International

Distributor Business will provide best-in-class service and

support as well as products that enhance our customers'

overall experience with Cummins.

The International Distributor Business is focused on:

• Profitable growth in retail sales

• Geographic and market diversification

• Innovative end user services, packages, and solutions

Profitable Growth in Retail Sales

Cummins has an extensive worldwide network of

manufacturing, marketing, and engineering investments

and alliances in the Engine, Power Generation, and

Filtration Businesses. Our International Distributor

Business strengthens that leading global position by

placing Company-owned distributors in key markets

such as India, China, Japan, Australia, United Kingdom,

and South Africa.

In addition, the globally respected Cummins brand offers

distributors the opportunity to build a dedicated customer

base and a population of Cummins products on which to

grow incremental service and solutions business.

Geographic and Market Diversification

The International Distributor Business is diversified

in terms of both geographic and business segments.

Approximately 30 percent of our revenue comes from

each of three regional markets: Asia, South Pacific, and

Europe. In each region, the international distributors sell

products and services to end users in virtually every

business segment that requires power.

The international distributors can price competitively and

still earn a strong return due to the modest investment

in fixed assets in combination with good working

capital management.

Broad geographic diversification, the sale of services to

end users in a wide range of markets, and the low

fixed-cost nature of the business all effectively hedge

our International Distributor Business against major

economic and commercial swings.

Innovative End User Services, Packages and Solutions

End user services include product maintenance, repair,

and overhaul. In many locations, such as in the Chile

distributor shown in the photograph, our distributors

have long-term engine repair and overhaul contracts or

provide complete maintenance and repair packages for

fleets using Cummins-powered equipment. Other

examples include passenger rail operations in the

United Kingdom and power generation customers in India.

The distributors also supply locally integrated packages

that include Cummins engines or power generation

equipment, together with related components or services,

engineered into a single package to meet a customer

need. Examples include engine, transmission and drive-

line packages for bus repowers in the United Kingdom,

wind machines for frost protection in Australia, and

flood pump drives in Taiwan.

In some locations, the distributors also provide

comprehensive business solutions that apply engine-

powered equipment to manage broad aspects of an end

user’s business. Examples include generator set rental

in Singapore, ship refurbishment in Australia, and power

projects in Brazil.

These packages and solutions represent a significant

growth opportunity for Cummins.

Steve Chapman

Vice President, International

General Manager, International Distributor Business

International Distributor

Business

Net sales were $5.7 billion in

2001, 14 percent lower than sales

of $6.6 billion reported in 2000

and 1999. Earnings before interest

and taxes in 2001 were $83

million, excluding a pretax

charge of $125 million in connec-

tion with certain restructuring

actions and asset impairment

write-downs. This compares to

$249 million in 2000, excluding a

pretax charge of $160 million for

restructuring actions and asset

impairments, and $356 million in

1999, excluding a pretax charge of

$60 million in connection with the

dissolution of the Cummins

Wärtsilä joint venture. In 2001,

Cummins reported a loss before

interest and taxes of $42 million,

compared to earnings of $89

million in 2000 and $296 million

in 1999. Cummins reported a net

loss in 2001 of $102 million, or

$(2.66) per share, compared to net

earnings of $8 million, or $.20 per

share, in 2000 and net earnings of

$160 million, or $4.13 per share,

in 1999.

Five Year Financial Summary

$ Millions, except per share amounts 2001 2000 1999 1998 1997

Net sales $5,681 $6,597 $6,639 $6,266 $5,625

Cost of goods sold 4,660 5,338 5,221 4,925 4,345

Special charges - --92 -

Gross margin 1,021 1,259 1,418 1,249 1,280

Operating expenses:

Selling and administrative expenses 728 776 781 787 744

Research and engineering expenses 220 244 245 255 260

(Income) expense from joint ventures and alliances (10) (9) 28 30 (10)

Other (income) expense, net - (1) 8 (13) (26)

Restructuring, asset impairment

and other charges 125 160 60 125 -

Earnings (loss) before interest and income taxes (42) 89 296 65 312

Interest expense 76 86 75 71 26

(Benefit) provision for income taxes (42) (19) 55 4 74

Minority interest 15 14 6 11 -

Dividends on preferred securities

of subsidiary trust 11--- -

Net earnings (loss) $ (102) $ 8 $ 160 $ (21) $ ,212

Net earnings (loss) per share:

Basic $ (2.66) $ 0.20 $ 4.16 $ ,(.55) $ 5.55

Diluted (2.66) 0.20 4.13 (.55) 5.48

Number of shares for EPS:

Basic 38.3 38.2 38.3 38.5 38.2

Diluted 38.3 38.2 38.6 38.5 38.7

Cash dividends per share $ 1.20 $ 1.20 $ 1.125 $ 1.10 $ 1.075

Shareholders’ investment per share 26.66 34.90 37.44 33.11 37.05

Working capital $ 665 $ 607 $ 866 $ 805 $ 655

Property, plant and equipment, net 1,405 1,598 1,630 1,671 1,532

Total assets 4,335 4,500 4,697 4,542 3,765

Total debt 945 1,196 1,215 1,227 654

Shareholders’ investment 1,025 1,336 1,429 1,272 1,422

Property, plant and equipment additions $ 206 $ 228 $ 215 $ 271 $ 405

Depreciation and amortization 231 240 233 199 158

Shareholders of record 4,600 4,800 4,800 5,200 4,700

Number of employees 24,900 28,000 28,500 28,300 26,300

54% United States 15% Europe/CIS

12% Asia

4% Australia/New Zealand

5% Canada

3% Mexico

5% Brazil/Latin America

2% Africa/Middle East

2001 Sales by Geographic Region

52% Engine Business

15% Filtration and Other Business

24% Power Generation Business

9% International Distributor Business

2001 Sales by Business Unit

Directors

Tim Solso

Robert J. DarnallWilliam I. MillerWalter Y. ElishaAlexis M. Herman

James A. JohnsonFranklin A. ThomasJohn M. Deutch

J. Lawrence Wilson Hanna H. GrayWilliam D. Ruckelshaus

Committees

Directors

Tim Solso Chairman and Chief Executive Officer of Cummins Inc.

Robert J. Darnall Retired Chairman and Chief Executive Officer, Inland Steel

■■ ■

Industries Inc., basic steel manufacturer, processor and distributor

John M. Deutch Institute Professor, Massachusetts Institute of Technology

■■■

Walter Y. Elisha Retired Chairman, Springs Industries, Inc., manufacturer of home furnishings,

■■ ■

industrial and specialty fabrics

Hanna H. Gray President Emeritus and Professor of History, University of Chicago

■■ ■

Alexis M. Herman Chairman and Chief Executive Officer of New Ventures, Inc.,

■■■

an independent consulting firm

James A. Johnson Vice-Chairman, Perseus, LLC

■■■

William I. Miller Chairman, Irwin Financial Corporation, financial services company

■■

William D. Ruckelshaus Strategic Partner, Madrona Venture Group

■■■

Franklin A. Thomas Consultant, TFF Study Group, non-profit initiative to assist the

■■■■

development process in South Africa

J. Lawrence Wilson Retired Chairman and Chief Executive Officer, Rohm and Haas Company,

■■ ■

specialty chemical manufacturing

J. Irwin Miller Honorary Chairman

Audit

Finance

Compensation

Technology & Environment

Nominating & Organization

Lead Director

Committees

Executives and Officers

Policy Committee

Tim Solso Chairman and Chief Executive Officer

Jean Blackwell Vice President, Cummins Business Services

Steve Chapman Vice President, International and General Manager, International Distributor Business

Jack Edwards Executive Vice President, President, Power Generation

Tom Linebarger Vice President and Chief Financial Officer

Joe Loughrey Executive Vice President, President, Engine Business

Rick Mills Vice President, President, Filtration and Fleetguard, Inc.

John Wall Vice President and Chief Technical Officer

Corporate

Tom Linebarger Vice President Chief Financial Officer

Jean Blackwell Vice President Cummins Business Services

John Crowther Vice President Information Technology and Chief Information Officer

Bob Crane Vice President Corporate Controller

Marya Rose Vice President General Counsel and Corporate Secretary

Steve May Vice President Government Relations

Donald Trapp Vice President Treasurer

International

Steve Chapman Vice President International

General Manager International Distributor Business

Ricardo Chuahy General Manager Latin America

President Cummins Brasil

Hugh Foden General Manager Southeast Asia

Mike Green Managing Director South Pacific

Jong S. Kim Area Managing Director East Asia

Steve Knaebel Vice President Cummins Mexico Operations

President and General Manager Cummins, S. de R.L. de C.V.

Ravi Venkatesan Managing Director India

Steve Yun Area Business Director Korea

Engine Business

Joe Loughrey Executive Vice President, President Engine Business

Iain Barrowman Vice President High-Horsepower Operations

Martha Finn Brooks Vice President Marketing and Sales

Rich Freeland Vice President and General Manager Fuel Systems Business

Richard M. Gold Vice President and General Manager PowerCare and Distribution

Jeff Hamilton Vice President Research and Development

Sam Hires Vice President High-Horsepower Engine Development

Jeff Jones Vice President Sales and Support

Jim Kelly Vice President and General Manager Midrange Engine Business

Mark Levett Vice President and General Manager High-Horsepower Engine Business

Jim Lyons Vice President Midrange Manufacturing

Frank McDonald Vice President and General Manager Heavy-Duty Engine Business

Larry Moore Vice President Operations Excellence

George L. Muntean Vice President Fuel Systems Engineering

Ed Pence Vice President Automotive Business

John H. Stang Vice President Automotive Engineering

Bharat Vedak Vice President Industrial Customer Engineering

Christine Vujovich Vice President Environmental Policy and Product Strategy

Bob Weimer Vice President Quality, Heavy-Duty Business

Mark Yragui Vice President Industrial Marketing and New Business Development

Power Generation Business

Jack Edwards Executive Vice President, President Power Generation Business

Ron Moore Vice President and General Manager Power Generation Americas

Peter McDowell Vice President and Managing Director Newage

Tony Satterthwaite Vice President Central Area Cummins Power Generation

Steve Zeller Vice President, Chairman

and Managing Director Newage AvK/SEG

Filtration and Other Business

Rick Mills Vice President, President Filtration and Fleetguard, Inc.

Pamela Carter Vice President Global Sales, Marketing, Logistics and Distribution

Mark Gerstle Vice President Operations

David Moorhouse Vice President and Managing Director Holset Engineering Company, Ltd.

Our Worldwide Locations

Location Products

■ Operations

BMC Sanayi ve Ticaret A.S.** Izmir, Turkey B3.9/5.9 C8.3

Chongqing Cummins Engine Company Ltd.* Chongqing, China NT L10/M11 K19/38/50

Columbus Midrange Engine Plant Columbus, Indiana B5.9 ISB

Columbus Engine Plant Columbus, Indiana N14/NT Signature 600 ISX

Consolidated Diesel Company* Rocky Mount, North Carolina B3.9/5.9 C8.3 ISB ISC

Cummins Brasil Ltda. Sao Paulo, Brazil B3.9/5.9 C8.3 NT/N14

Cummins Engine Company PTY Scoresby, Australia Generator sets

Cummins India Ltd. Pune, India C8.3 NT/N14 V28 K38/50

Cummins Industrial Center Seymour, Indiana K19 V903 QSK19

Cummins Komatsu Engine Co.* Seymour, Indiana QST30

Cummins Marine Charleston Charleston, South Carolina B C QSM11 N14

Cummins Natural Gas Engines, Inc. Forth Worth, Texas G-K19 G-V28 G-NT

Cummins Power Generation Fridley, Minnesota Generator sets and electronic controls

Cummins Power Generation Singapore Generator sets

Cummins Power Generation Limited Ramsgate, England Generator sets and electronic controls

Darlington Engine Plant Darlington, England B3.9/5.9 C8.3

Daventry Engine Plant Daventry, England K38/50 QSK45/60 QSV81/91

Dongfeng Cummins Engine Co. Ltd* Xiangfan, China C8.3

Dongfeng Motor Corporation** Xiangfan, China B3.9/5.9

Jamestown Engine Plant Jamestown, New York ISM L10 G-L10

Komatsu Cummins Engine Company, Ltd* Oyama, Japan B3.3 B3.9/5.9

Power Systems India Ltd Daman, India Generator sets

SsangYong Heavy Industries Co., Ltd** Seoul, South Korea K19 V903

Swagman International PTY Ltd. Queensland, Australia Recreational vehicles

Tata Cummins Limited* Jamshedpur, India B3.9/5.9

■ Technical Center Locations

Columbus, Indiana

Cookeville, Tennessee

Darlington, England

European Engine Alliance,* Maidenhead, England

Fridley, Minnesota

Industrial Power Alliance,* Oyama, Japan

Pune, India

Sao Paulo, Brazil

Stoughton, Wisconsin

■ Regional Parts Distribution Centers

Hebron, Kentucky

Mechelen, Belgium

Memphis, Tennessee

Mississauga, Canada

Pune, India

San Luis Potosi, Mexico

Sao Paulo, Brazil

Scoresby, Australia

Seoul, Korea

Shanghai, China

Singapore

Sparks, Nevada

Sparta, Tennessee

Weedon, UK

■ Sales and Service

Over 500 distributorships

and branches worldwide

* Joint Venture

** Licensee

Location Products

■ Components

AvK/SEG Holding GmbH & Co KG* AvK, Ingolstadt, Germany Alternators

AvK/SEG Holding GmbH & Co KG* SEG, Kempten, Germany Power Systems

CBM Technologies PTY Ltd. Launceston, Australia Engine components

Crompton Greaves Newage Ltd. Ahmednagar, India Alternators

Cummins Engine Company PTY Scoresby, Australia Generator set components and remanufactured engines

Cummins S.A. San Luis Potosi, Mexico Engine components and remanufactured engines

Cummins Xiangfan Manufacturing Company Xiangfan, China Engine components

Diesel ReCon Company Memphis, Tennessee Remanufactured engines and components

Diesel ReCon Company OER Toronto, Canada Remanufactured engines and components

Diesel ReCon de Mexico S. A. de C. V. Ciudad Juarez, Mexico Remanufactured engines and components

Fleetguard Kilsyth, Australia Filtration systems

Fleetguard Bonsucesso, Brazil Filtration and exhaust systems

Fleetguard Filters Ltd. Pune, India Filtration systems

Fleetguard Quimper, France Filtration systems

Fleetguard Cookeville, Tennessee Filtration systems

Fleetguard Lake Mills, Iowa Filtration systems

Fleetguard Nelson Mexico S. de R. L. de C. V. San Luis Potosi, Mexico Filtration and exhaust systems

Fleetguard Pietermaritzburg, South Africa Filtration systems

Fleetguard Nelson Hinckley, England Exhaust systems

Fuel Systems Division Columbus, Indiana Fuel system design and manufacture

Holset Engineering Company Ltd. Charleston, South Carolina Turbochargers

Holset Engineering Company Ltd. Huddersfield, England Turbochargers

Kuss Filtration Findlay, Ohio Filtration systems

Markon Sawafuji Ltd* Oakham, England Alternators

Nelson Engine Systems India Ltd. Daman, India Exhaust systems

Fleetguard Nelson Stoughton, Wisconsin Filtration and exhaust systems

Fleetguard Nelson Arcadia, Wisconsin Exhaust systems

Fleetguard Nelson Black River Falls, Wisconsin Exhaust systems

Fleetguard Nelson Bloomer, Wisconsin Filtration systems

Fleetguard Nelson Mineral Point, Wisconsin Filtration and exhaust systems

Fleetguard Nelson Neillsville, Wisconsin Filtration and exhaust systems

Fleetguard Nelson Viroqua, Wisconsin Exhaust systems

Fleetguard Nelson Wautoma, Wisconsin Exhaust systems

Newage International Limited Stamford, England Alternators

Shanghai Fleetguard Ltd.* Shanghai, China Filtration systems

Stamford Mexico S. de R.L. de C.V. San Luis Potosi, Mexico Alternators

Tata Holset Ltd* Dewas, India Turbochargers

Tubengineers Pty. Ltd. Scoresby, Australia Exhaust systems

Universal Silencer Montello, Wisconsin Filtration and silencing systems

Universal Silencer Muscoda, Wisconsin Filtration and silencing systems

Universal Silencer Mexico SA DE San Luis Potosi, Mexico Filtration and silencing systems

Universal Silencer Stoughton, Wisconsin Filtration and silencing systems

Wuxi Holset Ltd* Wuxi, China Turbochargers

Wuxi Newage Alternators Ltd* Wuxi, China Alternators

■ Operations

■ Components

■ Technical Center Locations

■ Regional Parts Distribution Centers

■ Sales and Service

■ International Distributors

Brussels, Belgium

Gross-Gerau, Germany

Milan, Italy

Wellingborough, England

Sandton, South Africa

Dubai, United Arab Emirates

Harare, Zimbabwe

Beijing, China

Hong Kong, China

Taipei, Taiwan (JV)

Shenzhen, China (JV)

Pune, India

Tokyo, Japan

Seoul, Korea

Buenos Aires, Argentina

Sao Paulo, Brazil

Santiago, Chile (JV)

Singapore

Manila, Philippines

Scoresby, Australia

Shareholder Information

Stock Transfer Agent, Registrar, and Dividend

Disbursing Agent

Wells Fargo Shareowner Services is the Company’s stock

transfer agent and registrar. Wells Fargo maintains the

Company’s shareholder records, disburses dividend checks, and

administers the Company’s Dividend Reinvestment Program.

General correspondence (address change, name change,

notification of lost securities, transfers, inquiries about transfer

requirements, and correspondence relating to the Dividend

Reinvestment Program) should be directed to Wells Fargo.

By mail:

Wells Fargo Shareowner Services

P.O. Box 64854

St. Paul, MN 55164-0854

By hand or overnight:

Wells Fargo Shareowner Services

161 North Concord Exchange

South St. Paul, MN 55075

By phone:

1-800-468-9716

1-651-450-4064

By fax:

1-651-450-4033

By e-mail:

StockTransfer@WellsFargo.com

Dividends

Common stock dividends are payable quarterly upon

authorization of the Board of Directors on or about

the fifteenth of March, June, September and December.

Dividend Reinvestment

As an added service to shareholders, Cummins has a

Dividend Reinvestment Plan, administered by Wells Fargo

Shareowner Services. This plan gives shareholders of record

the option of having their cash dividends and optional cash

payments applied toward the purchase of additional shares.

Shareholders desiring information about this plan may contact

Wells Fargo Shareowner Services (see above), or request

information from Cummins through the Company’s website,

www.cummins.com.

Annual Meeting

Shareholders are invited to attend the Company’s Annual

Meeting on April 2, 2002, at 10:00 a.m. (Eastern Standard

Time) in Columbus, Indiana at the Columbus Engine Plant

(CEP) located at 500 Central Avenue.

Further Information

Shareholders and others are invited to visit Cummins on

the Web for further information of interest to investors. Visit

www.cummins.com and click on Investor Information. The

Annual Meeting and quarterly earnings teleconferences will

be webcast from this site. SEC filings, press releases, stock

quotes, and other information are available there. In

addition, you can request a printed copy of the 10-K, 10-Q,

annual report, and dividend reinvestment literature, and you

can request e-mail alerts to advise you when new information

is posted to the site. Shares may be voted by mail, by a

toll-free telephone call or on the Internet. Please see the

simple instructions on the proxy card.

Investors may also contact:

Karen A. Battin

Director-Investor Relations

Cummins Inc.

Box 3005 (Mail Code 60118)

Columbus, IN 47202-3005

Phone: 812-377-3121

Fax: 812-377-4937

Inv[email protected]

The Company’s press releases by fax may

be requested by calling News on Demand at 1-888-329-2305.

Corporate Headquarters

Cummins Inc.

Columbus, IN 47202-3005

Exchange Listing

The common stock of Cummins Inc. is listed on the New York

Stock Exchange and the Pacific Stock Exchange under the

symbol CUM.

Cummins Inc. 20

01 Annual Repor