TABLE OF CONTENTS
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Page No.
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PART I. FINANCIAL INFORMATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Item 1. Financial Statements
Consolidated Statement of Earnings for the First 2
Quarter Ended April 3, 1994 and April 4, 1993
Consolidated Statement of Financial Position at 3
April 3, 1994 and December 31, 1993
Consolidated Statement of Cash Flows for the First 4
Quarter Ended April 3, 1994 and April 4, 1993
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of 6
Operations and Financial Condition
PART II. OTHER INFORMATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Index to Exhibits 14
(Page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Unaudited
(Millions, Except per Share Amounts)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
First Quarter Ended
4/3/94 4/4/93
~~~~~~~~ ~~~~~~~~
NET SALES $1,099.2 $1,048.4
Cost of goods sold 828.6 797.4
~~~~~~~~ ~~~~~~~~
GROSS PROFIT 270.6 251.0
Selling & administrative expenses 148.6 140.6
Research & engineering expenses 54.0 49.6
Interest expense 4.5 9.6
Other expense - 3.4
~~~~~~~~ ~~~~~~~~
Earnings before income taxes 63.5 47.8
Provision for income taxes 8.9 6.7
~~~~~~~~ ~~~~~~~~
NET EARNINGS 54.6 41.1
Preference stock dividends - 2.1
~~~~~~~~ ~~~~~~~~
EARNINGS AVAILABLE FOR COMMON SHARES $ 54.6 $ 39.0
~~~~~~~~ ~~~~~~~~
~~~~~~~~ ~~~~~~~~
Primary earnings per common share $ 1.35 $ 1.12
Fully diluted earnings per common share 1.35 1.07
Cash dividends declared per common share .125 .025
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
(Millions, Except per Share Amounts)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
4/3/94 12/31/93
~~~~~~~~ ~~~~~~~~
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 94.9 $ 77.3
Receivables less allowances of $10.0 & $9.5 472.7 426.3
Inventories 485.6 440.2
Other current assets 131.6 127.9
~~~~~~~~ ~~~~~~~~
1,184.8 1,071.7
INVESTMENTS AND OTHER ASSETS 200.9 190.7
PROPERTY, PLANT & EQUIPMENT less accumulated
depreciation of $1,250.1 & $1,222.3 962.6 958.2
INTANGIBLES, DEFERRED TAXES & DEFERRED CHARGES 169.7 170.0
~~~~~~~~ ~~~~~~~~
TOTAL ASSETS $2,518.0 $2,390.6
~~~~~~~~ ~~~~~~~~
~~~~~~~~ ~~~~~~~~
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Loans payable $ 37.4 $ 13.4
Current maturities of long-term debt 32.6 32.6
Accounts payable 284.9 267.5
Other current liabilities 417.7 386.8
~~~~~~~~ ~~~~~~~~
772.6 700.3
~~~~~~~~ ~~~~~~~~
LONG-TERM DEBT 188.3 189.6
~~~~~~~~ ~~~~~~~~
OTHER LIABILITIES 684.1 679.6
~~~~~~~~ ~~~~~~~~
SHAREHOLDERS' INVESTMENT:
Convertible preference stock, no par value,
.2 shares outstanding - 112.2
Common stock, $2.50 par value, 43.7 & 40.6
shares issued 109.1 101.5
Additional contributed capital 922.4 822.8
Retained earnings 53.5 4.1
Common stock in treasury, at cost, 2.1 shares (67.3) (67.3)
Unearned ESOP compensation (55.0) (59.3)
Cumulative translation adjustments (89.7) (92.9)
~~~~~~~~~ ~~~~~~~~~
873.0 821.1
~~~~~~~~ ~~~~~~~~
TOTAL LIABILITIES & SHAREHOLDERS' INVESTMENT $2,518.0 $2,390.6
~~~~~~~~ ~~~~~~~~
~~~~~~~~ ~~~~~~~~
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited (Millions)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
First Quarter Ended
4/3/94 4/4/93
~~~~~~~~ ~~~~~~~~
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 54.6 $ 41.1
~~~~~~ ~~~~~~
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization 29.0 31.7
Accounts receivable (44.8) (65.8)
Inventories (43.5) (22.3)
Accounts payable and accrued expenses 51.3 31.9
Other 6.8 7.4
~~~~~~~ ~~~~~~~
Total adjustments (1.2) (17.1)
~~~~~~~ ~~~~~~~
Net cash provided by operating activities 53.4 24.0
~~~~~~~ ~~~~~~~
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Additions (34.4) (27.3)
Disposals 2.7 .3
Investments in and advances to affiliates
and unconsolidated companies (16.2) 21.6
Acquisitions of new business activities - 3.4
Net cash proceeds from the disposition of
certain business activities - 1.3
~~~~~~~ ~~~~~~~
Net cash used in investing activities (47.9) ( .7)
~~~~~~~ ~~~~~~~
NET CASH FLOWS FROM OPERATING & INVESTING
ACTIVITIES 5.5 23.3
~~~~~~ ~~~~~~
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 48.6
Payments on borrowings ( 1.9) (69.8)
Net borrowings under credit agreements 24.1 21.5
Payments of dividends ( 5.2) ( 2.9)
Other ( 5.0) ( 5.6)
~~~~~~~ ~~~~~~~
Net cash provided by (used for)
financing activities 12.0 ( 8.2)
~~~~~~ ~~~~~~~
EFFECT OF EXCHANGE RATE CHANGES ON CASH .1 ( .3)
~~~~~~ ~~~~~~~
NET CHANGE IN CASH & CASH EQUIVALENTS 17.6 14.8
Cash & cash equivalents at beginning of year 77.3 54.2
~~~~~~ ~~~~~~
CASH & CASH EQUIVALENTS AT END OF QUARTER $ 94.9 $ 69.0
~~~~~~ ~~~~~~
~~~~~~ ~~~~~~
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
(Dollars in Millions, Unless Otherwise Stated)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NOTE 1. ACCOUNTING POLICIES: The CONSOLIDATED FINANCIAL STATEMENTS
for the interim periods ended April 3, 1994 and April 4, 1993 have been
prepared in accordance with the accounting policies described in the
Company's Annual Report to Shareholders and Form 10-K. Management
believes the statements include all adjustments of a normal recurring
nature necessary to present fairly the results of operations for the
interim periods. Inventory values at interim reporting dates are based
upon estimates of the annual adjustments for taking physical inventory
and for the change in cost of LIFO inventories.
NOTE 2. INCOME TAXES: Income tax expense is reported during the
interim reporting periods on the basis of the estimated annual
effective tax rate for the taxable jurisdictions in which the Company
operates. In the first quarter of 1994 and 1993, the Company
recognized approximately $11 and $10, respectively, related to a
reduction in its valuation allowance for tax loss carryforwards.
NOTE 3. Preference Stock Redemption: On January 24, 1994, the Company
called for redemption, at a price of $51.05 per depositary share, plus
accrued dividends, of its outstanding Convertible Exchangeable
Preference Stock, which had a face value of $112.2 at December 31,
1993. Holders elected to convert their shares into 2.9 million shares
of common stock prior to the redemption date. Had the stock conversion
occurred on January 1, 1994, pro forma net earnings per share would
have approximated $1.31 in the first quarter of 1994.
NOTE 4. EARNINGS PER SHARE: Primary earnings per share of common
stock are computed by subtracting preference stock dividend
requirements from net earnings and dividing that amount by the weighted
average number of common shares outstanding during the period. The
weighted average number of shares, which includes the exercise of
certain stock options granted to employees, was 40.3 million in the
first quarter of 1994 and 34.8 million in the first quarter of 1993.
Fully diluted earnings per share are computed by dividing net earnings
by the weighted average number of shares assuming the exercise of stock
options and conversion of debt and preference stock to common stock.
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Dollars In Millions, Unless Otherwise Stated)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
OVERVIEW
~~~~~~~~
Cummins continued to benefit from strong business conditions in most of
its markets in the first quarter of 1994. Net sales were $1,099.2,
compared to $1,048.4 in the first quarter of 1993. Net earnings were
$54.6, or $1.35 per share, in the first quarter of 1994, compared to
$4.1, or $1.12 per share, in the first quarter of 1993. The North
American heavy-duty truck market remained at high levels of production.
Sales of midrange engines were higher than in the first quarter of
1993. However, in the first quarter of 1994, midrange engine sales in
North America were reduced because of advance purchases made by some
truck and bus customers at the end of 1993 to avoid price increases.
Power generation sales benefited from improvements in the market for
power units in recreational vehicles. Sales to industrial markets also
increased, particularly for construction and agricultural applications.
RESULTS OF OPERATIONS
~~~~~~~~~~~~~~~~~~~~~
The percentage relationships between net sales and other elements of
the Company's CONSOLIDATED STATEMENT OF EARNINGS for the comparative
reporting periods were:
First Quarter
Percent of Net Sales 1994 1993
~~~~~~~~~~~~~~~~~~~~ ~~~~~ ~~~~~
Net sales 100.0 100.0
Cost of goods sold 75.4 76.1
~~~~~ ~~~~~
Gross profit 24.6 23.9
Selling and administrative expenses 13.5 13.4
Research and engineering expenses 4.9 4.7
Interest expense .4 .9
Other expense - .3
~~~~~ ~~~~~
Earnings before income taxes 5.8 4.6
Provision for income taxes .8 .7
~~~~~ ~~~~~
Net earnings 5.0 3.9
~~~~~ ~~~~~
~~~~~ ~~~~~
Sales by Market
~~~~~~~~~~~~~~~
Sales for each of the Company's markets for the comparative reporting
periods were:
First Quarter 1994 First Quarter 1993
Dollars Percent Dollars Percent
~~~~~~~ ~~~~~~~ ~~~~~~~ ~~~~~~~
Heavy-duty truck 335 31 324 31
Midrange truck 100 9 86 8
Power generation 230 21 213 20
Bus & light commercial vehicles 156 14 147 14
Industrial products 124 11 118 11
Government 15 1 28 3
Marine 17 2 17 2
Fleetguard, Holset and
Cummins Electronics (a) 122 11 115 11
~~~~~ ~~~ ~~~~~ ~~~
Net sales 1,099 100 1,048 100
~~~~~ ~~~ ~~~~~ ~~~
~~~~~ ~~~ ~~~~~ ~~~
(a) Included sales of McCord in the first quarter of 1993.
Sales of $335 to the heavy-duty market in the first quarter of 1994
were 3 percent higher than in the first quarter of 1993. This increase
was attributable to the strong North American heavy-duty market. In
the first quarter of 1994, the Company's heavy-duty engine shipments in
North America increased 9 percent over the first-quarter 1993 level.
The Company continues to lead this market with a 34-percent market
share. In general, shipments of the Company's heavy-duty truck engines
for international markets in the first quarter of 1994 were essentially
level with the first quarter of 1993.
Midrange truck engine sales in the first quarter of 1994 were $14
higher than in the first quarter of 1993. The effect of a decrease in
shipments of midrange engines for the North American market was offset
by an increase in shipments to international markets, primarily in the
United Kingdom where there were unusually low shipments in the first
quarter of 1993. The first-quarter 1994 decrease in North American
shipments was due to advance purchases by some midrange engine truck
customers at the end of 1993 to avoid price increases. Shipments of
these engines are projected to increase in the second quarter of 1994.
Power generation sales in the first quarter of 1994 were $230, compared
to $213 in the first quarter of 1993. The 8-percent increase was due
to a strengthening of the market for power units in recreational
vehicles and the continued increase in demand for alternators. Power
generation sales also continued to benefit from demand for industrial
generator sets in international markets.
In the bus and light commercial vehicle market, the Company's sales
were $156 in the first quarter of 1994, compared to $147 in the first
quarter of 1993. The 6-percent increase in sales was due primarily to
pricing actions, with actual engine shipments approximately 9 percent
lower than first-quarter 1993. The lower level of engine shipments was
due primarily to advance purchases of midrange engines for the North
American bus market at the end of 1993.
Sales to industrial markets increased 5 percent in the first quarter of
1994, compared to the first quarter of 1993. This increase in sales
was due primarily to improvements in both North American and
international construction markets. Shipments for the agricultural
market in North America also showed modest gains in the first quarter
of 1994.
Engine shipments for all markets in the first quarter of 1994 were
69,900, compared to 67,900 in the first quarter of 1993. Shipments by
engine family for the comparative periods were:
First Quarter
1994 1995
~~~~~~ ~~~~~~
Midrange engines 45,000 44,300
Heavy-duty engines 23,000 21,600
High-horsepower engines 1,900 2,000
~~~~~~ ~~~~~~
Total engine shipments 69,900 67,900
~~~~~~ ~~~~~~
~~~~~~ ~~~~~~
Gross Profit
~~~~~~~~~~~~~
The Company's gross profit percentage was 24.6 percent in the first
quarter of 1994, compared to 23.9 percent in the first quarter of 1993.
The key factors contributing to the improved margin in the first
quarter of 1994 were the increase in demand for the Company's products
and the full-year effect of price increases subsequent to the first
quarter of 1993. This was partially offset by an increase in costs
associated with product coverage programs. The cost of these programs,
which includes both warranty and extended coverage, was 2.7 percent of
net sales in the first quarter of 1994, compared to 2.2 percent of net
sales in the first quarter of 1993. This increase was attributable to
higher product coverage provisions for new product introductions.
Operating Expense
~~~~~~~~~~~~~~~~~
Selling and administrative expenses were $148.6, or 13.5 percent of net
sales, in the first quarter of 1994, compared to $140.6, or 13.4
percent of net sales, in the first quarter of 1993. The increase in
expenditures in the first quarter of 1994 was primarily attributable to
the increase in demand for the Company's products. The increase of
$4.4 in research and engineering expenses in the first quarter of 1994,
compared to the first quarter of 1993, was due to increased
expenditures for fuel systems and for ongoing product development.
Interest Expense
~~~~~~~~~~~~~~~~
Interest expense was $4.5 in the first quarter of 1994, compared to
$9.6 in the first quarter of 1993. The decrease in interest expense in
the first quarter of 1994 was due to the Company's early retirement and
redemption of debt obligations during 1993.
Provision For Income Taxes
~~~~~~~~~~~~~~~~~~~~~~~~~~
As disclosed in NOTE 2 to the CONSOLIDATED FINANCIAL STATEMENTS, the
Company reduced its valuation allowance for tax loss carryforwards
approximately $11 in the first quarter of 1994 and $10 in the first
quarter of 1993.
FINANCIAL CONDITION AND CASH FLOW
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Key elements of the CONSOLIDATED STATEMENT OF CASH FLOWS were:
1994 1993
~~~~~~ ~~~~~~
Net cash provided by operating activities $53.4 $24.0
Net cash used for investing activities (47.9) ( .7)
~~~~~~ ~~~~~~
Net cash flows from operating and investing
activities 5.5 23.3
Net cash provided by (used for) financing activities 12.0 (8.2)
Effect of exchange rate changes on cash .1 ( .3)
~~~~~ ~~~~~~
Net change in cash and cash equivalents $17.6 $14.8
~~~~~ ~~~~~
~~~~~ ~~~~~
During the first quarter of 1994, the Company generated cash flows from
operating activities of $53.4, compared to $24.0 in the first quarter
of 1993, due to improved earnings and a reduction in net working
capital requirements. Investing activities required net cash resources
of $47.9 for capital expenditures and investments in and advances to
affiliates and unconsolidated companies. Cash reserves increased $17.6
during the quarter to $94.9.
On January 24, 1994, the Company called for redemption, at a price of
$51.05 per depositary share, plus accrued dividends, its outstanding
Convertible Exchangeable Preference Stock, which had a face value of
$112.2 at December 31, 1993. In lieu of accepting the cash redemption
price, virtually all of the holders elected to convert their preference
stock into common stock of the Company. As a result, the Company
issued 2.9 million shares of common stock to the holders.
Total indebtedness (including the guaranteed notes of the ESOP Trust)
was $258.3 at the end of the first quarter of 1994, compared to $235.6
at December 31, 1993. The Company's debt-to-capital ratio was 22.8
percent at the end of the first quarter and 22.3 percent at
December 31, 1993.
On January 25, 1994, Moody's Investors Service upgraded the ratings of
the senior debt of the Company to investment grade (from Ba1 to Baa2).
Moody's stated that the action reflected the favorable intermediate-
term outlook for the Company's sales and operating performance as a
result of the Company's stronger and more diversified customer base,
the expansion of its international presence and better cost controls.
(page)
PART II. OTHER INFORMATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Item 4. Submission of Matters to a Vote of Security Holders
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Company held its annual meeting of security holders on April 5,
1994 at which security holders: (a) elected 14 directors of the
Company for the ensuing year, (b) ratified the appointment of Arthur
Andersen & Co., as auditors for the year 1994, (c) approved the Cummins
Engine Company, Inc., Restricted Stock Plan for Non-Employee Directors,
and (d) amended the Company's Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock from
50,000,000 to 150,000,000 shares.
Results of the voting in connection with each of the items were as
follows:
Voting on Directors:
~~~~~~~~~~~~~~~~~~~~
For Withheld
~~~~~~~~~~ ~~~~~~~~
H. Brown 34,542,776 226,628
R. Darnall 34,557,124 212,280
J. D. Donaldson 34,430,683 338,721
W. Y. Elisha 34,559,371 210,033
H. H. Gray 34,548,706 220,698
J. A. Henderson 34,573,197 196,207
D. G. Mead 34,428,226 341,178
J. I. Miller 34,558,903 210,501
W. I. Miller 34,571,279 198,125
D. S. Perkins 34,559,081 210,323
W. D. Ruckelshaus 34,563,696 205,708
H. B. Schacht 34,568,560 200,844
F. A. Thomas 34,560,531 208,873
J. L. Wilson 34,558,981 210,423
Ratification of Accountants:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
For Against Abstain
~~~~~~~~~~ ~~~~~~~ ~~~~~~~
34,601,673 89,088 78,643
Restricted Stock Plan:
~~~~~~~~~~~~~~~~~~~~~~
For Against Abstain
~~~~~~~~~~ ~~~~~~~ ~~~~~~~
34,168,688 421,624 179,092
Restated Articles of Incorporation:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
For Against Abstain
~~~~~~~~~~ ~~~~~~~~~ ~~~~~~~
29,998,915 4,551,308 219,181
With regard to the election of directors, votes were cast in favor of
or withheld from each nominee; votes that were withheld were excluded
entirely from the vote and had no effect. Abstentions on all proposals
(except the election of directors) were counted as present for purposes
of determining the existence of a quorum regarding the item on which
the abstention was voted. Since the amendment of the Restated Articles
of Incorporation required the approval of a majority of the outstanding
shares, abstentions had the effect of a negative vote. Abstentions on
the adoption of the Restricted Stock Plan had the same effect because
it required the affirmative vote of a majority of shares present in
person or by proxy and entitled to vote. Under the rules of the New
York Stock Exchange, brokers who held shares in street name had the
authority to vote on certain items when they did not receive
instructions from beneficial owners. Brokers that did not receive
instructions were entitled to vote on the election of directors and the
amendment to the Restated Articles of Incorporation. With respect to
the Restricted Stock Plan, brokers could not vote shares held for
customers without specific instructions from such customers. Under
applicable Indiana law, a broker non-vote had the same effect as a vote
against the proposed amendment to the Restated Articles of
Incorporation, and had no effect on the outcome of the election of
directors or the approval of the Restricted Stock Plan.
Item 6. Exhibits and Reports on Form 8-K:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
(a) See the Index to Exhibits on Page 14 for a list of exhibits filed
herewith.
(b) The Company was not required to file a Form 8-K during the first
quarter of 1994.
SIGNATURES
~~~~~~~~~~
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CUMMINS ENGINE COMPANY, INC.
By: /s/John McLachlan May 5, 1994
~~~~~~~~~~~~~~~~~
John McLachlan
Vice President - Corporate Controller
(Chief Accounting Officer)
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
INDEX TO EXHIBITS
~~~~~~~~~~~~~~~~~
Page No.
~~~~~~~~
3(a) Restated Articles of Incorporation of Cummins
Engine Company, Inc., as amended (filed herewith
and incorporated by reference to Quarterly
Report on Form 10-Q for the quarter ended
October 1, 1989 and by reference to Form 8-K,
dated July 26, 1990). 15
10(s) 1992 Stock Incentive Plan (filed herewith). 16
10(t) Restricted Stock Plan for Non-Employee Directors
(filed herewith). 25
11 Schedule of Computation of Per Share Earnings
for the First Quarter ended April 3, 1994 and
April 4, 1993 (filed herewith). 27
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
EXHIBIT 3(a)
ARTICLES OF AMENDMENT OF THE ARTICLES OF INCORPORATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The text of Article IV, Section 4.1 of the Restated Articles of
Incorporation is amended to read as follows:
SECTION 4.1 AUTHORIZED CLASSES and NUMBER OF SHARES. The
total number of shares which the Corporation has authority
to issue shall be 152,000,000 shares, consisting of
150,000,000 shares of common stock ("Common Stock"),
1,000,000 shares of preference stock ("Preference Stock")
and 1,000,000 shares of preferred stock (Preferred Stock").
The shares of Common Stock have a par value of $2.50 per
share. The shares of Preference and Preferred Stock do not
have any par or stated value, except that, solely for the
purpose of any statute or regulation imposing any tax or fee
based upon the capitalization of the Corporation, each of
the Corporation's shares of Preference Stock and Preferred
Stock shall be deemed to have a par value of $1.00 per
share.
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
EXHIBIT 10(s)
1992 STOCK INCENTIVE PLAN
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. OBJECTIVES. The Cummins Engine Company, Inc. 1992 Stock Incentive
Plan (the "Plan") is designed to retain and motivate executives and
other selected employees. These objectives are accomplished by
making incentive awards of the Company's stock under the Plan thereby
providing participants with a proprietary interest in the growth and
performance of the Company.
2. DEFINITIONS:
(a) "Award" -- The grant of any form of stock option, stock
appreciation right or stock award whether granted singly, in
combination or in tandem, to a Participant pursuant to such
terms, conditions and limitations as the Committee may
establish in order to fulfill the objectives of the Plan.
(b) "Award Agreement" -- An agreement between the Company and a
Participant that sets forth the terms, conditions and
limitations applicable to an Award.
(c) "Board" -- The Board of Directors of the Company.
(d) "Change of Control" -- The occurrence of any of the following:
(i) there shall be consummated (A) any consolidation or merger
of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of Common
Stock would be converted in whole or in part into cash, other
securities or other property, other than a merger of the
Company in which the holders of Common Stock immediately prior
to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange
or transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the
Company; or (ii) the stockholders of the Company shall approve
any plan or proposal for the liquidation or dissolution of the
Company; or (iii) any "person" (as such term is used in
Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), other than the
Company or a subsidiary thereof or any employee benefit plan
sponsored by the Company or a subsidiary thereof, shall become
the beneficial owners (within the meaning of Rule 13d-3 under
the Exchange Act) of securities of the Company representing 25%
or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights
accruing in special circumstances) having the right to vote in
the election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or
otherwise; or (iv) at any time during a period of two
consecutive years, individuals who, at the beginning of such
period constituted the Board, shall cease for any reason to
constitute at least a majority thereof, unless the election or
the nomination for election by the Company's stockholders of
each new director during such two-year period was approved by a
vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such two-year
period; or (v) any other event shall occur that would be
required to be reported in response to Item 6(e) (or any
successor provision) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act.
(e) "Common Stock" -- Authorized and issued or unissued Common
Stock, par value $2.50 per share, of the Company.
(f) "Code" -- The Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" -- The Compensation Committee of the Board, or such
other committee of the Board that is designated by the Board to
administer the Plan. The Committee shall be constituted so as
to permit the Plan to comply with Rule 16b-3 promulgated under
the Exchange Act or any successor rule and shall initially
consist of not less than three members of the Board, each of
whom is ineligible to receive Awards, shall have been so
ineligible for at least one year prior to serving on the
Committee and shall satisfy the requirements to be a
disinterested person contained in Rule 16b-3(1)(2)(i).
(h) "Company" -- Cummins Engine Company, Inc. and its subsidiaries,
including subsidiaries of subsidiaries.
(i) "Fair Market Value" -- The average of the high and low prices
of the Common Stock as reported on the composite tape for
securities listed on the New York Stock Exchange for the date
in question, provided that if no sales of Common Stock were
made on said Exchange on that date, the average of the high and
low prices of Common Stock as reported on said composite tape
for the preceding day on which sales of Common Stock were made
on said Exchange.
(j) "Participant" -- An employee of the Company to whom an Award
has been made under the Plan.
3. ELIGIBILITY. Employees of the Company eligible for an Award under
the Plan are those who hold positions of responsibility and whose
performance, in the judgment of the Committee or the management of
the Company, can have a significant effect on the success of the
Company.
4. STOCK AVAILABLE FOR AWARDS. Up to 1.0% of the outstanding Common
Stock as determined on December 31 of the preceding year shall be
available for Awards granted wholly or partly in stock during each
calendar year in which the Plan is in effect. For purposes of
Awards made during 1992, 17,200,000 shares shall be deemed to have
been outstanding as of December 31, 1991. From time to time, the
Board and appropriate officers of the Company shall take whatever
actions are necessary to file required documents with governmental
authorities and stock exchanges to make shares of Common Stock
available for issuance pursuant to Awards. Common Stock related to
Awards that are forfeited (provided that the participant received no
benefits of ownership such as dividends from the forfeited shares),
terminated or expire unexercised, or related to options or stock
appreciation rights settled in cash in lieu of stock, shall again
become available for Awards. Any Common Stock that so becomes
available, as well as any unused portion of the percentage limit for
any calendar year, shall be carried forward and be available for
Awards in succeeding calendar years.
5. ADMINISTRATION. The Plan shall be administered by the Committee
which shall have full and exclusive power to interpret the Plan, to
grant waivers of Plan restrictions, including waivers of
restrictions on exercise of outstanding stock options and
appreciation rights, waivers of vesting requirements and
acceleration of Award payments, and to adopt such rules, regulations
and guidelines for carrying out the Plan as it may deem necessary or
proper, all of which powers shall be executed in the best interests
of the Company and in keeping with the objectives of the Plan.
These powers include, but are not limited to, the adoption of
modifications, amendments, procedures, subplans and the like as are
necessary to comply with provisions of the laws or other countries
in which the Company may operate in order to assure the viability of
Awards granted under the Plan and to enable Participants employed in
such other countries to receive advantages and benefits under the
Plan and such laws.
6. AWARDS. The Committee shall determine the type or types of Award(s)
to be made to each participant and shall set forth in the related
Award Agreement the terms, conditions and limitations applicable to
each Award. Awards may include but are not limited to those listed
in this Section 6. Awards may be granted singly, in combination or
in tandem. Awards may also be made in combination or in tandem
with, in replacement of or as alternatives to grants or rights under
any other employee plan of the Company, including the plan of any
acquired entity. On such terms and conditions as shall be approved
by the Committee, the Company or any of its subsidiaries may
directly or indirectly lend money to any Participant or other person
to accomplish the purposes of the Plan, including to assist such
persons to acquire shares of Common Stock acquired upon the exercise
of options.
(a) Stock Option -- A grant of a right to purchase a specified
number of shares of Common Stock at not less than 100% of Fair
Market Value on the date of grant during a specified period as
determined by the Committee. A stock option may be in the form
of an incentive stock option ("ISO") which, in addition to
being subject to applicable terms, conditions and limitations
established by the Committee, complies with Section 422 of the
Code which, among other limitations, provides that (i) to the
extent that the aggregate Fair Market Value (determined at the
time the option is granted) of Common Stock exercisable for the
first time by a Participant during any calendar year exceeds
$100,000 (or such other limit as may be required by the Code),
such option shall not be treated as an ISO and (ii) the option
shall be exercisable for a period of not more than ten years
from the date of grant.
(b) Stock Appreciation Right -- A right to receive a payment, in
cash and/or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number
of shares of Common Stock on the date the stock appreciation
right ("SAR") is exercised over the Fair Market Value or other
specified valuation on the date of grant of the SAR as set
forth in the applicable Award Agreement, except that where the
SAR is granted in tandem with a stock option, the grant and
exercise valuations must be not less than Fair Market Value.
(c) Stock Award -- An Award made in Common Stock or denominated in
units of Common Stock. All or part of any Common Stock award
may be subject to conditions established by the Committee and
set forth in the Award Agreement, which may include, but are
not limited to, continuous service with the Company,
achievement of specific business objectives, increases in
specified indices, attaining growth rates and other comparable
measurements of Company performance. Such Awards may be based
on Fair Market Value or other specified valuation.
7. PAYMENT OF AWARDS. Award payments made in the form of Common Stock
may include such restrictions as the Committee shall determine,
including restrictions on transfer and forfeiture provisions. When
transfer of Common Stock is so restricted or subject to forfeiture
provisions, it is referred to as "Restricted Stock". Further, with
Committee approval, payments may be deferred, either in the form of
installments or a future single payment. The Committee may permit
selected Participants to elect to defer payments of some or all
types of Awards in accordance with procedures established by the
Committee to assure that such deferrals comply with applicable
requirements of the Code including, at the choice of Participants,
the capability to make further deferrals for payment after
retirement. Any deferred payment, whether elected by the
Participant or specified by the Award Agreement or by the Committee,
may require the payment be forfeited in accordance with the
provisions of Section 12. Dividends or dividend equivalent rights
may be extended to and made part of any Award denominated in Common
Stock or units of Common Stock, subject to such terms, conditions
and restrictions as the Committee may establish. The Committee may
also establish rules and procedures for the crediting of dividend
equivalents for deferred payments denominated in Common Stock or
units of Common Stock. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for
another Award or Awards of the same or different type.
8. STOCK OPTION EXERCISE. The price at which shares of Common Stock may
be purchased under a stock option shall be paid in full at the time
of the exercise in cash or, if permitted by the Committee, by means
of tendering Common Stock or surrendering another Award, including
Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine
acceptable methods for tendering Common Stock or other Awards and
may impose such conditions on the use of Common Stock or other
Awards to exercise a stock option as it deems appropriate. In the
event shares of Restricted Stock are tendered as consideration for
the exercise of a stock option, a number of the shares issued upon
the exercise of the stock option, equal to the number of shares of
Restricted Stock used as consideration therefor, shall be subject to
the same restrictions as the Restricted Stock so submitted plus any
additional restrictions that may be imposed by the Committee.
9. TAX WITHHOLDING. The Company shall have the right to deduct
applicable taxes from any Award payment and to retain at the time of
delivery or vesting of shares under the Plan, an appropriate number
of shares of Common Stock in value sufficient to cover the payment
of any taxes required by law to be withheld or to take such other
action as may be necessary in the opinion of the Company to satisfy
all obligations for withholding of such taxes; provided, however,
that a Participant shall have the option to provide the Company with
the funds to enable it to pay such taxes. Notwithstanding the
preceding sentence, if the participant is subject to Section 16 of
the Exchange Act, the Participant must affirmatively elect whether
he wishes to (i) have the Company retain shares of Common Stock,
(ii) provide the Company with other funds or (iii) have the Company
deduct amounts from other compensation due him in order to satisfy
the tax withholding requirements arising under an Award. Such
election shall either (a) be an irrevocable election made after the
date shareholder approval of the Plan is obtained and at least six
months prior to the date on which the amount of the taxes to be
withheld is determined or (b) take effect (or with respect to
elections made prior to September 1, 1993, be made) during the ten-
business day "window period" beginning on the third business day
following the date on which the Company releases for publication its
annual or quarterly financial statements and ending on the twelfth
business day following the date of release thereof. If Common Stock
is used to satisfy tax withholding, such stock shall be valued based
on the Fair Market Value when the amount of the taxes to be withheld
is determined.
10. AMENDMENT, MODIFICATION, SUSPENSION OR DISCONTINUANCE OF THE PLAN.
The Board may amend, modify, suspend or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements
or for any other purpose permitted by law. Subject to changes in
law or other legal requirements which would permit otherwise, the
Plan may not be amended without the consent of the holders of a
majority of the shares of Common Stock then outstanding to (i)
increase the maximum number of shares of Common Stock that may be
awarded under the Plan in any calendar year, taking into
consideration any carryover of shares from prior years (except for
adjustments pursuant to Section 14 of the Plan), (ii) decrease the
option price, (iii) materially modify the requirements as to
eligibility for participation in the Plan, (iv) withdraw
administration of the Plan from the Committee or (v) extend the
period during which Awards may be granted.
11. TERMINATION OF EMPLOYMENT. If the employment of a Participant
terminates, other than pursuant to paragraphs (a) through (c) of
this Section 11, all unexercised, deferred and unpaid Awards shall
be canceled immediately unless the Award Agreement provides
otherwise.
(a) Retirement Under a Company Retirement Plan. When a
Participant's employment terminates as a result of retirement
in accordance with the terms of a Company retirement plan, the
Committee may permit Awards to continue in effect beyond the
date of retirement in accordance with the applicable Award
Agreement and the exercisability and vesting of any Award may
be accelerated.
(b) Resignation in the Best Interests of the Company. When a
Participant resigns from the Company and, in the judgment of
the Committee, the acceleration and/or continuation of
outstanding Awards would be in the best interests of the
Company, the Committee may (i) authorize, where appropriate,
the acceleration and/or continuation of all or any part of
Awards granted prior to such termination and (ii) permit the
exercise, vesting and payment of such Awards for such period as
may be set forth in the applicable Award Agreement, subject to
earlier cancellation pursuant to Section 12 or at such time as
the Committee shall deem the continuation of all or any part of
the Participant's Awards are not in the Company's best
interests.
(c) Death or Disability of a Participant
(i) In the event of a Participant's death, the participant's
estate or beneficiaries shall have the period specified in
the Award Agreement within which to receive or exercise
any outstanding Award held by the participant under such
terms as may be specified in the applicable Award
Agreement.
(ii) In the event a Participant is deemed by the Company to be
disabled and eligible for benefits pursuant to the terms
of the Company's Long-Term Disability Plan, any successor
plan, or similar plan of another employer, Awards and
rights to any Awards may be paid to or exercised by the
Participant, if legally competent, or a committee or other
legally designated guardian or representative if the
Participant is legally incompetent by virtue of such
disability.
(iii) After the death or disability of a Participant, the
Committee may in its sole discretion at any time (1)
terminate restrictions in Award Agreements; (2) accelerate
any or all installments and rights; and (3) instruct the
Company to pay the total of any accelerated payments in a
single sum to the Participant, the Participant's estate,
beneficiaries or representative -- notwithstanding that,
in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due
under the Awards might ultimately have become payable to
other beneficiaries.
12. CANCELLATION AND RESCISSION OF AWARDS. Unless the Award Agreement
specifies otherwise, the Committee may cancel any unexpired, unpaid
or deferred Award at any time if the Participant is not in
compliance with all other applicable provisions of the Award
Agreement and the Plan and with the condition that the Participant
(whether or not an employee of the Company at the time) shall not
render services for any organization or engage directly or
indirectly in any business which, in the judgment of the Committee,
is or becomes competitive with the Company, or which organization or
business, or the rendering of services to such organization or
business, is or becomes otherwise prejudicial to or in conflict with
the interests of the Company.
13. NONASSIGNABILITY.
(a) Except pursuant to paragraph (c) of Section 11, no Award or any
other benefit under the Plan shall be assignable or
transferable, or payable to or exercisable by, anyone other
than the Participant to whom it was granted.
14. ADJUSTMENTS. In the event of any change in the Common Stock by
reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, split-up, spin-off,
dividend other than a regular quarterly cash dividend, separation,
reorganization, liquidation, merger, consolidation or similar event,
the Committee may adjust proportionally (a) the number of shares of
Common Stock (i) reserved under the Plan, and (ii) covered by
outstanding Awards; (b) the stock prices related to outstanding
Awards; and (c) the appropriate Fair Market Value and other price
determinations for such Awards. In the event of any of the changes
described in the first sentence of this Section 14, the Committee
shall be authorized to issue or assume stock options, whether or not
in a transaction to which Section 424(a) of the Code applies, by
means of substitution of new options for previously issued options
or an assumption of previously issued options.
15. CHANGE OF CONTROL. In order to maintain the Participants' rights in
the event of a Change of Control, the Committee, in its sole
discretion, may, either at the time an Award is made hereunder or at
any time prior to, or coincident with or after the time of, a Change
of Control:
(a) provide for the acceleration of any time periods relating to
the exercise or realization of such Awards so that such awards
may be exercised or realized in full on or before a date fixed
by the Committee;
(b) provide for the purchase by the Company of such Awards, upon
the Participant's request, for an amount of cash equal to the
amount which could have been obtained upon the exercise or
realization of such rights had such Awards been currently
exercisable or payable;
(c) make such adjustment to the Awards then outstanding as the
Committee deems appropriate to reflect such Change of Control;
or
(d) cause the Awards then outstanding to be assumed, or new rights
substituted therefore, by the surviving corporation in such
Change of Control.
The Committee may, in its discretion, include such further
provisions and limitations in any agreement documenting such Awards
as it may deem equitable and in the best interests of the Company
with respect to changes in control.
16. GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by the
Code or the securities laws of the United States, shall be governed
by the laws of the State of Indiana and construed accordingly.
17. EFFECTIVE AND TERMINATION DATES. The Plan shall become effective on
the date of its adoption by the Board and Awards may be made
immediately thereafter, but no Stock Award may be paid, Restricted
Stock issued (unless containing restrictions requiring cancellation
of such Restricted Stock if stockholder approval is not received) or
Stock Option exercised under the Plan until it is approved by the
holders of a majority of the shares of Common Stock then
outstanding. The Plan shall terminate on December 31, 2002, subject
to earlier termination by the Board pursuant to Section 10.
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
EXHIBIT 10(t)
RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. PURPOSE. This Restricted Stock Plan for Non-Employee Directors ("the
Plan") is intended to attract and retain the services of experienced
and knowledgeable independent directors of Cummins Engine Company, Inc.
("the Company") for the benefit of the Company and its stockholders and
to provide additional incentive for such directors to continue to work
for the best interests of the Company and its stockholders.
2. STOCK AVAILABLE FOR AWARDS. No additional shares of the Company's
commons stock ("Common Stock") shall be reserved for issuance under the
Plan. Instead, the number of shares available under the Plan shall be
integrated with the number available for awards pursuant to the
Company's 1992 Stock Incentive Plan ("the SIP"). Awards made under
this plan shall reduce the number of shares of Common Stock available
for awards under the SIP.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company ("the Board"). Subject to the express
provisions of the Plan, the Board shall have plenary authority to
interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of
the restrictions on Common Stock awards (which shall comply with and be
subject to the terms and conditions of the Plan) and to make all other
determinations necessary or advisable for the administration of the
Plan. The Board's determinations of the matters referred to in this
Paragraph 3 shall be conclusive.
4. PARTICIPATION IN THE PLAN. Persons who are now or shall become
incumbent directors of the Company who are not at the respective times
employees of the Company or any subsidiary of the Company shall be
eligible to participate in the Plan (an "Eligible Director"). A
director of the Company shall not be deemed to be an employee of the
Company solely by reason of the existence of a consulting contract or
arrangement between such director and the Company or any subsidiary
thereof pursuant to which the director agrees to provide consulting
services as an independent consultant on a regular or occasional basis
for a stated consideration.
5. AWARDS. Each Eligible Director shall automatically receive, in payment
of a portion of his or her annual Board retainer fee, an annual award
of Common Stock, restricted as to transfer for a period of six (6)
months following the date of the award. In the case of an initial
award, the restriction period shall end six (6) months following the
date of stockholder approval of the Plan. The number of shares in each
such annual award shall be equal to $6,000 divided by the average of
the closing prices of Common Stock as reported on the composite tape
of the New York Stock Exchange for the twenty (20) consecutive trading
days immediately preceding the date of the award. An initial automatic
award to each Eligible Director shall be effective as of July 13, 1993,
subject to stockholder approval of the Plan. Following the initial
award, each Eligible Director shall automatically receive the award on
the date of each Annual Meeting of Shareholders of the Company. The
Company reserves the right to legend the share certificates for an
appropriate period of time and to take other actions designed to assure
compliance with applicable securities laws.
6. CHANGES IN PRESENT COMMON STOCK. In the event of any merger,
consolidation, reorganization, recapitalization, stock dividend, stock
split or other change in the corporate structure or capitalization
affecting the Company's present Common Stock, appropriate adjustment
shall be made by the Board in the number and kind of shares which are
or may be awarded hereunder.
7. EFFECTIVE DATE AND DURATION OF THE PLAN. Awards shall be made under
the Plan, subject to its authorization and adoption by the stockholders
of the Company, upon its adoption by the Board of Directors, but no
share certificates shall be issued under the Plan until the Plan shall
have been adopted and approved at the Annual Meeting of shareholders of
the Company next following adoption of the Plan by the Board. If so
adopted by stockholders, this Plan shall become effective as of July
13, 1993. The Plan shall terminate on December 31, 2002 (unless
earlier discontinued by the Board) but such termination shall not
affect the rights of the holder of any Common Stock subject to
restriction on such date of termination.
8. AMENDMENT OF PLAN. The Board may suspend or discontinue the Plan or
revise or amend it in any respect whatsoever, provided, however, that
without approval of the stockholders, no revision or amendment shall
change the number of shares subject to the Plan (except as provided in
Section 6), change the definition of the class of directors eligible to
receive awards, or materially increase the benefits accruing to
participants under the Plan.
9. GOVERNING LAW. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by securities
laws of the United States, shall be governed by the laws of the State
of Indiana and construed accordingly.
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
EXHIBIT 11
SCHEDULE OF COMPUTATION OF PER SHARE EARNINGS
FOR THE FIRST QUARTER ENDED APRIL 3, 1994 AND APRIL 4, 1993
(Millions, except per share data)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Weighted Calculated
Average Net Per
Shares Earnings Share
~~~~~~~~ ~~~~~~~~~ ~~~~~~~~~~
1994
~~~~
Earnings available for common stock
shareholders 40.1 $54.6 $1.36
Options .2 -
~~~~ ~~~~~
Primary earnings per common share 40.3 54.6 1.35
Convertible preference stock - -
~~~~ ~~~~~
Fully diluted earnings per common
share 40.3 $54.6 1.35
~~~~ ~~~~~
~~~~ ~~~~~
1993
~~~~
Earnings available for common stock
shareholders 34.6 $39.1 $1.13
Options .2 -
~~~~ ~~~~~
Primary earnings per common share 34.8 39.1 1.12
Liquid Yield Option Notes 1.1 .9
Convertible preference stock 3.0 2.0
Other - (.4)
~~~~ ~~~~~~
Fully diluted earnings per common share 38.9 $41.6 1.07
~~~~ ~~~~~~
~~~~ ~~~~~~
