UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
CUMMINS ENGINE COMPANY, INC.
____________________________
For the Quarter Ended April 2, 1995 Commission File Number 1-4949
_____________ ______
Indiana 35-0257090
_______ __________
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
500 Jackson Street, Box 3005
____________________________
Columbus, Indiana 47202-3005
_________________ __________
(Address of Principal Executive Offices) (Zip Code)
812-377-5000
____________
Registrant's Telephone Number
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the proceeding 12 months and (2) has been
subject to such filing requirements for the past 90 days:
Yes [x]
No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date:
As of April 2, 1995, the number of shares outstanding of the
registrant's only class of common stock was 40.8 million.
<PAGE>
TABLE OF CONTENTS
_________________
Page No.
________
PART I. FINANCIAL INFORMATION
______________________________
Item 1. Financial Statements
Consolidated Statement of Earnings for the First 3
Quarter Ended April 2, 1995 and April 3, 1994
Consolidated Statement of Financial Position at 4
April 2, 1995 and December 31, 1994
Consolidated Statement of Cash Flows for the First 5
Quarter Ended April 2, 1995 and April 3, 1994
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of 7
Operations and Financial Condition
PART II. OTHER INFORMATION
___________________________
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 12
Index to Exhibits 13
<PAGE>
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Unaudited
(Millions, Except per Share Amounts)
______________________________________________
First Quarter Ended
4/2/95 4/3/94
_______ ______
Net sales $1,334 $1,099
Cost of goods sold 991 828
______ ______
Gross profit 343 271
Selling & administrative expenses 183 149
Research & engineering expenses 66 54
Interest expense 4 4
Other expense 3 -
______ ______
Earnings before income taxes 87 64
Provision for income taxes 20 9
______ ______
Net earnings $ 67 $ 55
______ ______
______ ______
Earnings per share $ 1.63 $ 1.35
Cash dividends declared per share .25 .125
<PAGE>
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
(Millions, Except per Share Amounts)
______________________________________________
4/2/95 12/31/94
______ ________
Assets
Current assets:
Cash and cash equivalents $ 95 $ 147
Receivables less allowances of $11 & $10 612 504
Inventories 555 515
Other current assets 133 132
______ ______
1,395 1,298
Investments and other assets 184 190
Property, plant & equipment less accumulated
depreciation of $1,308 & $1,279 1,102 1,090
Intangibles, deferred taxes & deferred charges 128 128
______ ______
Total assets $2,809 $2,706
______ ______
______ ______
Liabilities and shareholders' investment
Current liabilities:
Loans payable $ 40 $ 41
Current maturities of long-term debt 37 37
Accounts payable 351 322
Other current liabilities 477 440
______ ______
905 840
______ ______
Long-term debt 153 155
______ ______
Other liabilities 648 639
______ ______
Shareholders' investment:
Common stock, $2.50 par value, 43.8 shares issued 109 109
Additional contributed capital 924 927
Retained earnings 289 232
Common stock in treasury, at cost, 3.0 & 2.2 shares (109) (72)
Unearned ESOP compensation ( 51) (55)
Cumulative translation adjustments ( 59) (69)
______ ______
1,103 1,072
______ ______
Total liabilities & shareholders' investment $2,809 $2,706
______ ______
______ ______
<PAGE>
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited (Millions)
______________________________________________
First Quarter Ended
4/2/95 4/3/94
______ ______
Cash flows from operating activities:
Net earnings $ 67 $ 55
_____ _____
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization 35 29
Accounts receivable (105) (45)
Inventories ( 32) (44)
Accounts payable and accrued expenses 64 51
Other 9 7
_____ _____
Total adjustments ( 29) ( 2)
_____ _____
Net cash provided by operating activities 38 53
_____ _____
Cash flows from investing activities:
Property, plant and equipment:
Additions ( 32) (34)
Disposals 1 3
Investments in and advances to affiliates
and unconsolidated companies ( 5) (16)
_____ ____
Net cash used in investing activities ( 36) (47)
_____ _____
Net cash flows from operating & investing
activities 2 6
_____ _____
Cash flows from financing activities:
Payments on borrowings ( 2) ( 2)
Net borrowings under credit agreements ( 2) 24
Payments of dividends ( 10) ( 5)
Repurchases of common stock ( 37) -
Other ( 4) ( 5)
_____ _____
Net cash (used for) provided by
financing activities ( 55) 12
_____ _____
Effect of exchange rate changes on cash 1 -
_____ _____
Net change in cash & cash equivalents ( 52) 18
Cash & cash equivalents at beginning of year 147 77
_____ _____
Cash & cash equivalents at end of quarter $ 95 $ 95
_____ _____
_____ _____
<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 2, 1995 and April 3, 1994 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 both 1995 and 1994, the Company
recognized approximately $11 related to a reduction in its valuation
allowance for tax benefit carryforwards.
NOTE 3. Stock Repurchase Program: In October 1994, the Board of
Directors authorized repurchase by the Company of up to 2.5 million
shares of its common stock. During the first quarter of 1995, the
Company repurchased on the open market 850,900 shares at an aggregate
purchase price of $37, or average price of $44.36 per share. The
Company repurchased 103,100 shares at an aggregate purchase price of
$4, or average price of $42.47 per share, in 1994.
NOTE 4. Earnings per Share: Earnings per share of common stock are
computed by dividing net earnings 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 41.3 million in the first quarter of 1995 and
40.3 million in the first quarter of 1994.
<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 demand in most markets in the
first quarter of 1995. The Company's record sales of $1,334 in the
first quarter of 1995 were 21 percent higher than the first quarter of
1994.
The Company shipped 88,900 engines in the first quarter of 1995, a 27-
percent increase over first-quarter 1994:
First Quarter
1995 1994
______ ______
Midrange engines 58,100 45,000
Heavy-duty engines 28,500 23,000
High-horsepower engines 2,300 1,900
______ ______
Total engine shipments 88,900 69,900
______ ______
______ ______
The Company also had record earnings before income taxes of $87 in the
first quarter of 1995. Net earnings were $67, or $1.63 per share, in
the first quarter of 1995, compared to $55, or $1.35 per share, in the
first quarter of 1994. The Company's effective tax rate increased to
23 percent in 1995 from 14 percent in 1994.
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 1995 1994
____________________ _____ _____
Net sales 100.0 100.0
Cost of goods sold 74.3 75.4
_____ _____
Gross profit 25.7 24.6
Selling and administrative expenses 13.7 13.5
Research and engineering expenses 4.9 4.9
Interest expense .3 .4
Other expense .3 -
_____ _____
Earnings before income taxes 6.5 5.8
Provision for income taxes 1.5 .8
_____ _____
Net earnings 5.0 5.0
_____ _____
_____ _____
Net Sales
_________
Sales for each of the Company's markets for the comparative reporting
periods were:
First Quarter 1995 First Quarter 1994
Dollars Percent Dollars Percent
_______ _______ _______ _______
Heavy-duty truck 396 30 335 30
Midrange truck 144 11 98 9
Power generation 277 21 230 21
Bus & light commercial vehicles 183 13 156 14
Industrial products 158 12 124 11
Government 21 1 17 2
Marine 11 1 17 2
Fleetguard, Holset and
Cummins Electronics 144 11 122 11
_____ ___ _____ ___
Net sales 1,334 100 1,099 100
_____ ___ _____ ___
_____ ___ _____ ___
Sales of $396 to the heavy-duty truck market in the first quarter of
1995 were 18 percent higher than in the first quarter of 1994. This
increase in sales was primarily attributable to demand for engines for
the North American heavy-duty truck market. Cummins increased its
share of this market to nearly 36 percent in the first quarter of 1995.
Shipments of the Company's heavy-duty truck engines for international
markets in the first quarter of 1995 were essentially level with the
first quarter of 1994. While the truck market in the United Kingdom
continued to improve in the first quarter of 1995, demand for heavy-
duty engines in Mexico was reduced significantly due to economic
conditions in that country.
Midrange truck engine sales in the first quarter of 1995 were $46
higher than in the first quarter of 1994. Engine shipments for the
North American market increased significantly, with shipments to Ford
42 percent higher than the first-quarter 1994. Shipments for
international markets, which represented approximately 30 percent of
the Company's midrange truck engine sales, also were higher due to
increased demand in the United Kingdom and in Brazil.
Power generation sales of $277 were $47 higher in the first quarter of
1995, up 20 percent over first-quarter 1994. Sales to this market
represented 21 percent of the Company's net sales. The increase in the
first quarter of 1995 was due to sales of Power Group International,
which was acquired at the beginning of the fourth quarter of 1994, and
as a result of increased sales of industrial gensets.
In the bus and light commercial vehicles market, the Company's sales of
$183 were 17 percent higher than first-quarter 1994. Engines for the
Chrysler Dodge Ram pickup were at record levels in the first quarter of
1995, 17 percent higher than in the first quarter of 1994. Engine
shipments for bus markets were 35 percent higher than year-ago levels,
primarily for transit buses in the United States.
Sales of $158 for industrial products were $34 higher, with engine
shipments up 27 percent. Industrial product sales continue to be
strong worldwide, particularly for construction applications.
Fleetguard, Holset and Cummins Electronics represented 11 percent of
the Company's net sales. In the first quarter of 1995, sales of
filters, turbochargers and electronic controls were 18 percent higher
than in the first quarter of 1994.
Gross Profit
____________
The Company's gross profit percentage was 25.7 percent in the first
quarter of 1995, compared to 24.6 percent in the first quarter of 1994.
The key factor contributing to the improved margin was the increase in
demand for the Company's products, which represented over 70 percent of
the increase in gross profit. Other factors included the effects of
cost-improvement measures to improve production systems and throughput
and the full-year effect of price increases subsequent to the first
quarter of 1994. Product coverage was 2.5 percent of sales, compared
to 2.7 percent of sales in the first quarter of 1994.
Operating Expenses
__________________
Selling and administrative expenses were $183, or 13.7 percent of net
sales, in the first quarter of 1995, compared to $149, or 13.5 percent
of net sales, in the first quarter of 1994. Research and engineering
expenses were 4.9 percent of net sales in both first-quarter periods.
Interest and Other Expenses
___________________________
Interest expense of $4 in the first quarter of 1995 was level with the
first quarter of 1994. Other expense includes a variety of items, such
as foreign exchange gains and losses, interest income, earnings and
losses of unconsolidated companies and royalty income. In the first
quarter of 1995, expense of $3 was due to foreign exchange translation
and unconsolidated companies.
Provision For Income Taxes
__________________________
As disclosed in Note 2 to the Consolidated Financial Statements, the
Company reduced its valuation allowance for tax benefit carryforwards
approximately $11 in both first-quarter reporting periods.
CASH FLOW AND FINANCIAL CONDITION
_________________________________
Key elements of the Consolidated Statement of Cash Flows were:
1995 1994
______ ______
Net cash provided by operating activities $ 38 $ 53
Net cash used in investing activities (36) (47)
_____ _____
Net cash flows from operating and investing
activities 2 6
Net cash (used for) provided by financing activities (55) 12
Effect of exchange rate changes on cash 1 -
____ ____
Net change in cash and cash equivalents $(52) $ 18
_____ ____
_____ ____
During the first quarter of 1995, the Company generated cash flows from
operating activities of $38, compared to $53 in the first quarter of
1994. A higher level of working capital in the first quarter of 1995
was required due to the increase in demand for the Company's products.
Investing activities required net cash resources of $36, primarily for
capital expenditures. Cash and cash equivalents totaled $95 at the end
of the first quarter of 1995.
Total indebtedness (including the guaranteed notes of the ESOP Trust)
was $230 at the end of the first quarter of 1995. The Company's debt-
to-capital ratio was 17 percent at the end of the first quarter and 18
percent at December 31, 1994. In March 1995, Standard & Poor upgraded
the ratings of the Company's senior debt to BBB+ from BBB.
As disclosed more fully in Note 3 to the Consolidated Financial
Statements, the Company repurchased on the open market 850,900 shares
of its common stock at an average price of $44.36 per share in the
first quarter of 1995.
PART II. OTHER INFORMATION
___________________________
Item 1. Legal Proceedings
__________________________
On April 4, 1995, the U.S. Court of Appeals for the Seventh Circuit
affirmed in part, reversed in part, and remanded in part the decision
of the U.S. District Court for the Southern District of Indiana to
dismiss all the claims of the Plaintiff Stransky with prejudice. The
Company believes the allegations are without merit and intends to
defend the action vigorously.
Item 4. Submission of Matters to a Vote of Security Holders
____________________________________________________________
The Company held its annual meeting of security holders on April 4,
1995 at which security holders: (a) elected 15 directors of the
Company for the ensuing year, (b) ratified the appointment of Arthur
Andersen LLP as auditors for the year 1995, (c) approved the Cummins
Engine Company, Inc. Senior Executive Bonus Plan and (d) approved the
Cummins Engine Company, Inc. Senior Executive Three Year Performance
Plan.
Results of the voting in connection with each of the items were as
follows:
Voting on Directors:
____________________
For Withheld
__________ ________
H. Brown 35,444,276 527,747
K. R. Dabrowski 35,637,811 334,212
R. Darnall 35,645,302 326,721
W. Y. Elisha 35,641,166 330,857
H. H. Gray 35,638,040 333,983
J. A. Henderson 35,644,768 327,255
D. G. Mead 34,981,818 990,205
J. I. Miller 35,641,643 330,380
W. I. Miller 35,645,026 326,997
D. S. Perkins 35,644,857 327,166
W. D. Ruckelshaus 35,639,254 332,769
H. B. Schacht 35,640,874 331,149
T. M. Solso 35,649,097 322,926
F. A. Thomas 35,638,367 333,656
J. L. Wilson 35,641,173 330,850
Ratify Appointment of Auditors:
_______________________________
For Against Abstain
__________ _______ _______
35,699,840 125,209 146,974
Senior Executive Bonus Plan:
____________________________
For Against Abstain
__________ _________ _______
32,361,993 3,254,682 355,348
Senior Executive Three Year Performance Plan:
_____________________________________________
For Against Abstain
__________ _________ _______
33,621,459 1,991,569 358,995
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. Abstentions on the adoption of the Senior
Executive Bonus Plan and the Senior Executive Three Year Performance
Plan (the "Plans") were treated as negative votes. 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
adoption of the Plans. Under applicable Indiana law, a broker non-vote
had no effect on the outcome of the election of directors or the
approval of the Plans.
Item 6. Exhibits and Reports on Form 8-K:
__________________________________________
(a) See the Index to Exhibits on Page 13 for a list of exhibits filed
herewith.
(b) The Company was not required to file a Form 8-K during the first
quarter of 1995.
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 9, 1995
_________________
John McLachlan
Vice President - Corporate Controller
(Chief Accounting Officer)
<PAGE>
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
______________________________________________
INDEX TO EXHIBITS
_________________
Page No.
________
10(j) Performance Share Plan, as amended January 1989 14
(filed herewith)
10(l) Retirement Plan for Non-employee Directors, 22
effective September 1989 (filed herewith)
10(m) Stock Unit Appreciation Plan, effective October 26
1990 (filed herewith)
10(q) Three Year Performance Plan, effective December 30
1992 (filed herewith)
10(u) Senior Executive Bonus Plan (filed herewith) 35
10(v) Senior Executive Three Year Performance Plan 40
(filed herewith)
11 Schedule of Computation of Per Share Earnings 45
for the First Quarter ended April 2, 1995 and
April 3, 1994 (filed herewith)
27 Financial Data Schedule 46
CUMMINS ENGINE COMPANY, INC.
___________________________
EXHIBIT 10(j)
_____________
PERFORMANCE SHARE PLAN
______________________
Effective as of December 8, 1987
Amended as of January 12, 1989
1. Purpose and Effective Date.
___________________________
The Performance Share Plan (the "Plan") of the Cummins Engine
Company, Inc., and its subsidiaries is a long-term incentive
compensation plan designed to enhance and reinforce the Company's
goals of profitable growth by providing key employees with
additional incentive and reward opportunity based on attainment
of such profitability in a manner analogous to that of owners of
a closely-held corporation. A further purpose of the Plan is to
aid in retaining a management group capable of assuring the
Company's success during the next several years. To achieve
these purposes, the Plan provides for awards of rights to common
stock of the Company that may be earned over a future period.
The Plan is effective as of December 8, 1987, and no Share Rights
can be awarded under the Plan after
December 31, 1993.
2. Definitions.
____________
(a) "Change in Control" means 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 the Company's 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 the Company's 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 Section 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 or a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, 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 ("Voting Shares"), 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 of
Directors of the Company, 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.
(b) "Committee" means the Compensation Committee of the Board of
Directors of the Company referred to in paragraph 10 of the
Plan.
(c) "Common Stock" means the common shares of the Company.
(d) "Company" means Cummins Engine Company, Inc., and any
successor corporation, whether by merger, consolidation,
purchase or otherwise.
(e) "Deferred Shares" means shares of Common Stock for which
distribution from the Plan is deferred beyond the calendar
year next following the Performance Year in which they are
earned, the credits for which remain subject to forfeiture
pursuant to paragraph 11 until distributed. All other
shares earned under the Plan are "Current Shares".
(f) "Participant" means an individual to whom an award of Share
Rights has been made.
(g) "Payment Schedule" means the schedule of Payment Years
established by the Committee in accordance with paragraph 6.
(h) "Payment Year" means a calendar year during which shares of
Common Stock earned under the Plan are distributed pursuant
to paragraphs 5 and 6.
(i) "Performance Year" means each calendar year established by
the Committee for measuring the Company's financial
performance for purposes of the Plan.
(j) "Share Rights" means the rights awarded to earn shares of
Common Stock pursuant to the terms of the Plan.
3. Stock Subject to the Plan.
_________________________
An aggregate of 500,000 shares of Common Stock are reserved for
issuance upon the payment of Current and Deferred Shares earned
from Share Rights awarded under the Plan. Such shares may be
authorized and unissued shares of Common Stock or previously
outstanding shares of Common Stock then held in the Company's
treasury. If any Share Rights or credited Deferred Shares are
forfeited for any reason under the Plan, the forfeited shares
will return to the pool of shares and again be available for all
purposes of the Plan.
4. Eligibility.
____________
Share Rights may be awarded only to key employees (which term
shall be deemed to include officers) of the Company and of its
subsidiary corporations as defined in Section 425 of the Internal
Revenue Code of 1986. Any such employee may be awarded one or
more Share Rights and at one or more times, all as the Committee
shall determine, and such determination may be different as to
different Participants. Notwithstanding the foregoing, a
Director of the Company or of a subsidiary, who is not also an
employee of the Company or of a subsidiary, will not be eligible
to receive any Share Rights.
5. Payment of Share Rights.
________________________
The Committee shall establish performance measures prior to the
commencement of each Performance Year. Such performance measure
shall be based upon the Company's return on shareholder equity or
such other factors as the Committee shall determine and shall be
defined in such manner as the Committee shall deem appropriate.
If, during any Performance Year, the Committee should conclude
that accounting rules or business conditions or operations have
changed in a manner which the Committee did not foresee in
establishing the performance measures for such Performance Year,
the Committee may revise the Payment Schedule and the performance
measure for such Performance Year in such manner as the
Committee, in its sole judgment, may deem appropriate.
Following the completion of each Performance Year, the percentage
of the Share Rights which have been earned shall be determined
for such Performance Year, and the shares of Common Stock so
earned (based on one share for each Share Right) shall be
distributed as Current Shares or credited by the Company as
Deferred Shares on behalf of the Participants pending their
distribution pursuant to paragraph 6. Current Shares shall be
distributed during the Payment Year immediately following the
Performance Year in which they are earned, unless the Committee
shall, in its sole judgment, determine otherwise. The Committee
shall determine, at the time it awards any Share Rights, whether
they shall result in the Participant being entitled to receive
Current Shares or Deferred Shares, and such determination may be
different as to different Participants.
6. Distribution of Deferred Shares.
_______________________________
Deferred Shares earned under the Plan shall be distributed to
Participants once during each Payment Year. The number and
timing of Payment Years and the number of shares distributed
during any Payment Year shall be based on a Payment Schedule
established by the Committee. The Payment Schedule may be
different with respect to different Share Rights awarded. In any
case, the Committee shall have the authority, if it deems
appropriate, to defer or delay any distribution of Deferred
Shares.
Prior to their distribution, Deferred Shares earned by a
Participant shall be credited by the Committee to the
Participant's account in the Plan's records (on the basis of one
credit for each Deferred Share earned), provided, however, that a
certificate for such Deferred Shares will not be issued or
registered in the name of such Participant until their Payment
Year or earlier distribution under the Plan, and the credits
shall not constitute or be treated as property of any kind.
A Participant with Deferred Share credits shall be entitled to
receive dividend equivalents from the Company for each credit
equal in value to the cash dividends, if any, paid per share on
issues and outstanding shares of Common Stock, as of the dividend
record dates occurring during the period between the date
credited and date of distribution. Unless otherwise determined
by the Committee, such amounts will be accrued and paid in cash
on or about December 15 of each year.
Distribution of Current Shares and crediting of Deferred Shares
will occur as soon as practicable following certification by the
Company's outside auditors of the financial statements of the
Company for the Performance Year for which the distribution or
crediting is based.
7. Adjustment Upon Changes in Capitalization.
__________________________________________
In the event of any change in the Company's outstanding Common
Stock by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or
exchanges of shares, split-ups, spin-offs, or consolidations,
combinations or exchanges of shares, split-ups, spin-offs, or
other changes in capitalization, or any distributions to common
shareholders other than cash dividends, the Committee shall make
such adjustments as it deems appropriate and equitable in the
number of Share Rights, credited Deferred Shares and performance
measures, and the maximum number of shares of Common Stock that
may be issued under the Plan, provided that the same adjustments
shall be made with respect to all Participants similarly
situated. The Committee's determination as to any such
adjustments shall be final and conclusive. Any new or additional
or different shares, other securities or credits resulting from
any adjustment of such shares shall be subject to the same terms,
conditions and restrictions as the Share Rights and credited
Deferred Shares prior to such adjustment.
8. Term-Certain Conversion and Distribution.
_________________________________________
In the event that any Share Rights granted to a Participant are
not earned upon completion of all applicable Performance Years,
such Rights shall be automatically converted, without limitation,
to shares of Common Stock on December 31, 2006 on the basis of
one share of Common Stock for each Share Right. Automatic
conversion shall occur even if the Participant is not an employee
of the Company or a subsidiary on such date due to retirement,
death, disability or termination without cause. Distribution of
such share of Common Stock to each such Participant shall be made
as soon as practicable after January 1, 2007.
9. Change in Control Conversion and Distribution.
______________________________________________
In the event of a Change in Control of the Company, the
provisions of paragraph 5, 6, 8 and 11 shall not apply. All
Share Rights previously awarded each Participant which have not
been earned, and all Deferred Shares earned during any
Performance Year but not yet distributed according to the Payment
Schedule, shall be, in the case of such Share Rights, deemed to
have been earned in full on the date of such Change in Control,
and the value of all shares so earned and the value of all
Deferred Shares (including undistributed dividend equivalents, if
any) credited to Participant Accounts on or before such date
shall be distributed in cash to the Participants. The cash value
of each Share Right and Deferred Share so distributed shall be
equal to the greater of (i) the highest reported closing price of
a share of Common Stock on the NYSE Composite Tape at any time
during the period beginning on the 60th day prior to the date of
the Change in Control and ending on the date of such Change in
Control or (ii) the highest gross price (before brokerage
commissions and soliciting dealers' fees) paid or to be paid for
a share of Common Stock in any transaction associated or series
of transactions associated with the Change in Control (whether by
way of exchange, conversion, distribution upon liquidation or
otherwise). For purposes of (ii) above, if the consideration
paid consists, in whole or part, of consideration other than
cash, the Committee shall take such action, as in its judgment it
deems appropriate, to establish the cash value of such
consideration.
10. Administration.
_______________
The Plan shall be administered by the Compensation Committee of
the Board of Directors of the Company, consisting of at least
three members, each of whom shall be (and within the twelve-month
period preceding his or her appointment as a member of the
Committee shall have been) ineligible to participate in the Plan
or in any similar plan of the Company or its affiliates. The
Board may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed,
may fill vacancies in the Committee and may discharge the
Committee. The Committee shall select one of its members as its
chairman and shall hold its meetings at such times and places as
it shall deem advisable. A majority of its members shall
constitute a quorum and all determinations shall be made by a
majority of its members. Any determination reduced to writing
and signed by all the members (or by any lesser number of members
to the extent permitted by law) shall be fully as effective as if
it had been made by vote at a meeting duly called and held.
Subject to the express provisions of the Plan, the Committee
shall have plenary authority, in its discretion, to determine the
number of Share Rights awarded, the performance measures for each
Performance Year, and any other conditions under which Current or
Deferred Shares will be earned and distributed. In making such
determinations, the Committee may take into account the nature of
the services rendered by the respective employees, their present
and potential contributions to the Company's success and such
other factors as the Committee in its discretion shall deem
relevant. Subject to the express provisions of the Plan, the
Committee shall have plenary authority to interpret the Plan, to
prescribe, amend and rescind the rules and regulations relating
to it and to make all other determinations deemed necessary or
advisable for the administration of the Plan, except the power to
determine whether shares reserved for issuance upon distribution
of Common Stock under the Plan shall be unissued or issued
shares, to appoint members of the Committee and to terminate,
modify or amend the Plan, which powers shall be exercised only by
the Board. The determinations of the Committee on the matters
referred to in this paragraph shall be conclusive.
11. Termination of Employment.
__________________________
If a Participant voluntarily resigns or is terminated for cause
at any time prior to December 31, 2006, Share Rights awarded and
not previously credited to his account as Deferred Shares or
earned as Current Shares and all credited Deferred Shares not
previously distributed shall be forfeited, except that the
Committee may, in its discretion, waive the forfeiture of
credited Deferred Shares. Current Shares previously earned but
not distributed shall not be forfeited.
If a Participant retires, dies, becomes disabled or is terminated
by the Company for any reason without cause, Share Rights awarded
will continue to be subject to the terms of the Plan, and when
earned, shall be distributed as Current or credited as Deferred
Shares, provided, however, that the Committee shall have the
authority, in the case of death, retirement or termination
without cause, to cause all of such Participant's remaining Share
Rights to be deemed to have been earned and to immediately
distribute the shares of Common Stock so earned (whether or not
originally established as Current or Deferred Shares).
12. Amendment and Termination.
_________________________
The Board of Directors may at any time amend, modify, alter, or
terminate the Plan, except that the Board of Directors may not
amend the Plan to increase the number of shares of Common Stock
reserved for the Plan, to increase the benefits accruing under
the Plan or to modify the class of employees eligible to receive
awards without approval of the shareholders of the Company.
13. Miscellaneous Provisions.
_________________________
(a) Nothing in the Plan or any booklet or other document
describing or referring to the Plan shall be deemed to
confer on any Participant the right to continue in the
employ of the Company or affect the right of the Company to
terminate the employment of any Participant with or without
cause.
(b) Nothing contained herein shall require the Company to
segregate any monies from its general funds, or to create
any trusts, or to make any special deposits for any
immediate or deferred shares distributable to any
Participant.
(c) The Plan and all actions taken hereunder shall be governed
by the laws of the State of Indiana.
(d) The Company may made such provisions and take such steps as
it may deem necessary or appropriate for the withholding of
any taxes which the Company is required by any law or
regulation of any government authority, whether federal,
state or local, domestic or foreign, to withhold in
connection with any Share Rights or distributions of Common
Stock earned therefrom, including, but not limited to, the
withholding of payment of all or any portion of such Common
Stock distribution until the Participant reimburses the
Company for the amount the Company is required to withhold
with respect to such taxes, or cancelling any portion of
such Common Stock distribution in an amount sufficient to
reimburse itself for the amount it is required to withhold,
or selling any Deferred Shares held in escrow that are not
yet eligible for distribution under the terms of the Plan,
in order to withhold or reimburse itself for the amount it
is required to so withhold.
CUMMINS ENGINE COMPANY, INC.
____________________________
EXHIBIT 10(l)
_____________
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
__________________________________________
Effective September 12, 1989
1. Purpose.
________
The Retirement Plan for Non-Employee Directors (the "Plan") has
been established to provide term-certain pension payments, as set
forth more fully herein, to eligible non-employee Directors of
Cummins Engine Company, Inc. (the "Company"). The Plan is
intended to enhance the Company's ability to attract and retain
as Directors individuals with the highest caliber of experience,
ability and judgment.
2. Eligibility.
____________
Each Director of the Company who is not an employee or former
employee of the Company with vested rights under a pension plan
sponsored by the Company, its subsidiaries or affiliates is
eligible to participate in the Plan as set forth below.
3. Participation.
______________
An eligible Director shall become a Participant in the Plan
commencing with the sixth (6th) year of service as a Director of
the Company.
4. Vesting.
________
Each eligible Director shall be fully vested in benefits accrued
under the Plan immediately upon becoming a Participant.
5. Benefit Amount.
_______________
Each Participant shall be entitled to receive an annual benefit,
payable annually, equal to the fees (excluding Committee fees)
paid or payable to such Participant for services rendered as a
Director of the Company during the one-year period immediately
preceding the Participant's ceasing to be a Director.
6. Commencement of Benefits.
_________________________
The annual benefit shall be payable on the first business day in
the month of May each year, commencing with the May next
following the later of (i) the date the Participant ceases to be
a Director or (ii) the Participant's 65th birthday.
7. Duration of Benefits.
_____________________
Once begun, the annual benefit shall be payable for the lesser of
(i) the number of completed full years the Participant served as
a Director or (ii) twenty (20) years.
8. Payments Upon Death of Participant.
___________________________________
In the event of death, a Participant's surviving spouse, if any,
shall continue to receive annual benefit payments equal to fifty
percent (50%) of the benefit payable to the Participant. If
death occurs prior to commencement of benefits under paragraph 5,
such spousal benefit payments shall continue for the greater of
(i) ten (10) years or (ii) the number of years the Participant
would have been entitled to payments under paragraph 7. If death
occurs following commencement of benefits under paragraph 6, but
prior to receiving the number of payments described in paragraph
7, such spousal benefits shall continue for the remaining number
of payments.
9. Payments Upon Change of Control.
________________________________
Notwithstanding anything contained in paragraphs 6, 7 or 8 to the
contrary, following a Change of Control (as hereinafter defined),
each Participant (or beneficiary, if appropriate) shall be
entitled to receive a lump sum payment of the actuarial
equivalent of benefits accrued and remaining unpaid as of the
date of the Change of Control. The lump sum equivalent shall be
calculated assuming (a) the interest rate used by the Pension
Benefit Guaranty Corporation in determining the value of
immediate benefits as of the immediately preceding January 1 and
(b) the mortality tables incorporated by reference into the
Cummins Engine Company, Inc. and Affiliates Retirement Plan A.
For purposes of this Plan a "Change of Control" means 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 the Company's 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 the Company's 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 12 (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 or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company,
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 ("Voting Shares"), 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 of Directors of
the Company, shall cease for any reason to constitute at least a
majority thereof, unless 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.
10. Funding of Benefits.
____________________
The Company shall set aside funds to satisfy its obligations
hereunder by making deposits to the grantor trust created under
agreement dated February 1, 1988 (the "Trust") by and between the
Company and Wachovia Bank and Trust Company, N.A. (the "Trustee")
or any successor trust thereto. Deposits to the Trust to fund
such obligations shall be calculated on a sound actuarial basis.
Benefit payments will be made from the Trust by the Trustee to
the extent not paid by the Company.
11. Miscellaneous.
______________
(a) Participation in the Plan shall not confer any rights
concerning nomination for re-election to the Board of
Directors of the Company.
(b) The Board of Directors of the Company shall be responsible
for the administration of the Plan. Any decisions by the
Board of Directors (as reflected in its approved minutes)
shall be final.
(c) The Plan shall continue in force with respect to any
Participant until completion of any payments due hereunder.
The Company may, however, at any time, amend or terminate
the Plan, provided, however, that no such termination or
amendment shall deprive any Participant or surviving spouse
of any benefits accrued under the Plan prior to such
amendment.
(d) No right or interest of a Participant or surviving spouse
under the Plan shall be subject to voluntary or involuntary
alienation, assignment or transfer of any kind.
CUMMINS ENGINE COMPANY, INC.
____________________________
EXHIBIT 10(m)
_____________
STOCK UNIT APPRECIATION PLAN
____________________________
Effective as of October 9, 1990
1. Purpose.
_______
The purpose of the Stock Unit Appreciation Plan (the "Plan") is
to provide a means by which Cummins Engine Company, Inc. (the
"Company") and/or its subsidiary corporations shall be able to
attract and retain competent key employees (including officers
and directors who are employees) and provide those personnel with
an opportunity to participate in the increased value of the
Company which their efforts, initiative, and skill have helped
and will continue to help produce. The Plan is effective as of
October 9, 1990.
2. Administration.
_______________
(a) The Plan shall be administered by the Compensation Committee
(the "Committee") of the Board of Directors (the "Board") as
that Committee may be constituted from time to time. The
Committee shall consist of at least three members of the
Board selected by the Board, all of whom shall be
Disinterested Persons. A Disinterested Person for purposes
of the Plan is one who is not at the time he exercises
discretion in administering the Plan or at any time within
one year prior thereto eligible for participation in the
Plan or any other plan of the Company that would entitle him
or her to acquire stock, stock options or stock appreciation
units of the Company.
(b) A majority of the members of the Committee shall constitute
a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination
reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by
a majority vote at a meeting duly called and held.
(c) Subject to the express provisions of the Plan, the Committee
also shall have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating
to it, and to make all other determinations necessary or
advisable for the administration of the Plan. The
determinations of the Committee on the matters referred to
in this paragraph 2 shall be conclusive.
3. Participants.
_____________
Participants in the Plan shall be selected by the Committee from
key employees of the Company or any subsidiary of the Company
(the "Participants").
4. Plan Operation and Appreciation of Units.
_________________________________________
(a) Participants shall be awarded stock appreciation units
("Units") for a period of years determined by the Committee,
not to exceed five years from the date of the award (the
"Appreciation Period"). Units may be exercised by a
Participant, to the extent exercisable by their terms, in
whole or from time to time in part at any time prior to the
end of the Appreciation Period, but in no event prior to six
months following the date such Units were awarded to such
Participant, except that this limitation shall not be
applicable in the event of death or disability of the
Participant occurring before the expiration of the six-month
period. When awarded, each Unit shall have a basis equal to
the average of the closing prices of the Common Stock of the
Company (the "Common Stock") on the New York Stock Exchange
(the "NYSE") for the 30 consecutive trading days immediately
preceding the date of the award of such Unit (the "Grant
Base").
(b) At the end of the Appreciation Period or upon the
Participant's earlier exercise of a Unit, the Participant
shall be entitled to receive from the Company a cash payment
(the "Payment") for previously unexercised Units as
determined by this paragraph 4(b). The Payment shall be
equal to (i) in the case of Participant exercise, the
average of the closing prices of the Common Stock of the
NYSE for the 30 consecutive trading days immediately
preceding the date of such exercise or (ii) upon expiration
of the Appreciation Period, the average of the closing
prices of the Common Stock on the NYSE for the 90
consecutive trading days immediately preceding the date of
such expiration, in each case (x) reduced by the Grant Base
and (y) multiplied by the number of Units exercised or
remaining at the end of the Appreciation Periods, as
applicable.
5. Nature of Units.
________________
The Units shall be used solely as a device for the measurement
and determination of the amount to be paid in cash to
Participants as provided in the Plan. The Units shall not
constitute or be treated as property or as a trust fund of any
kind. All amounts at any time attributable to the Units shall be
and remain the sole property of the Company and all Participants'
rights hereunder are limited to the rights to receive cash as
provided in this Plan.
6. Dilution.
_________
In the event of a stock split, stock dividend, recapitalization,
reclassification, reorganization, merger, consolidation,
combination or exchange of shares, split-up, split-off, spin-off,
liquidation or similar changes in the capitalization of the
Company, or any distribution to the holders of Common Stock other
than regular quarterly cash dividends, the number of Units of a
Participant and/or the Grant Base shall be adjusted in such
manner as the Committee shall, in its discretion, determine to be
appropriate under the circumstances so that the Participants'
interests in the Units shall be congruent with the interests of
the holders of the Common Stock.
7. Transferability.
________________
Any rights arising under the Plan shall not be transferable
otherwise than by will or the laws of descent and distribution.
8. Termination of Employment.
__________________________
In the event a Participant leaves the employ of the Company, a
subsidiary or an affiliate of the Company, otherwise than by
retirement or due to disability or death, any right arising under
the Plan shall be forfeited. In the event of retirement pursuant
to any retirement plan of the Company, of a subsidiary or of an
affiliate of the Company, the disability, or the death of a
Participant, any unexercised Units may be exercised by the
Participant or by a legatee or legatees of such Participant under
such Participant's last will, or by such Participant's personal
representatives or distributees, at any time (a) in the case of
retirement or disability, within a period of 90 days after his
retirement or disability (or such longer period as the Committee
may in its sole discretion determine) and (b) in the case of
death, within a period of one year after his death, but in all
cases not after expiration of the Appreciation Period with
respect to such Units.
9. Withholding of Tax.
___________________
There shall be deducted from each Payment under the Plan the
amount of any tax required by any governmental authority to be
withheld and paid over by the Company to that governmental
authority for the account of the person entitled to such Payment.
10. Termination and Amendment of Plan.
__________________________________
The Committee may at any time terminate the Plan, or make such
modification of the Plan as it shall deem advisable. No
termination or amendment of the Plan may, without the consent of
a Participant, adversely affect the rights of such Participant
with respect to Units granted prior thereto.
CUMMINS ENGINE COMPANY, INC.
___________________________
EXHIBIT 10(q)
_____________
THREE YEAR PERFORMANCE PLAN
___________________________
Effective as of December 8, 1992
The Three Year Performance Plan is hereby adopted by the Board of
Directors of Cummins Engine Company, Inc. (hereinafter call the
"Company"), with the objectives and upon the terms set forth herein.
1. Objectives.
___________
The objectives of the Plan are to:
(a) serve as a balance to the short-term compensation provided by
base salary and bonus;
(b) place emphasis on the medium-term performance of the Company
in direct relationship to its industry competitors and/or
other such measures deemed appropriate by the Compensation
Committee of the Board of Directors;
(c) strengthen the relationship between management and
shareholder interests; and
(d) encourage participants to remain with the Company through
important business cycles.
Individual plan grants are intended to reflect the varying degrees
of influence participating officers and key non-officer employees
have in their functional positions on the medium-term (3 year)
performance of the Company. Calculation of the payout is intended
to directly reflect the Company's performance based on various
measures designated by the Committee and the business judgment of
the Committee.
2. Definitions.
____________
(a) Award Cycle - The three (3) year period upon which a
particular year's payout is calculated. A new Award Cycle
commences with the beginning of each of the Company's fiscal
years. Payouts to Participants in any one year are based
upon actual results of the most recently completed Award
Cycle.
(b) 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 the Company's 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 the Company's 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 Section 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 or a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, 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 ("Voting Shares"), 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 (2) consecutive years, individuals who at the
beginning of such period constituted the Board of Directors
of the Company 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 (2/3) 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.
(c) Committee - The Compensation Committee of the Board of
Directors of the Company which has been designated to review
compensation of officers, key non-officers, and non-employee
directors of the Company.
(d) Comparator Panel - Selected companies whose primary industry
is similar to that of the Company. Those companies are;
General Motors Dana
Ford Motor Company Arvin
Caterpillar Ingersoll Rand
Deere Paccar
Eaton Dresser
Navistar
(e) Participants - Officers or other employees designated
annually by the Committee as participants in the Plan.
(f) Payout Factor - The percentage determined by the Committee
and applied to a Target Award to determine the amount of the
award to be paid as described in Section 6 of the Plan.
(g) Plan - The Three Year Performance Plan described herein.
(h) Target Award - The amount of targeted compensation described
in Section 4 of the Plan.
3. Eligibility.
____________
The Committee shall determine each year the officers and other
employees of the Company who shall be Participants in the Plan.
4. Target Award.
_____________
Participants in the Plan shall be assigned a Target Award for an
Award Cycle by the Committee, in its discretion, based on the
following criteria, and such other criteria as the Committee may
determine from time to time:
(a) Scope and breadth of the Participant's Position;
(b) Effect on the Company's medium-term performance;
(c) Work relationships.
The Target Award for an Award Cycle shall be expressed as a dollar
amount. The Target Award for a particular Award Cycle shall be
the Target Award approved for that Participant prior to the actual
payout for that Award Cycle. Therefore, Target Awards for an
Award Cycle may be changed during the course of an Award Cycle
(but prior to the payout being made for such Award Cycle) based on
the Committee's evaluation of changes in the aforementioned
criteria for each Participant.
The eligibility of new Participants and their levels of
participation, if any, in Award Cycles already begun shall be
determined by the Committee, in its discretion.
5. Payout Formula.
_______________
The Committee will establish, at the commencement of each Award
Cycle, performance measures to be used as the guideline for
determining the Payout Factor for the Award Cycle. The
performance measures will provide guidelines; the final Payout
Factor will be determined in the judgment of the Committee,
considering performance against the established measures and such
other factors as the Committee deems appropriate.
Performance measure will generally be the Company's performance
relative to the median performance of the Comparator Panel. The
Committee may designate, but shall not be limited to, return on
the Company's stockholder equity as the measure of performance.
6. Award Payout.
____________
The award payout shall be determined as follows:
Target Award Award Cycle
for the X Payout Factor
Award Cycle
7. Termination of Employment.
__________________________
(a) If a Participant's employment with the Company terminates
(except through retirement, disability or death), such
Participant will not receive a payout for any Award Cycle (a
"Payout"") for which payment has not been made where such
Participant's employment and participation in the Plan was
for a period of one (1) year or less. If a Participant's
employment so terminated during the second (2nd) through the
third (3rd) years of participation in the Plan, the
Committee, in its discretion, shall determine whether the
Participant will receive a proportionate share of the Payout
at the end of each Award Cycle initiated while such employee
was a Participant in the Plan.
(b) If a Participant retires, becomes disabled or dies, the
Participant, or such Participant's estate, shall be entitled
to receive a proportionate share of the Payout at the end of
each Award Cycle based upon the number of years such employee
participated during each Award Cycle.
8. Performance Plan Payout.
________________________
Any payout under the Plan will be made after the audit of the
Company's financial statements and after the Committee has
determined the Payout Factor resulting from the Company's
performance. In general, the Payout date will occur as soon as
practicable following the end of an Award Cycle, but not later
than June 30 following completion of such Award Cycle.
9. Change of Control.
__________________
In the event of a Change of Control of the Company, the provisions
of this Section 9 shall supersede those of Section 5. The Target
Award for each Award Cycle in progress shall be payable in full
upon the date of the Change of Control and shall be determined for
each cycle as follows:
Award
Target Award 1.0 Payout Percent
for the X Factor X Completion
Award Cycle Factor
The Award Cycle Percent Completion Factor for each Payout Award
calculation shall be determined by dividing the number of days in
the particular cycle completed prior to the Change of Control by
the number of days in a complete cycle, one thousand ninety-five
(1095) days.
10. Notice.
______
To the extent practicable, the Plan shall be communicated as early
as possible to each Participant in each Award Cycle to permit
maximum incentive to be generated by the Plan.
11. Term.
____
The Plan will continue from year to year until terminated by the
Committee.
CUMMINS ENGINE COMPANY, INC.
____________________________
EXHIBIT 10(u)
_____________
SENIOR EXECUTIVE BONUS PLAN
___________________________
1. Purpose.
________
The Senior Executive Bonus Plan is designed to: (i) reinforce the
financial objectives of the Company in the minds of senior
executives, (ii) attain and maintain a leadership position for
the Company in its method of compensating its senior executives
consistent with the relative size of the Company, the industry in
which the Company competes, and the relative performance of its
senior executives, (iii) recognize the performance of the Company
as a whole, maximizing the contributions of the Company's various
businesses and (iv) reward both team and individual performance.
The Plan is an incentive plan providing compensation that varies
with the financial results of the Company.
2. Philosophy.
___________
Bonus payments should relate to the importance of the executive's
position in influencing Company performance, the financial
performance of the Company during a Quarter and the performance
of the individual during that Quarter. Bonus payments should
encourage and promote outstanding decisions and efforts by senior
executives for the benefit of the Company.
3. Definitions.
____________
(a) "Base Salary" means the salary paid to a Participant during
a Quarter, exclusive of allowances, incentive pay,
reimbursed expenses, fringe benefits and other similar forms
of payment.
(b) "Compensation Committee" or "Committee" means the
Compensation Committee of the Board of Directors of the
Company.
(c) "Company" means Cummins Engine Company, Inc.
(d) "Participant" means the Company's Chief Executive Officer
and other executive officers designated by the Compensation
Committee.
(e) "Performance Measure" means the Company's return on equity,
return on sales, net income, sales growth, return on assets,
total shareholder return or a combination thereof.
(f) "Plan" means the Senior Executive Bonus Plan described
herein.
(g) "Plan Year" means the Company's fiscal year, provided,
however, that the first Plan Year includes only three
Quarters beginning April 3, 1995.
(h) "Quarter" means a fiscal quarter of the Company.
(i) "Target Bonus" means an incentive bonus amount described in
Section 7 of the Plan.
(j) "Target Bonus Percentage" means a percentage of the
Participant's Base Salary intended to be paid as a Target
Bonus under the Plan.
4. Eligibility.
____________
The Compensation Committee shall designate the Participants each
Plan Year and establish the Target Bonus Percentage applicable to
each Participant. The Committee shall have the power to change
the Target Bonus Percentage of a Participant or remove one or
more Participants from the Plan, provided, however, that the
percentage shall not be increased following the commencement of
any period for which a Target Bonus may be earned.
5. Target Bonus Percentage.
_______________________
On or before the 20th day of each Quarter during which a Target
Bonus may be earned, each Participant will be informed of his or
her applicable Target Bonus Percentage. The Target Bonus
Percentage assigned to each Participant by the Committee shall be
based on various criteria applicable to the Participant
including, but not limited to: (i) the scope and breadth of the
Participant's management position, (ii) opportunity for
independent thought and action, (iii) effect of the Company's
financial performance, (iv) role in decision-making, (v) working
relationships within the Company and (vi) the level of
compensation prevailing in the industry in which the Company
competes
6. Bonus Payout Schedule.
______________________
On or before the 20th day of each Plan Year, a Bonus Payout
Schedule will be calculated by the Committee and communicated to
Participants. The Bonus Payout Schedule will specify the
Performance Measure and the performance level against the measure
during the Quarter required to achieve each payout factor ("Bonus
Factor"). The "Target Performance" is that performance which
provides a 1.0 Bonus Factor.
7. Target Bonus.
_____________
A Target Bonus is calculated for each Participant by multiplying
Base Salary times the Target Bonus Percentage designated for the
Participant.
8. Earned Bonus.
_____________
Corporate performance during the Quarter in excess of the Target
Performance or performance less than the Target Performance will
result in an increased or diminished bonus, respectively, from
the Target Bonus communicated to the Participant. The "Earned
Bonus" will be calculated by multiplying the Target Bonus
Percentage times the Participant's Base Salary times the Bonus
Factor associated with the actual performance for the Quarter as
specified in the Bonus Payout Schedule in effect for the Plan
Year containing the Quarter. In no event may a Participant
receive an Earned Bonus for any Quarter in excess of $750,000.
9. Change in Accounting Standards.
_______________________________
For purposes of determining the Bonus Factor, the Company's
actual performance under the Performance Measure will exclude
extraordinary charges and credits which result from a change in
accounting standards of the Company.
10. Adjustment for Individual Performance.
______________________________________
The Earned Bonus will be the bonus paid, except in unusual
circumstances where poor individual performance justifies a
reduced bonus.
11. Termination of Employment.
__________________________
During any Quarter that a Participant's employment is voluntarily
or involuntarily terminated, including termination due to death,
disability or retirement, the amount of the Earned Bonus for the
Quarter will be paid to the Participant or his or her legal
representative or estate, whichever is applicable.
12. Bonus Distribution Date.
________________________
Any Earned Bonus will be distributed as soon as practicable
following the determination of actual performance and written
certification by the Compensation Committee that the performance
level with respect to a bonus payable to the Participant has been
met. In general, the Earned Bonus will be distributed
approximately six (6) weeks following the end of the Quarter in
which earned, provided however, payments under the Plan may be
deferred pursuant to the Company's Deferred Compensation Plan.
13. Administration.
_______________
The plan shall be administered by the Compensation Committee. No
member of the Committee shall be eligible to receive a bonus
under this Plan while serving on the Committee. The Committee
shall be authority to interpret the Plan and to establish, amend
and rescind rules and regulations for the administration of the
Plan, and all such interpretations, rules and regulations shall
be conclusive and binding on all persons. Notwithstanding any
other provision of the Plan to the contrary, the Committee may
impose such conditions on participation in and bonuses under the
Plan as it deems appropriate.
14. Optional Administration as Annual Plan.
_______________________________________
The Plan is designed to operate primarily as a quarterly plan,
measuring Company performance and paying Target Bonuses on the
basis of quarterly results. From time-to-time, however, the
Committee may, in its sole discretion, determine it wishes to
measure performance and pay Target Bonuses on the basis of a Plan
Year. In the vent such a determination is made, all references
contained in this Plan to the term "Quarter" shall be deemed to
mean "Plan Year" as the context requires, and the maximum Earned
Bonus referenced in Section 8 of the Plan shall be increased to
$3,000,000.
15. Effective Date.
_______________
The Plan shall be effective for Quarters beginning April 3, 1995,
subject to its approval by the Company's shareholders.
16. Amendment and Termination.
__________________________
The Board of Directors may at any time amend, modify, alter or
terminate this Plan.
17. Governing Law.
______________
This Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Indiana and
construed accordingly.
18. Miscellaneous.
______________
There shall be no bonus pool or cumulative bonus pool. This Plan
is based upon the number of Participants, the Target Bonus
Percentages, the Bonus Factors and the Base Salaries of the
Participants.
CUMMINS ENGINE COMPANY, INC.
____________________________
EXHIBIT 10(v)
_____________
SENIOR EXECUTIVE THREE YEAR PERFORMANCE PLAN
____________________________________________
1. Objectives.
___________
The objectives of the Plan are to: (i) serve as a balance against
the short-term compensation provided by base salary and bonus
payments of the Company, (ii) emphasize the medium-term
performance of the Company as compared to its industry
competitors, (iii) strengthen the relationship between Company
management and shareholder interest, and (iv) encourage
participants to remain with the Company through important business
cycles.
The size of grants under the Plan are intended to reflect the
degrees of influence participating executive officers have in
their functional positions on the medium-term (three year)
performance of the Company. The calculation of payments from the
Plan is intended to reflect the Company's performance against
certain performance measures designated by the Compensation
Committee.
2. Definitions.
____________
(a) "Award Cycle" means the three-year period upon which a
particular year's payout is calculated. A new Award Cycle
commences with the beginning of each of the Company's fiscal
years. Payments, if any, under the Plan to Participants
during a fiscal year are based upon the Company's performance
during the most recently completed Award Cycle.
(b) "Change of Control" means 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 the Company's 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 the Company's Common Stock immediately prior to
the merger have substantially the same proportionate
ownership on common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease,
exchange or transfer (in one transaction or 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 subsidiary thereof or any
employee benefit plan sponsored by the Company or a
subsidiary thereof or a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, 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 ("Voting Shares"), 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 (2) consecutive years, individuals who at the
beginning of such period constituted the Board of Directors
of the Company shall cease for any reason to constitute a
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 (2/3) 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 or Regulation 14A
promulgated under the Exchange Act.
(c) "Committee" means the Compensation Committee of the Board of
Directors of the Company.
(d) "Company" means Cummins Engine Company, Inc.
(e) "Participants" means the Company's Chief Executive Officer and
other executive officers designated annually by the Committee
to participate in the Plan for the ensuing Award Cycle.
(f) "Payout Factor" means the percentage determined by the
Committee and applied to a Target Award to determine the
amount of an award to be paid as described in Section 4 of
the Plan.
(g) "Peer Group" means the group of companies selected by the
Committee whose primary industry is similar to that of
the Company's. As of the effective date of the Plan, the
Peer Group consists of the following companies: (i) Arvin
Industries, Inc., (ii) Caterpillar, Inc., (iii) Dana
Corporation, (iv) Deere & Company, (v) Dresser Industries,
Inc., (vi) Eaton Corporation, (vii) Ford Motor Company,
(viii) General Motors Corporation, (ix) Ingersoll-Rand
Company, (x) Navistar International Corporation, and (xi)
Paccar, Inc.
(h) "Performance Measures" means the Company's return on equity,
return on sales, net income, sales growth, return on assets,
total shareholder return, or any combination thereof.
(i) "Plan" means the Senior Executive Three Year Performance Plan
described herein.
(j) "Target Award" means the amount of targeted compensation
described in Section 3 of the Plan.
3. Target Award.
_____________
The Committee shall assign each Participant a Target Award for
each Award Cycle, in its discretion, based upon, but not limited
to, the scope and breadth of the Participant's position, ability
to effect the Company's medium-term financial performance, and his
or her working relationships within the Company. The Target Award
for an Award cycle shall be expressed in terms of a threshold,
target, and maximum dollar amount.
The Target Award for each Award Cycle shall be assigned and
communicated to each Participant as soon as practicable
thereafter, but in no event later than the 270th day of the Award
Cycle. Target Awards may be changed during the course of an Award
Cycle based on the Committee's reevaluation of the criteria
described in the preceding paragraph, provided however, a Target
Award shall not be increased following commencement of the Award
Cycle.
4. Payout Schedule.
________________
On or before the 270th day of each Award Cycle, the Committee
shall establish the Performance Measures to be used in determining
a Payout Factor applicable to the Award Cycle. The Committee may
determine the Payout Factor based upon the attainment of one or
more different Performance Measures, provided the measures, when
established, are stated as alternatives to one another.
Under the Payout Factor schedule, the targeted dollar amount
("Targeted Amount") of a Target Award will be earned by a
Participant if the Company's performance against the Performance
Measures equals the median of the performance of the Peer Group
during the same period against the same measures. The threshold
dollar amount will be earned if performance is fifty percent (50%)
and the maximum dollar amount will be earned if performance is two
hundred percent (200%) of the median performance of the Peer
Group. The maximum dollar amount that may be paid by the Plan to
a Participant with respect to any Award Cycle is $2,000,000.
5. Change in Accounting Standards.
_______________________________
For purposes of determining the Payout Factor, the Company's
actual performance under the Performance Measures will exclude
extraordinary charges and credits which result from a change in
accounting standards of the Company.
6. Plan Payments.
______________
Any payout under the Plan will be made as soon as practicable
following audits of the Company's financial statements applicable
to all fiscal years of the Award Cycle and written certification
by the Committee of attainment of the applicable Performance
Measures and corresponding Payout Factor. Payments under the Plan
may be deferred pursuant to the Company's Deferred Compensation
Plan.
7. Administration.
_______________
The Plan shall be administered by the Compensation Committee. No
member of the Committee shall be eligible for a Target Award while
serving on the Committee. The Committee shall have authority to
interpret the Plan and to establish, amend and rescind rules and
regulations for the administration of the Plan, and all such
interpretations, rules and regulations shall be conclusive and
binding on all persons. Notwithstanding any other provision of
the Plan to the contrary, the Committee may impose such conditions
on participation in, awards under and payments from the Plan as it
deems appropriate.
8. Termination of Employment.
__________________________
If a Participant's employment with the Company terminates during
the first year of an Award Cycle, other than by reason of
retirement, death or disability, the Participant will not receive
any payout for that Award Cycle. If a Participant's employment so
terminates during the second or third years of an Award Cycle, the
Committee, in its discretion, shall determine whether the
Participant will receive a proportionate payout of any payment
with respect to the Award Cycle based on the period of employment
during the cycle.
If a Participant retires, dies or becomes disabled during an Award
Cycle, the Participant or such Participant's estate, as the case
may be, shall receive a proportionate share of any payment with
respect to the Award Cycle based on the period of employment
during the cycle, regardless of the length of time of such
employment.
9. Change of Control.
__________________
Notwithstanding any other provision herein to the contrary, in the
event of a Change of Control, an amount shall be immediately
payable from the Plan to each Participant equal to the Targeted
Amount times a fraction, the numerator of which is the number of
days in the Award Cycle preceding the Change of Control and the
denominator of which is 1095.
10. Effective Date.
_______________
The Plan shall be effective for the Award Cycle beginning January
1, 1995, subject to its approval by the Company's shareholders.
11. Amendment and Termination.
__________________________
The Board of Directors of the Company may at any time amend,
modify, alter or terminate this Plan.
12. Governing Law.
_____________
This Plan and all determinations made and actions taken pursuant
hereto, 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 2, 1995 and APRIL 3, 1994
(Millions, Except per Share Amounts)
___________________________________________________________
Weighted
Average Net Calculated
Shares Earnings Per Share
________ ________ __________
1995
____
Net earnings 41.2 $67 $1.63
Options .1 -
____ ___
Primary and fully diluted earnings
per common share 41.3 $67 $1.63
____ ___ _____
____ ___ _____
1994
____
Net earnings 40.1 $55 $1.36
Options .2 -
____ ___
Primary and fully diluted earnings
per common share 40.3 $55 $1.35
____ ___ _____
____ ___ _____
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<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> APR-02-1995
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 612
<ALLOWANCES> 11
<INVENTORY> 555
<CURRENT-ASSETS> 1,395
<PP&E> 2,410
<DEPRECIATION> 1,308
<TOTAL-ASSETS> 2,809
<CURRENT-LIABILITIES> 905
<BONDS> 153
<COMMON> 109
0
0
<OTHER-SE> 994
<TOTAL-LIABILITY-AND-EQUITY> 2,809
<SALES> 1,334
<TOTAL-REVENUES> 1,334
<CGS> 991
<TOTAL-COSTS> 249
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 87
<INCOME-TAX> 20
<INCOME-CONTINUING> 67
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67
<EPS-PRIMARY> 1.63
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</TABLE>
