SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
_________________
CUMMINS ENGINE COMPANY, INC.
(Name of issuer of the securities held pursuant to the plan)
Commission File Number 1-4949.
_______
Incorporated in the State of Indiana I.R.S. Employer Identification
No. 35-0257090
500 Jackson Street, Box 3005, Columbus, Indiana 47202-3005
(Address of Principal Executive Office)
Telephone Number: (812) 377-5000
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH AUDITORS' REPORT
(Full title of the plan)
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
INDEX TO FINANCIAL STATEMENTS
Page
____
Report of Independent Public Accountants 3
Combining Statements of Net Assets by Plan 4-5
Combining Statements of Changes in Net Assets by Plan 6-8
Combining Statements of Net Assets by Fund 9-10
Combining Statements of Changes in Net Assets by Fund 11-13
Notes to Financial Statements 14-20
Schedule
________
Assets Held for Investment Purposes I
Reportable Transactions II
Matching Contribution Formulas III
Employing Locations by Plan IV
Loans or Fixed Income Obligations V
Exhibit
_______
Consent of Independent Public Accountants 23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
________________________________________
To the Pension Policy Committee
of Cummins Engine Company, Inc.:
We have audited the accompanying combining statements of net assets
by plan and by fund, of the CUMMINS ENGINE COMPANY, INC. AND
AFFILIATES RETIREMENT AND SAVINGS PLANS (the Plans) as of December
31, 1997 and 1996, and the related statements of changes in net
assets by plan and by fund, for the years ended December 31, 1997,
1996 and 1995. These financial statements and the schedules
referred to below are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets of the Plans as of
December 31, 1997 and 1996, and the changes in the net assets for
the years ended December 31, 1997, 1996 and 1995, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental
schedules of assets held for investment purposes, reportable
transactions, matching contribution formulas, employing locations by
plan, and loans or fixed income obligations are presented for the
purpose of additional analysis and are not a required part of the
basic financial statements but are supplementary information
required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The Fund Information in the statement of net
assets and the statement of changes in net assets is presented for
purposes of additional analysis rather than to present the net
assets and changes in net assets available for plan benefits of each
fund. The supplemental schedules and Fund Information have been
subject to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated in
all material respects in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 17, 1998.
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF NET ASSETS BY PLAN
DECEMBER 31, 1997
(stated in OOO's)
<TABLE>
<CAPTION>
Salaried Bargaining Onan Lubricon
CDC TOTAL
________ __________ _______ ________
_______ ________
<S> <C> <C> <C> <C>
<C> <C>
Assets
______
Cash and investments:
The Northern Trust Company
Short-Term Investment Fund $ 1,130 $ - $ - $ -
$ - $ 1,130
Cummins Engine Company, Inc.
Fixed Income Fund 88,160 111,266 20,194 75
5,884 225,579
Vanguard Wellington Fund 96,263 62,915 29,895 103
5,750 194,926
Vanguard U.S. Growth Fund 57,069 20,390 16,735 116
4,359 98,669
Vanguard Index Trust Fund 79,880 36,215 22,475 133
5,569 144,272
Vanguard Explorer Fund 13,112 3,093 2,547 84
501 19,337
Vanguard International Fund 7,542 1,256 1,295 32
344 10,469
Cummins Engine Company, Inc.
Common Stock 148,332 9,890 3,217 21
1,783 163,243
Participant Loans 6,346 4,142 1,475 28
1,102 13,093
________ ________ _______ ____
_______ ________
Total cash and investments 497,834 249,167 97,833 592
25,292 870,718
________ ________ _______ ____
_______ ________
Receivables:
Employer contributions 3,786 1,354 141 15
686 5,982
Employee contributions 1,382 1,437 342 5
300 3,466
Employee loan repayments 286 230 79 1
77 673
Accrued interest 4 - - -
- - 4
________ ________ _______ ____
_______ ________
Total receivables 5,458 3,021 562 21
1,063 10,125
________ ________ _______ ____
_______ ________
Total assets 503,292 252,188 98,395 613
26,355 880,843
________ ________ _______ ____
_______ ________
Liabilities
___________
Interest payable 2,819 - - -
- - 2,819
Note payable - ESOP 64,950 - - -
- - 64,950
________ ________ _______ ____
_______ ________
Total liabilities 67,769 - - -
- - 67,769
________ ________ _______ ____
_______ ________
Net Assets $435,523 $252,188 $98,395 $613
$26,355 $813,074
________ ________ _______ ____
_______ ________
________ ________ _______ ____
_______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF NET ASSETS BY PLAN
DECEMBER 31, 1996
(stated in OOO's)
<TABLE>
<CAPTION>
Salaried Bargaining Onan Lubricon
CDC TOTAL
________ __________ _______ ________
_______ ________
<S> <C> <C> <C> <C>
<C> <C>
Assets
______
Cash and investments:
The Northern Trust Company
Short-Term Investment Fund $ 1,134 $ - $ - $ -
$ - $ 1,134
Cummins Engine Company, Inc.
Fixed Income Fund 89,808 111,753 19,473 68
5,920 227,022
Vanguard Wellington Fund 77,360 49,591 24,290 74
4,352 155,667
Vanguard U.S. Growth Fund 45,475 17,367 13,167 91
3,182 79,282
Vanguard Index Trust Fund 53,581 23,567 15,973 105
3,323 96,549
Vanguard Explorer Fund 9,192 2,262 2,179 43
411 14,087
Vanguard International Fund 6,971 1,335 1,292 33
312 9,943
Cummins Engine Company, Inc.
Common Stock 111,725 5,847 2,383 18
858 120,831
Participant Loans 5,919 4,084 1,734 21
954 12,712
________ ________ _______ ____
_______ ________
Total cash and investments 401,165 215,806 80,491 453
19,312 717,227
________ ________ _______ ____
_______ ________
Receivables:
Employer contributions 3,555 1,332 262 21
562 5,732
Employee contributions 1,411 1,384 436 3
239 3,473
Employee loan repayments 274 208 85 1
65 633
Accrued interest 4 - - -
- - 4
________ ________ _______ ____
_______ ________
Total receivables 5,244 2,924 783 25
866 9,842
________ ________ _______ ____
_______ ________
Total assets 406,409 218,730 81,274 478
20,178 727,069
________ ________ _______ ____
_______ ________
Liabilities
___________
Interest payable 2,888 - - -
- - 2,888
Note payable - ESOP 66,550 - - -
- - 66,550
________ ________ _______ ____
_______ ________
Total liabilities 69,438 - - -
- - 69,438
________ ________ _______ ____
_______ ________
Net Assets $336,971 $218,730 $81,274 $478
$20,178 $657,631
________ ________ _______ ____
_______ ________
________ ________ _______ ____
_______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF CHANGES IN NET ASSETS BY PLAN
DECEMBER 31, 1997
(stated in OOO's)
<TABLE>
<CAPTION>
Salaried Bargaining Onan
Lubricon CDC TOTAL
________ __________ _______
________ _______ ________
<S> <C> <C> <C> <C>
<C> <C>
Net Assets - beginning of year $336,971 $218,730 $81,274
$478 $20,178 $657,631
________ ________ _______
____ _______ ________
Investment income:
Fund investment income 57,480 33,293 16,480
95 3,837 111,185
Interest income 23 - -
- - - 23
Dividend income 1,488 - -
- - - 1,488
Net realized & unrealized depreciation
in the value of investments 29,137 - -
- - - 29,137
_________ ________ _______
_____ _______ _________
Total investment income 88,128 33,293 16,480
95 3,837 141,833
Less: investment advisory expense 17 - -
- - - 17
interest expense 5,638 - -
- - - 5,638
________ ________ _______
_____ _______ ________
Net investment income 82,473 33,293 16,480
95 3,837 136,178
________ ________ _______
_____ _______ _________
Contributions:
Employer 12,649 1,363 152
14 1,247 15,425
Employee 22,737 13,927 5,631
68 2,596 44,959
Rollover 1,475 129 178
- - 30 1,812
________ ________ _______
____ _______ ________
Total contributions 36,861 15,419 5,961
82 3,873 62,196
________ ________ _______
____ _______ ________
Participant withdrawals (21,231) (15,182) (6,215)
(40) (1,789) (44,457)
Inter-plan transfers 449 (72) 895
(2) 256 1,526
________ _________ ________
_____ ________ ________
Net assets - end of year $435,523 $252,188 $98,395
$613 $26,355 $813,074
________ ________ _______
____ _______ ________
________ ________ _______
____ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF CHANGES IN NET ASSETS BY PLAN
DECEMBER 31, 1996
(stated in OOO's)
<TABLE>
<CAPTION>
Salaried Bargaining Onan
Lubricon CDC TOTAL
________ __________ _______
________ _______ ________
<S> <C> <C> <C> <C>
<C> <C>
Net Assets - beginning of year $274,796 $195,517 $69,026
$469 $17,064 $556,872
________ ________ _______
____ _______ ________
Investment income:
Fund investment income 39,001 23,367 11,144
68 2,550 76,130
Interest income 26 - -
- - - 26
Dividend income 2,252 - -
- - - 2,252
Net realized & unrealized depreciation
in the value of investments 20,256 - -
- - - 20,256
_________ ________ _______
____ _______ _________
Total investment income 61,535 23,367 11,144
68 2,550 98,664
Less: investment advisory expense 44 - -
- - - 44
interest expense 5,777 - -
- - - 5,777
________ ________ _______
____ _______ ________
Net investment income 55,714 23,367 11,144
68 2,550 92,843
________ ________ _______
____ _______ ________
Contributions:
Employer 5,342 1,346 266
21 564 7,539
Employee 19,798 13,885 5,768
46 2,161 41,658
Rollover 779 34 193
- - 44 1,050
________ ________ _______
____ _______ ________
Total contributions 25,919 15,265 6,227
67 2,769 50,247
________ ________ _______
____ _______ ________
Participant withdrawals (19,649) (15,218) (5,191)
(126) (2,147) (42,331)
Inter-plan transfers 191 (201) 68
- - (58) -
________ _________ _______
____ ________ ________
Net assets - end of year $336,971 $218,730 $81,274
$478 $20,178 $657,631
________ ________ _______
____ _______ ________
________ ________ _______
____ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF CHANGES IN NET ASSETS BY PLAN
DECEMBER 31, 1995
(stated in OOO's)
<TABLE>
<CAPTION>
Salaried Bargaining Onan
Lubricon CDC TOTAL
________ __________ _______
________ _______ ________
<S> <C> <C> <C> <C>
<C> <C>
Net Assets - beginning of year $238,898 $167,221 $54,262
$369 $13,892 $474,642
________ ________ _______
____ _______ ________
Investment income:
Fund investment income 39,792 22,889 11,797
79 2,290 76,847
Interest income 28 - -
- - - 28
Dividend income 2,287 - -
- - - 2,287
Net realized & unrealized depreciation
in the value of investments (18,865) - -
- - - (18,865)
_________ ________ _______
____ _______ _________
Total investment income 23,242 22,889 11,797
79 2,290 60,297
Less: investment advisory expense 70 25 4
- - 2 101
interest expense 5,907 - -
- - - 5,907
________ ________ _______
____ _______ ________
Net investment income 17,265 22,864 11,793
79 2,288 54,289
________ ________ _______
____ _______ ________
Contributions:
Employer 5,390 1,462 286
20 592 7,750
Employee 21,602 13,946 5,903
59 2,213 43,723
Rollover 1,029 88 106
- - 23 1,246
________ ________ _______
____ _______ ________
Total contributions 28,021 15,496 6,295
79 2,828 52,719
________ ________ _______
____ _______ ________
Participant withdrawals (9,896) (10,006) (3,265)
(57) (1,554) (24,778)
Inter-plan transfers 508 (57) (59)
(1) (391) -
________ _________ ________
_____ ________ ________
Net assets - end of year $274,796 $195,518 $69,026
$469 $17,063 $556,872
________ ________ _______
____ _______ ________
________ ________ _______
____ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF NET ASSETS BY FUND
DECEMBER 31, 1997
(stated in OOO's)
<CAPTION>
Fixed U.S. Index Explorer
Cummins Flexi Loan
Income Wellington Growth Fund Fund
Intl. Stock ESOP Trust Fund Total
________ __________ _______ _______ _______
_______ _______ _______ _____ _______ ________
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
Assets
______
Cash and investments:
The Vanguard
Short-Term Investment Fund $ - $ - $ - $ - $ - $
- - $ - $ 865 $ 265 $ - $ 1,130
Cummins Engine Company,Inc.
Fixed Income Fund 225,579 - - - -
- - - - - - 225,579
Vanguard Wellington Fund - 194,925 - - -
- - - - - - 194,925
Vanguard U.S. Growth Fund - - 98,669 - -
- - - - - 98,669
Vanguard Index Trust Fund - - - 144,273 -
- - - - - - 144,273
Vanguard Explorer Fund - - - - 19,339
- - - - - - 19,339
Vanguard International Fund - - - - -
10,468 - - - - 10,468
Cummins Engine Company, Inc.
Common Stock - - - - -
- - 29,398 127,787 6059 - 163,244
Participant Loans - - - - -
- - - - - 13,092 13,092
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total cash and investments 225,579 194,925 98,669 144,273 19,339
10,468 29,398 128,652 6324 13,092 870,719
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Receivables:
Employer contributions 1,009 433 256 324 50
32 95 3,781 - - 5,980
Employee contributions 1,026 835 545 715 122
74 151 - - - 3,468
Employee loan repayments 210 160 104 131 17
10 40 - - - 672
Accrued interest - - - - -
- - - 4 - - 4
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total receivables 2,245 1,428 905 1,170 189
116 286 3,785 - - 10,124
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total assets 227,824 196,353 99,574 145,443 19,528
10,584 29,684 132,437 6324 13,092 880,843
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Liabilities
___________
Interest payable - - - - -
- - - 2,819 - - 2,819
Note payable - ESOP - - - - -
- - - 64,950 - - 64,950
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total liabilities - - - - -
- - - 67,769 - - 67,769
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Net Assets $227,824 $196,353 $99,574 $145,443 $19,528
$10,584 $29,684 $64,668 $6324 $13,092 $813,074
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF NET ASSETS BY FUND
DECEMBER 31, 1996
(stated in OOO's)
<CAPTION>
Fixed U.S. Index Explorer
Cummins Loan
Income Wellington Growth Fund Fund
Intl. Stock ESOP Fund Total
________ __________ _______ _______ ________
______ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
Assets
______
Cash and investments:
The Northern Trust Company
Short-Term Investment Fund $ - $ - $ - $ - $ - $
- - $ - $ 1,134 $ - $ 1,134
Cummins Engine Company, Inc.
Fixed Income Fund 227,022 - - - -
- - - - - 227,022
Vanguard Wellington Fund - 155,667 - - -
- - - - - 155,667
Vanguard U.S. Growth Fund - - 79,282 - -
- - - - - 79,282
Vanguard Index Trust Fund - - - 96,550 -
- - - - - 96,550
Vanguard Explorer Fund - - - - 14,088
- - - - - 14,088
Vanguard International Fund - - - - -
9,942 - - - 9,942
Cummins Engine Company, Inc.
Common Stock - - - - -
- - 18,135 102,694 - 120,829
Participant Loans - - - - -
- - - - 12,712 12,712
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Total cash and investments 227,022 155,667 79,282 96,550 14,088
9,942 18,135 103,828 12,712 717,226
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Receivables:
Employer contributions 1,037 500 303 350 58
41 78 3,365 - 5,732
Employee contributions 1,126 838 555 646 129
79 100 - - 3,473
Employee loan repayments 209 155 102 112 18
12 26 - - 634
Accrued interest - - - - -
- - - 4 - 4
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Total receivables 2,372 1,493 960 1,108 205
132 204 3,369 - 9,843
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Total assets 229,394 157,160 80,242 97,658 14,293
10,074 18,339 107,197 12,712 727,069
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Liabilities
___________
Interest payable - - - - -
- - - 2,888 - 2,888
Note payable - ESOP - - - - -
- - - 66,550 - 66,550
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Total liabilities - - - - -
- - - 69,438 - 69,438
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Net Assets $229,394 $157,160 $80,242 $97,658 $14,293
$10,074 $18,339 $37,759 $12,712 $657,631
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF CHANGES IN NET ASSETS BY FUND
DECEMBER 31, 1997
(stated in OOO's)
<CAPTION>
Fixed U.S.
Cummins Flexi Loan
Income Wellington Growth Index Explorer
Intl. Stock ESOP Trust Fund Total
________ __________ _______ _______ _______
_______ _______ _______ _____ _______ ________
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
Net Assets - beginning of year $229,394 $157,160 $80,242 $97,658 $14,293
$10,074 $18,339 $37,759 - $12,712 $657,631
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Investment income:
Fund investment income (loss) 14,236 36,584 20,540 34,077 1,983
(593) 4,359 - - - 111,186
Interest income - - - - -
- - - 23 - - 23
Dividend income - - - - -
- - - 1,431 56 - 1,487
Net realized and unrealized
depreciation in the value
of investments - - - - -
- - - 29,484 (346) - 29,138
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ _________
Total investment income (loss) 14,236 36,584 20,540 34,077 1,983
(593) 4,359 30,938 (290) - 141,834
Less: investment advisory expense - - - - -
- - - 17 - - 17
interest expense - - - - -
- - - 5,637 - - 5,637
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Net investment income (loss) 14,236 36,584 20,540 34,077 1,983
(593) 4,359 25,284 (290) - 136,180
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Contributions:
Employer 1,228 540 358 430 66
45 133 5,894 6730 - 15,424
Employee 12,136 10,908 7,792 9,537 1,766
1,232 1,587 - - - 44,958
Rollover 348 250 329 508 130
46 202 - - - 1,813
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total contributions 13,712 11,698 8,479 10,475 1,962
1,323 1,922 5,894 6730 - 62,195
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Participant loan repayments 2,747 2,124 1,446 1,662 237
158 408 - - (8,782) -
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Inter-fund transfers (11,277) 60 (4,527) 8,773 2,079
238 6,180 - (44) - -
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Payments:
Participant withdrawals (18,124) (8,913) (5,124) (5,547) (803)
(489) (1,073) (2,787) (72) - (42,932)
Participant loan withdrawals ( 2,864) (2,360) (1,482) (1,655) (223)
(127) ( 451) - - 9,162 -
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total payments (20,988) (11,273) (6,606) (7,202) (1,026)
(616) (1,524) (2,787) (72) 9,162 (42,932)
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Net Assets - end of year $227,824 $196,353 $99,574 $145,443 $19,528
$10,584 $29,684 $64,668 $6324 $13,092 $813,074
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF CHANGES IN NET ASSETS BY FUND
DECEMBER 31, 1996
(stated in OOO's)
<CAPTION>
Fixed U.S.
Cummins Loan
Income Wellington Growth Index Explorer
Intl. Stock ESOP Fund Total
________ __________ _______ _______ ________
_______ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
Net Assets - beginning of year $227,822 $135,360 $54,293 $71,047 $9,352 $
8,102 $21,651 $17,667 $11,578 $556,872
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Investment income:
Fund investment income (loss) 14,358 21,730 15,259 17,403 1,357
904 5,120 - - 76,131
Interest income - - - - -
- - - 26 - 26
Dividend income - - - - -
- - - 2,252 - 2,252
Net realized and unrealized
depreciation in the value
of investments - - - - -
- - - 20,257 - 20,257
________ ________ _______ _______ ______
_______ _______ _______ _______ _________
Total investment income (loss) 14,358 21,730 15,259 17,403 1,357
904 5,120 22,535 - 98,666
Less: investment advisory expense - - - - -
- - - 44 - 44
interest expense - - - - -
- - - 5,777 - 5,777
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Net investment income (loss) 14,358 21,730 15,259 17,403 1,357
904 5,120 16,714 - 92,845
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Contributions:
Employer 1,080 501 303 351 59
41 79 5,125 - 7,539
Employee 13,169 10,273 6,426 7,533 1,657
1,194 1,405 - - 41,657
Rollover 207 182 192 265 91
53 60 - - 1,050
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Total contributions 14,456 10,956 6,921 8,149 1,807
1,288 1,544 5,125 - 50,246
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Participant loan repayments 2,751 1,971 1,229 1,405 244
180 364 - (8,144) -
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Inter-fund transfers (7,367) (470) 8,234 5,399 2,371
389 (8,556) - - -
_________ _________ _______ _______ ______
_______ _______ _______ _______ ________
Payments:
Participant withdrawals (19,211) (10,208) (4,406) (4,179) (673)
(644) (1,264) (1,747) - (42,332)
Participant loan withdrawals ( 3,415) ( 2,179) (1,288) (1,566) (165)
(145) ( 520) - 9,278 -
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Total payments (22,626) (12,387) (5,694) (5,745) (838)
(789) (1,784) (1,747) 9,278 (42,332)
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
Net Assets - end of year $229,394 $157,160 $80,242 $97,658 $14,293
$10,074 $18,339 $37,759 $12,712 $657,631
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
________ ________ _______ _______ _______
_______ _______ _______ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF CHANGES IN NET ASSETS BY FUND
DECEMBER 31, 1995
(stated in OOO's)
<CAPTION>
Fixed U.S.
Cummins Loan
Income Wellington Growth Index
Explorer Intl. Stock ESOP Fund Total
________ __________ _______ _______
________ _______ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
Net Assets - beginning of year $214,951 $ 99,306 $31,985 $44,135 $4,134
$10,511 $22,298 $35,953 $11,369 $474,642
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Investment income:
Fund investment income (loss) 15,416 31,854 13,383 17,250 1,429
770 (3,255) - - 76,847
Interest income - - - - -
- - - 28 - 28
Dividend income - - - - -
- - - 2,287 - 2,287
Net realized and unrealized
depreciation in the value
of investments - - - - -
- - - (18,865) - (18,865)
________ ________ _______ _______ ______
_______ _______ _______ _______ _________
Total investment income (loss) 15,416 31,854 13,383 17,250 1,429
770 (3,255) (16,550) - 60,297
Less: investment advisory expense 51 - - - -
- - - 50 - 101
interest expense - - - - -
- - - 5,907 - 5,907
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Net investment income (loss) 15,365 31,854 13,383 17,250 1,429
770 (3,255) (22,507) - 54,289
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Contributions:
Employer 1,309 526 268 309 45
40 96 5,157 - 7,750
Employee 16,125 10,654 5,579 6,694 1,175
1,489 2,007 - - 43,723
Rollover 254 262 235 291 68
62 74 - - 1,246
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Total contributions 17,688 11,442 6,082 7,294 1,288
1,591 2,177 5,157 - 52,719
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Participant loan repayments 2,994 1,835 945 1,137 151
204 461 - (7,727) -
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Inter-fund transfers (6,077) (2,427) 4,462 4,288 2,792
(4,420) 1,382 - - -
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Payments:
Participant withdrawals (13,912) (4,811) (1,651) (1,922)
(298) (361) (887) (936) - (24,778)
Participant loan withdrawals ( 3,187) (1,838) ( 913) (1,136)
(144) (193) (525) - 7,936 -
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Total payments (17,099) (6,649) (2,564) (3,058)
(442) (554) (1,412) (936) 7,936 (24,778)
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
Net assets - end of year $227,822 $135,361 $54,293 $71,046 $9,352
$ 8,102 $21,651 $17,667 $11,578 $556,872
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
________ ________ _______ _______ ______
_______ _______ _______ _______ ________
The accompanying notes and schedules are an integral part of these statements.
</TABLE>
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF THE PLAN
___________________
The Cummins Engine Company, Inc. and Affiliates Retirement and
Savings Plans (the Plan or the Plans) are defined contribution plans
that cover five employee groups, as described in Note 2.
Participants have the opportunity to make pre-tax and after-tax
contributions to the plan and can choose from seven different
investment options. Investment options and details of the plans are
described in Note 2 and Note 3.
2. SUMMARY OF ACCOUNTING POLICIES
______________________________
Basis of Combination
____________________
The Combining Statements of Net Assets and Changes in Net Assets
reflect the financial activity of the Retirement and Savings Plans of
Cummins Engine Company, Inc. (the Company) and certain subsidiary
companies (the Companies). These Plans include:
Cummins Engine Company, Inc. and Affiliates Retirement and Savings
Plan for Salaried and Non-Bargaining Hourly Employees (Salaried
Plan)
Cummins Engine Company, Inc. and Affiliates Retirement and Savings
Plan for Bargaining Unit Employees (Bargaining Plan)
Cummins Engine Company, Inc. Retirement and Savings Plan for Onan
Corporation Employees (Onan Plan)
Cummins Engine Company, Inc. Retirement and Savings Plan for
Lubricant Consultants, Inc. Employees (Lubricon Plan)
Cummins Engine Company, Inc. Retirement and Savings Plan for
Consolidated Diesel Company Employees (CDC Plan)
Trust Arrangements
__________________
A single trust arrangement is maintained with the Trustee for the
administration of all the investments in the Plans; however, the
Employee Stock Ownership Plan (ESOP) was maintained with The Northern
Trust Company (Vanguard assumed responsibility effective February
1997) for the ESOP portion of the Plans (as described in Note 3).
Accounting Method
_________________
Accounting records are maintained by the Trustee on a modified
cash basis. All material adjustments have been made to present the
financial statements under the accrual basis of accounting as
required by generally accepted accounting principles.
All investments included in the Combining Statements of Net
Assets and Schedule I and the investment related income included in
the Combining Statements of Changes in Net Assets reflect amounts
obtained from and certified by the respective trustees as being
complete and accurate.
Investments
___________
Investments held by the Trust are stated at market value except
for its investment contracts which are stated at contract value and
changes in market value are reflected in Fund investment income
(loss). Quoted market prices are used to value investments.
The Fixed Income Fund consists primarily of insurance contracts
and bank investment contracts with various insurance companies. The
insurance companies maintain investment accounts for each contract.
The accounts are credited with earnings on the underlying investments
at interest rates ranging from 4.95% to 7.88% for both 1996 and 1997
and charged for withdrawals and administrative expenses by the
insurance companies. The contracts are included in the financial
statements at contract value. Fair Values of the contracts
approximate $228,086,000 and $227,560,000 at December 31, 1997 and
1996, respectively. Contract values represent contributions made
under the contracts, plus earnings, less Plan withdrawals and
administrative expenses. The crediting interest rate is based on an
agreed upon formula with the issuer.
Assets of the Trust are segregated into seven investment funds:
the Cummins Engine Company, Inc. Fixed Income Fund, the Wellington
Fund, the Vanguard U.S. Growth Fund, the Vanguard Institutional Index
Fund, the Vanguard Explorer Fund, the Vanguard International Fund,
and the Cummins Common Stock Fund. Maintenance of separate funds
provides investment alternatives to participants in the Plans; the
allocation of investments between the funds is at the direction of
participants.
Like all the other investment alternatives, the Cummins Common
Stock Fund is valued in units. The net asset value per unit
fluctuates on a daily basis with the change in the price of Cummins
Stock. At December 31, 1997 there were a total of 2,599,000 units
and a net asset value of $29,680,000.
The assets of the Fixed Income Fund consist primarily of
insurance and bank investment contracts. The Wellington Fund
consists primarily of equity, fixed income, and cash equivalent
marketable securities. The Vanguard U.S. Growth Fund consists
primarily of long-term domestic and foreign capital growth stock.
The Vanguard Institutional Index Fund consists primarily of equity
and cash equivalent marketable securities whose investment results
should correspond to the performance of the Standard & Poor's 500
Composite Stock Price (S & P 500) Index. The Explorer Fund consists
of common stocks of small companies with favorable prospects for
above-average growth in market value. The International Fund
consists of a broadly diversified portfolio of non-U.S. equity
securities selected on the basis of relative value. The Cummins
Common Stock Fund consists of investments in Company common stock.
The ESOP Fund consists of matching contributions in the form of
common stock for certain plans. The Flexi Trust Fund also consists
of matching contributions in the form of common stock for certain
plans.
Effective January 1996, the Vanguard Institutional Index Fund
replaced Vanguard Index Trust-500 Fund.
Net investment income (loss) of each fund is allocated to each
Plan based on the relationship of each Plan's investment in the fund
to the total investment in the fund. Net investment income (loss) is
likewise allocated to participants based on the relationship of
participant account balances in each fund to the total balance in
each fund.
Participant Loans
_________________
The Plans permit participants to borrow portions of their
accounts subject to Department of Labor regulations. Participants
may take out loans limited to the lessor of $50,000 or 50 percent of
the present value of their accounts (excluding ESOP and Flexi Trust
accounts) over a period not to exceed 54 months. The annual interest
rate is the Prime Rate, as quoted in the Wall Street Journal, plus 1
percent. The amount used to secure a loan is 50 percent of the
participant's account balance.
Participant loan activity is reported in the Combining Statements
of Net Assets and Changes in Net Assets by Fund in the Loan Fund.
Administrative Expenses and Investment Advisory Fees
____________________________________________________
Administrative expenses such as record keeping fees are paid by
the Companies. Investment advisory fees for portfolio management of
Vanguard Funds are paid directly from fund earnings. Investment
advisory fees for the Fixed Income Fund are paid directly from the
fund. The trust agreement entitles the Trustee to receive reasonable
compensation for services rendered and expenses incurred in the
administration and execution of the Plans.
3. DESCRIPTION OF THE PLANS
________________________
Participation
_____________
Substantially all full-time, domestic employees of the Company
and designated subsidiaries are eligible to participate in one of the
Plans no later than the first day of the month following the 60th day
after date of employment. Nonresident aliens employed by the Company
or a foreign subsidiary are eligible to participate if the Company
owns at least 80 percent of the foreign subsidiary's common stock.
The Plans encourage voluntary savings through regular payroll
deductions. Subject to limitations contained in the Internal Revenue
Code and Regulations, participants may contribute up to 15 percent of
gross pay (10 percent with respect to certain highly compensated
participants) as pre-tax contributions, and 10 percent of gross pay
as after-tax contributions (not to exceed 20% in total). In
addition, participants are permitted to make voluntary additional
after-tax contributions once each year.
Either at the end of each Plan year or on a monthly basis
(monthly matching new in January, 1997), the Companies make matching
contributions for each participant's pre-tax and after-tax
contributions that remain in the Plans at the end of the Plan year or
month. The formulas for these matches, as set forth in the Plans,
vary for each Company (see Schedule III). Certain groups of
participants receive cash matches and other groups participate in the
ESOP and Flexi Trust (as described below) and receive matching
contributions in the form of Company common stock. All matching cash
contributions, ESOP shares, Flexi Trust shares, and earnings thereon
are immediately vested and nonforfeitable.
In July 1989, the Company established the ESOP Trust and sold
2,362,206 shares of its common stock at $31.75 per share (amounts
reflect two-for-one common stock split) to the ESOP Trust in exchange
for a $75 million promissory note (the Note) secured by the shares.
In December 1990, the ESOP Trust prepaid its then-current
indebtedness to the Company with proceeds from the issuance of
$72,750,000 of 8.76 percent ESOP Notes due 1998 and guaranteed by the
Company (see Note 6). The arrangement requires the Companies to
contribute an aggregate annual amount to the ESOP Trust equal to the
annual principal and interest payable under the terms of the Note
after application of dividends paid on shares held in the ESOP Trust.
As the ESOP Trust's indebtedness is repaid from these sources of
funds, shares are allocated to the accounts of participants in the
ESOP in relative proportion to each participant's contributions to
the Plans as well as dividends received on shares previously
allocated to the participant's account in the ESOP Trust. Effective
July, 1998 the ESOP Notes will be refinanced at 6.96 percent due 2010
and guaranteed by the Company (see Note 6). As of December 31, 1997,
1,030,978 shares were allocated and 1,331,228 remain unallocated in
the ESOP Trust.
In January 1997, the Company established the Flexi Trust and sold
3,750,000 shares of its common stock at $48.25 per share to the Flexi
Trust in exchange for a $180,937,500 promissory note (the Note) at
7.65 percent due 2012 secured by the shares. In the event
contributions to, and earnings of, the Trust are insufficient to
satisfy any installment of principal and interest on the due date
thereof, the Company (acting through the Trust Committee) may, in its
discretion, forgive such installment to the extent of the
insufficiency.
Participant and Company cash matching contributions are deposited
in the Trust and then invested in the seven investment funds in
accordance with participant elections. Account balances and
contributions can be invested in one or more of the seven investment
funds in multiples of 1 percent. Investment direction can be changed
daily with a limit of two times per month. Until February 3, 1997,
common stock account balances in the ESOP and Flexi Trust accounts
could not be redirected. As of February 3, 1997, participants 55
years of age or older are able to diversify their stock account
balances in the ESOP and Flexi Trust accounts into the other RSP
investment options. Investment experience is allocated to
participant accounts on a daily basis.
Participant Withdrawals
_______________________
Participants are permitted to withdraw their after-tax
contributions, the Company cash matching contributions (after
remaining in the account for two full plan years) and accumulated
earnings thereon. Participants are also permitted to take out loans
(see Note 2). In the event of financial hardship, participants are
permitted to withdraw pre-tax contributions and accumulated earnings
thereon. Each hardship withdrawal request, including proof of
financial hardship, is reviewed individually by the Plans'
Administrator. In-service withdrawals from the ESOP account are
prohibited.
Plan Payouts
____________
Upon termination of employment, immediate distribution is made to
those participants with account balances less than or equal to
$3,500. Terminating participants with account balances greater than
$3,500 must consent to any payment prior to the attainment of age 70
1/2. Participants who do not consent to immediate distribution may
subsequently elect in writing to begin receiving benefits as soon as
is practical, provided that in any event the distribution commences
no later than April 1 of the Plan year following the Plan year in
which age 70 1/2 occurs. Account balances remaining in the Plans
will continue to share in the earnings of the investments prior to
distribution. Distributions from the ESOP and Flexi Trust portions
of the Plans are in whole shares of stock allocated to participant
accounts, with cash for partial shares unless participants elect to
receive the entire distribution in cash at current market value.
4. PLAN AMENDMENTS
_______________
Effective January 1, 1996, the after-tax match for OCU employees
hired after June 19, 1990 and OCU-CMEP employees (Bargaining Plan)
was replaced by a pre-tax match of $1 for every $1 contributed up to
2% of gross pay and $.25 for every $1 contributed up to the next 4%
of gross pay.
Effective January 1, 1997, the pre- and after-tax matches for
Salaried and Nonbargaining Hourly and Consolidated Diesel Company
(CDC) was replaced by a pre-tax match of $.50 for every $1
contributed up to 6% of gross pay. However, hourly employees meeting
certain criteria at Jamestown, Charleston and CDC had the option of
adopting the above mentioned amendment or remaining with the old
plan.
As of February 3, 1997, participants 55 years of age or older are
able to diversify their stock account balances in the ESOP and Flexi
Trust accounts into the other RSP investment options.
5. TAX STATUS
__________
The Internal Revenue Service issued determination letters stating
that the Plans were qualified in accordance with applicable plan
design requirements as of their dates. In the opinion of the Plan
Administrator and Internal Tax Counsel, the Plans are currently
designed and continue to operate in a manner that qualifies them
under Internal Revenue Code (IRC) Section 401(a) and, therefore, are
exempt from income taxes under the provisions of IRC Section 501(a).
Accordingly, no provision for Federal income taxes has been made.
6. LONG-TERM DEBT
______________
The ESOP Trust has issued $72,750,000 of ESOP Notes due in 1998
with an annual interest rate of 8.76 percent payable semi-annually to
the Note holders (see Note 3). Effective January 1, 1993, the
interest rate on the notes was reduced to 8.68 percent due to a tax
law change. Effective July, 1998 the ESOP Notes will be refinanced
at 6.96 percent due 2010 and guaranteed by the Company. A principal
payment of $2.3 million is due in 1999. The final principal payment,
$3.15 million, is due on January 4, 2010.
7. PARTIES-IN-INTEREST AND REPORTABLE TRANSACTIONS
_______________________________________________
Party-in-interest transactions during the plan year ended
December 31, 1997 are included in Schedules I and II of these
statements.
Reportable transactions during the plan year ended December 31,
1997 are included in Schedule II of these statements.
<PAGE>
SCHEDULE I
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
EIN 35-0257090
ITEM 27 A: SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1997
(cost and market value amounts stated in 000's)
ISSUER/DESCRIPTION COST MARKET VALUE
_______________________________ ________ ____________
Salaried:
The Northern Trust Company
Short-Term Investment Fund $ 1,130 $ 1,130
Cummins Engine Company, Inc.
Fixed Income Fund**** 88,160 88,160
Vanguard Wellington Fund*** 74,789 96,263
Vanguard U.S. Growth Fund*** 40,676 57,069
Vanguard Index Trust Fund*** 57,236 79,880
Vanguard Explorer Fund*** 13,073 13,112
Vanguard International Fund*** 9,700 7,542
Cummins Engine Company, Inc.
Common Stock*** 73,911 148,332
Participant Loans (7.0%-10.0%) 6,346 6,346
________ ________
$365,021 $497,834
________ ________
Bargaining:
The Northern Trust Company
Short-Term Investment Fund $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 111,266 111,266
Vanguard Wellington Fund*** 48,880 62,915
Vanguard U.S. Growth Fund*** 14,533 20,390
Vanguard Index Trust Fund*** 25,949 36,215
Vanguard Explorer Fund*** 3,084 3,093
Vanguard International Fund*** 1,615 1,256
Cummins Engine Company, Inc.
Common Stock*** 4,928 9,890
Participant Loans (7.0%-10.0%) 4,142 4,142
________ ________
$214,397 $249,167
________ ________
Onan:
The Northern Trust Company
Short-Term Investment Fund $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 20,194 20,194
Vanguard Wellington Fund*** 23,226 29,895
Vanguard U.S. Growth Fund*** 11,928 16,735
Vanguard Index Trust Fund*** 16,104 22,475
Vanguard Explorer Fund*** 2,539 2,547
Vanguard International Fund*** 1,666 1,295
Cummins Engine Company, Inc.
Common Stock*** 1,603 3,217
Participant Loans (7.0%-10.0%) 1,475 1,475
________ ________
$ 78,735 $ 97,833
________ ________
Lubricon:
The Northern Trust Company
Short-Term Investment Fund $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 75 75
Vanguard Wellington Fund*** 80 103
Vanguard U.S. Growth Fund*** 83 116
Vanguard Index Trust Fund*** 95 133
Vanguard Explorer Fund*** 84 84
Vanguard International Fund*** 41 32
Cummins Engine Company, Inc.
Common Stock*** 10 21
Participant Loans (7.0%-10.0%) 28 28
________ ________
$ 496 $ 592
________ ________
CDC:
The Northern Trust Company
Short-Term Investment Fund $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 5,884 5,884
Vanguard Wellington Fund*** 4,467 5,750
Vanguard U.S. Growth Fund*** 3,107 4,359
Vanguard Index Trust Fund*** 3,990 5,569
Vanguard Explorer Fund*** 499 501
Vanguard International Fund*** 442 344
Cummins Engine Company, Inc.
Common Stock*** 888 1,783
Participant Loans (7.0%-10.0%) 1,102 1,102
________ ________
$ 20,381 $ 25,292
________ ________
Total:
The Northern Trust Company
Short-Term Investment Fund $ 1,130 $ 1,130
Cummins Engine Company, Inc.
Fixed Income Fund**** 225,579 225,579
Vanguard Wellington Fund*** 151,443 194,926
Vanguard U.S. Growth Fund*** 70,327 98,669
Vanguard Index Trust Fund*** 103,374 144,272
Vanguard Explorer Fund*** 19,279 19,337
Vanguard International Fund*** 13,465 10,469
Cummins Engine Company, Inc.
Common Stock*** 81,341 163,243
Participant Loans (7.0%-10.0%) 13,093 13,093
________ ________
$679,031 $870,718
________ ________
*** Identifies known party-in-interest to the plan
****See detail of Cummins Engine Company, Inc. Fixed Income Fund
following Schedule I.
<PAGE>
Schedule I
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND INVESTMENT PLANS
EIN 35-0257090
ITEM 27A: SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1997
(cost and market value amounts stated in 000's)
SECURITY NAME CONTRACT VALUE MARKET VALUE
UNDERLYING ASSET RATE AT 12/31/97 AT 12/31/97
__________________________ _____ ______________ ____________
AIG 129128 7.07% $ 8,883 $ 9,197
AIG 18175B 4.95% 3,048 3,048
Caisse Des Depots 31701 6.78% 10,054 10,270
Canada Life P45735 5.90% 7,308 7,308
Deutschi Bank VG-CUM-1 6.35% 17,833 18,008
Deutschi Bank VG-CUM-2 7.04% 8,385 8,689
John Hancock 8760 6.48% 7,452 7,452
Metropolitan 13753 6.93% 4,478 4,478
New York Life GA-06971 7.10% 6,380 6,380
New York Life GA-06971-002 7.32% 12,730 12,730
New York Life GA-30196 7.88% 12,865 12,865
New York Life GA-30196-002 7.35% 6,352 6,352
Principal 4-15203-1 7.75% 4,434 4,434
Principal 4-15203-2 7.86% 8,897 8,897
Principal 4-15203-3 7.30% 7,307 7,307
Prudential GA 5036-214 5.21% 4,941 4,941
Prudential GA 5036-216 7.26% 9,056 9,056
Rabobank CUM-119601 6.18% 10,654 10,875
Rabobank CUM-089501 6.38% 11,547 11,847
Rabobank CUM-049601 6.51% 11,129 11,585
Sun Life Canada S-0856-G 5.77% 10,487 10,487
Sun Life Canada S-0877-G 5.70% 6,416 6,416
Bank of Union Switzerland 2112 6.26% 14,044 14,372
WLB4001 6.21% 5,046 5,063
VGI Money Market Prime 5.48% 16,029 16,029
________ ________
Total $225,755 $228,086
________ ________
________ ________
<PAGE>
<TABLE>
Schedule II
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND INVESTMENT PLANS
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(amounts stated in 000's)
<CAPTION>
Par Value
Number of or Principal Purchased Sales
Current Gain or
Transactions Amount Cost
Proceeds Value (Loss)
____________ ____________ _________
________ _______ _______
<S> <C> <C> <C> <C>
<C> <C>
Description of Issue
____________________
Vanguard Wellington Fund*** 158 N/A $43,247 $
- - $43,247 $ -
Vanguard Wellington Fund*** 161 N/A 18,041
23,835 - 5,794
Vanguard World-U.S. Growth*** 161 N/A 23,263
- - 23,263 -
Vanguard World-U.S. Growth*** 161 N/A 14,647
20,525 - 5,878
VMMR - Prime Portfolio*** 147 N/A 59,055
- - 59,055 -
VMMR - Prime Portfolio*** 77 N/A 58,762
58,762 - -
Vanquard Institutional Index*** 184 N/A 36,258
- - 36,258 -
Vanquard Institutional Index*** 132 N/A 14,462
19,186 - 4,724
Fixed Income Fund 165 N/A 60,283
- - 60,283 -
Fixed Income Fund 159 N/A 61,717
61,717 - -
Cummins Common Stock Fund*** 163 N/A 22,561
- - 22,561 -
Cummins Common Stock Fund*** 151 N/A 10,914
15,230 - 4,316
Cummins ESOP Fund*** 85 N/A 3,328
4,125 - 797
Transfer of Assets from TNT 2 N/A -
- - 50,975 -
To Vanguard
***Identifies known party-in-interest to the plan
</TABLE>
<PAGE>
Schedule III
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
SCHEDULE OF MATCHING CONTRIBUTION FORMULAS
AS OF DECEMBER 31, 1997
LOC CASH ESOP STOCK
EMPLOYING COMPANY CODE LOCATION NAME CONTRIBUTIONS CONTRIBUTION
_________________ ____ _____________ _____________ ____________
Cummins Engine Company 110 Columbus Exempt No Yes(12)
" 120 Columbus DWU Yes(3)(4) No
" 121 Walesboro DWU Yes(13) No
" 122 DWU New Hires Yes(13) No
" 130 Columbus OCU Yes(3)(4) No
" 131 OCU New Hires Yes(13) No
" 132 Walesboro OCU Yes(13) No
" 135 Cols. Security No Yes(1)(2)
CADEC 190 CADEC No Yes(12)
Cummins Engine Company 200(O) CHS Mgmt. Services No Yes(1)(2)
" 200(N) CHS Mgmt. Services No Yes(12)
" 220(O) CTI Charleston No Yes(1)(2)
" 220(N) CTI Charleston No Yes(12)
Cummins Engine Company 240(O) CHS Cylinder Head No Yes(1)(2)
" 240(N) CHS Cylinder Heads No Yes(12)
" 250(O) CHS Recon No Yes(1)(2)
" 250(N) CHS Recon No Yes(12)
" 260(O) CHS Engr Test Svcs No Yes(1)(2)
" 260(N) CHS Engr Test Svcs No Yes(12)
" 291(O) Cummins Marine No Yes(1)(2)
" 291(N) Cummins Marine No Yes(12)
" 300(O) Jamestown No Yes(1)(2)
" 300(N) Jamestown No Yes(12)
" 301 JEP New Hires No Yes(12)
Cummins Natural Gas 390 Cummins Natural Gas No Yes(12)
Engines
Cummins Americas, Inc. 400 Miami PDC No Yes(12)
Atlas Crankshaft 500 Atlas Salaried No Yes(12)
" 510 Atlas Union Yes(14) No
Onan Corporation 550 Onan-Multiple Loc. Yes(8) Yes(7)
" 551 Onan Huntsville Yes(8) Yes(7)
" 552 Onan OPE St. Peter Yes(8) Yes(7)
Fleetguard, Inc. 600 Fleetguard TN No Yes(12)
Salaried
" 610 Fleetguard Lake No Yes(12)
Mills Salaried
" 620 Fleetguard Lake No Yes(1)(2)
Mills Hourly
Fleetguard, Inc. 630 Fleetguard TN Hrly Yes(9) No
Lubricant Consultants 640 Lubricon Yes(11) No
Kuss 650 Kuss Salaried No Yes(1)(2)
Kuss 651 Kuss Union No Yes(1)(2)
Cummins Engine Company 700 DRC Salaried No Yes(12)
" * 720 DRC TN Union Yes(10) No
Cummins Diesel Intl. 810 CDIL No Yes(12)
Consolidated Diesel Co. 900(O) Consol. Diesel Co. Yes(10)(6) No
" 900(N) Consol. Diesel Co. Yes(5) No
Holset Engr. Company 950 Holset Memphis No Yes(12)
" 951 Holset CHS No Yes(12)
" 952 Holset Air
Compressors No Yes(12)
*Participants at location 720 are not eligible to make Basic Savings
Contributions.
Matching Contribution Legend
____________________________
( 1) ESOP Stock Contribution based on 50% of 1st 2% of pay
contributed as a Pre-Tax Contribution.
( 2) ESOP Stock Contribution based on 50% of 1st $900 of pay
contributed as a Basic Savings Contribution.
( 3) Cash Contribution of 50% (up to a maximum of $325) of 1st 2%
of pay contributed as a Pre-tax Contribution.
( 4) Cash Contribution of 50% of the 1st $900 of pay contributed
as a Basic Savings Contribution.
( 5) Cash Contribution of 50% on 1st 6% of pay contributed as a Pre-tax
Contribution.
( 6) Cash Contribution based on 50% (up to a maximum of $900) on
1st $1,800 of pay contributed as a Basic Savings Contribution.
( 7) ESOP Stock Contribution based on 100% of 1st $250, 75% of next
$250, 50% of next $1,000, and 25% of next $1,000 (maximum
stock match = $1,187.50). NOTE: Applies to Pre-Tax
Contributions.
( 8) Cash Contribution of 25% of the 1st $1,000 of pay contributed
as a Basic Savings Contribution.
( 9) Cash Contribution of 50% of the 1st 2% of pay contributed as a
Pre-Tax Contribution with a minimum of $200 if at least 2% is
contributed.
(10) Cash Contribution of 50% of 1st 2% of pay contributed as a
Pre-Tax Contribution.
(11) Cash Contribution of 100% of 1st 2.5% of pay contributed as
a Pre-Tax Contribution.
(12) ESOP Stock Contribution based on 50% of 1st 6% of pay contributed as
a
Pre-Tax Contribution.
(13) Cash Contribution of $1 for $1 up to 2% of gross pay; $.25
on dollar up to next 4% of gross pay for pretax.
(14) Cash Contribution of $1 for $1 up to 2% of gross pay contributed
as a Pre-Tax Contribution.
<PAGE>
Schedule IV
Cummins Engine Company, Inc. and Affiliates
Retirement and Savings Plans
Employing Locations by Plan
As of December 31, 1997
Cummins Engine Company, Inc. and Affiliates Retirement and Savings Plan for
Salaried and Non-Bargaining Hourly Employees
EIN # 35-0257090
Plan 020
- ---------------------------------------------------------------------------
110 Columbus Exempt 400 Miami PDC
135 Columbus Security 500 Atlas Salaried
190 CADEC 600 Fleetguard TN Salaried
200 Charleston Management Svcs. 610 Fleetguard Lake Mills Salaried
220 CTI Charleston 620 Fleetguard Lake Mills Hourly
240 Headline 650 Kuss Salaried
250 Charleston ReCon 700 DRC Salaried
260 CHS Engr. Test Services 810 CDIL
291 Cummins Marine 950 Holset Memphis
300 Jamestown 951 Holset Charleston
301 Jamestown New Hires 952 Holset Air Compressors
390 Cummins Natural Gas Engines
Cummins Engine Company, Inc. Retirement and Savings Plan for
Onan Corporation Employees
EIN # 41-0965373
Plan 025
- --------------------------------------------------------------------------
550 Onan Multiple Locations 552 Onan OPE St. Peter
551 Onan Huntsville
Cummins Engine Company, Inc. Retirement and Savings Plan for
Consolidated Diesel Company Employees
EIN # 56-1896727
Plan 020
- -------------------------------------------------------------------------
900 Consolidated Diesel Company
901
<PAGE>
Schedule IV
Cummins Engine Company, Inc. and Affiliates
Retirement and Savings Plans
Employing Locations by Plan
Cummins Engine Company, Inc. Retirement and Savings Plan for
Lubricant Consultants, Inc. Employees
EIN # 22-2083361
Plan 020
- -------------------------------------------------------------------------
640 Lubricon
Cummins Engine Company, Inc. and Affiliates Retirement and Savings Plan for
Bargaining Unit Employees
EIN # 35-0257090
Plan 030
- ---------------------------------------------------------------------------
120 Columbus DWU 132 Walesboro OCU
121 Walesboro DWU 510 Atlas Hourly
122 DWU New Hires 630 Fleetguard TN Hourly
130 Columbus OCU 651 Kuss Union
131 OCU New Hires 720 DRC TN Union
<PAGE>
Schedule V
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
EIN 35-0257090
ITEM 27B: SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
AS OF DECEMBER 31, 1997
(amounts stated in 000's)
PRINCIPAL
ORIGINAL RECEIVED UNPAID
AMOUNT OF DURING PRINCIPAL AMOUNT
PLAN LOAN THE YEAR AT 12/31/97 OVERDUE
__________ _________ _________ ___________ _______
Salaried $212 $23 $135 $45
Bargaining 204 14 126 46
Onan 71 7 31 13
CDC 14 - 4 2
Lubricon 5 1 3 1
Participants may borrow amounts contributed up to 50% of the participant's
account balance, not to exceed $50,000. Loans must be repaid at least
quarterly over a period not to exceed five years. Interest rates vary
depending upon the time the loans are requested. A collection policy has
been implemented to tax all delinquent loans greater than 90 days past due
as distributions to the participant.
<PAGE>
SIGNATURE
_________
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
CUMMINS ENGINE COMPANY, INC.
RETIREMENT AND SAVINGS PLAN
____________________________
(Name of Plan)
By /s/ Lori G. Roberts
____________________
Lori G. Roberts
Secretary - Pension
Policy Committee
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
_________________________________________
As independent public accountants, we hereby consent to the
incorporation of our report dated June 17, 1998, included in this Form
11-K, into the Company's previously filed Registration Statement File
Nos. 2-32091, 2-53247, 2-58696, 33-2161, 33-8842, 33-31095,
33-37690, 33-46096, 33-46097, 33-46098, 33-50665, 33-56115, 333-2165,
333-31573 and 333-42687.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 17, 1998.
