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, 1998
_________________
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, 1998 AND 1997
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 1
Combining Statements of Net Assets by Plan 2-3
Combining Statements of Changes in Net Assets by Plan 4-6
Combining Statements of Net Assets by Fund 7-8
Combining Statements of Changes in Net Assets by Fund 9-11
Notes to Financial Statements 12-20
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, 1998 and 1997, and the related statements of changes in net
assets by plan and by fund, for the years ended December 31, 1998,
1997 and 1996. 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, 1998 and 1997, and the changes in the net assets for
the years ended December 31, 1998, 1997 and 1996, 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 1, 1999.
<PAGE>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF NET ASSETS BY PLAN
DECEMBER 31, 1998
(stated in OOO's)
<TABLE>
<CAPTION>
Salaried Bargaining Onan Lubricon
CDC Total
________ __________ _______ ________
_______ ________
<S> <C> <C> <C> <C>
<C> <C>
Assets
______
Cash and investments:
Cash and Cash Equivalents $ 1,290 $ - $ - $ -
$ - $ 1,290
Cummins Engine Company, Inc.
Fixed Income Fund at contract 95,344 116,675 19,721 23
7,077 238,840
value (Note 2)
Vanguard Wellington Fund 99,607 62,609 29,501 88
6,436 198,241
Vanguard U.S. Growth Fund 79,025 29,491 21,470 145
6,823 136,954
Vanguard Index Trust Fund 97,714 41,462 26,094 148
7,640 173,058
Vanguard Explorer Fund 10,834 1,992 2,182 80
439 15,527
Vanguard International Fund 7,669 1,090 1,447 31
405 10,642
Cummins Engine Company, Inc.
Common Stock 109,977 20,319 5,994 9
2,129 138,428
Participant Loans 5,148 3,808 1,121 27
1,118 11,222
________ ________ _______ ____
_______ ________
Total cash and investments 506,608 277,446 107,530 551
32,067 924,202
________ ________ _______ ____
_______ ________
Receivables:
Employer contributions 6,394 1,538 149 -
681 8,762
Employee contributions 1,605 1,378 358 -
305 3,646
Employee loan repayments 275 233 66 -
87 661
Accrued interest 1 - - -
- - 1
________ ________ _______ ____
_______ ________
Total receivables 8,275 3,149 573 -
1,073 13,070
________ ________ _______ ____
_______ ________
Total assets 514,883 280,595 108,103 551
33,140 937,272
________ ________ _______ ____
_______ ________
Liabilities
___________
Interest payable 1,856 - - -
- - 1,856
Note payable - ESOP 63,250 - - -
- - 63,250
Administrative Fees Payable 4 4 1 -
- - 9
________ ________ _______ ____
_______ ________
Total liabilities 65,110 4 1 -
- - 65,115
________ ________ _______ ____
_______ ________
Net Assets $449,773 $280,591 $108,102 $551
$33,140 $872,157
________ ________ _______ ____
_______ ________
________ ________ _______ ____
_______ ________
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, 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 CHANGES IN NET ASSETS BY PLAN
DECEMBER 31, 1998
(stated in OOO's)
<TABLE>
<CAPTION>
Salaried Bargaining Onan
Lubricon CDC Total
________ __________ _______
________ _______ ________
<S> <C> <C> <C> <C>
<C> <C>
Net Assets - beginning of year $435,523 $252,188 $98,395
$613 $26,355 $813,074
________ ________ _______
____ _______ ________
Investment income:
Fund investment income 58,052 28,316 15,696
91 4,197 106,352
Interest income 157 - -
- - - 157
Dividend income 2,093 - -
- - - 2,093
Net realized & unrealized depreciation
in the value of investments (52,861) - -
- - - (52,861)
_________ ________ _______
____ _______ _________
Total investment income 7,441 28,316 15,696
91 4,197 55,741
Less: investment advisory expense 5 - -
- - - 5
interest expense 4,523 - -
- - - 4,523
________ ________ _______
____ _______ ________
Net investment income 2,913 28,316 15,696
91 4,197 51,213
________ ________ _______
____ _______ ________
Contributions:
Employer 15,355 1,421 231
6 1,318 18,331
Employee 23,995 13,912 5,466
(1) 2,843 46,215
Rollover 3,338 279 185
- - 228 4,030
________ ________ _______
____ _______ ________
Total contributions 42,688 15,612 5,882
5 4,389 68,576
________ ________ _______
____ _______ ________
Participant withdrawals (31,724) (15,228) (11,806)
(119) (1,829) (60,706)
Inter-plan transfers 373 (298) (64)
(39) 28 -
________ _________ _______
____ _______ ________
Net assets - end of year $449,773 $280,591 $108,102
$551 $33,140 $872,157
________ ________ _______
____ _______ ________
________ ________ _______
____ _______ ________
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>
<TABLE>
CUMMINS ENGINE COMPANY, INC. AND
AFFILIATES
RETIREMENT AND SAVINGS PLANS
COMBINING STATEMENTS OF NET ASSETS BY
FUND
DECEMBER 31, 1998
(stated in OOO's)
<CAPTION>
Fixed U.S. Index Explorer
Interna- Cummins Flexi Loan
Income Wellington Growth Fund Fund
tional 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 $ - $ - $ - $ - $ - $
- - $ - $ 993 $ 297 $ - $ 1,290
Cummins Engine Company,Inc.
Fixed Income Fund 238,840 - - - -
- - - - - - 238,840
Vanguard Wellington Fund - 198,241 - - -
- - - - - - 198,241
Vanguard U.S. Growth Fund - - 136,954 - -
- - - - - - 136,954
Vanguard Index Trust Fund - - - 173,058 -
- - - - - - 173,058
Vanguard Explorer Fund - - - - 15,527
- - - - - - 15,527
Vanguard International Fund - - - - -
10,642 - - - - 10,642
Cummins Engine Company, Inc.
Common Stock - - - - -
- - 56,638 74,745 7,046 - 138,428
Participant Loans - - - - -
- - - - - 11,222 11,222
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total cash and investments 238,840 198,241 136,954 173,058 15,527
10,642 56,638 75,738 7,343 11,222 924,202
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Receivables:
Employer contributions 1,171 419 316 352 42
31 125 6,288 18 - 8,762
Employee contributions 980 811 663 797 106
68 221 - - - 3,646
Employee loan repayments 204 150 109 132 12
8 46 - - - 661
Accrued interest - - - - -
- - - 1 - - 1
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total receivables 2,355 1,380 1,088 1,281 160
107 392 6,289 18 - 13,070
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total assets 241,195 199,621 138,042 174,339 15,687
10,749 57,030 82,027 7,361 11,222 937,272
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Liabilities
___________
Interest payable - - - - -
- - - 1,856 - - 1,856
Note payable - ESOP - - - - -
- - - 63,250 - - 63,250
Administrative Fees Payable 9 - - - -
- - - - - - 9
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total liabilities 9 - - - -
- - - 65,106 - - 65,115
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Net Assets $241,186 $199,621 $138,042 $174,339 $15,687
$10,749 $57,030 $16,921 $7,360 $11,222 $872,157
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
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
Interna- Cummins Flexi Loan
Income Wellington Growth Fund Fund
tional 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 CHANGES IN NET ASSETS
BY FUND
DECEMBER 31, 1998
(stated in OOO's)
<CAPTION>
Fixed U.S.
Interna- Cummins Flexi Loan
Income Wellington Growth Index Explorer
tional Stock ESOP Trust Fund Total
________ __________ _______ _______ _______
_______ _______ _______ _____ _______ ________
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
Net Assets - beginning of year $227,824 $196,352 $99,574 $145,443 $19,529
$10,584 $29,684 $64,668 $6324 $13,092 $813,074
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Investment income:
Fund investment income (loss) 15,129 22,064 38,739 39,382 281
1,699 (10,945) - - - 106,350
Interest income - - - - -
- - - 20 136 - 156
Dividend income - - - - -
- - - 2,093 - - 2,093
Net realized and unrealized
depreciation in the value
of investments - - - - -
- - - (50,286) (2574) - (52,860)
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ _________
Total investment income (loss) 15,129 22,064 38,739 39,382 281
1,699 (10,945) (48,173) (2438) - 55,739
Less: investment advisory expense - - - - -
- - - 5 - - 5
interest expense - - - - -
- - - 4,523 - - 4,523
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Net investment income (loss) 15,129 22,064 38,739 39,382 281
1,699 (10,945) (52,701) (2438) - 51,211
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Contributions:
Employer 1,217 561 451 499 66
46 175 11,559 3758 - 18,332
Employee 11,296 10,913 8,369 10,573 1,731
1,110 2,224 - - - 46,216
Rollover 1,565 538 628 678 123
73 424 - - - 4,029
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total contributions 14,078 12,012 9,448 11,750 1,920
1,229 2,823 11,559 3758 - 68,577
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Participant loan repayments 2,608 2,047 1,482 1,852 219
150 503 - - (8,860) 1
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Inter-fund transfers 6,625 (18,846) (2,838) (13,235) (5,531)
(2,185) 36,642 (571) (62) - -
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Payments:
Participant withdrawals (23,183) (12,208) (7,142) (9,329) (601)
(644) (1,344) (6,033) (222) - (60,706)
Participant loan withdrawals ( 1,896) (1,800) (1,221) (1,524) (129) (
86) ( 334) - - 6,990 -
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Total payments (25,079) (14,008) (8,363) (10,853) (730)
(730) (1,678) (6,033) (222) 6,990 (60,706)
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
Net Assets - end of year $241,185 $199,621 $138,042 $174,339 $15,687
$10,749 $57,030 $16,921 $7360 $11,222 $872,157
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
________ ________ _______ _______ _______
_______ _______ _______ _____ _______ ________
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.
Interna- Cummins Flexi Loan
Income Wellington Growth Index Explorer
tional 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 (1,482) (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.
Interna- Cummins Loan
Income Wellington Growth Index Explorer
tional 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>
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
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 Vanguard Group
(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 through January 31, 1997.
Effective February 1997, Vanguard assumed responsibility 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
the investment contracts, within the Fixed Income Fund, which are stated at
contract value. Changes in market value of the investment contracts are
reflected in Fund investment income(loss)on the Combining Statements of
Changes in Net Assets. 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 5.48% to 7.88% for both 1997 and 1998 and charged for
withdrawals and administrative expenses by the insurance companies. The
contracts are included in the financial statements at contract value as
reported to the Plan by the investment administrator. 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,
1998 there were a total of 8,079,000 units and a net asset value of
$56,637,858.
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
Cummins company stock available for matching contributions for certain
plans. The Flexi Trust Fund also consists of matching contributions in the
form of common stock for certain plans.
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 and ESOP Fund are paid
directly from the fund, which are included in fund investment income
on the Combining Statement of Changes in Net Assets. 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 were refinanced at 6.96 percent due 2010 and guaranteed by the
Company (see Note 6). As of December 31, 1998, 1,164,180 shares were
allocated and 1,198,026 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 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. Fund reallocations 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.
Federal Income Tax Effect to Participants
_________________________________________
The Plan was established as a qualified plan under Section 401(a) of
the Code. This means that a participant is not subject to Federal income
taxes on amounts contributed to the participant's account or earnings
thereon, until such amounts are distributed to the participant or to a
beneficiary in the event of the participant's death. Contributions to the
participant's account are subject to Federal employment (FICA) taxes.
If a participant receives a distribution from his/her account
prior to obtaining age 59-1/2, such distribution is taxed as ordinary
income and may be subject to an additional 10% penalty tax unless one
of the statutory exceptions to such penalty tax applies.
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
$5,000. Terminating participants with account balances greater than
$5,000 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.
Plan Termination
________________
While it has not expressed any intention to do so, the Company has the
right to terminate the Plan subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). Upon partial or total
termination of the Plan, the participants' accounts shall become fully
vested and nonforfeitable.
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. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
___________________________________________________
The following is a reconciliation of net assets available for plan
participants as indicated in the financial statements to the federal tax
Form 5500.
Year Ended December 31,
--------------------------------
1998 1997 1996
____________ ____ ____
Net assets available for plan
participants as indicated
in the financial statements $872,157,000 $ - $ -
Amounts allocated to withdrawing
participants (3,103,283) - -
_____________ ____ ____
Net Assets available for plan
participants as indicated
in the Form 5500 $869,053,717 $ - -
____________ ____ ____
____________ ____ ____
The following is a reconciliation of benefits paid to participants as
indicated in the financial statements to the Form 5500.
Year Ended December 31,
--------------------------------
1998 1997 1996
____________ ____ ____
Participant benefit payments
as indicated in the
financial statements $ 60,706,000 $ - $ -
Amounts allocated to withdrawing
participants 3,103,283 - -
_____________ ____ ____
Participant benefit payments
as indicated in the Form 5500 $ 63,809,283 $ - -
____________ ____ ____
____________ ____ ____
7. 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 were refinanced at 6.96 percent due 2010 and guaranteed
by the Company. The final principal payment, $3.15 million, is due on
January 4, 2010.
8. PARTIES-IN-INTEREST AND REPORTABLE TRANSACTIONS
_______________________________________________
Party-in-interest transactions during the plan year ended December 31,
1998 are included in Schedules I and II of these statements.
Reportable transactions during the plan year ended December 31, 1998
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, 1998
(cost and market value amounts stated in 000's)
ISSUER/DESCRIPTION COST MARKET VALUE
_______________________________ ________ ____________
Salaried:
Vanguard VMMR Prime Portfolio $ 1,290 $ 1,290
Cummins Engine Company, Inc.
Fixed Income Fund**** 95,344 95,344
Vanguard Wellington Fund*** 82,784 99,607
Vanguard U.S. Growth Fund*** 50,373 79,025
Vanguard Index Trust Fund*** 61,482 97,714
Vanguard Explorer Fund*** 10,434 10,834
Vanguard International Fund*** 8,565 7,669
Cummins Engine Company, Inc.
Common Stock*** 100,980 109,977
Participant Loans (7.0%-10.0%) 5,148 5,148
________ ________
$416,481 $506,689
________ ________
Bargaining:
Vanguard VMMR Prime Portfolio $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 116,675 116,675
Vanguard Wellington Fund*** 52,035 62,609
Vanguard U.S. Growth Fund*** 18,798 29,491
Vanguard Index Trust Fund*** 26,088 41,462
Vanguard Explorer Fund*** 1,918 1,992
Vanguard International Fund*** 1,217 1,090
Cummins Engine Company, Inc.
Common Stock*** 18,657 20,319
Participant Loans (7.0%-10.0%) 3,808 3,808
________ ________
$239,296 $277,545
________ ________
Onan:
Vanguard VMMR Prime Portfolio $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 19,721 19,721
Vanguard Wellington Fund*** 24,519 29,501
Vanguard U.S. Growth Fund*** 13,686 21,470
Vanguard Index Trust Fund*** 16,419 26,094
Vanguard Explorer Fund*** 2,101 2,182
Vanguard International Fund*** 1,616 1,447
Cummins Engine Company, Inc.
Common Stock*** 5,504 5,994
Participant Loans (7.0%-10.0%) 1,121 1,121
________ ________
$ 84,703 $107,547
________ ________
Lubricon:
Vanguard VMMR Prime Portfolio $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 23 23
Vanguard Wellington Fund*** 73 88
Vanguard U.S. Growth Fund*** 92 144
Vanguard Index Trust Fund*** 94 149
Vanguard Explorer Fund*** 77 80
Vanguard International Fund*** 35 31
Cummins Engine Company, Inc.
Common Stock*** 8 9
Participant Loans (7.0%-10.0%) 27 27
________ ________
$ 429 $ 551
________ ________
CDC:
Vanguard VMMR Prime Portfolio $ - $ -
Cummins Engine Company, Inc.
Fixed Income Fund**** 7,077 7,077
Vanguard Wellington Fund*** 5,349 6,436
Vanguard U.S. Growth Fund*** 4,349 6,823
Vanguard Index Trust Fund*** 4,807 7,640
Vanguard Explorer Fund*** 424 440
Vanguard International Fund*** 451 404
Cummins Engine Company, Inc.
Common Stock*** 1,955 2,129
Participant Loans (7.0%-10.0%) 1,118 1,118
________ ________
$ 25,536 $ 32,073
________ ________
Total:
Vanguard VMMR Prime Portfolio $ 1,290 $ 1,290
Cummins Engine Company, Inc.
Fixed Income Fund**** 238,840 239,840
Vanguard Wellington Fund*** 164,760 198,241
Vanguard U.S. Growth Fund*** 87,298 136,954
Vanguard Index Trust Fund*** 108,890 173,059
Vanguard Explorer Fund*** 14,954 15,527
Vanguard International Fund*** 11,884 10,641
Cummins Engine Company, Inc.
Common Stock*** 127,104 138,428
Participant Loans (7.0%-10.0%) 11,222 11,222
________ ________
$766,444 $924,405
________ ________
*** Identifies known party-in-interest to the plan
****See detail of Cummins Engine Company, Inc. Fixed Income Fund
following Schedule IA.
<PAGE>
Schedule IA
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
EIN 35-0257090
ITEM 27A: SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
(cost and market value amounts stated in 000's)
SECURITY NAME COST CONTRACT VALUE
UNDERLYING ASSET RATE AT 12/31/98 AT 12/31/98
__________________________ _____ ______________ ____________
AIG 1035 5.50% $ 12,030 $ 12,030
AIG 129128 7.15% 9,520 9,520
Caisse Des Depots 31701 6.78% 10,054 10,054
Canada Life P46010 6.17% 10,432 10,432
Deutsche Bank VG-CUM-1 6.41% 18,975 18,975
Deutsche Bank VG-CUM-2 7.11% 8,981 8,981
John Hancock 8760 6.48% 7,935 7,935
John Hancock 9729 6.23% 10,502 10,502
Life of Virginia 3144 6.18% 5,181 5,181
Metropolitan 13753 6.93% 4,788 4,788
New York Life GA-06971 7.10% 6,833 6,833
New York Life GA-06971-002 7.32% 13,662 13,662
New York Life GA-30196 7.88% 6,843 6,843
New York Life GA-30196-002 7.35% 6,352 6,352
Principal 4-15203-1 7.75% 4,778 4,778
Principal 4-15203-2 7.86% 3,199 3,199
Principal 4-15203-3 7.30% 7,841 7,841
Prudential GA 5036-215 7.26% 9,713 9,713
Rabobank CUM-119601 6.47% 11,325 11,325
Rabobank CUM-089501 6.59% 12,295 12,295
Rabobank CUM-049601 6.91% 11,880 11,880
Bank of Union Switzerland 2112 6.48% 14,937 14,937
WLB4001 6.16% 5,360 5,360
VGI Money Market Prime 5.48% 25,424 25,424
________ ________
Total Cummins Engine Company, Inc.
Fixed Income Fund $238,840 $238,840
________ ________
________ ________
<PAGE>
<TABLE>
Schedule II
CUMMINS ENGINE COMPANY, INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLANS
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(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>
Party Involved
___________________________
Vanguard Wellington Fund*** 138 N/A $46,234 $
- - $46,234 $ -
Vanguard Wellington Fund*** 180 N/A 32,918
42,793 - 9,875
Vanguard - U.S. Growth*** 169 N/A 34,845
- - 34,845 -
Vanguard - U.S. Growth*** 150 N/A 17,874
26,758 - 8,884
VMMR - Prime Portfolio*** 168 N/A 62,891
- - 62,891 -
VMMR - Prime Portfolio*** 69 N/A 62,105
62,105 - -
Vanquard Index*** 148 N/A 33,215
- - 33,215 -
Vanquard Index*** 170 N/A 27,700
40,078 - 12,378
Cummins Engine Company, Inc.
Fixed Income Fund 159 N/A 79,356
- - 79,356 -
Cummins Engine Company, Inc.
Fixed Income Fund 157 N/A 65,903
65,903 - -
Cummins Common Stock Fund*** 182 N/A 52,512
- - 52,512 -
Cummins Common Stock Fund*** 132 N/A 14,222
13,704 - (518)
***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, 1998
Loc Cash ESOP Stock
Employing Company Code Location Name Contributions Contribution
_________________ ____ _____________ _____________ ____________
Cummins Engine Company 110 Columbus Exempt No Yes(11)
" 120 Columbus DWU Yes(3)(4) No
" 121 Walesboro DWU Yes(12) No
" 122 DWU New Hires Yes(12) No
" 130 Columbus OCU Yes(3)(4) No
" 131 OCU New Hires Yes(12) No
" 132 Walesboro OCU Yes(12) No
" 135 Columbus Security No Yes(1)(2)
CADEC 190 CADEC No Yes(11)
Cummins Engine Company 200(O) CHS Mgmt. Services No Yes(1)(2)
" 200(N) CHS Mgmt. Services No Yes(11)
Cummins Engine Company 240(O) CHS Cylinder Head No Yes(1)(2)
" 240(N) CHS Cylinder Heads No Yes(11)
" 250(O) CHS Recon No Yes(1)(2)
" 250(N) CHS Recon No Yes(11)
" 260(O) CHS Engr.Test Svcs. No Yes(1)(2)
" 260(N) CHS Engr.Test Svcs. No Yes(11)
" 291(O) Cummins Marine No Yes(1)(2)
" 291(N) Cummins Marine No Yes(11)
" 300(O) Jamestown No Yes(1)(2)
" 300(N) Jamestown No Yes(11)
" 301 JEP New Hires No Yes(11)
Cummins Natural Gas 390 Cummins Natural Gas No Yes(11)
Engines
Cummins Americas, Inc. 400 Miami PDC No Yes(11)
Atlas Crankshaft 500 Atlas Salaried No Yes(11)
" 510 Atlas Union Yes(13) 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(11)
Salaried
" 610 Fleetguard Lake No Yes(11)
Mills Salaried
" 620 Fleetguard Lake No Yes(1)(2)
Mills Hourly
Fleetguard, Inc. 630 Fleetguard TN Hrly Yes(9) 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(11)
" * 720 DRC TN Union Yes(10) No
Cummins Diesel Intl. 810 CDIL No Yes(11)
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(11)
" 951 Holset Charleston No Yes(11)
" 952 Holset Air
Compressors No Yes(11)
*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 max 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 max 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 (max
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) ESOP Stock Contribution based on 50% of 1st 6% of pay contributed as
a Pre-Tax Contribution
(12) Cash Contribution of $1 for $1 up to 2% of gross pay; $.25
on dollar up to next 4% of gross pay for Pre-Tax
(13) 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, 1998
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
240 Charleston Headline 620 Fleetguard Lake Mills Hourly
250 Charleston ReCon 650 Kuss Salaried
260 Charleston Engr. Test Services 700 DRC Salaried
291 Cummins Marine 810 CDIL
300 Jamestown 950 Holset Memphis
301 Jamestown New Hires 951 Holset Charleston
390 Cummins Natural Gas Engines 952 Holset Air Compressors
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
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, 1998
(amounts stated in 000's)
PRINCIPAL
ORIGINAL RECEIVED UNPAID
AMOUNT OF DURING PRINCIPAL AMOUNT
PLAN LOAN THE YEAR AT 12/31/98 OVERDUE
__________ _________ _________ ___________ _______
Salaried $305 $32 $155 $43
Bargaining 270 17 197 56
Onan 74 7 44 13
CDC 13 3 8 2
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/ Dave C. Wright
___________________
Dave C. Wright
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 1, 1999, 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, 333-42687 and 333-67391.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 1, 1999.
