UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
CUMMINS ENGINE COMPANY, INC.
____________________________
For the Quarter Ended March 28, 1999 Commission File Number 1-4949
______________ ______
Indiana 35-0257090
_______ __________
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
500 Jackson Street, Box 3005
____________________________
Columbus, Indiana 47202-3005
_________________ __________
(Address of Principal Executive Offices) (Zip Code)
812-377-5000
____________
(Registrant's Telephone Number)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the proceeding 12 months and (2) has been
subject to such filing requirements for the past 90 days:
Yes [x]
No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date:
As of March 28, 1999, the number of shares outstanding of the
registrant's only class of common stock was 42.2 million.
<PAGE>
TABLE OF CONTENTS
_________________
Page No.
________
PART I. FINANCIAL INFORMATION
______________________________
Item 1. Financial Statements
Consolidated Statement of Earnings for the First 3
Quarter Ended March 28, 1999 and March 29, 1998
Consolidated Statement of Financial Position at 4
March 28, 1999 and December 31, 1998
Consolidated Statement of Cash Flows for the First 5
Quarter Ended March 28, 1999 and March 29, 1998
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of 8
Operations, Cash Flow and Financial Condition
PART II. OTHER INFORMATION
___________________________
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Index to Exhibits 15
<PAGE>
CUMMINS ENGINE COMPANY, INC.
CONSOLIDATED STATEMENT OF EARNINGS
Unaudited
__________________________________
First Quarter Ended
Millions, except per share amounts 3/28/99 3/29/98
__________________________________ _______ _______
Net sales $1,505 $1,500
Cost of goods sold 1,204 1,160
Special charge - 43
______ ______
Gross profit 301 297
Selling & administrative expenses 178 202
Research & engineering expenses 54 67
Net expense from joint ventures & alliances 7 4
Interest expense 19 17
Other expense (income), net 7 (7)
______ ______
Earnings before income taxes 36 14
Provision for income taxes 10 4
Minority interest 2 3
______ ______
Net earnings $ 24 $ 7
______ ______
Basic earnings per share $ .63 $ .18
Diluted earnings per share .63 .18
Cash dividends declared per share .275 .275
<PAGE>
CUMMINS ENGINE COMPANY, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
____________________________________________
Millions, except per share amounts 3/28/99 12/31/98
__________________________________ _______ ________
Assets
Current assets:
Cash and cash equivalents $ 45 $ 38
Receivables 962 833
Inventories 733 731
Other current assets 283 274
______ ______
2,023 1,876
Investments and other assets 294 280
Property, plant & equipment less accumulated
depreciation of $1,464 and $1,424 1,655 1,671
Goodwill, net of amortization of $20 and $17 380 384
Other intangibles, deferred taxes & deferred charges 339 331
______ ______
Total assets $4,691 $4,542
______ ______
Liabilities and shareholders' investment
Current liabilities:
Loans payable $ 21 $ 64
Current maturities of long-term debt 27 26
Accounts payable 381 340
Other current liabilities 684 641
______ ______
1,113 1,071
______ ______
Long-term debt 1,213 1,137
______ ______
Other liabilities 1,003 1,000
______ ______
Minority interest 67 62
______ ______
Shareholders' investment:
Common stock, $2.50 par value, 48.3 and 48.1
shares issued 121 120
Additional contributed capital 1,126 1,121
Retained earnings 660 648
Accumulated other comprehensive income (166) (167)
Common stock in treasury, at cost, 6.1 shares (240) (240)
Common stock held in trust for employee benefit
plans, 3.6 shares (171) (172)
Unearned compensation (ESOP) ( 35) ( 38)
______ ______
1,295 1,272
______ ______
Total liabilities & shareholders' investment $4,691 $4,542
______ ______
<PAGE>
CUMMINS ENGINE COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
____________________________________
First Quarter Ended
Millions 3/28/99 3/29/98
________ _______ _______
Cash flows from operating activities:
Net earnings $ 24 $ 7
_____ _____
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization 56 47
Restructuring actions ( 5) ( 6)
Accounts receivable (130) (113)
Inventories ( 2) ( 54)
Accounts payable and accrued expenses 95 120
Income taxes payable ( 5) ( 7)
Equity in losses of joint ventures and alliances 11 7
Other ( 12) 20
_____ _____
Total adjustments 8 14
_____ _____
Net cash provided by operating activities 32 21
_____ _____
Cash flows from investing activities:
Property, plant and equipment:
Additions ( 37) ( 83)
Disposals 4 2
Investments in joint ventures and alliances ( 19) ( 20)
Acquisition and disposition of businesses 7 (453)
Other ( 1) -
_____ _____
Net cash used in investing activities ( 46) (554)
_____ _____
Net cash flows used for operating and
investing activities ( 14) (533)
_____ _____
Cash flows from financing activities:
Proceeds from borrowings 88 710
Payments on borrowings ( 11) (103)
Net payments under credit agreements ( 43) ( 62)
Dividend payments ( 12) ( 12)
Other ( 1) ( 1)
_____ _____
Net cash provided from financing activities 21 532
_____ _____
Net change in cash and cash equivalents 7 ( 1)
Cash & cash equivalents at beginning of the year 38 49
_____ _____
Cash & cash equivalents at the end of the quarter $ 45 $ 48
_____ _____
<PAGE>
CUMMINS ENGINE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
______________________________________________
Note 1. Accounting Policies: The Consolidated Financial Statements
for the interim periods ended March 28, 1999 and March 29, 1998 have
been prepared in accordance with the accounting policies described in
the Company's Annual Report to Shareholders and Form 10-K. Management
believes the statements include all adjustments of a normal recurring
nature necessary to present fairly the results of operations for the
interim periods. Inventory values at interim reporting dates are based
upon estimates of the annual adjustments for taking physical inventory
and for the change in cost of LIFO inventories.
Note 2. Acquisition: In January 1998, Cummins completed the
acquisition of the stock of Nelson Industries, Inc., for $453 million.
Nelson, a filtration and exhaust systems manufacturer, was consolidated
from the date of its acquisition. In accordance with APB Opinion
No.16, Nelson's net assets were recorded at fair value at the date of
acquisition. The purchase price in excess of net assets will be
amortized over 40 years.
Note 3. Special Charge: In the first quarter of 1998, the Company
recorded a special charge for product coverage expense primarily
attributable to the recent experience of higher-than-anticipated costs
to repair certain automotive engines manufactured in previous years.
The Company believes it was necessary to make a special charge of $43
million pre-tax to accrue for such product coverage costs expected to
be incurred in the future on these engines currently in the field.
Note 4. Income Taxes: Income tax expense is reported during the
interim reporting periods on the basis of the estimated annual
effective tax rate for the taxable jurisdictions in which the Company
operates.
Note 5. Long-term Debt: In February 1998, the Company issued $765
million face amount of notes and debentures. Net proceeds were used to
finance the acquisition of Nelson and pay down other indebtedness
outstanding at December 31, 1997.
Note 6. Earnings per Share: Basic earnings per share of common stock
are computed by dividing net earnings by the weighted-average number of
common shares outstanding during the period. Diluted earnings per
share are computed by dividing net earnings by the weighted-average
number of shares, assuming the exercise of stock options. Shares of
stock held by the employee benefits trust are not included in
outstanding shares for EPS until distributed from the trust.
Weighted Per-
Net Average Share
Millions, except per share amounts Earnings Shares Amount
__________________________________ ________ ________ ______
1999
____
Basic $24 38.5 $ .63
Options - -
___ ____
Diluted $24 38.5 $ .63
___ ____
1998
____
Basic $ 7 38.5 $ .18
Options - .4
___ ____
Diluted $ 7 38.9 $ .18
___ ____
Note 7. Comprehensive Income: Comprehensive income, which includes net
income and all other nonowner changes in equity during a period, is as
follows:
First Quarter Ended
Millions March 28, 1999 March 29, 1998
________ ______________ ______________
Net income $ 24 $ 7
Unrealized gain on securities 1 -
Translation loss - (19)
____ ____
Comprehensive income $ 25 $(12)
____ ____
Note 8. Segment Information: Operating segment information is as
follows:
Power Filtration
Millions Engine Generation And Other Total
________ ______ __________ __________ ______
Quarter Ended March 28, 1999
____________________________
Net sales $1,000 $251 $254 $1,505
Earnings before interest and
income taxes 27 2 26 55
Net assets 976 523 799 2,298
Quarter Ended March 29, 1998
____________________________
Net sales $ 953 $291 $256 $1,500
Earnings before interest,
income taxes & special charges 48 2 24 74
Special charges 43 - - 43
Earnings before interest and
income taxes 5 2 24 31
Net assets 1,170 540 814 2,524
Reconciliation to Consolidated Financial Statements:
First Quarter Ended
Millions 3/28/99 3/29/98
________ _______ _______
Earnings before interest and income taxes
for reportable segments $ 55 $ 31
Interest expense 19 17
Income tax expense 10 4
Minority interest 2 3
______ ______
Net earnings $ 24 $ 7
______ ______
Net assets for reportable segments $2,298 $2,524
Liabilities deducted in arriving at net assets 2,037 1,693
Deferred tax assets not allocated to segments 334 257
Debt-related costs not allocated to segments 22 22
______ ______
Total assets $4,691 $4,496
______ ______
<PAGE>
CUMMINS ENGINE COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS,
CASH FLOW AND FINANCIAL CONDITION
_____________________________________________________________
Overview
________
Net sales were $1.5 billion in the first quarter of 1999, essentially
flat with the first quarter of 1998. Earnings before interest and
taxes in the first quarter of 1999 were $55 million or 3.7 percent of
sales. Net earnings were $24 million or 63 cents per share compared to
$7 million or 18 cents per share in the first quarter of 1998.
Excluding the special charge for product coverage costs, net earnings
in the first quarter of 1998 were $37 million or 96 cents per share.
Results of Operations
_____________________
Net Sales:
__________
Revenues from sales of engines were 58 percent of the Company's net
sales in the first quarter of 1999, with engine revenues 6 percent
higher than first-quarter 1998 and unit shipments 10 percent higher.
This variance reflected a shift from heavy-duty and high-horsepower
engines to more mid-range engines in certain industrial markets and a
mix shift within the Company's medium-duty truck sales to lower unit
revenue engines.
First Quarter
Unit Shipments 1999 1998
________________ ______ ______
Midrange Engines 73,700 65,000
Heavy-duty Engines 26,800 26,900
High-horsepower Engines 2,000 2,200
_______ ______
102,500 94,100
_______ ______
Revenues from non-engine products, which were 42 percent of net sales
in the first quarter of 1999, were 6 percent lower than the first
quarter of 1998. This decrease was primarily due to the continued
softening of the power generation business in Asia.
The Company's sales for each of its key businesses during the
comparative first quarters were:
First Quarter
$ Millions 1999 1998
__________ ______ ______
Automotive markets $ 760 $ 684
Industrial markets 240 269
_____ _____
Engine Business 1,000 953
Power Generation Business 251 291
Filtration Business and Other 254 256
______ ______
$1,505 $1,500
______ ______
In the first quarter of 1999, engine business revenues of $1 billion
increased 5 percent as compared to the first quarter of 1998, primarily
due to the strength of the North American automotive market.
Sales of $760 million in the first quarter of 1999 for automotive
markets were 11 percent higher than the first quarter of 1998. Heavy-
duty truck revenues increased 8 percent from the first quarter of 1998
due to the strong market in North America, partially offset by reduced
demand in Mexican and European automotive markets.
Medium-duty truck revenues increased 14 percent from the first quarter
of 1998 due to higher sales of engines combined with lower kits and
parts sales. Revenues from the sales of engines for medium-duty trucks
in the first quarter of 1999 were 26 percent higher than the prior
year's quarter on a 43-percent increase in units. This variance
reflected a mix shift towards engines with a lower selling price and
margin.
Revenues of the bus and light commercial vehicle market were 15 percent
higher than the first quarter of 1998. In the first quarter of 1999,
Cummins shipped 25,300 engines to DaimlerChrysler, 14 percent higher
than the first-quarter 1998 level. Bus and recreational vehicle
volumes increased 27 percent from the year-ago quarter due to growth in
sales of midrange engines in North America.
Sales to industrial markets were 11 percent lower than the first
quarter of 1998, due to decreased volume and a shift in product mix.
Engine revenues for this market were down 13 percent on a 9-percent
decrease in units. Construction equipment business remained relatively
flat compared to first quarter 1998, while agricultural equipment
demand declined 51 percent from the prior year's quarter. Sales to
marine markets increased 9 percent from first quarter 1998, with a
shift to more mid-range engines in recreational applications. Mining
market sales decreased 12 percent as compared to the first quarter of
1998, reflecting lower high-horsepower engine volumes.
In the first quarter of 1999, sales for the Company's power generation
business decreased 14 percent compared to first quarter 1998. Sales of
the Company's generator sets were 18 percent below first quarter last
year due to declines in Latin America, which offset increased sales in
North America. Engine sales to generator set assemblers were down 15
percent and sales of alternators decreased 24 percent from the first
quarter of 1998 due to lower Asian demand. However, generator set
sales for the recreational vehicle market in North America continued to
be strong, with revenues 11 percent above the year-ago quarter.
Filtration business and other sales were $254 million in the first
quarter of 1999, essentially flat with the first quarter of 1998.
Within the filtration business, the Company was impacted by reduced
demand in agricultural and mining markets, offset by market gains in
Europe, South Africa and Australia.
In total, international markets represented 36 percent of the Company's
revenues in the first quarter of 1999. The Company experienced
declines in most of the international markets in which it participates.
Sales to Europe and the CIS, representing 12 percent of the Company's
sales in the first quarter of 1999, were 6 percent lower than the prior
year's quarter. Business in Mexico, Brazil and Latin America
represented 5 percent of sales in the first quarter of 1999, with
revenues 40 percent below the year-ago levels. Asia and Australian
markets, in total, represented 11 percent of sales in the first quarter
of 1999 as compared to 14 percent in the prior year's quarter. Sales
to Canada, representing 6 percent of sales in the first quarter of
1999, were 23 percent lower than the first quarter of 1998.
Gross Margin:
_____________
The Company's gross margin percentage was 20.0 percent in the first
quarter of 1999, compared to 19.8 percent in the prior year's quarter.
Gross margin percentage before the special charge for product coverage
costs was 22.7 percent in the first quarter of 1998. The decreased
margin in 1999 was due to higher product coverage costs, increased
costs related to new products, a change in product mix and the effect
of the devaluation of the Brazilian Real.
Operating Expenses:
___________________
Selling and administrative expenses as a percent of sales were 11.8
percent in the first quarter of 1999, compared to 13.4 percent in the
first quarter of 1998, a decrease of $24 million in absolute dollars.
This improvement is primarily a result of the Company's cost reduction
initiatives. Research and engineering expenses declined from 4.5
percent of sales in the first quarter of 1998 to 3.5 percent in the
first quarter of 1999, primarily due to new products moving into
production and some delay in the start-up of new programs.
The Company is continuing the restructuring plan implemented in the
third quarter of 1998. During the first quarter of 1999, $12 million
was charged against the liabilities associated with these actions. The
Company does not anticipate any material changes in the original charges
recorded for these actions.
The Company's losses from joint ventures and alliances were $7 million
in the first quarter of 1999, compared to $4 million in the first
quarter of 1998. This difference resulted from higher losses at the
Company's joint venture with Wartsila where business continues to be
affected by decreased demand in Asia.
Year 2000:
__________
The Company continues to address the impact of the Year 2000 issue on
its businesses worldwide. This issue affects computer systems that
have date-sensitive programs that may not properly recognize the year
2000. With respect to the Company, this issue affects not only
computer systems but also machinery and equipment used in production
that may contain embedded computer technology.
The Company's Year 2000 efforts are being carried out by the Company's
Year 2000 Program Office under the leadership of the Director of the
Year 2000 Program. The Year 2000 effort is being implemented at each
of the Company's facilities and is overseen by a Year 2000 coordinator.
In addition to internal resources, the Company continues to retain
external resources to assist with its Year 2000 program.
The Company's Year 2000 program involves: 1) mainframe (legacy systems);
2) distributed computing (includes manufacturing and warehousing systems,
end user computing, facility systems, laboratory equipment, technical
infrastructure and remote business systems); 3) products; 4) suppliers;
5) business readiness and contingency planning and 6) communication.
The general phases of the program are: a) inventory; b) analyze and
prioritize; c) determine compliance; d) remediate, replace or retire and
e) test, implement, audit and maintain.
The Company completed the inventorying, analyzing and prioritizing
phase of its mainframe and distributed computing in 1998. Substantial
portions of the Company's remediation and implementation efforts were
conducted in 1998, and the Company is on track to complete that process
by the end of the second quarter of 1999. Testing began in 1998 and
will continue through 1999. The Company's Year 2000 Program Office
continues to monitor the progress and compliance of its facilities
through audits and reports by the Year 2000 coordinators. The Company's
goal is to be Year 2000 ready by June 30, 1999. The Company will use
its best efforts to ensure that any Year 2000 item not completed by that
date would be completed well before the end of 1999.
During the first quarter, the Company announced that its commercial
products met the Company's Year 2000 compliance standards. For the
convenience of its customers, the Company continues to maintain a Year
2000 Internet website at www.cummins.com/custasis/y2k.html. The
Company's product compliance information is also included on that
website.
The greatest area of potential risk is the supply chain. This is
particularly true because the Company utilizes sole suppliers for
certain critical components used in the manufacture of the Company's
products. The high level of skill and expertise required to develop
certain components makes it impractical to change such suppliers
quickly. The failure of a sole supplier may lead to a delay in
production and/or business interruption. To mitigate this, the Company
continues its efforts to review the Year 2000 readiness of key
suppliers through a formal program of prioritization and communication
using questionnaires and/or personal follow up, as appropriate. To
further the Company's efforts with suppliers, the Company continues to
be a member of the Automotive Industry Action Group (AIAG).
There can be no assurances that the systems or products of third
parties relied upon by the Company, such as suppliers, vendors or
significant customers, will be timely converted or that a failure by
such third parties or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the
Company. Other undiscovered factors related to the Year 2000 issue may
also have potential for an adverse effect on the Company. Such adverse
effect may include an adverse effect on the Company's revenues.
The Company expects to incur total expenditures of approximately $45
million in connection with its Year 2000 program and remediation
efforts. To date, the Company has incurred approximately $35 million
in costs relating to its Year 2000 efforts.
The Company believes that its "reasonably likely worst case scenarios"
involve the failure of third parties with whom the Company does
business to address Year 2000 issues. As a result, in the following
months, the Company intends to focus on business readiness and
contingency planning to address possible external Year 2000 problems.
A significant part of this effort will be the evaluation of the risk to
the Company's operations from external sources, and the development of
strategies to manage those risks. The Company's efforts in this regard
include identifying alternate suppliers, vendors and procedures where
possible, conducting employee training and developing communication plans.
The Company's contingency planning also covers the identification and
evaluation of risk areas at the Company's international locations.
The Company believes that it is taking full advantage of its internal
resources and all necessary external resources to understand, identify
and correct all Year 2000 issues within its control. The Company is
also taking steps to minimize the impact of its exposure to Year 2000
risks outside its control.
The estimated time of completion and success of the Company's Year 2000
program and compliance efforts, and the expenses related to the
Company's Year 2000 compliance efforts are based upon management's best
estimates, which were based on assumptions of future events, including
the availability of certain resources, third party modification plans
and other factors. There can be no assurances that these results and
estimates will be achieved, and the actual results could materially
differ from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability
of trained personnel, the ability to locate and correct all relevant
computer code and failure by third parties.
Other:
______
Interest expense was $19 million in the first quarter of 1999, compared
to $17 million in the prior year's quarter. Other income decreased $14
million from the first quarter of 1998, due to Brazilian currency
translation losses, loss on various asset dispositions and reduction in
royalty income.
Provision for Income Taxes:
__________________________
The Company's income tax provision in the first quarter of 1999 was $10
million, reflecting an effective tax rate of 29 percent for the year.
Cash Flow and Financial Condition
_________________________________
Key elements of cash flows were:
First Quarter
$ Millions 1999 1998
__________ ______ ______
Net cash used for operating and investing activities $ (14) $(533)
Net cash from financing activities 21 532
_____ _____
Net change in cash and cash equivalents $ 7 $( 1)
_____ _____
In the first quarter of 1999, net cash used for operating and investing
activities was $14 million. The high level of net cash requirements in
the first quarter of 1998 was due primarily to the acquisition of
Nelson and planned capital expenditures of $83 million. In the first
quarter of 1998, the Company issued $765 million face amount of notes
and debentures to support working capital and to complete the
acquisition of Nelson.
FORWARD-LOOKING STATEMENTS
__________________________
When used herein, the terms "expect, plan, anticipate, believe" or
similar expressions, as they relate to the Company or its management,
are intended to identify forward-looking statements.
The Company has included certain forward-looking statements in this
Management's Discussion and Analysis of Results of Operations, Cash
Flow and Financial Condition. These statements are based on current
expectations, estimates and projections about the industries in which
the Company operates, management's beliefs and various assumptions made
by management which are difficult to predict. Among the factors that
could affect the outcome of the statements are general industry and
market conditions and growth rates. Therefore, actual outcomes and
their impact on the Company may differ materially from what is
expressed or forecasted. The Company undertakes no obligation to
update publicly any forward-looking statements, whether as a result of
new information, future events or otherwise.
<PAGE>
PART II. OTHER INFORMATION
___________________________
Item 4. Submission of Matters to a Vote of Security Holders
____________________________________________________________
The Company held its annual meeting of security holders on April 6,
1999 at which security holders elected 13 directors of the Company for
the ensuing year and ratified the appointment of Arthur Andersen LLP as
auditors for the year 1999.
Results of the voting in connection with each of the items were as
follows:
Voting on Directors:
____________________
For Withheld
__________ ________
H. Brown 36,074,950 1,402,960
R. Darnall 36,258,197 1,219,713
J. M. Deutch 36,247,396 1,230,514
W. Y. Elisha 36,245,001 1,232,909
H. H. Gray 36,148,638 1,329,272
J. A. Henderson 36,121,573 1,356,337
J. A. Johnson 36,249,849 1,228,061
W. I. Miller 36,259,031 1,218,879
W. D. Ruckelshaus 36,206,535 1,271,375
H. B. Schacht 36,235,405 1,242,505
T. M. Solso 36,015,077 1,462,833
F. A. Thomas 36,247,743 1,230,167
J. L. Wilson 36,211,409 1,266,501
Ratify Appointment of Auditors:
_______________________________
For Against Abstain
__________ _______ _______
36,684,408 602,364 191,138
With regard to the election of directors, votes were cast in favor of
or withheld from each nominee; votes that were withheld were excluded
entirely from the vote and had no effect. Abstentions on the
ratification of the appointment of Arthur Andersen LLP were counted as
present for purposes of determining the existence of a quorum. Under
the rules of the New York Stock Exchange, brokers who held shares in
street names had the authority to vote on certain items when they did
not receive instructions from beneficial owners. Brokers who did not
receive instructions were entitled to vote on the election of
directors. Under applicable Indiana law, a broker non-vote had no
effect on the outcome of the election of directors.
Item 6. Exhibits and Reports on Form 8-K:
__________________________________________
(a) See the Index to Exhibits on Page 15 for a list of exhibits filed
herewith.
(b) The Company was not required to file a Form 8-K during the first
quarter of 1999.
<PAGE>
Signatures
__________
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CUMMINS ENGINE COMPANY, INC.
By: /s/Rick J. Mills May 4, 1999
________________
Rick J. Mills
Vice President - Corporate Controller
(Chief Accounting Officer)
<PAGE>
CUMMINS ENGINE COMPANY, INC.
____________________________
INDEX TO EXHIBITS
_________________
27 Financial Data Schedule (filed herewith)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-28-1999
<CASH> 45
<SECURITIES> 0
<RECEIVABLES> 962
<ALLOWANCES> 0
<INVENTORY> 733
<CURRENT-ASSETS> 2,023
<PP&E> 3,119
<DEPRECIATION> 1,464
<TOTAL-ASSETS> 4,691
<CURRENT-LIABILITIES> 1,113
<BONDS> 1,213
0
0
<COMMON> 121
<OTHER-SE> 1,174
<TOTAL-LIABILITY-AND-EQUITY> 4,691
<SALES> 1,505
<TOTAL-REVENUES> 1,505
<CGS> 1,204
<TOTAL-COSTS> 1,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 36
<INCOME-TAX> 10
<INCOME-CONTINUING> 24
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
