TABLE OF CONTENTS
~~~~~~~~~~~~~~~~~
Page No.
~~~~~~~~
PART I. FINANCIAL INFORMATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Item 1. Financial Statements
Consolidated Statement of Earnings for the FirstSecond 2
Quarter and First Half Ended AprilJuly 3, 1994 and
AprilJuly 4, 1993
Consolidated Statement of Financial Position at 3
AprilJuly 3, 1994 and December 31, 1993
Consolidated Statement of Cash Flows for the First 4
QuarterHalf Ended AprilJuly 3, 1994 and AprilJuly 4, 1993
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of 6
Operations and Financial Condition
PART II. OTHER INFORMATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 1210
Index to Exhibits 14
(Page)12
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
CONSOLIDATED STATEMENT OF EARNINGS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Unaudited
~~~~~~~~~
(Millions, Except per Share Amounts)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Second Quarter First Half
~~~~~~~~~~~~~~~~~~ First Quarter Ended
4/3/94 4/4/93~~~~~~~~~~~~~~~~~~
1994 1993 1994 1993
~~~~~~~~ ~~~~~~~~ ~~~~~~~~ ~~~~~~~~
NET SALES $1,099.2 $1,048.4$1,204.9 $1,093.4 $2,304.1 $2,141.8
Cost of goods sold 828.6 797.4907.2 832.8 1,735.8 1,630.2
~~~~~~~~ ~~~~~~~~ ~~~~~~~~ ~~~~~~~~
GROSS PROFIT 270.6 251.0297.7 260.6 568.3 511.6
Selling & administrative expenses 148.6 140.6160.8 145.4 309.4 286.0
Research & engineering expenses 54.0 49.656.4 52.0 110.4 101.6
Interest expense 4.5 9.64.6 9.1 9.1 18.7
Other (income) expense, - 3.4net (.7) (2.0) (.7) 1.4
~~~~~~~~ ~~~~~~~~ ~~~~~~~~ ~~~~~~~~
Earnings before income taxes 63.5 47.876.6 56.1 140.1 103.9
Provision for income taxes 8.9 6.710.4 7.9 19.3 14.6
~~~~~~~~ ~~~~~~~~ ~~~~~~~~ ~~~~~~~~
NET EARNINGS 54.6 41.166.2 48.2 120.8 89.3
Preference stock dividends - 2.12.0 - 4.1
~~~~~~~~ ~~~~~~~~ ~~~~~~~~ ~~~~~~~~
EARNINGS AVAILABLE FOR COMMON SHARES $ 54.666.2 $ 39.046.2 $ 120.8 $ 85.2
~~~~~~~~ ~~~~~~~~ ~~~~~~~~ ~~~~~~~~
~~~~~~~~ ~~~~~~~~ ~~~~~~~~ ~~~~~~~~
Primary earnings per common share $ 1.351.58 $ 1.121.32 $ 2.94 $ 2.44
Fully diluted earnings per
common share 1.35 1.071.58 1.25 2.94 2.32
Cash dividends declared per
common share .1251.25 .025 (page).25 .05
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
(Millions, Except per Share Amounts)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
4/7/3/94 12/31/93
~~~~~~~~ ~~~~~~~~
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 94.9150.1 $ 77.3
Receivables less allowances of $10.0$10.4 & $9.5 472.7482.4 426.3
Inventories 485.6508.9 440.2
Other current assets 131.6136.3 127.9
~~~~~~~~ ~~~~~~~~
1,184.81,277.7 1,071.7
INVESTMENTS AND OTHER ASSETS 200.9186.9 190.7
PROPERTY, PLANT & EQUIPMENT less accumulated
depreciation of $1,250.1$1,263.1 & $1,222.3 962.6977.3 958.2
INTANGIBLES, DEFERRED TAXES & DEFERRED CHARGES 169.7169.5 170.0
~~~~~~~~ ~~~~~~~~
TOTAL ASSETS $2,518.0$2,611.4 $2,390.6
~~~~~~~~ ~~~~~~~~
~~~~~~~~ ~~~~~~~~
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Loans payable $ 37.411.2 $ 13.4
Current maturities of long-term debt 32.632.5 32.6
Accounts payable 284.9301.1 267.5
Other current liabilities 417.7440.5 386.8
~~~~~~~~ ~~~~~~~~
772.6785.3 700.3
~~~~~~~~ ~~~~~~~~
LONG-TERM DEBT 188.3188.4 189.6
~~~~~~~~ ~~~~~~~~
OTHER LIABILITIES 684.1687.7 679.6
~~~~~~~~ ~~~~~~~~
SHAREHOLDERS' INVESTMENT:
Convertible preference stock, no par value,
.2 shares outstanding - 112.2
Common stock, $2.50 par value, 43.7 & 40.6
shares issued 109.1 101.5
Additional contributed capital 922.4923.0 822.8
Retained earnings 53.5114.4 4.1
Common stock in treasury, at cost, 2.1 shares (67.3) (67.3)
Unearned ESOP compensation (55.0) (59.3)
Cumulative translation adjustments (89.7)(74.2) (92.9)
~~~~~~~~~ ~~~~~~~~~
873.0
950.0 821.1
~~~~~~~~ ~~~~~~~~
TOTAL LIABILITIES & SHAREHOLDERS' INVESTMENT $2,518.0$2,611.4 $2,390.6
~~~~~~~~ ~~~~~~~~
~~~~~~~~ ~~~~~~~~
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited (Millions)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
First QuarterHalf Ended
4/7/3/94 4/4/7/3/93
~~~~~~~~ ~~~~~~~~
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $120.8 $ 54.6 $ 41.189.3
~~~~~~ ~~~~~~
Adjustments to reconcile net earnings
to net cash from operating activities:
Depreciation and amortization 29.0 31.762.0 63.8
Accounts receivable (44.8) (65.8)(45.2) (51.4)
Inventories (43.5) (22.3)(60.3) (20.6)
Accounts payable and accrued expenses 51.3 31.984.5 24.8
Other 6.8 7.48.6 3.3
~~~~~~~ ~~~~~~~
Total adjustments (1.2) (17.1)49.6 19.9
~~~~~~~ ~~~~~~~
Net cash provided by operating activities 53.4 24.0170.4 109.2
~~~~~~~ ~~~~~~~
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Additions (34.4) (27.3)(75.9) (58.9)
Disposals 2.7 .33.2 4.3
Investments in and advances to affiliates
and unconsolidated companies (16.2) 21.6( 6.4) 19.7
Acquisitions of new business activities - 3.4
Net cash proceeds from the disposition of
certain business activities - 1.3
~~~~~~~ ~~~~~~~
Net cash used in investing activities (47.9) ( .7)(79.1) (30.2)
~~~~~~~ ~~~~~~~
NET CASH FLOWS FROM OPERATING & INVESTING
ACTIVITIES 5.5 23.391.3 79.0
~~~~~~ ~~~~~~
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 48.654.7
Payments on borrowings ( 1.9) (69.8)2.6) (134.9)
Net borrowings under credit agreements 24.1 21.5
Payments of dividends ( 5.2)2.7) 18.4
Dividend payments (10.4) ( 2.9)5.8)
Other ( 5.0)4.6) ( 5.6)5.8)
~~~~~~~ ~~~~~~~
Net cash provided by (used for)used for financing activities 12.0 ( 8.2)(20.3) (73.4)
~~~~~~~ ~~~~~~~
EFFECT OF EXCHANGE RATE CHANGES ON CASH .1 ( .3)1.8 .4
~~~~~~ ~~~~~~~
NET CHANGE IN CASH & CASH EQUIVALENTS 17.6 14.872.8 6.0
Cash & cash equivalents at beginning of year 77.3 54.2
~~~~~~ ~~~~~~
CASH & CASH EQUIVALENTS AT END OF QUARTERFIRST HALF $150.1 $ 94.9 $ 69.060.2
~~~~~~ ~~~~~~
~~~~~~ ~~~~~~
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Unaudited
~~~~~~~~~
(Dollars in Millions, Unless Otherwise Stated)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NOTE 1. ACCOUNTING POLICIES: The CONSOLIDATED FINANCIAL STATEMENTSConsolidated Financial Statements for
the interim periods ended AprilJuly 3, 1994 and AprilJuly 4, 1993 have been prepared
in accordance with the accounting policies described in the Company's
Annual Report to Shareholders and Form 10-K. Management believes the
statements include all adjustments of a normal recurring nature necessary
to present fairly the results of operations for the interim periods.
Inventory values at interim reporting dates are based upon estimates of
the annual adjustments for taking physical inventory and for the change in
cost of LIFO inventories.
NOTE 2. INCOME TAXES: Income tax expense is reported during the
interim reporting periods on the basis of the estimated annual effective
tax rate for the taxable jurisdictions in which the Company operates.
In the first quarterhalf of 1994 and 1993, the Company recognized approximately
$11$25 and $10,$22, respectively, related to a reduction in its valuation
allowance for tax lossbenefit carryforwards.
NOTE 3. Preference Stock Redemption:PREFERENCE STOCK REDEMPTION: On January 24, 1994, the Company
called for redemption, at a price of $51.05 per depositary share, plus
accrued dividends, of its outstanding Convertible Exchangeable Preference
Stock, which had a face value of $112.2 at December 31, 1993. Holders
elected to convert their shares of preference stock into 2.9 million
shares of common stock prior to the redemption date.
Had the stock conversion
occurred on January 1, 1994, pro forma net earnings per share would
have approximated $1.31 in the first quarter of 1994.
NOTE 4. EARNINGS PER COMMON SHARE: Primary earnings per share of common
stock are computed by subtracting preference stock dividend requirements
from net earnings and dividing that amount by the weighted average number
of common shares outstanding during the period. The weighted average
number of shares, which includesassumes the exercise of certain stock options
granted to employees, was 40.341.7 million in the second quarter of 1994 and
41.1 million in the first quarterhalf of 1994 and 34.834.9 million in both the second
quarter and first quarterhalf of 1993. Fully diluted earnings per share are
computed by dividing net earnings by the weighted average number of shares
assuming the exercise of stock options and conversion of debt and
preference stock to common stock.
(page)
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Dollars In Millions, Unless Otherwise Stated)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
FINANCIAL CONDITION
~~~~~~~~~~~~~~~~~~~
(Dollars in Millions, Unless Otherwise Stated)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
OVERVIEW
~~~~~~~~
Cummins continued to benefit from strong business conditions in most of
its markets in the firstsecond quarter of 1994.1994, which resulted in the highest
quarterly sales and earnings in the Company's 75-year history. Net sales
of $1.2 billion were $1,099.2,10 percent higher than in the second quarter of 1993.
In the first half of 1994, the Company's net sales were $2.3 billion,
compared to $1,048.4$2.1 billion in the first half of 1993.
The Company's net earnings were $66.2, or $1.58 per share, in the second
quarter of 1994, compared to $48.2, or $1.32 per share, in the second
quarter of 1993. NetFor the first half of 1994, net earnings were $54.6,$120.8, or
$1.35$2.94 per share, compared to $89.3, or $2.44 per share, in the first quarterhalf
of 1994, compared to
$4.1, or $1.12 per share, in the first quarter of 1993. The North
American heavy-duty truck market remained at high levels of production.
Sales of midrange engines were higher than in the first quarter of
1993. However, in the first quarter of 1994, midrange engine sales in
North America were reduced because of advance purchases made by some
truck and bus customers at the end of 1993 to avoid price increases.
Power generation sales benefited from improvements in the market for
power units in recreational vehicles. Sales to industrial markets also
increased, particularly for construction and agricultural applications.
RESULTS OF OPERATIONS
~~~~~~~~~~~~~~~~~~~~~
The percentage relationships between net sales and other elements of
the Company's CONSOLIDATED STATEMENT OF EARNINGSConsolidated Statement of Earnings for the comparative
reporting periods were:
Second Quarter First QuarterHalf
~~~~~~~~~~~~~~ ~~~~~~~~~~~~
Percent of Net Sales 1994 1993 1994 1993
~~~~~~~~~~~~~~~~~~~~ ~~~~~ ~~~~~ ~~~~~ ~~~~~
Net sales 100.0 100.0 100.0 100.0
Cost of goods sold 75.3 76.2 75.4 76.1
~~~~~ ~~~~~ ~~~~~ ~~~~~
Gross profit 24.7 23.8 24.6 23.9
Selling and administrative expenses 13.513.3 13.3 13.4 13.3
Research and engineering expenses 4.94.7 4.8 4.8 4.7
Interest expense .4 .8 .4 .9
Other (income) expense, net (.1) (.2) - .3.1
~~~~~~ ~~~~~~ ~~~~~ ~~~~~
Earnings before income taxes 5.8 4.66.4 5.1 6.0 4.9
Provision for income taxes .9 .7 .8 .7
~~~~~ ~~~~~ ~~~~~ ~~~~~
Net earnings 5.0 3.95.5 4.4 5.2 4.2
~~~~~ ~~~~~ ~~~~~ ~~~~~
~~~~~ ~~~~~ ~~~~~ ~~~~~
Sales by Market
~~~~~~~~~~~~~~~
Sales for each of the Company's markets for the comparative reporting
periods were:
Second Quarter First Quarter 1994 First Quarter 1993
Dollars Percent Dollars PercentHalf
~~~~~~~~~~~~~~ ~~~~~~~~~~~~~
1994 1993 1994 1993
~~~~~~~ ~~~~~~ ~~~~~~ ~~~~~~
Heavy-duty truck 335 31 324 31$ 354 $ 336 $ 689 $ 660
Midrange truck 100 9 86 8135 101 234 187
Power generation 230 21 213 20268 237 497 450
Bus &and light commercial vehicles 156 14 147 14146 116 303 264
Industrial products 124 11 118 11142 133 266 251
Government 15 1 28 327 30 55
Marine 17 2 17 221 21 38 38
Fleetguard, Holset and Cummins
Electronics (a) 124 122 11 115 11247 237
~~~~~~ ~~~ ~~~~~ ~~~
Net sales 1,099 100 1,048 100
~~~~~ ~~~~~~
Net sales $1,205 $1,093 $2,304 $2,142
~~~~~~ ~~~
~~~~~ ~~~ ~~~~~ ~~~~~~
~~~~~~ ~~~~~~ ~~~~~~ ~~~~~~
(a) IncludedThe second quarter and first half of 1993 included McCord's sales of
McCord in the first quarter of 1993.$14.6 and $20.5, respectively.
Sales of $335 to the heavy-duty truck market in the second quarter and first quarterhalf
of 1994 were 3approximately 5 percent higher than in the first quartercomparable periods of
1993. ThisThe increase was attributable toin 1994 reflects the strongstrength of the North American
heavy-duty market. Intruck market, which is forecasted to produce at a record in
excess of 200,000 units for the first quarter of 1994, the Company's heavy-duty engine shipments in
North America increased 9 percent over the first-quarter 1993 level.year. The Company continues to lead this
market with a 34-percent35-percent year-to-date market share. In general, shipmentsShipments of the
Company's heavy-duty truck engines for international markets in the firstsecond
quarter of 1994 also were essentially
level withhigher than in the firstsecond quarter of 1993.1993, as a
result of improved market conditions in the United Kingdom.
Midrange truck engine sales in the firstsecond quarter of 1994 were $1434 percent
higher than in the first quarter of 1993. The effect of a decrease in
shipments of midrange engines for the North American market was offset
by an increase in shipments to international markets, primarily in the
United Kingdom where there were unusually low shipments in the first
quarter of 1993. The first-quarter 1994 decrease in North American
shipments was due to advance purchases by some midrange engine truck
customers at the end of 1993 to avoid price increases. Shipments of
these engines are projected to increase in the second quarter of 1994.1993 and 25 percent higher in the
first half of 1994, compared to the first half of 1993. The increase in
sales in 1994 was due to higher engine shipments in both North America and
Europe.
Power generation sales in the firstsecond quarter of 1994 were $230,$268, compared
to $213$237 in the firstsecond quarter of 1993. The 8-percent increase was due
to a strengthening ofCompany has benefited this
year from strong demand in this market for industrial generator sets,
particularly in the marketinternational markets, and for power units in
recreational vehicles and the continued increase in demand for alternators. Power
generation sales also continued to benefit from demand for industrial
generator sets in international markets.vehicles.
In the bus and light commercial vehicle market, the Company's sales were
$156$146 in the firstsecond quarter of 1994, compared to $147$116 million in the firstsecond
quarter of 1993. The 6-percent increase in sales during 1994 was due primarily to pricing actions,sales of
Cummins' midrange engines for light commercial vehicles in North America.
Demand for the Company's midrange engines for these vehicles continued to
be strong in the first half of 1994, with actual engine shipments up approximately 9
percent lower than first-quarter 1993. The lower level of engine shipments was
due primarily to advance purchases of midrange engines forover the North
American bus market at the endfirst half of 1993.
Sales to industrial markets increased 5approximately 6 percent in the
second quarter and first quarterhalf of 1994, compared to the first quartercorresponding reporting
periods of 1993. ThisThe increase in sales was due primarily to improvements in both
North American and international construction markets. Shipments for the
agricultural market in North America also showedexperienced modest gains in the
firstsecond quarter of 1994.1994, compared to the second quarter of 1993. The first
half of the year traditionally is higher in these markets.
Engine shipments for all markets in the second quarter and first quarterhalf of
1994 were 69,900,81,100 and 151,000, respectively, compared to 67,90068,100 and 136,000
in the first quarterrespective periods of 1993. Shipments by
engine family for the comparative periods were:1993:
Second Quarter First QuarterHalf
~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~
1994 19951993 1994 1993
~~~~~~ ~~~~~~ ~~~~~~~ ~~~~~~~
Midrange engines 45,000 44,30052,600 43,100 97,600 87,400
Heavy-duty engines 23,000 21,60025,900 22,700 48 900 44,300
High-horsepower engines 1,900 2,0002,600 2,300 4,500 4,300
~~~~~~ ~~~~~~ ~~~~~~~ ~~~~~~~
Total engine shipments 69,900 67,90081,100 68,100 151,000 136,000
~~~~~~ ~~~~~~ ~~~~~~~ ~~~~~~~
~~~~~~ ~~~~~~ ~~~~~~~ ~~~~~~~
Sales of Fleetguard, Holset and Cummins Electronics were approximately 15
percent higher in both the second quarter and first half of 1994, compared
to the same periods of 1993. The increase in sales of these subsidiaries
during 1994 was due primarily to demand for the Company's filter products
in international markets.
Gross Profit
~~~~~~~~~~~~~
The
In the second quarter of 1994, the Company's gross profit percentage was
24.7 percent of net sales, compared to 23.8 percent in the second quarter
of 1993. In the first half of 1994, gross profit percentage was 24.6
percent in the first
quarter of 1994,net sales, compared to 23.9 percent in the first quarterhalf of 1993.
The key factorsfactor contributing to the improved margin in the first
quarter of 1994 werewas the
increase in demand for the Company's products in all key domestic and
the full-year effect of price increases subsequent to the first
quarter of 1993. This was partially offset by an increase in costs
associated with product coverage programs.international markets. The cost of theseproduct coverage programs which includes both warranty and extended coverage, was 2.72.5
percent of net sales in both the firstsecond quarter of 1994 compared to 2.2and 1993. In the
first half of 1994, the cost of product coverage programs was 2.6 percent
of net sales, compared to 2.4 percent in the first quarterhalf of 1993.
This increase was attributable to
higher product coverage provisions for new product introductions.
Operating ExpenseExpenses
~~~~~~~~~~~~~~~~~~
Selling and administrative expenses were $148.6, or 13.5 percent of net
sales,$160.8 in the second quarter of
1994 and $309.4 in the first quarterhalf of 1994 compared to $140.6, or 13.4
percent of net sales, inwere $15.4 and $23.4 higher,
respectively, than the first quartercorresponding periods of 1993. The increase in
expenditures in the first quarter of 1994 was primarily attributable to variable operating
expenses related to the increase in demand for the Company's products.higher sales volumes. The increase of $4.4 and
$8.8 in research and engineering expenses in the second quarter and first
quarterhalf of 1994, compared to the first quarterrespective periods of 1993, was due to
increasedcontinued expenditures for fuel systems and for ongoing product
development.
Interest Expense
~~~~~~~~~~~~~~~~
Interest expense was $4.5of $4.6 in the second quarter of 1994 and $9.1 in the
first quarterhalf of 1994, compared to $9.6$9.1 and $18.7 in the first quarterrespective periods
of 1993. The decrease in interest expense in
the first quarter of 1994 was due to the
Company's early retirement and redemption of debt obligations during 1993.
Provision Forfor Income Taxes
~~~~~~~~~~~~~~~~~~~~~~~~~~
As disclosed in NOTENote 2 to the CONSOLIDATED FINANCIAL STATEMENTS,Consolidated Financial Statements, the
Company reduced its valuation allowance for tax lossbenefit carryforwards
approximately $11$25 in the first quarterhalf of 1994 and $10$22 in the first quarterhalf of
1993.
FINANCIAL CONDITION AND CASH FLOW
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Key elements of the CONSOLIDATED STATEMENT OF CASH FLOWSConsolidated Statement of Cash Flows were:
First Half
~~~~~~~~~~~~~~~~~~
1994 1993
~~~~~~ ~~~~~~
Net cash provided by operating activities $53.4 $24.0$170.4 $109.2
Net cash used for investing activities (47.9) ( .7)(79.1) (30.2)
~~~~~~~ ~~~~~~~
Net cash flows from operating and
investing activities 5.5 23.391.3 79.0
Net cash provided by (used for)used for financing activities 12.0 (8.2)(20.3) (73.4)
Effect of exchange rate changes on cash .1 ( .3)1.8 .4
~~~~~~ ~~~~~~
Net change in cash and cash equivalents $17.6 $14.8$ 72.8 $ 6.0
~~~~~~ ~~~~~~
~~~~~~ ~~~~~~
Cash reserves increased by $72.8 during the first half of 1994 to $150.1.
During the first quarterhalf of 1994, the Company generated cash flows from
operating activities of $53.4,$170.4, compared to $24.0$109.2 in the first quarterhalf of
1993, due to improved earnings and a reduction in net working capital requirements.
Investing activities required net cash resources of $47.9$79.1 for capital
expenditures and investments in and advances to affiliates and
unconsolidated companies. Cash reserves increased $17.6
duringcompanies in the quarterfirst half of 1994.
As more fully disclosed in Note 3 to $94.9.
On January 24, 1994,the Consolidated Financial
Statements, the Company called for redemption at a price of $51.05 per depositary share, plus accrued dividends, its outstanding
Convertible Exchangeable Preference Stock, which had a face value of
$112.2 at December 31, 1993.preference stock on
January 24, 1994. In lieu of accepting the cash redemption price, virtually all of the holders
elected to convert their shares of preference stock into common stock of
the Company. As a result, the Company
issued 2.9 million shares of common stock to the holders.
Total indebtedness (including the guaranteed notes of the ESOP Trust) was
$258.3$232.1 at the end of the firstsecond quarter of 1994, compared to $235.6
at December 31, 1993.1994. The Company's debt-to-capitaldebt-to-
capital ratio was 22.819.6 percent at the end of the firstsecond quarter andof 1994,
compared to 22.3 percent at December 31, 1993.
On January 25, 1994, Moody's Investors Service upgraded the ratings of the
senior debt of the Company to investment grade (from Ba1 to Baa2).
Moody's stated that the action reflected the favorable intermediate-
termintermediate-term
outlook for the Company's sales and operating performance as a result of
the Company's stronger and more diversified customer base, the expansion
of its international presence and better cost controls.
(page)
PART II. OTHER INFORMATION
~~~~~~~~~~~~~~~~~~~~~~~~~~~
Item 4. Submission of Matters to a Vote of Security Holders
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Company held its annual meeting of security holders on April 5,
1994 at which security holders: (a) elected 14 directors of the
Company for the ensuing year, (b) ratified the appointment of Arthur
Andersen & Co., as auditors for the year 1994, (c) approved the Cummins
Engine Company, Inc., Restricted Stock Plan for Non-Employee Directors,
and (d) amended the Company's Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock from
50,000,000 to 150,000,000 shares.
Results of the voting in connection with each of the items were as
follows:
Voting on Directors:
~~~~~~~~~~~~~~~~~~~~
For Withheld
~~~~~~~~~~ ~~~~~~~~
H. Brown 34,542,776 226,628
R. Darnall 34,557,124 212,280
J. D. Donaldson 34,430,683 338,721
W. Y. Elisha 34,559,371 210,033
H. H. Gray 34,548,706 220,698
J. A. Henderson 34,573,197 196,207
D. G. Mead 34,428,226 341,178
J. I. Miller 34,558,903 210,501
W. I. Miller 34,571,279 198,125
D. S. Perkins 34,559,081 210,323
W. D. Ruckelshaus 34,563,696 205,708
H. B. Schacht 34,568,560 200,844
F. A. Thomas 34,560,531 208,873
J. L. Wilson 34,558,981 210,423
Ratification of Accountants:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
For Against Abstain
~~~~~~~~~~ ~~~~~~~ ~~~~~~~
34,601,673 89,088 78,643
Restricted Stock Plan:
~~~~~~~~~~~~~~~~~~~~~~
For Against Abstain
~~~~~~~~~~ ~~~~~~~ ~~~~~~~
34,168,688 421,624 179,092
Restated Articles of Incorporation:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
For Against Abstain
~~~~~~~~~~ ~~~~~~~~~ ~~~~~~~
29,998,915 4,551,308 219,181
With regard to the election of directors, votes were cast in favor of
or withheld from each nominee; votes that were withheld were excluded
entirely from the vote and had no effect. Abstentions on all proposals
(except the election of directors) were counted as present for purposes
of determining the existence of a quorum regarding the item on which
the abstention was voted. Since the amendment of the Restated Articles
of Incorporation required the approval of a majority of the outstanding
shares, abstentions had the effect of a negative vote. Abstentions on
the adoption of the Restricted Stock Plan had the same effect because
it required the affirmative vote of a majority of shares present in
person or by proxy and entitled to vote. Under the rules of the New
York Stock Exchange, brokers who held shares in street name had the
authority to vote on certain items when they did not receive
instructions from beneficial owners. Brokers that did not receive
instructions were entitled to vote on the election of directors and the
amendment to the Restated Articles of Incorporation. With respect to
the Restricted Stock Plan, brokers could not vote shares held for
customers without specific instructions from such customers. Under
applicable Indiana law, a broker non-vote had the same effect as a vote
against the proposed amendment to the Restated Articles of
Incorporation, and had no effect on the outcome of the election of
directors or the approval of the Restricted Stock Plan.
Item 6. Exhibits and Reports on Form 8-K:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
(a) See the Index to Exhibits on Page 1412 for a list of exhibits filed
herewith.
(b) The Company was not required to file a Form 8-K during the firstsecond
quarter of 1994.
SIGNATURES
~~~~~~~~~~
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CUMMINS ENGINE COMPANY, INC.
By: /s/John McLachlan
May 5, 1994
~~~~~~~~~~~~~~~~~
John McLachlan
Vice President - Corporate Controller
(Chief Accounting Officer) (page)August 1, 1994
CUMMINS ENGINE COMPANY, INC., AND SUBSIDIARIES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
INDEX TO EXHIBITS
~~~~~~~~~~~~~~~~~
Page No.
~~~~~~~~
3(a) Restated Articles of Incorporation of Cummins
Engine Company, Inc., as amended (filed4(b) Revolving Credit Agreement (First Amendment filed
herewith andto agreement incorporated by reference to
Quarterly Report on Form 10-Q for the quarter
ended October 1, 1989 and by reference to Form 8-K,
dated July 26, 1990)4, 1993). 15
10(s) 1992 Stock Incentive13
10(a) Target Bonus Plan (filed herewith). 16
10(t) Restricted 17
10(c) Key Employee Stock Investment Plan, for Non-Employee Directorsas amended
(filed herewith). 25 22
10(e) Financial Counseling Program (filed herewith) 27
11 Schedule of Computation of Per Share Earnings
for the Second Quarter and First Quarter ended AprilHalf Ended
July 3, 1994 and AprilJuly 4, 1993 (filed herewith). 27 28