UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
[X] | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
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For the Fiscal Year Ended December 31, 2008
OR
[ ] | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE |
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For the transition period from _______ to _______
Commission File Number 1-4949
CUMMINS INC. AND AFFILIATES RETIREMENT AND SAVINGS PLAN FOR
CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
(Full title of the plan)
CUMMINS INC.
500 Jackson Street
P. O. Box 3005
Columbus, IN 47202-3005
(Name of Issuer of Securities Held Pursuant to the Plan and
the Address of its Principal Executive Office)
CUMMINS INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY INFORMATION
DECEMBER 31, 2008 AND 2007
CUMMINS INC. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
TABLE OF CONTENTS
DECEMBER 31, 2008 AND 2007
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Report of Independent Registered Public Accounting Firm | 1 |
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Financial Statements | |
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Statements of Net Assets Available for Benefits as of December 31, 2008 and 2007 | 2 |
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Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2008 | 3 |
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Notes to Financial Statements | 4 |
Supplemental Schedules*
* As the Plan is a member of the Cummins Inc. and Affiliates Retirement and Savings Plans Master Trust (“Master Trust”), the schedules of assets (held at end of year), at December 31, 2008 and of reportable transactions for the year ended December 31, 2008 of the Master Trust have been certified by the Master Trustee and have been separately filed with the Department of Labor. Other Supplemental Schedules not filed herewith are omitted because of the absence of the conditions under which they are required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.
report of INDEPENDENT Registered Public Accounting Firm
To the Benefits Policy Committee and
Participants of the Cummins Inc. and
Affiliates Retirement and Savings Plan for Consolidated
Diesel Company, Inc. Employees
Columbus, Indiana
We have audited the accompanying statements of net assets available for benefits of the Cummins Inc. and Affiliates Retirement and Savings Plan for Consolidated Diesel Company, Inc. Employees (the “Plan”) as of December 31, 2008 and 2007, and the related statement of changes in net assets available for benefits for the year ended December 31, 2008. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. 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 available for benefits of the Plan as of December 31, 2008 and 2007, and the changes in net assets available for benefits for the year ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
June 24, 2009
1
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2008 AND 2007
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| 2008 |
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| 2007 | ||
Assets |
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Investments: |
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Investment in Cummins Inc. and Affiliates |
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Retirement and Savings Plans Master |
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Trust, at fair value |
| $ | -0- |
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| $ | 56,968,148 |
Participant loans |
| -0- |
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| 2,475,744 | ||
Total investments |
| -0- |
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| 59,443,892 | ||
Employer contributions receivable |
| -0- |
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| 514,172 | ||
Total assets |
| -0- |
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| 59,958,064 | ||
Liabilities |
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Excess contributions refundable |
| -0- |
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| 6,110 | ||
Net assets available for benefits |
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Net assets reflecting all investments |
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at fair value |
| -0- |
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| 59,951,954 | ||
Adjustment from fair value to contract |
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value for fully benefit-responsive |
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investment contracts |
| -0- |
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| 176,384 | ||
Net assets available for benefits |
| $ | -0- |
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| $ | 60,128,338 |
See accompanying notes to financial statements.
2
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2008
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Additions |
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Contributions: |
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Employer | $ | 1,924,762 |
Employee | 4,827,845 | |
Plan interest in Cummins Inc. and Affiliates Retirement |
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| and Savings Plans Master Trust investment income | (8,139,457) | |
Interest income | 193,541 | |
| Total additions | (1,193,309) | |
Deductions |
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Benefits paid to participants | 8,116,506 | |
Other deductions | 21,148 | |
Total deductions | 8,137,654 | |
| Fund transfers with Affiliate Plans | (50,797,375) | |
| Net change in net assets available for benefits | (60,128,338) | |
Net assets available for benefits, beginning of year | 60,128,338 | |
Net assets available for benefits, end of year | $ | -0- |
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See accompanying notes to financial statements.
3
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
1. description of the plan
The following description of the Cummins Inc. and Affiliates Retirement and Savings Plan for Consolidated Diesel Company, Inc. Employees (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions. As of December 31, 2008, the Plan was merged into the Cummins Inc. and Affiliates Retirement and Savings Plan for Salaried and Non-Bargaining Hourly Employees.
General
The Plan was a defined contribution plan designed to provide participants with a systematic method of savings and at the same time enable such participants to benefit from contributions made to the Plan by Cummins Inc. and Affiliates (collectively, the “Company”). Eligible employees were employees of Consolidated Diesel Company, Inc. The Plan was subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Master Trust
The Cummins Inc. and Affiliates Retirement and Savings Plans Master Trust (“Master Trust”) holds the assets of the Plan and the following Company-sponsored plans:
Cummins Inc. and Affiliates Retirement and Savings Plan for Salaried and Non-Bargaining Hourly Employees;
Cummins Inc. and Affiliates Retirement and Savings Plan for Bargaining Unit Employees; and
Nelson Retirement and Savings Plan
The trustee for the Master Trust is State Street Corporation. As participants transfer between different locations within the Company, their related Plan account transfers to the appropriate Plan, if applicable. Such transfers are reflected in the accompanying financial statements as “Fund transfers with Affiliate Plans”.
Contributions
Participants could contribute up to 50% of their eligible pay through a combination of pre-tax and after-tax contributions. Participants could direct their contributions in any of twenty-one investment options.
4
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
Matching Contributions
The Company contributed to the Plan by matching 100% of the first 1% contributed plus 50% of the next 5% contributed.
Participant Accounts
Each participant’s account was credited with the participant’s contributions, the Company’s contributions and an allocation of Plan earnings. Allocations of Plan earnings were made daily and were based upon the participant’s weighted average account balance for the day, as described in the Plan document.
Vesting
Participants were fully vested in all employee and employer contributions and earnings thereon at all times.
Benefit Payments
Upon termination of employment or retirement, account balances were paid either as a lump-sum distribution or annual installments not to exceed the lesser of 15 years or the life expectancy of the participant and/or joint life expectancy of the participant and beneficiary, and commence no later than the participant reaching age 70-1/2. The Plan also permitted hardship withdrawals from participant pre-tax contributions and actual earnings thereon. Participants could also withdraw their after-tax contributions.
Participant Loans
A participant could obtain a loan up to a maximum of the lesser of $50,000 or 50% of the participant’s account balance. Loans were secured by the participant’s account balance and accumulated interest at the prime rate plus one percent, and matured no later than 4½ years from the date of the loan.
Plan Termination
As aforementioned, the Plan was merged into the Cummins, Inc. and Affiliates Retirement and Savings Plan for Salaried and Non-Bargaining Hourly Employees effective December 31, 2008. Plan participants were not impacted by the merger as the prior provisions of the Plan continue to apply to them subsequent the merger.
5
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan have been prepared on the accrual basis of accounting.
Investments
The Plan’s investment in the Master Trust is stated at fair value based on the fair value of the underlying investments of the Master Trust, determined primarily by quoted market prices, except for the Stable Value fund. The Stable Value fund consists primarily of insurance contracts and bank investment contracts with various companies. Insurance contracts and bank contracts are nontransferable, but provide for benefit-responsive withdrawals by plan participants at contract value. Alternative investment contracts consist of investments together with contracts under which a bank or other institution provides for benefit-responsive withdrawals by plan participants at contract value. Fair value is determined using a discounted cash flow method by considering such factors as the benefit-responsiveness of the investment contracts, the ability of the parties to perform in accordance with the terms of the contracts, and the likelihood that plan-directed withdrawals would cause payment to plan participants to be at amounts other than contract value. There are no limitations on liquidity guarantees and no valuation reserves are being recorded to adjust contract amounts.
Allocation of Master Trust Assets and Transactions
The investment income and expenses of the Master Trust are allocated to each plan based on the relationship of the Plan’s investment balances to the total Master Trust investment balances.
Use of Estimates
The preparation of financial statements, in accordance with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Payment of Benefits
Benefit payments are recorded when paid.
6
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
Administrative Expenses
Substantially all costs of administering the Plan are paid by the Company.
Reclassifications
Certain prior year amounts have been reclassified herein to conform to the current method of presentation.
3. INVESTMENTS IN MASTER TRUST
The Plan’s investments are held in the Master Trust. At December 31, 2008 and 2007, the Plan’s interest in the net assets of the Master Trust was 0% and 3.4%, respectively. The following investments are held by the Master Trust as of December 31:
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| 2008 |
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| 2007 | ||
Cummins Inc. Common Stock Fund |
| $ | 113,120,749 |
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| $ | 243,342,978 |
Cummins Inc. common stock - ESOP fund |
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(non-participant directed) |
| 16,801,598 |
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| 85,089,690 | ||
Stable Value fund investments |
| 380,694,849 |
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| 350,099,530 | ||
Stable Value fund wrapper contracts |
| 1,150,592 |
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| -0- | ||
Common / collective trust fund |
| 102,060,792 |
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| 169,049,248 | ||
Registered investment companies |
| 549,086,595 |
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| 834,577,180 | ||
Total |
| $ | 1,162,915,175 |
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| $ | 1,682,158,626 |
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The Stable Value fund portion of the Master Trust comprises several fully benefit-responsive insurance and investment contracts. This fund includes both open-ended, security-backed investments as well as closed-ended, general account investments maturing through 2020. The contracts have varying yields which averaged 5.68 percent and 6.05 percent during the years ended December 31, 2008 and 2007, respectively. The contracts have varying crediting interest rates which averaged 3.38 percent and 5.16 percent during the years ended December 31, 2008 and 2007, respectively. The crediting interest rates adjust on varying intervals by contract. There are no reserves against contract value for credit risk of the contract issuer or otherwise.
7
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
The Stable Value fund’s key objectives are to provide preservation of principal, maintain a stable interest rate, and provide daily liquidity at contract value for participant withdrawals and transfers in accordance with the provision of the Plans. To accomplish these objectives, the Stable Value fund invests primarily in investment contracts such as traditional guaranteed investment contracts (GICs) and wrapper contracts (also known as synthetic GICs). In a traditional GIC, the issuer takes a deposit from the Stable Value fund and purchases investments that are held in the issuer’s general account. The issuer is contractually obligated to repay the principal and a specified rate of interest guaranteed to the Stable Value fund.
In a wrapper contract structure, the underlying investments are owned by the Stable Value fund and held in trust for participants. The Stable Value fund purchases a wrapper contract from an insurance company or bank. The wrapper contract amortizes the realized and unrealized gains and losses on the underlying fixed income investments, typically over the duration of the investments, through adjustments to the future interest crediting rate (which is the rate earned by participants in the Stable Value fund for the underlying investments). The issuer of the wrapper contract provides assurance that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero. An interest crediting rate less than zero would result in a loss of principal or accrued interest.
The key factors that influence future interest crediting rates for a wrapper contract include the level of market interest rates, the amount and timing of participant contributions, transfers, and withdrawals into and out of the wrapper contract, the investment returns generated by the fixed income investments that back the wrapper contract and the duration of the underlying investments backing the wrapper contract. Wrapper contracts’ interest crediting rates are typically reset on a monthly or quarterly basis. While there may be slight variations from one contract to another, most wrapper contracts use a formula to determine the interest crediting rate that is based on the specific factors as aforementioned. Over time, the crediting rate formula amortizes the Stable Value fund’s realized and unrealized market value gains and losses over the duration of the underlying investments.
Because changes in market interest rates affect the yield to maturity and the market value of the underlying investments, they can have a material impact on the wrapper contract’s interest crediting rate. In addition, participant withdrawals and transfers from the Stable Value fund are paid at contract value but funded through the market value liquidation of the underlying investments, which also impacts the interest crediting rate. The resulting gains and losses in the market value of the underlying investments relative to the wrapper contract values are represented in the Statements of Net Assets Available for Benefits as “Adjustment from fair value to contract value”. If the adjustment from fair value to contract value is positive for a given contract, this indicates that the wrapper contract value is greater than the market value of the underlying investments. The embedded market value losses will be amortized in the future through a lower interest crediting rate than would otherwise be the case. If the adjustment from fair value to contract value is negative, this indicates that the wrapper contract value is less than the market value of the underlying investments. The amortization of the embedded market value gains will cause the future interest crediting rate to be higher than it otherwise would have been.
8
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
All wrapper contracts provide for a minimum interest crediting rate of zero percent. In the event that the interest crediting rate should fall to zero and the requirements of the wrapper contract are satisfied, the wrapper issuers will pay to the Plans the shortfall needed to maintain the interest crediting rate at zero. This helps to ensure that participants’ principal and accrued interest will be protected.
In certain circumstances, the amount withdrawn from the wrapper contract would be payable at fair value rather than at contract value. These events include termination of the Plans, a material adverse change to the provisions of the Plans, if the employer elects to withdraw from a wrapper contract in order to switch to a different investment provider, or if the terms of a successor plan (in the event of the spin-off or sale of a division) do not meet the wrapper contract issuer’s underwriting criteria for issuance of a clone wrapper contract. These events described herein that could result in the payment of benefits at market value rather than contract value are not probable of occurring in the foreseeable future.
Examples of events that would permit a wrapper contract issuer to terminate a wrapper contract upon short notice include the Plans’ loss of its qualified status, uncured material breaches of responsibilities, or material and adverse changes to the provisions of the Plans. If one of these events was to occur, the wrapper contract issuer could terminate the wrapper contract at the market value of the underlying investments (or in the case of a traditional GIC, at the hypothetical market value based upon a contractual formula).
The contracts’ aggregate fair values were approximately $28,000,000 and $2,900,000 lower than the reported contract values at December 31, 2008 and 2007, respectively.
9
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
Investments that represent 5% or more of the Master Trust’s assets are separately identified as follows:
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| 2008 |
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| 2007 | ||
American Funds Growth Fund of America |
| $ | 74,548,986 |
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| $ | 124,172,394 |
Cummins Inc. Common Stock Fund |
| 129,922,347 |
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| 328,432,668 | ||
NTGI S & P 500 Index Fund |
| 102,060,792 |
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| 169,049,248 | ||
Vanguard International Fund |
| 48,154,113 |
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| 94,507,210 | ||
Vanguard Wellington Admiral Shares Fund |
| 177,247,269 |
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| 260,172,016 | ||
Aegon Wrapped Investment Contract |
| 118,467,232 |
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| 103,907,261 | ||
Royal Bank of Canada Wrapped |
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Investment Contract |
| 118,467,236 |
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| 103,907,261 | ||
State Street Bank Wrapped Investment |
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Contract |
| 118,482,835 |
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| 103,907,261 | ||
Other |
| 275,564,365 |
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| 394,103,307 | ||
Total |
| $ | 1,162,915,175 |
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| $ | 1,682,158,626 |
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Investment income for the Master Trust for the year ended December 31, 2008 is as follows:
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Net depreciation in fair value of investments: |
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Cummins Inc. Common Stock Fund | $ | (145,297,057) |
Cummins Inc. common stock - ESOP fund |
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(non-participant directed) | (31,854,102) | |
Common / collective trust fund | (61,406,704) | |
Registered investment companies | (243,757,995) | |
Interest | 17,647,860 | |
Dividends | 2,374,405 | |
Dividends from Cummins Inc. common stock - |
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ESOP fund (non-participant directed) | 1,962,014 | |
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Additional changes in net assets related to non-participant directed investments in the Master Trust for the year ended December 31, 2008 include transfers of Cummins Inc. common stock from unallocated status to allocated status totaling $36,465,686.
10
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
4. TAX STATUS
The Plan received a favorable determination letter dated September 11, 2002 in which the Internal Revenue Service (“IRS”) stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code (the “Code”). The Plan has been amended since receiving that determination letter. The Company and its counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
5. RELATED PARTY TRANSACTIONS
Certain Master Trust investments are or were shares of mutual funds managed by State Street Corporation and shares of Cummins Inc. State Street Corporation is the Master Trust trustee. Cummins Inc. is the Plan Sponsor. Hewitt Associates, LLC serves as the Plans’ third party administrator. Blue & Co., LLC serves as the Plans’ auditor. JPMorgan Asset Management serves as the Plans’ investment manager of the Stable Value fund. Transactions with these parties qualify as party-in-interest transactions.
6. reconciliation of financial statements to form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
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| 2008 |
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| 2007 | ||
As reported per the financial statements | $ | -0- |
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| $ | 60,128,338 |
Adjustment from fair value to contract value |
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for fully benefit-responsive investment |
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contracts | -0- | (176,384) | |||||
As reported per the Form 5500 | $ | -0- |
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| $ | 59,951,954 |
11
cummins inc. AND AFFILIATES
RETIREMENT AND SAVINGS PLAN
FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
The following is a reconciliation of plan interest in Cummins Inc. and Affiliates Retirement and Savings Plans Master Trust investment income per the financial statements to the Form 5500 for the year ended December 31, 2008:
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As reported per the financial statements | $ | (8,139,457) |
Less: Adjustment from fair value to contract |
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value for fully benefit-responsive investment |
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contracts at December, 31, 2008 | -0- | |
Add: Adjustment from fair value to contract |
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value for fully benefit-responsive investment |
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contracts at December, 31, 2007 | 176,384 | |
As reported per the Form 5500 | $ | (7,963,073) |
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| CUMMINS INC. AND AFFILIATES RETIREMENT AND SAVINGS PLAN FOR CONSOLIDATED DIESEL COMPANY, INC. EMPLOYEES | |
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| By: Benefits Policy Committee of Cummins Inc. | |
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Date: June 29, 2009 | By: Gloria Griesinger | |
| Gloria Griesinger | |
| Executive Director - Pensions | |