SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
CUMMINS ENGINE COMPANY, INC.
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
(Principal Executive Office)
Telephone Number: (812) 377-5000
TABLE OF CONTENTS
_________________
Part Item Description Page
____ ____ _________________________________________________ ____
IV 14 Cummins Wartsila SAS Financial Statements 4
Signatures 32
PART IV
_______
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
________ _______________________________________________________________
Documents filed as a part of this report:
1. Cummins Wartsila SAS Financial Statements for the years ended
December 31, 1998 and 1997 together with the Auditor's Report.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
________________________________________
To the Shareholders of Cummins Wartsila SAS:
In compliance with the assignment entrusted to us by your shareholders'
annual general meeting, we hereby report to you, for the year ended
December 31, 1998, on:
- - the audit of the financial statements of Cummins Wartsila
reported in French Francs and prepared in accordance with French
GAAP. These include:
. a balance sheet
. a profit and loss statement
. Notes 1 to 12
. Schedules I to XIII
- - the audit of Schedule XIV a reconciliation to US Generally
Accepted Accounting Principles in accordance with SEC Item 17 of
Form 20-F.
- - the specific verifications and information required by law.
These financial statements have been approved by the Board of Directors.
Our role is to express an opinion on these financial statements based on
our
audit.
1. OPINION ON THE FINANCIAL STATEMENTS
We conducted our audit in accordance with the professional standards
applied in France which essentially are similar to Generally
Accepted Accounting 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
statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements give a fair presentation of
the company's financial position and its assets and liabilities as
of December 31, 1998, and of the results of its operations for the
year then ended in accordance with accounting principles generally
accepted in France. In our opinion, the reconciliation schedule
gives a fair presentation of all significant adjustments necessary
to be consistent with US Generally Accepted Accounting Principles.
2. SPECIFIC VERIFICATIONS AND INFORMATION
We also performed the specific verifications required by law, in
accordance with the professional standards applied in France.
We have no comment as to the fair presentation and the conformity
with the financial statements of the information given in the
management report of the Board of Directors, and in the documents
addressed to the shareholders with respect to the financial position
and the financial statements.
We communicate to you that, due to the incurred losses, total equity
of the Company has become lower than half of share capital as of
December 31, 1998. In accordance with article 241 of the law from
July 24, 1966, you have to be convened in an extraordinary
shareholders' meeting to be held before 4 months after the general
meeting approving the present financial statements to decide whether
to dissolve the Company. If the dissolution is not decided, we
remind you that the Company will have to restore its equity to a
level at least equal to half of share capital by December 31, 2001.
Neuilly-sur-Seine , June 29, 1999
_________________________________
BARBIER FRINAULT & ASSOCIES
Nicolas Job
CUMMINS WARTSILA SAS
BALANCE SHEET AS OF
December 31, 1998
____________________
(FRF thousands)
12/31/98 12/31/97
_________________________________ _________
Amort. &
ASSETS Gross Provisions Net Net
_________ __________ ________ _________
Intangible Fixed Assets
Research & development costs 6,150 2,050 4,100 0
Goodwill 12,760 7,018 5,742 6,380
Franchises Patents Licenses 418,957 28,867 390,090 347,133
Software 32,643 24,461 8,182 13,252
Intangible fixed assets
in-progress 916 - 916 500
________ ________ _______ _______
471,426 62,396 409,030 367,265
Tangible Fixed Assets
Land 925 - 925 925
Buildings, Fixtures, Fittings 149,870 62,834 87,036 83,166
Technical plant and machinery 426,221 224,773 201,448 179,358
Other tangible fixed assets 39,123 24,756 14,367 15,949
Tangible fixed assets
in-progress 34,018 - 34,018 60,992
Advances and down payments 124 - 124 1,014
_______ _______ _______ _______
650,281 312,363 337,918 341,404
Long-Term Investments
Equity investments 6,699 4,424 2,275 2,150
Receivables from controlled
entities 1,374 - 1,374 1,374
Loans and other long-term
investments 20,312 147 20,165 19,655
_________ _______ _______ _______
28,385 4,571 23,814 23,179
_________ _______ _______ _______
Fixed Assets 1,150,092 379,330 770,762 731,848
_________ _______ _______ _______
Inventories and
Work-In-Progress
Raw materials and other
supplies 85,459 16,629 68,830 81,788
Supplies 3,751 83 3,668 3,121
Production work-in-progress 173,762 1,867 171,895 157,291
Semi-finished goods 221,877 41,639 180,238 202,841
Finished goods 30,375 0 30,375 0
_______ _______ _______ _______
515,224 60,218 455,006 445,041
Advances & down payments on
Orders 28,200 28,200 18,101
Receivables:
Receivables from sales 505,434 82,433 423,001 432,529
Other operating receivables 136,762 10,183 126,579 55,710
Liaison account 0
_______ ______ _______ _______
642,196 92,616 549,580 488,239
Marketable Securities 451 451 22,525
Cash-On-Hand 15,229 15,229 43,141
_________ _______ _________ _________
Current Assets 1,201,300 152,834 1,048,466 1,017,047
_________ _______ _________ _________
Prepaid Expenses 11,577 11,577 7,785
Charges to be spread over
several periods 4,613 4,613 0
Unrealized Foreign Exchange
Losses 8,091 8,091 2,657
_________ _______ _________ _________
Total Assets 2,375,673 532,164 1,843,509 1,759,337
_________ _______ _________ _________
12/31/98 12/31/97
______________________ _________
Partial
LIABILITIES Amounts Amounts Amounts
_________ _________ _________
Shareholders' Equity
Share capital 500,000 753,557
Legal reserve 7,674
Restricted reserve as of 3/31/98 129,521
L/T capital gain reserve 2,967 2,967
FNI reserve - Cote d'lvoire 5
Additional paid-in capital 58,670
Retained earnings (155,716)
CWEC merger clearing account 85,000
Income for the period (581,488) (119,669)
Investment subsidies 8,047 2,052
Cumulative translation adjustment 14,497 30,362
_________ _________
Total Shareholders' Equity 73,544 664,902
Conditional Advances 5,598
Provisions for legal disputes and
commitment 77,192 66,295
Provisions for restructuring and
retirement 276,722 132,578
_________ _________
Total Provisions 353,914 198,873
Liabilities:
Financial liabilities:
. Medium-term loans 844,000 74,667
. Short-term credits 311,050
. Miscellaneous loans and financial
liabilities 21,898 22,129
. Other loans 34,337 9,855
_________ _________
900,235 417,701
Down payments on orders in-progress 100,327 114,829
Operating liabilities:
. Trade payables & assimilated accounts 325,443 279,517
. Tax and social liabilities 45,835 47,917
. Other liabilities 30,408 23,199
_________ _________
401,686 350,633
Payables to fixed asset suppliers 4,110 4,726
_________ _________
Total Liabilities 1,406,358 887,889
Prepaid Revenue 1,499 1,047
Unrealized Gains on Foreign Exchange 2,596 6,626
_________ _________
Total Liabilities 1,843,509 1,759,337
_________ _________
CUMMINS WARTSILA SAS
INCOME STATEMENT
____________________
(FRF thousands)
1/1/98 to 1/1/97 to
12/31/98 12/31/97
__________ _________
Operating Revenues
Net revenues 955,348 1,205,713
Change in stored production 32,355 (23,994)
In-house production 75,972 13,256
Subsidies 2,114 2,886
Reversal of provisions and expense
transfers 179,941 165,231
Other revenues 2,484 11,820
_________ _________
Total 1,248,214 1,374,912
Operating Expenses
Purchases 626,352 656,777
Change in inventories 22,375 (24,777)
Other purchases & external charges 441,074 392,208
Taxes and assimilated payments 19,598 23,844
Payroll and associated costs 198,983 221,238
Social charges 83,419 90,707
Allocations:
Depreciation & amortization
of tangible and intangible
fixed assets 99,156 66,958
Depreciation of charges allocated
over several periods 1,153
Provisions for depreciation of assets 41,236 57,636
Provisions for losses & contingencies 89,414 118,797
Other charges 6,156 8,185
_________ _________
Total 1,628,916 1,611,573
_________ _________
1. Operating Income/Loss (380,702) (236,661)
_________ _________
Share of Income From Joint Ventures 4,378
Financial Income
Other interest & assimilated income 3,357 7,273
Reversal of provisions and expense
transfers 5,406 2,275
Positive exchange rate differences 14,961 41,878
_________ _________
Total 23,724 51,426
Financial Charges
Depreciation and provisions 9,094 5,406
Interest and assimilated charges 34,983 19,033
Negative exchange rate differences 18,335 23,486
_________ _________
Total 62,412 47,925
_________ _________
2. Financial Income/Loss (38,688) 3,501
_________ _________
3. Current Income Before Tax (419,390) (228,782)
_________ _________
"Exceptional" Revenues
On management transactions 882 206,642
On capital transactions 1,161 127,169
Share of investment subs. allocated
to income statement 97
Reversal of other provisions 15,292 61,881
_________ _________
Total 17,432 395,692
"Exceptional" Charges
On management transactions 7,478 58,844
On capital transactions 1,251 232,905
Restructuring expense 176,800 3,500
_________ _________
Total 185,529 295,249
_________ _________
4. Extraordinary Income/Loss (168,097) 100,443
_________ _________
5. Corporate Income Tax ( 5,999) ( 8,670)
_________ _________
6. Income/Loss (581,488) (119,669)
_________ _________
NOTES
_____
1. Activity
The twelve month financial period ended December 31, 1998 shows
accounting revenues of FRF 955.3 million (Euro 145.6 million), compared
to FRF 1,205.7 million (Euro 183.8 million) for the previous financial
period.
Movement In Net Sales
_____________________
(FRF millions)
12 Month Period
Year Net Sales
____ _________
1993 1,058
1994 1,012
1995 1,085
1996 1,191
1997 1,206
1998 955
Direct exports were FRF 580 million (Euro 88 million), i.e. 61% of
total revenues excluding taxes. Taking indirect exports into account,
the share of revenues relating to foreign markets was FRF 603 million
(Euro 92 million), i.e. 63% of revenues excluding taxes.
Direct exports 1998: FRF 580 million
_____________________________________
Percent of
Foreign Markets Export Sales
_______________ ____________
Europe 50%
Asia 24%
Americas 18%
Africa 7%
Other 1%
Orders in 1998 amounted to FRF 857 million (Euro 131 million). At the
end of the period, new orders were FRF 555 million (Euro 85 million).
278 megawatts were delivered in 1998.
Cummins Wartsila SAS's marketing network relies mainly on the parent
companies' distribution structures.
2. Accounting principles
Cummins Wartsila prepares its financial statements in accordance with
French accounting principles.
The same accounting principles were used as those used for the 1997
financial period, with the exception of the recording of Research and
Development costs (see paragraph 2.2 below).
2.1. Foreign currency translation
Transactions in foreign currency are recorded at the following exchange
rates:
. Daily transactions are converted into French francs as follows:
- Purchase and sales invoices by using the monthly rates
published by the French Customs Authorities.
- Payments and receipts using daily bank rates.
. Valuation of receivables and liabilities in foreign currency
as of December 31, 1998:
- Euro zone currencies: unrealized foreign exchange gains and
losses are recorded in line with the Euro currency exchange
rates as set at December 31, 1998.
- Non-Euro zone currencies: valuation takes place in line with
the last known rate before the period end. These rates were
published in the Journal Official (Gazette) of January 1,
1999.
The assets and liabilities of the two sites in England are converted
using the exchange rate in effect on December 31, 1998. The income
statement is converted at the average monthly exchange rate.
2.2. Intangible fixed assets
The company has decided to book the costs of studies and trials
relating to specific markets and benefiting from advances whose
repayment is conditional, in Research and Development costs. These
costs are amortized over a period of three years.
Former WARTSILA France's own goodwill, increased by the contribution
related to the takeover of Societe Surgerienne de Constructions
Mecaniques of Budi and by the repair activity of Wartsila Diesel
France, is amortized over a period of twenty years.
Intangible fixed assets capitalized in 1997 for an amount of FRF 350
million, relating to know-how and technology in respect of the CW 200
and the CW 170 motors, are amortized on a straight-line basis over a
period of 15 years. The 1998 costs relating to know-how and technology
in respect of these motors was capitalized for a sum of FRF 68.9
million, bringing the amount in intangible fixed assets to FRF 418.9
million at the end of the period. These costs are amortized over the
remaining useful life of the intangible fixed assets mentioned at the
beginning of this paragraph.
Software is amortized on a straight-line basis over four years; low
value software is amortized over 12 months.
2.3. Tangible fixed assets
Tangible fixed assets are recorded at their acquisition cost.
Depreciation is calculated on a straight-line basis over the following
useful life periods:
. Buildings 20 years
. Fixtures and fittings 10 years
. Industrial equipment 10 years
. Development motors 2 years
. Plant 3 years
. Transport equipment 4 years
. Furniture 10 years
. Office equipment 4 years
. IT equipment 4 years
2.4. Inventories and work-in-progress
Purchased inventory is valued at average weighted cost.
Work-in-progress is valued at total cost of production, which includes
both cost of material purchased and manufacturing costs. Manufacturing
costs include normal production costs as well as depreciation charges.
Articles with a low turnover are subject to sliding provisions of up to
90% of their value. Provisions are booked in work-in-progress accounts
if circumstances place the completion of the project in jeopardy.
A provision is set aside for inventories of raw materials and work-in-
progress relating to engines in the start-up phase of production when
inventory costs exceed the estimated sales price. The provision
recorded represents the excess of costs over the sales price.
2.5. Sales
The principle of product recognition is the following:
. upon dispatch of the engines and the spare parts
. upon completion of work in relation to repairs and upgrading
. for important, large-scale engines whose manufacture involves long-
term contracts, product recognition is applied according to the
following methods:
Engineering contracts:
. for the study and document submission phases, billing takes
place as work progresses; the triggering event is the
submission of plans.
. equipment is billed on the basis of deliveries on a pro
rata basis with a check being made to ensure that the
margin generated at this stage is in line with the average
margin of the contract as a whole.
Military contracts:
. Billing for development and industrialization contract
takes place as work progresses at a pace agreed on by the
parties.
2.6. Loss and contingency provisions
Provisions are set aside for the estimated value of the work to be
carried out relating to the installation and commissioning of engines
delivered and invoiced.
The company sets aside provisions on the basis of statistical data in
order to cover possible expenses relating to the guarantee given to
customers.
Lastly, contingency provisions are set aside for legal disputes with
customers likely to involve either additional work or to pose a risk to
the payment of receivables.
2.7. Retirement indemnities
Estimated retirement indemnities due upon the retirement of an
employee, to which must be added social charges at the average company
rate, are calculated according to the following criteria:
. employees' length of service with the company
. person's age
. mortality table
. turnover rate of the company's own personnel
. discount rate, excluding inflation
. inflation rate
3. Shareholders' equity
3.1. Share capital
As of March 31, 1998, the Extraordinary General Meeting of
Shareholders decided:
. to reduce the share capital from FRF 753,556,800 to FRF
500,000,000
. transform the company into a simplified joint-stock company
As of December 31, 1998, the share capital was FRF 500,000,000. It
is composed of 5,000,000 shares, each of a par value of FRF 100.
The capital is held in equal amounts by CUMMINS ENGINE COMPANY
Limited and WARTSILA NSD Corporation.
3.2. Reserve account
Following the decision of the Extraordinary General Meeting of
Cummins Wartsila of March 31, 1998, a reserve account was set up
for an amount of FRF 129,520,500 corresponding to the amount of
estimated losses for the first quarter of 1998.
This account can only be used either for offsetting future losses
or for being included in share capital.
3.3. Loss of half of capital
Due to the losses recorded in the financial accounts, shareholders'
equity has fallen below half the nominal value of share capital.
Decisions concerning the continuation of the business activity will
be examined within the legal deadlines.
4. Comments relating to exceptional items
The most significant extraordinary items consist of:
(FRF millions)
Charges Rev.
_______ ______
. Release of provision for retirement indemnity
corresponding to employees made redundant 11.3
. Reversal of the excess provision for restructuring
charges following the shutdown of the melting
activity 2.8
. Penalties on contracts 4.5
. Additional pensions 1.4
. Restructuring provision 176.8
. Research tax credit 5.8
The restructuring provision of FRF 176.8 million
is composed of:
. costs related to the planned redundancy
scheme 105.3
. write-off of tangible fixed assets 52.5
. costs relating to the transfer of activities 19.0
Costs related to the planned redundancy scheme have been computed based on
amounts pursuant to detailed benefit programs, contractual provisions or
statutory requirements for each category of employees. Planned workforce
reduction is approximately 320 people. None of these employees left the
company prior to December 31, 1998.
5. Subsidies
The company received an investment subsidy for the acquisition of new
equipment. A portion of this subsidy is reversed to income at the same
rate as depreciation relating to equipment.
Furthermore, the company receives Credit National loans known as
`article 90' loans for the financing of research programs. These loans
are only repaid if research results are successful. In the case of a
recognized failure or if commercial success has not been achieved
within a certain time, these loans are converted into subsidies.
6. Operating receivables
Provisions, calculated on a case by case basis, are set aside for
doubtful debts.
7. Research tax credit
Because of research and development undertaken in 1998, the company
declared a tax research credit of approximately FRF 5.8 million which
is recorded in the income statement as a tax revenue.
This credit may be set against the charge for tax during the next three
years. After this period, the portion exceeding the tax charge will be
paid back to the company.
8. Prepaid expenses
This account consists mainly of insurance charges of FRF 8.8 million to
be allocated over the twelve months following payment of the premium.
9. Charges to be spread over several periods
These consist of costs borne by the company relating to engines
installed in field tests. They are spread over 5 years and 1/5 of the
costs are amortized in the current period.
10. Off balance sheet commitments
The company's commitments relating to the hedging of future currency to
be cashed in or out during the next twelve months are as follows:
Amount in millions Amount in millions (FRF)
(foreign currency)
__________________ ________________________
. USD 31 174
. DEM 16 55
. GBP 5 47
Other miscellaneous commitments appear in the table attached as an
appendix.
11. Incorporation into the consolidated financial statements
The financial statements of our company are consolidated on a like by
like basis, using the equity method of consolidation, by our parent
companies:
CUMMINS ENGINE COMPANY, Inc., Columbus, Indiana, USA
METRA CORPORATION, Helsinki, Finland
In light of the insignificant nature of the subsidiaries held by
CUMMINS WARTSILA, consolidated financial statements were not prepared.
12. Information concerning the remuneration of the directors
This information was not provided, as it would have led to disclosure
of the amount of an individual salary.
I. MOVEMENT IN FIXED ASSETS - GROSS VALUE
__________________________________________
(FRF thousands)
Gross
Situation Value
As of As Of
1/1/98 Acquisitions Disposals 12/31/98
_________ ____________ _________ ________
Intangible Fixed Assets
_______________________
Research & Development Costs 6,150 6,150
Goodwill 12,760 12,760
Licenses 50 50
Software 30,905 1,738 32,643
Know-How W170 & W200 350,000 68,907 418,907
Intangible Fixed Assets
In-Progress 500 416 916
_______ _______ _______ _______
Total 394,215 77,211 471,426
_______ _______ _______ _______
Tangible Fixed Assets
_____________________
Land 925 925
Buildings Fixtures Fittings 136,478 16,249 2,858 149,869
Technical Plant & Machinery 372,841 80,557 27,176 426,222
Other Tangible Fixed Assets 36,867 3,790 1,534 39,123
Tangible Fixed Assets
In-Progress 60,992 (26,974) 34,018
Advances and Down Payments 1,014 ( 890) 124
_______ _______ _______ _______
Total 609,117 72,732 31,568 650,281
_______ _______ _______ _______
II. MOVEMENT OF DEPRECIATION AND AMORTIZATION CHARGES
______________________________________________________
(FRF thousands)
Situation Allocation Depr. of Situation
As of for the Disposed As Of
1/1/98 Period Assets 12/31/98
_________ __________ ________ ________
Intangible Fixed Assets
_______________________
Research & Development Costs 2,050 2,050
Goodwill 6,380 638 7,018
Licenses 5 5
Software 17,653 6,808 24,461
Know-How W170 & W200 2,917 25,944 28,861
_______ _______ _______ _______
Total 26,950 35,445 62,395
_______ _______ _______ _______
Tangible Fixed Assets
_____________________
Buildings Fixtures Fittings 53,312 10,393 872 62,833
Technical Plant & Machinery 193,482 47,057 15,765 224,774
Other Tangible Fixed Assets 20,919 4,977 1,140 24,756
_______ _______ _______ _______
Total 267,713 62,427 17,777 312,363
_______ _______ _______ _______
III. MOVEMENT OF ALL PROVISIONS
________________________________
(FRF thousands)
ALLOCATIONS
REVERSAL
_______________________________
_______________________________
SITUATION REGUL./ EXTRA-
EXTRA- SITUATION
01/01/98 MEDIUM SP OPERATIONS FINANCIAL ORDINARY
OPERATIONS FINANCIAL ORDINARY 12/31/98
_________ _________ __________ _________ ________
__________ _________ ________ ________
Equity Interests and
Assimilated Accounts 4,570
4,570
Inventories & work-in-progress 59,217 20,646
19,645 60,218
Doubtful debts France 9,349 192
184 9,357
Doubtful debts exports 24,505 1,487
105 235 25,652
Doubtful debts - other legal
disputes 27,534 19,897
7 47,424
Other receivables 10,533
350 10,183
Marketable securities
_______ ______ _______ _____ _______
_______ _____ ______ _______
Total Depreciation on Current
Assets: 131,138 42,222
19,941 585 152,834
_______ ______ _______ _____ _______
_______ _____ ______ _______
Provision for Legal Disputes
and Commitments
.Legal disputes 18,382 50 5,453
4,115 215 19,555
.Guarantees 35,728 14,120
2,246 47,602
.Other provisions 6,730
5,811 27 892
_______ ______ _______ _____ _______
_______ _____ ______ _______
Sub-total Contingency Provision 60,840 50 19,573
12,172 242 68,049
Social-Foreign Exchange Losses 5,455 9,094
5,406 9,143
Provision for Restructuring
and Retirement
.Work to be carried out 88,406 (8,033) 69,880
67,642 82,611
.Provision for retirement
indemnities 40,672
12,396 11,265 17,011
.Provision for 1998 planned
redundancy scheme 176,800
176,800
.Other provisions 3,500
3,200 300
_______ ______ _______ _____ _______
_______ _____ ______ _______
Sub-total Provision for Losses 132,578 (8,083) 69,880 176,800
80,038 14,465 276,722
_______ ______ _______ _____ _______
_______ _____ ______ _______
Total Provisions 198,873 (7,983) 89,453 9,094 176,800
92,210 5,406 14,707 353,914
_______ ______ _______ _____ _______
_______ _____ ______ _______
334,581 (7,983) 131,675 9,094 176,800
112,151 5,406 15,292 511,318
_______ ______ _______ _____ _______
_______ _____ ______ _______
IV. TRADE RECEIVABLES
______________________
(FRF thousands)
AMOUNT AMOUNT GROSS
> 1 YEAR < 1 YEAR TOTAL DEPRECIATION
________ ________ _______ ____________
Receivables on Capitalized
Assets
Receivables from controlled
entities 1,374 1,374
Loans 18,558 18,558
Current Assets Receivables
Trade receivables and
assimilated accounts
France
Affiliated companies 31,091 31,091
Other receivables 107,373 107,373 24,696
Commercial papers 27,022 27,022
_______ _______ _______ _______
Total France 165,486 165,486 24,696
_______ ________ _______ _______
Export
Affiliated companies 542 146,069 146,611 6,877
Other receivables 587 192,734 193,321 50,860
Commercial papers 15 15
_______ _______ _______ _______
Total Export 1,129 338,818 339,947 57,737
_______ ________ _______ _______
Total Receivables 1,129 504,304 505,433 82,433
_______ ________ _______ _______
Other Receivables
Affiliated companies 55,482 55,482
Others 14,467 66,813 81,280 10,183
_______ ________ _______ _______
Total Other Receivables 14,467 122,295 136,762 10,183
_______ ________ _______ _______
V. FINANCIAL LIABILITIES
_________________________
(FRF thousands)
1 <
MATURITY MATURITY MATURITY
DATE DATE DATE
< 1 YEAR < 5 YEARS > 5 YEARS TOTAL
________ _________ __________ _______
Medium-Term Loans 64,000 780,000 844,000
Other Loans 16,874 3,051 9,300 29,225
______ _______ _____ _______
Total 80,874 783,051 9,300 873,225
VI. INCOME STATEMENT (SPECIAL FORMAT)
______________________________________
(FRF thousands)
12/31/98 12/31/97
_________ _________
Production Sold 955,349 1,205,713
Change in inventory of finished goods & WIP 32,355 (23,994)
Self-created fixed assets 75,971 13,256
_________ _________
Total Production: 1,063,675 1,194,975
Purchases adj. for changes in inventories (878,092) (896,643)
Other external charges (149,478) (109,307)
Change in provision for losses ( 11,929) ( 6,744)
_________ _________
Value Added: 24,176 182,281
Operating subsidies 2,114 2,886
Taxes and assimilated payments (19,414) (23,763)
Payroll charges (277,028) (308,040)
_________ _________
Operating Cash Flow: (270,152) (146,636)
Depreciation and amortization charges (100,308) ( 66,958)
Change in provision on current assets ( 21,295) ( 22,698)
Change in contingency provision ( 4,733) ( 4,004)
Other revenues 2,483 11,820
Other charges ( 6,156) ( 8,185)
_________ _________
Operating Income: (400,161) (236,661)
Share of income from joint ventures 0 4,378
Financial income 23,724 51,426
Financial charges (62,411) ( 47,925)
_________ _________
Current Income: (438,848) (228,782)
"Exceptional" revenue (141,168) 265,022
"Exceptional" charges ( 7,478) ( 58,845)
_________ _________
Income Before Tax: (587,494) ( 22,605)
Corporate income tax 5,999 8,670
Income on disposal of fixed asset items 7 (105,734)
_________ _________
Net Accounting Income: (581,488) (119,669)
_________ _________
VII. TABLE OF OFF BALANCE SHEET COMMITMENTS
____________________________________________
(FRF thousands)
AFFILIATED
TYPE OF COMMITMENT TOTAL COMPANIES OTHERS
__________________ _______ __________ ________
Commitments given
Commercial guarantees provided by
banks and other institutions 94,643 94,643
Lease purchase commitments 2,663 2,663
_______ _______ _______
Total 97,306 97,306
_______ _______ _______
Commitments received
Guarantees received from suppliers 5,679 5,679
Guarantees on lines of credit 800,000 800,000
_______ _______ _______
Total 805,679 800,000 5,679
_______ _______ _______
Reciprocal commitments
Sale of foreign currency futures 174,278 174,278
Purchase of foreign currency futures 102,657 102,657
_______ _______ _______
Total 276,935 276,935
_______ _______ _______
*sales and purchases of foreign currency are shown in the appendix.
VIII - FINANCIAL RESULTS OVER THE LAST
FIVE YEARS
__________________________________________________
(Articles 133, 135 and 148 of Decree n 67-236 of March 23, 1967 relating to
commercial enterprises)
1994 1995 1996
1997 1998
_____________ _____________
_____________ _____________ ____________
1. Financial Situation at Period End
____________________________________
a. Share capital 150,000,000 150,000,000
150,000,000 753,556,800 500,000,000
b. Number of existing ordinary shares 1,500,000 1,500,000
1,500,000 7,535,568 5,000,000
c. Number of preferred dividend shares n/a n/a n/a
n/a n/a
d. Maximum number of shares to be
created in the future n/a n/a n/a
n/a n/a
2. Global Results From Operations
_________________________________
a. Revenues before tax 1,012,128,978 1,085,450,627
1,191,058,795 1,205,712,690 955,348,271
b. Income before tax, *depreciation &
provisions (79,253,376) 257,827,072
17,971,164 (74,413,761) (297,331,650)
c. Income tax 100,000 100,000
100,000 100,000 150,000
d. Income after tax, depreciation &
provisions (66,662,423) 25,686,089
10,356,903 (119,669,536) (581,488,331)
e. Profits distributed n/a n/a n/a
n/a n/a
3. Results On A Per Share Basis
_______________________________
a. Income after tax but before
depreciation & provisions (52.90) 171.82 11.91
(9.89) (59.50)
b. Income after tax, depreciation
and provisions (44.44) 17.12 6.90
(15.88) (116.30)
c. Dividend paid on each share n/a n/a n/a
n/a n/a
4. Personnel
____________
a. Number of employees at period end 998 669
727 1,049 1,004
b. Payroll 196,404,316 144,694,599
133,506,549 221,238,494 198,983,384
c. Social charges & assimilated amounts
(social security, & social works),etc. 75,940,353 60,054,014
60,484,248 90,707,469 83,418,514
___________ ___________
___________ ___________ ___________
*Income before tax,depreciation,provisions
and cancellation of receivables (79,253,376) 257,827,072
17,971,164 (74,413,761) (297,331,650)
___________ ___________
___________ ___________ ____________
IX - INFORMATION ON PURCHASE LEASE
AGREEMENTS AS OF 12/31/98
____________________________________________________________
(FRF thousands)
BALANCE SHEET
LEASED FIXED ASSETS
INCLUDING LEASED FIXED ASSETS
___________________________________________________________________________________
________________________________
INITIAL DEPRECIATION CHARGES
GROSS
BALANCE SHEET ITEM COST (1) OF PERIOD (2) ACCUMULATED (2) NET VALUE
VALUE DEPRECIATION NET VALUE
__________________ ________ _____________ _______________ _________
_______ ____________ _________
Land
925 925
Buildings 3,545 142 1,135 2,410
153,415 63,968 89,447
Technical plant,
equipment and machinery
426,221 224,773 201,448
Other fixed assets
39,123 24,756 14,367
Fixed assets in-progress
34,018 34,018
Adv & down payments on orders
124 124
_____ ___ _____ _____
_______ _______ _______
TOTALS 3,545 142 1,135 2,410
653,826 313,497 340,329
_____ ___ _____ _____
_______ _______ _______
(1) Value of these assets upon signature of contracts.
(2) Allocation for the period and accumulated charges which would have been recorded
if these assets had been acquired
and depreciated on a straight-line basis.
PURCHASE LEASE COMMITMENTS
_____________________________________________________________________________________
________________________________
LEASE PAYMENTS MADE OUTSTANDING LEASE
PAYMENTS
________________________
_________________________________________________ RESIDUAL
OF THE 1 TO 5
> 5 PURCHASE
BALANCE SHEET ITEM PERIOD ACCUMULATED < 1 YEAR YEARS
YEARS TOTAL DUE PRICE (1)
__________________ ________ _____________ _______________ _________
_______ ____________ _________
Land
Buildings 367 3,069 367 1,774
396 2,537 126
Technical plant,
equipment and machinery
Other fixed assets
Fixed assets in-progress
___ _____ ___ _____
___ _____ ___
TOTALS 367 3,069 367 1,774
396 2,537 126
___ _____ ___ _____
___ _____ ___
(1) According to the contract.
X - INFORMATION RELATING TO SUBSIDIARIES
AND EQUITY INTEREST
___________________________________________________________
(FRF thousands)
LOANS
AND AMOUNT OF
ADVANCES DEPOSITS/ DIVIDENDS
OTHER SHARE OF ACCOUNTING VALUE
GRANTED BY GUARANTEES 1998 RECEIVED
SHARE CAPITAL OF SHARES HELD CW
NOT YET PROVIDED REVENUES INCOME BY CW
CAPITAL CAPITAL HELD (%) GROSS NET PAID
BACK BY CW (EXCL.TAXES) 1998 In 1998
_________ _________ _______ _________ _________
_________ __________ ____________ _______ _______
A. Detailed information
on equity interests
1) Subsidiary (at least
50% of capital held)
Cummins Wartsila ACO 1,446,000 940,215 99.99 3,071,100 2,050,426
1,553,577 0 14,646,281 168,953 0
Cummins Wartsila West
Africa 100,000 (430,524) 100.00 100,000 100,000
300,000 0 11,144,795 434,252 0
Cummins Wartsila
Moteurs S.A. 125,000 125,000
2) Equity interest (10 to
50% of capital held)
B. Detailed information
on other subsidiaries
or equity interests
1) Subsidiaries not
covered in paragraph A
a) French subsidiaries 3,378,255 0
9,550,000 0 0 (1)
b) Foreign subsidiarie 0
0 0
2) Equity interests not
covered in paragraph A
a) in French
companies 25,000 0
0 0 (2)
b) in Foreign
companies 0
0 0
1) SACM ROUBAIX : 100% depreciated
2) LEBOCEY : 100% depreciated
XI. DEFERRED AND CONTINGENT TAX
LIABILITY
__________________________________________
(FRF thousands)
Situation at the beginning of the
period Movements of the period
___________________________________
________________________ _______________________
Amount of Deferred taxation
Contingent taxation
Item Receivables Liabilities
Receivables Liabilities Increase Decrease
_________ ___________ ___________
___________ ___________ ___________ _________
Long-term capital gain taxed at 10% 450
128
Long-term capital gain taxed at 15% 2,029
481
Long-term capital gain taxed at 19% 488
94
Long-term capital losses 60,368
22,137 15,857
Loss carry-forwards 155,358 56,970
170,149
Deferred depreciation 153,341 56,230
77,700
Provision for paid leave 15,877 5,822
613
Provision for exchange rate losses 5,406 1,982
3,688
Contingent tax liability (FRF): 2,010 737
775
Provision for retirement indemnities 40,672 14,914
Amortization of goodwill 6,380
2,339 638 23,661
_______ _______
______ ___ _______ ______
Total 442,379 136,655
24,476 703 252,175 40,906
Balance of deferred taxation 136,655
Balance of contingent taxation
23,773
Situation at the end of the
period
___________________________________
________________________
Amount of Deferred taxation
Contingent taxation
Item Receivables Liabilities
Receivables Liabilities
_________ ___________ ___________
___________ ___________
Long-term capital gain taxed at 10% 450
128
Long-term capital gain taxed at 15% 2,029
481
Long-term capital gain taxed at 19% 488
94
Long-term capital losses 44,511
16,322
Loss carry-forwards 325,507 119,363
Deferred depreciation 231,041 84,723
Provision for paid leave 15,264 5,597
Provision for exchange rate losses 9,094 3,335
Contingent tax liability (FRF): 1,235 453
Provision for retirement indemnities 17,011 6,238
Amortization of goodwill 7,018
2,574
_______ _______
______ ___
Total 653,648 219,709
18,896 703
Balance of deferred taxation 219,709
Balance of contingent taxation
18,193
N.B.: Corporate income tax rate at the beginning and end of the period: 36.67%
XII. ITEMS RELATING TO SEVERAL BALANCE SHEET ITEMS AND
CONCERNING AFFILIATED COMPANIES
_______________________________________________________
(FRF thousands)
GROSS NET
AMOUNT DEPRECIATION AMOUNT
_______ ____________ ________
1 - ASSETS
__________
1.1 FIXED ASSETS
________________
Equity interests 3,296 1,021 2,275
Receivables from controlled entities 1,374 1,374
1.2 CURRENT ASSETS
__________________
Advances & down payments on orders 1,192 1,192
Trade receivables and assimilated
accounts 177,702 6,877 170,825
Other receivables 55,482 55,482
2 - LIABILITIES
_______________
Equity loan
Other cash advances 587
Other loans 406
Advances on orders-in-progress 20,093
Trade payables and assimilated
accounts 85,206
Other liabilities 5,095
Financial revenue
Financial charges 8,872
Affiliated companies:
Cummins
Cummins Wartsila West Africa
Cummins Wartsila ACO
Cummins Wartsila Moteur S.A.
Wartsila (Consolidated Group)
Metra Finance
XIII - BREAKDOWN OF WORKFORCE -
SITE/SECTOR
___________________________________________
MULHOUSE SURGERES NEUILLY COURBEVOIE
VENISSIEUX GEMENOS UK TOTAL
________ ________ _______ __________
__________ _______ ________ _______
Workers 217 48
265
Fitters 35 13 4
52
Middle Management 268 138 10 9
4 429
Executives 174 58 6 2
1 241
Apprentices
UK
17 17
12/31/98 694 257 20 11
5 17 1,004
12/31/97 782 221 1 21 12
6 6 1,049
XIV RECONCILIATION TO US GAAP
_____________________________
In accordance with requests from Cummins Group, a reconciliation to US
GAAP is presented below:
XIV.1 Reconciliation of net result
FRF `000
Note 1998
______ _________
Net statutory result (581,488)
Deferred taxation XIV.3 28,502
Assets not capitalized in US GAAP XIV.4a 1,114
Adjustment of depreciation period: XIV.4b 1,355
equipment
R&D costs capitalized in French XIV.4c ( 4,516)
accounts
R&D costs `know how' capitalized in XIV.4c ( 42,963)
French Accounts
Expenses spread for tax purposes XIV.4e ( 4,613)
Unrealized exchange gains XIV.5 ( 4,030)
_________
Net result US GAAP (606,639)
_________
XIV.2 Reconciliation of equity
FRF `000
Note 1998
______ _________
Net equity statutory 73,544
Deferred taxation XIV.3 84,561
Assets not capitalized in US GAAP XIV.4a (3,876)
Adjustment of depreciation period: XIV.4b 6,292
equipment
R&D costs capitalized in French XIV.4c ( 5,016)
accounts
R&D costs `know how' capitalized in XIV.4c (390,046)
French Accounts
Expenses spread for tax purposes XIV.4e ( 4,613)
Unrealized exchange gains XIV.5 2,596
_________
Net equity US GAAP (236,558)
_________
XIV.3 Deferred taxation
In accordance with french accounting regulation, no deferred taxation has
been recognised in French accounts.
In US GAAP, only tax losses carried forward having no expiry date have been
capitalized using the enacted tax rate (36.6%)
XIV.4 Adjustment on assets
In accordance with accounting policies used in the Cummins Group,
adjustments have been made on fixed assets to revise the economic useful
lives of some significant assets.
Most significant adjustments are as follows:
a) Some assets, having a net book value of KFF 3,876 should have been
expensed upon purchase in accordance with Group accounting policy.
Net assets and net profit (depreciation charge)are adjusted
accordingly.
b) Some equipment are depreciated in statutory accounts over a 10 year
period (tax rates). Economic useful lives of these assets have been
estimated by management to be 20 years. Net assets and net profit
(depreciation charge) are adjusted accordingly.
c) Research and development should be expensed as incurred. For tax
purposes, and in accordance with French accounting rules, such costs
can be capitalised under some circumstances and amortized. The R&D
expenses of Cummins Wartsila have been reversed back to P/L.
d) For tax purposes, some expenses can be capitalised and amortized over
a maximum of 5 years. All these expenses have been reversed back to
P/L.
No deferred taxation is recorded on these items due to immateriality.
XIV.5. Unrealized exchange gains
In accordance with French regulation, unrealized exchange gains are kept
in the balance sheet while unrealized exchange losses are provided for.
In accordance with US GAAP, assets and liabilities are valued at market
value using year-end exchange rates. Unrealized exchange gains or losses
are recorded as profit or losses.
XIV.6 Statement of comprehensive income
1998
_________
Net income (US GAAP) (606,639)
Foreign currency translation adjustments,
net of nil deferred taxation ( 15,865)
_________
Comprehensive income (US GAAP) (622,504)
_________
XIV.7 Cash flow statement (US GAAP)
In accordance with French accounting regulation, no cash flows statement
needs to be presented. The cash flow for Cummins Wartsila in 1998 is as
follows:
Year Ended
December 31, 1998
_________________
Operating activities
Net loss (US GAAP (606,639)
Depreciation & amoirtization of property, plant
and equipment (US GAAP) 68,693
Change in provisions (except restructuring) ( 63)
Provision for restructuring 176,800
Other non cash profits 4,531
Increase (decrease) in cash from:
accounts receivable and other assets (119,764)
inventories ( 21,065)
accounts payable and accruals 38,571
________
Net cash used in operating aactivities (458,936)
________
Investing activities
Purchase of property, plant and equipment ( 75,086)
________
Net cash used in investing activities ( 75,086)
________
Financing activities
Change in interest bearing current accounts (286,799)
Change in long term debt (external) 769,333
________
Net cash from financing activities 482,534
________
Effect of exchange rate on cash and cash equivalent 1,502
________
Net increase (decrease) in cash and cash equivalent ( 49,986)
________
Cash and cash equivalent, beginning of period 65,666
Cash and cash equivalent, end of period 15,680
SIGNATURES
__________
Pursuant to the requirements of Section 13 or 15(d) 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/K. M. Patel By /s/R. J. Mills
________________________ _________________
K. M. Patel R. J. Mills
Vice President and Chief Vice President -
Financial Officer Corporate Controller
(Principal Financial (Principal Accounting
Officer) Officer)
Date: June 30, 1999