RULE NO. 424(b)(2)
REGISTRATION NO.333-42687
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 18, 1998
$765,000,000
LOGO CUMMINS ENGINE COMPANY, INC.
$125,000,000 6.25% NOTES DUE MARCH 1, 2003
$225,000,000 6.45% NOTES DUE MARCH 1, 2005
$250,000,000 7.125% DEBENTURES DUE MARCH 1, 2028
$165,000,000 5.65% DEBENTURES DUE MARCH 1, 2098
---------------
Interest on each series of Notes and each series of Debentures
(collectively, the "Offered Securities") is payable on March 1 and September 1
of each year, commencing September 1, 1998. Each series of Offered Securities
is hereby offered separately, and not as a unit. The 2003 Notes (as defined
herein) and the 2005 Notes (as defined herein) are not redeemable prior to
maturity. The 2028 Debentures (as defined herein) and the 2098 Debentures (as
defined herein) are redeemable at any time, in either case, in whole or in
part, at the option of the Company at redemption prices equal to the greater
of (i) 100% of the principal amount (or Accreted Value (as defined herein) in
the case of the 2098 Debentures) of such Offered Securities and (ii) the sum
of the present values of the Remaining Scheduled Payments (as defined herein)
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined herein), plus in each case accrued interest thereon to the date of
redemption. See "Description of Offered Securities--Optional Redemption" .
The Offered Securities will not be subject to any sinking fund. Upon the
occurrence of a Tax Event (as defined herein), the Company will have the right
to shorten the maturity of the 2098 Debentures to the extent required so that
the interest paid thereon will continue to be deductible by the Company for
United States federal income tax purposes. See "Description of Offered
Securities--Conditional Right to Shorten Maturity of the 2098 Debentures".
The Offered Securities will be represented by one or more global securities
registered in the name of a nominee of The Depository Trust Company ("DTC").
Beneficial interests in such global securities will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described herein, the Offered Securities will not be
issued in definitive form. The Offered Securities will be issued only in
denominations of $1,000 and integral multiples thereof. See "Description of
Offered Securities--General" and "--Book-Entry System".
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT (2) COMPANY (1)(3)
------------------ ------------ --------------
Per Note due 2003.................... 99.821% 0.600% 99.221%
Total................................ $124,776,250 $750,000 $124,026,250
Per Note due 2005.................... 99.727% 0.625% 99.102%
Total................................ $224,385,750 $1,406,250 $222,979,500
Per Debenture due 2028............... 99.374% 0.875% 98.499%
Total................................ $248,435,000 $2,187,500 $246,247,500
Per Debenture due 2098............... 75.590% 0.8504% 74.7396%
Total................................ $124,723,500 $1,403,160 $123,320,340
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(1) Plus accrued interest, if any, from March 1, 1998.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933 (the "Securities Act").
(3) Before deducting estimated expenses of $150,000 payable by the Company.
---------------
The Offered Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Offered Securities will be ready for delivery in book-entry
form only through the facilities of DTC in New York, New York on or about
March 3, 1998, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
---------------
The date of this Prospectus Supplement is February 26, 1998.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID IN
CONNECTION WITH THE OFFERING. SUCH ACTIVITIES, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
----------------
AVAILABLE INFORMATION
The Securities and Exchange Commission (the "Commission") maintains a World
Wide Web site that contains reports, proxy and information statements and
other information regarding Cummins Engine Company, Inc. The address of such
site is: http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. Quarterly Reports on Form 10-Q for the quarterly periods ended March
30, June 29 and September 28, 1997.
3. Current Report on Form 8-K, dated February 14, 1997.
4. Each document filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus Supplement and prior to the termination of the
offering of the Offered Securities shall be deemed to be incorporated by
reference into this Prospectus Supplement and to be made a part hereof from
the date of filing of such document.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus Supplement to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus
Supplement.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus Supplement is delivered, upon the
request of such person, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such documents).
Written requests should be addressed to Linda J. Hall, Director--Investor
Relations, Mail Code 60118, 500 Jackson Street, Box 3005, Columbus, Indiana
47202-3005. Telephone requests may be directed to (812) 377-3121.
S-2
THE COMPANY
Cummins Engine Company, Inc. ("Cummins" or the "Company") is a leading
worldwide designer and manufacturer of diesel engines, ranging from 76 to
6,000 horsepower. The Company also produces natural gas engines and engine
components and subsystems. Cummins provides power and components for a wide
variety of equipment in its key markets: automotive, power generation,
industrial and filtration.
Cummins sells its products to original equipment manufacturers ("OEMs"),
distributors and other customers worldwide and conducts manufacturing, sales,
distribution and service activities in most areas of the world. Sales of
products to major international firms outside North America are transacted by
exports directly from the United States and shipments from foreign facilities
(operated through subsidiaries, affiliates, joint ventures or licensees) which
manufacture and/or assemble Cummins' products.
In 1997, approximately 56% of net sales were in the United States.
International markets include Asia and Australia (16% of net sales); Europe
and the Commonwealth of Independent States (14% of net sales); Mexico and
Latin America (6% of net sales); Canada (6% of net sales); and Africa (2% of
net sales).
AUTOMOTIVE
HEAVY-DUTY TRUCK
Cummins has a complete line of 8-, 10-, 11- and 14-litre diesel engines that
range from 260 to 525 horsepower serving the heavy-duty truck market. The
Company's heavy-duty diesel engines are offered as standard or optional power
by most major heavy-duty truck manufacturers in North America. The Company's
largest customer for heavy-duty truck engines in 1997 was Navistar
International Corporation, which represented approximately 5% of the Company's
net sales.
For 1997, factory retail sales of North American heavy-duty trucks were
200,655 units, more than 14% above that of the previous year's level. Factory
retail sales were 176,000 units in 1996 and 227,000 units in 1995. The
Company's share of the North American heavy-duty truck engine market was 32%
in 1997, based on data published by the American Automotive Manufacturers
Association.
Based on data published by the Society of Motor Manufacturers and Traders,
the Company's share of engines for trucks sold in the United Kingdom was 12%
in 1997.
Based on data published by the National Association of Truck and Bus
Manufacturers, in 1997 Cummins remained the leader of the heavy-duty truck
market in Mexico, where the economy continued the recovery that began in 1996.
MEDIUM-DUTY TRUCK
The Company currently manufactures a line of diesel engines ranging from 130
to 300 horsepower serving medium-duty and intercity delivery truck customers
worldwide. In 1996, the Company introduced its next generation of medium-duty
diesel engines, with higher horsepower and electronic controls.
The Company entered the North American medium-duty truck market in 1990.
Based upon data published by R. L. Polk, the Company's share of the market for
diesel-powered medium-duty trucks
S-3
was 25% through November 1997. Ford Motor Company was the Company's largest
customer of medium-duty engines for this market in 1997, representing
approximately 4% of the Company's net sales.
The Company sells its B and C Series engines and engine components outside
North America to medium-duty truck markets in Asia, Europe, South America and
India. In 1996, the Company expanded its relationship with Dongfeng Motor
Corporation of China ("Dongfeng") from a license arrangement for the
production of B Series engines to a joint venture for the production of C
Series engines.
BUS AND LIGHT COMMERCIAL VEHICLES
Within this market segment, Cummins produces both diesel and natural gas
engines for pickup trucks, school buses, transit buses, delivery trucks and
recreational vehicles.
In North America, Chrysler Corporation, which offers the Cummins B Series
engine in its Dodge Ram pickup truck, was the Company's largest customer for
medium-duty engines, representing approximately 8% of the Company's net sales
in 1997. The Company's new 5.9 litre ISB electronic engine was introduced into
the recreational vehicle market in 1997 and in the Dodge Ram pickup truck in
early 1998. This engine increased horsepower from 215 to 235 in the manual
transmission option.
The Company's C Series and M11 diesel engines and L10 natural gas engines
are available for the U.S. transit bus market. The demand for natural gas
products continues to grow. At the 1996 Olympics in Atlanta, 95 of the 100
natural gas buses were equipped with the Company's engines. In 1995, Cummins
introduced its C Series natural gas engines for school buses in the United
States.
POWER GENERATION
In 1997, power generation sales represented 21% of the Company's net sales.
Products include Cummins' engines, Onan and Petbow generator sets and Newage
alternators.
The Company provides stationary electrical power generation products and
services to major markets worldwide. The Company's joint venture with Wartsila
Diesel International Ltd. Oy of Finland ("Wartsila") to produce high-
horsepower engines is proceeding on schedule. The QSZ engine family was
introduced by the joint venture in 1996 with initial deliveries in Europe and
Asia. The production of power generation products for the utility industry has
become an increasingly important market for the Company, with utilities
turning to generator sets to manage peak and seasonal demands in lieu of
making capital investments in additional capacity. In the mobile business, the
Company produces generator sets and gasoline engines for a wide variety of
applications through its subsidiary Onan Corporation ("Onan"), a leading
supplier of power generation sets for recreational vehicles in the United
States.
Newage International Ltd. ("Newage") is a leading manufacturer of
alternators in its product range. During 1997, Newage completed an expansion
of manufacturing capacity at its joint venture in India. Production at its
joint venture in China began in 1997.
INDUSTRIAL
Cummins' engines power more than 3,000 models of equipment for the
construction, logging, mining, agricultural, petroleum, rail, marine and
government markets throughout the world. In 1997, the Company's engine
shipments to these markets were a Company record 93,900 engines, an increase
of approximately 21% compared to 1996.
S-4
In construction markets, the Company's relationship with Komatsu Limited of
Japan ("Komatsu") continued to expand. Cummins and Komatsu formed joint
ventures in 1993 to produce Cummins' B Series engines in Japan and Komatsu's
30-litre engine in the United States. Production at both joint venture sites
began in 1996. In 1997, a third joint venture with Komatsu to design
industrial engines was announced. Also during 1997, Cummins and Case
Corporation ("Case") jointly launched a financing program for manufacturers,
dealers and customers of Cummins-powered industrial equipment. Cummins'
relationships with Komatsu and Case provide a strong base in the Company's
construction markets.
The Company's high-horsepower QUANTUM engine was introduced in 1995 and
enhanced in late 1996 with the introduction of two new products for the mining
market.
Marine product applications include recreational and commercial markets. The
Company's joint venture with Wartsila will expand commercial product offerings
to 6,000 horsepower diesel engines for the marine market, significantly above
the 1,800 horsepower diesel engines currently available from the Company.
FILTRATION AND OTHER
Fleetguard, Inc. ("Fleetguard"), Cummins' filtration subsidiary, is a
leading designer and manufacturer of filtration products for the North
American heavy-duty filter industry. Its products are also sold and produced
in international markets, including Europe, South America, India, Australia
and the Far East. Fleetguard also produces products for the specialty
filtration market through its Kuss subsidiary located in Findlay, Ohio. In
January 1998, the Company completed the purchase of Nelson Industries, Inc.
("Nelson"). Nelson is a world leader in the design, manufacture and
distribution of exhaust systems, filtration systems and engine and industrial
silencers.
Turbochargers produced by Cummins' subsidiary, Holset Engineering Company
("Holset"), are sold worldwide. Holset's joint venture with Tata Engineering
and Locomotive Company Limited of India ("TELCO") assembled and shipped its
first turbochargers in 1996. A joint venture with Wuxi Power Engineering
Company Limited in China also began production in 1996. During 1997, the
vibration attenuation business of Holset was sold to Simpson Industries, Inc.
INTERNATIONAL
The Company has manufacturing facilities worldwide, including major
operations in Europe, India, Mexico and Brazil. Cummins has entered into
license agreements that provide for the manufacture and sale of the Company's
products in Turkey, China, Pakistan, South Korea, Indonesia and other
countries.
The Company continues to enter into and expand strategic alliances with
business partners in various areas of the world.
In 1997, the Company acquired an additional 1% of the outstanding shares of
Kirloskar Cummins Limited, thereby becoming the majority owner, and changed
its name to Cummins India Limited. It was also announced that the joint
venture with Wartsila will be expanded to include worldwide marketing and
service activities in addition to design, development and manufacturing. The
Company entered this joint venture in 1995 to manufacture both diesel and
natural gas engines above 2,500 horsepower.
In 1996, a joint venture was formed with two of the Fiat Group companies,
Iveco (trucks and buses) and New Holland (agricultural equipment), to design
and manufacture the next generation of 4-, 5-, and 6-liter engines based on
Cummins' 4- and 6-liter B Series engines. Also, operations at Dongfeng in
China were expanded to include a joint venture for production of C Series
engines in addition to the license for B Series engines.
In 1995, the Company formed a joint venture in Chongqing with China National
Heavy Duty Truck Corporation, previously Cummins' licensee, to manufacture a
broad line of diesel engines in China.
S-5
Cummins and Scania of Sweden have a joint venture to develop a fuel system
for heavy-duty diesel engines. Cummins also has a joint venture with TELCO to
manufacture Cummins' B Series engines in India for TELCO trucks. Cummins and
Komatsu have formed joint ventures to manufacture the B Series engines in
Japan and high-horsepower Komatsu-designed engines in the United States. In
1997, a third joint venture with Komatsu to design next-generation industrial
engines was announced.
Because of the Company's global business activities, its operations are
subject to risks, such as currency controls and fluctuations, import
restrictions and changes in national governments and policies.
Sales to Asian markets represented 12% of the Company's net sales during
1997. In Indonesia, Malaysia, Thailand and Korea, the Company serves and
provides replacement parts to the power generation and industrial markets. As
compared with the third quarter of 1997, the Company's sales to these
countries declined 9% in the fourth quarter of 1997. To date, the Company has
not experienced any material effects in its markets in China, Hong Kong and
Taiwan from the recent economic turmoil in the region.
RESEARCH AND DEVELOPMENT
Cummins conducts an extensive research and engineering program to achieve
product improvements, innovations and cost reductions for its customers, as
well as to satisfy legislated emissions requirements. The Company is currently
in the midst of a program to refurbish and extend its engine horsepower range.
Cummins has introduced a variety of concepts in the diesel industry that
combine electronic controls, computing capability and information technology.
Research and development expenditures approximated $250 million in 1997, $235
million in 1996 and $230 million in 1995.
SALES AND DISTRIBUTION
While the Company has supply agreements with some customers for Cummins'
engines in both on- and off-highway markets, most of the Company's business is
done on open purchase orders. These purchase orders usually may be canceled on
reasonable notice without cancellation charges. Therefore, while incoming
orders generally are indicative of anticipated future demand, the actual
demand for the Company's products may change at any time. While the Company
typically does not measure backlog, customers provide information about future
demand, which is used by the Company for production planning. Lead times for
producing the Company's engines are dependent upon the customer, market and
application.
While individual product lines may experience seasonal declines in
production, there is no material effect on the overall demand for Cummins'
products on a quarterly basis.
The Company's products compete on a number of factors, including
performance, price, delivery, quality and customer support. Cummins believes
that its continued focus on cost, quality and delivery, extensive technical
investment, full product line and customer-led support programs are key
elements of its competitive position.
Cummins warrants its engines, subject to proper use and maintenance, against
defects in factory workmanship or materials for either a specified time
period, mileage or hours of use. Warranty periods vary by engine family and
market segment.
S-6
There are approximately 7,800 locations in North America, primarily owned
and operated by OEMs or their dealers, at which Cummins-trained service
personnel and Cummins' parts are available to maintain and repair Cummins'
engines. The Company's parts distribution centers are also located
strategically throughout the world.
Cummins also sells engines, parts and related products through
distributorships worldwide. The Company believes its distribution system is an
important part of its marketing strategy and competitive position. Most of its
North American distributors are independently owned and operated. The Company
has agreements with each of these distributors, which typically are for a term
of three years, subject to certain termination provisions. Upon termination or
expiration of an agreement, the Company is obligated to purchase various
assets of the distributorship. The purchase obligation of the Company relates
primarily to inventory of the Company's products, which can be resold by the
Company over a reasonable period of time. In the event the Company had been
required to fulfill its obligations to purchase assets from all distributors
simultaneously at December 31, 1997, the aggregate cost would have been
approximately $255 million. Management believes it is unlikely that a
significant number of distributors would terminate their agreements at the
same time, requiring the Company to fulfill its purchase obligations.
SUPPLY
The Company manufactures many of the components that are used in its
engines, including blocks, heads, rods, turbochargers, crankshafts and fuel
systems. Cummins has adequate sources of supply of raw materials and
components required for its operations and has arrangements with certain
suppliers who are the sole sources for specific products. While the Company
believes it has adequate assurances of continued supply, the inability of a
supplier to deliver could have an adverse effect on production at certain of
the Company's manufacturing locations.
EMPLOYMENT
As of December 31, 1997, Cummins employed 26,300 persons worldwide,
approximately 10,200 of whom are represented by various unions. The Company
has labor agreements covering employees in North America, South America, the
United Kingdom and India. In 1995, members of the Diesel Workers Union and the
Office Committee Union at the Company's medium-duty engine plant in Southern
Indiana ratified 5-year agreements. In 1995, members of the Office Committee
Union ratified an early agreement which extends until 1999 for offices and
plants in Southern Indiana and the Company's Technical Center. In 1993,
members of the Diesel Workers Union reached an agreement that extends until
the year 2004. In 1995, members of the United Auto Workers at Fleetguard,
located in Cookeville, Tennessee, reached an agreement that expires in the
year 1999. In 1995, members of the United Auto Workers Union at the Company's
crankshaft plant in Fostoria, Ohio, reached an agreement that extends for five
years. In 1997, negotiations were completed with members of the United Auto
Workers Union on the closure of the Company's facility in Huntsville, Alabama.
In 1997, employees represented by the International Association of Machinists
at the Memphis, Tennessee plant of Diesel Recon ratified an agreement that
expires in the year 2000. Also, members of the Union of Needletrades,
Industrial and Textile Employees at the Kuss facility in Findlay, Ohio
approved a contract through the year 2003.
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The Company has its principal executive offices at 500 Jackson Street, Box
3005, Columbus, Indiana 47202-3005. Its telephone number is (812) 377-5000.
S-7
RECENT DEVELOPMENTS
OPERATING RESULTS
On January 29, 1998, the Company announced earnings for the year ended
December 31, 1997. The Company reported sales of $5.6 billion for 1997, with
earnings of $212 million, or $5.55 per share. In 1996, earnings were $160
million, or $4.01 per share (as adjusted to reflect the requirements of
Statement of Financial Accounting Standards No. 128--Earnings Per Share ("SFAS
128"), on sales of $5.3 billion. Net earnings for the fourth quarter of 1997
were $64 million, or $1.69 per share, on sales of $1.6 billion, compared to
$41 million, or $1.03 per share (as adjusted to reflect the requirements of
SFAS 128), on sales of $1.4 billion in the fourth quarter of 1996.
Fourth quarter 1997 sales to the heavy-duty truck market were $393 million,
34% higher than the fourth quarter of 1996. Sales of engines for the medium-
duty truck market were $148 million, a 17% increase over the fourth quarter of
1996.
In the bus and light commercial vehicles market, fourth quarter 1997 sales
of $211 million were 32% higher than the fourth quarter of 1996. The increase
was due to the strong demand for transit bus engines and engines for the Dodge
Ram pickup truck. Cummins' 1997 engine sales for these trucks reached a
Company record level of more than 78,000 units, an 8% increase over the 1996
level.
Power generation market sales were $339 million for the fourth quarter of
1997, level with the fourth quarter of 1996.
Fourth quarter 1997 sales to industrial markets of $279 million were $30
million higher than for the fourth quarter of 1996. The 12% increase was
principally attributable to North American construction and agricultural
markets and international construction markets.
The Company's sales to the filtration and other markets were $189 million
for the fourth quarter of 1997, $5 million lower than for the fourth quarter
of 1996.
ACQUISITION
On January 9, 1998, the Company completed the acquisition of all outstanding
common shares of privately-held Nelson for $448 million in cash and the
assumption of $47 million in indebtedness. Nelson is a world leader in the
design, manufacture and distribution of exhaust systems, filtration systems
and engine and industrial silencers. Nelson operates eight production
facilities in the United States and one in each of Canada, Mexico and the
United Kingdom, and sells to customers in North America, the United Kingdom,
Australia and Korea. By consolidating Nelson with the Company's Filtration
Systems Group, the Company intends to broaden its offering of comprehensive
filtration systems by combining Fleetguard's current products with those of
Nelson. Over the past five years, Nelson's sales have grown at an approximate
annual rate of 15% and totaled $279 million for Nelson's fiscal year ended
August 31, 1997. As of the same date, Nelson employed approximately 2,580
people.
DISCUSSIONS WITH THE EPA
The Environmental Protection Agency (the "EPA"), the U.S. Department of
Justice and the California Air Resources Board (collectively, the "government
agencies") have raised concerns with diesel engine manufacturers, including
Cummins, about the level of Nitrogen Oxide ("NOX") emissions from diesel
engines under certain driving conditions. The government agencies have also
raised concerns about the strategies that diesel manufacturers have employed
to maximize fuel economy and lessen other pollutants, while also meeting Clean
Air Act standards for NOX emissions. The government agencies have indicated
that they may conclude that diesel manufacturers have been in violation of the
Clean Air Act and have therefore issued conditional certificates of conformity
on the 1998 heavy-duty, on-highway diesel engine models.
Cummins believes that it is in full compliance with all laws and regulations
regarding emissions.
S-8
The government agencies have not made any final determinations or
allegations. The industry and Cummins are engaged in confidential discussions
regarding these emissions, the technical challenges confronted if new
emissions standards are imposed, the commercial impact of the government's
policy and legal positions and related issues.
Both the industry and the government agencies are taking these concerns and
discussions very seriously and are working diligently toward an amicable
resolution. It is premature to predict the outcome of the discussions or
whether the outcome will have a material adverse effect on Cummins.
YEAR 2000
Many business and process control systems used in the Company's business
were designed to use only two digits in the date field and thus may not
function properly in the year 2000. In response to this problem, the Company
initiated a project in 1997 to identify, evaluate and implement changes to its
existing computerized business systems. The Company is addressing the issue
through a combination of modifications to existing programs and conversions to
year 2000 compliant software. The Company expects the required remedial
actions to cost approximately $43 million. In 1997, $3 million of these costs
were expensed, and the Company estimates an expense of $18 million in 1998. In
addition, the Company is communicating with its customers, suppliers and other
service providers to determine whether they are actively involved in projects
to ensure that their products and business systems will function properly in
the year 2000. Although the Company believes that it is taking appropriate
steps to address the year 2000 issue, if modifications and conversions by the
Company and those with which it conducts business with are not made in a
timely manner, the year 2000 issue could have a material adverse effect on the
Company's business, financial condition and results of operations.
S-9
USE OF PROCEEDS
The Company expects to use the net proceeds of the sale of the Offered
Securities offered hereby principally to repay commercial paper indebtedness,
bearing interest at current rates ranging from 5.65% to 5.78% and for general
corporate purposes. As of February 24, 1998 the outstanding amount of
commercial paper indebtedness was $897.5 million, which includes indebtedness
incurred in January 1998 to acquire all outstanding common shares of Nelson.
See "Recent Developments--Acquisition".
CAPITALIZATION
The following table sets forth the short-term indebtedness and
capitalization of the Company as of September 28, 1997, giving pro forma
effect to the acquisition of Nelson and as adjusted to give effect to the
issuance of the Offered Securities offered hereby with application of the net
proceeds to the Company therefrom. See "Use of Proceeds". This table should be
read in conjunction with the consolidated financial statements of the Company
incorporated by reference in this Prospectus Supplement. See "Incorporation of
Certain Documents by Reference".
AS OF SEPTEMBER 28, 1997
---------------------------
PRO
ACTUAL FORMA AS ADJUSTED
------ ------ -----------
Short-term debt:
Loans payable................................. $ 34 $ 44 $ 19
Current maturities of long-term debt.......... 45 50 50
------ ------ ------
Total short-term debt........................... 79 94 69
------ ------ ------
Long-term debt:
Offered Securities............................ -- -- 725
Commercial paper.............................. 252 700 --
Other long-term debt.......................... 286 318 318
------ ------ ------
Total long-term debt............................ 538 1,018 1,043
------ ------ ------
Shareholders' investment:
Common Stock, $2.50 par value................. 119 119 119
Additional contributed capital................ 1,099 1,099 1,099
Retained earnings............................. 649 649 649
Common stock in treasury, at cost............. (236) (236) (236)
Common stock held in trust for employee
benefit plans................................ (177) (177) (177)
Unearned compensation......................... (42) (42) (42)
Cumulative translation adjustments............ (70) (70) (70)
------ ------ ------
Total shareholders' investment.............. 1,342 1,342 1,342
------ ------ ------
Total capitalization...................... $1,959 $2,454 $2,454
====== ====== ======
S-10
SELECTED FINANCIAL DATA
The following selected financial data for each of the five years in the
period ended December 31, 1996 are derived from and should be read in
conjunction with the audited consolidated financial statements of the Company.
The data presented for the periods ended September 28, 1997 and September 29,
1996 are derived from unaudited financial statements and include, in the
opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the data for such periods. The results
for the nine-month period ended September 28, 1997 are not necessarily
indicative of the results to be expected for the full fiscal year. See "Recent
Developments--Operating Results".
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 29, SEPTEMBER 28,
-------------------------------------- ------------- -------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA:
Net sales.............. $3,749 $4,248 $4,737 $5,245 $5,257 $3,896 $4,066
Gross profit........... 842 1,037 1,186 1,271 1,185 886 919
Earnings before income
taxes................. 76 205 294 177 214 164 199
Earnings before
extraordinary items
and cumulative effect
of accounting changes. 67 183 253 224 160 119 148
Net earnings (loss).... (190) 177 253 224 160 119 148
Preference stock
dividends............. 8 8 -- -- -- -- --
Earnings (loss)
available for common
shares................ (198) 169 253 224 160 119 148
Primary earnings (loss)
per share:
Before extraordinary
items and cumulative
effect of accounting
changes............... $ 1.77 $ 4.95 $ 6.11 $ 5.52 $ 4.01 $ 2.99 $ 3.85
Net.................... (6.01) 4.79 6.11 5.52 4.01 2.99 3.85
Fully diluted earnings
(loss) per common
share:
Before extraordinary
items and cumulative
effect of accounting
changes............... $ 1.77 $ 4.77 $ 6.11 $ 5.52 $ 4.01 $ 2.99 $ 3.85
Net.................... (6.01) 4.63 6.11 5.52 4.01 2.99 3.85
Weighted average number
of shares outstanding:
Primary................ 32.9 35.3 41.4 40.7 39.8 40.0 38.4
Fully diluted.......... 32.9 38.3 41.4 40.7 39.8 40.0 38.4
STATEMENT OF FINANCIAL
POSITION DATA
(END OF PERIOD):
Total assets........... $2,230 $2,390 $2,706 $3,056 $3,369 $3,301 $3,679
Total debt............. 488 236 233 219 415 328 617
Shareholders'
investment............ 501 821 1,072 1,183 1,312 1,251 1,342
OTHER FINANCIAL DATA:
Depreciation and
amortization.......... $ 123 $ 125 $ 128 $ 143 $ 149 $ 111 $ 118
Property, plant and
equipment
expenditures.......... 139 174 238 223 304 151 298
RATIO OF EARNINGS TO
FIXED CHARGES: ........ 2.1x 4.5x 8.3x 5.2x 5.3x 5.5x 4.9x(1)
- --------
(1) The cost of acquisition and consolidation of Nelson (before the benefit of
synergies) for the period would reduce the ratio of earnings to fixed
charges to 3.7x from 4.9x.
S-11
DESCRIPTION OF OFFERED SECURITIES
The 6.25% Notes due 2003 (the "2003 Notes"), the 6.45% Notes due 2005 (the
"2005 Notes"), the 7.125% Debentures due 2028 (the "2028 Debentures") and the
5.65% Debentures due 2098 (the "2098 Debentures") are each a series of the
Offered Securities (referred to in the accompanying Prospectus as the "Debt
Securities"). The following description of the particular terms of the Offered
Securities offered hereby supplements and, to the extent inconsistent
therewith, replaces the description of the general terms and provisions of the
Debt Securities set forth in the accompanying Prospectus, to which reference
is hereby made.
GENERAL
The Offered Securities will be issued under an indenture dated as of March
1, 1986, as supplemented (the "Indenture"), between the Company and the
Trustee. The 2003 Notes, the 2005 Notes, the 2028 Debentures and the 2098
Debentures will be limited to $125,000,000, $225,000,000, $250,000,000 and
$165,000,000 aggregate principal amount, respectively, and will mature on
March 1, 2003, March 1, 2005, March 1, 2028 and March 1, 2098, respectively.
The Offered Securities will be issued only in registered form in denominations
of $1,000 and integral multiples thereof. The Offered Securities will not be
subject to any sinking fund.
The Offered Securities will bear interest at the respective rates set forth
on the cover page of this Prospectus Supplement from March 1, 1998, or the
most recent interest payment date to which interest has been paid or provided
for, payable semiannually on March 1 and September 1 of each year, commencing
September 1, 1998, to persons in whose names the Offered Securities are
registered at the close of business on the next preceding February 15 or
August 15, respectively, as applicable.
So long as each series of Offered Securities is represented by one or more
global certificates, the interest payable on the Offered Securities will be
paid to Cede & Co., the nominee of DTC, as Depositary (the "Depositary"), or
its registered assigns as the registered owner of the global certificates, by
wire transfer of immediately available funds on each of the applicable
interest payment dates, not later than 2:30 p.m. (New York City time). If any
series of the Offered Securities is no longer represented by global
certificates, payment of interest may, at the option of the Company, be made
by check mailed to the address of the person entitled thereto. No service
charge will be made for any transfer or exchange of Offered Securities but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
OPTIONAL REDEMPTION
The 2003 Notes and the 2005 Notes are not redeemable prior to maturity. The
2028 Debentures and the 2098 Debentures are redeemable, in whole or in part,
at any time at the option of the Company at redemption prices equal to the
greater of (i) 100% of the principal amount (or Accreted Value in the case of
the 2098 Debentures) of such Offered Securities and (ii) as determined by a
Reference Treasury Dealer (as defined herein), the sum of the present values
of the Remaining Scheduled Payments discounted to the date of redemption on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate, plus in each case accrued interest on such
Offered Securities being redeemed to the date of redemption.
In addition, if a Tax Event occurs and in the opinion of nationally
recognized independent tax counsel, there would, notwithstanding any
shortening of the maturity of the 2098 Debentures, be more than an
insubstantial risk that interest paid by the Company, or original issue
discount accrued, on the 2098 Debentures is not, or will not be, deductible,
in whole or in part, by the Company for United States federal income tax
purposes, the Company will have the right, within 90 days following the
occurrence of such Tax Event, to redeem the 2098 Debentures in whole (but not
in part), on not less
S-12
than 30 or more than 60 days' notice mailed to holders of the 2098 Debentures,
at a redemption price equal to the greater of (i) 100% of the Accreted Value
and (ii) the sum of the present values of the Remaining Scheduled Payments
thereon discounted to the date of redemption on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
plus 0.10%, plus accrued interest on the 2098 Debentures being redeemed to the
date of redemption.
"Accreted Value" as of any date (the "Specified Date") means the sum of the
present values of the Remaining Scheduled Payments, on the 2098 Debentures
discounted to the Specified Date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at 7.476% per annum, which is the
initial yield to maturity of the 2098 Debentures based on the initial public
offering price of the 2098 Debentures set forth on the cover of this
Prospectus Supplement.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable
to the remaining term of the applicable Offered Securities to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such Offered Securities.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed as such by the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (A)
the Reference Treasury Dealer Quotation for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked price for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Treasury Reference Dealer at 5:00 p.m. (New
York City time) on the third business day preceding such redemption date.
"Reference Treasury Dealer" means Goldman, Sachs & Co., Credit Suisse First
Boston Corporation and J.P. Morgan Securities Inc. and their respective
successors, provided, however, that if any of the foregoing shall cease to be
a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each 2028 Debenture
and 2098 Debenture to be redeemed, the remaining scheduled payments of the
principal thereof and interest thereon that would be due after the related
redemption date but for such redemption; provided, however, that, if such
redemption date is not an interest payment date with respect to such
Debenture, the amount of the next succeeding scheduled interest payment
thereon will be reduced by the amount of interest accrued thereon to such
redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Offered Securities to
be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date interest will cease to accrue on the Offered Securities or
portions thereof called for redemption.
S-13
CONDITIONAL RIGHT TO SHORTEN MATURITY OF THE 2098 DEBENTURES
The Company intends to deduct interest paid on the 2098 Debentures for
United States federal income tax purposes. However, there have been proposed
tax law changes over the past several years that would have, among other
things, prohibited an issuer from deducting interest payments on debt
instruments with a maturity of more than 40 years. While none of these
proposals has become law, there can be no assurance that legislation affecting
the Company's ability to deduct interest paid on the 2098 Debentures will not
be enacted in the future or that any such legislation would not have a
retroactive effective date. As a result, there can be no assurance that a Tax
Event (as defined below) will not occur.
Upon the occurrence of a Tax Event, the Company, at its option, will have
the right to shorten the maturity of the 2098 Debentures to the longest
maturity within the original maturity date that, in the opinion of a
nationally recognized independent tax counsel, would permit the Company, after
such shortening of the maturity, to continue to deduct the interest paid on
the 2098 Debentures for United States federal income tax purposes. There can
be no assurance that the Company would not exercise its right to shorten the
maturity of the 2098 Debentures upon the occurrence of such a Tax Event.
If the Company elects to exercise its rights to shorten the maturity of the
2098 Debentures on the occurrence of a Tax Event, the Company will mail a
notice of shortened maturity to each holder of record of the 2098 Debentures
by first-class mail not more than 60 days after the occurrence of such Tax
Event, stating the new maturity date (the "New Maturity Date") of the 2098
Debentures. Such notice shall be effective immediately upon mailing. No holder
of 2098 Debentures shall be entitled to any compensation from the Company in
connection with its exercise of such right. In addition, in the event that the
maturity of the 2098 Debentures is shortened to the minimum extent required,
the principal amount of the 2098 Debentures payable upon maturity shall change
to an amount equal to the Accreted Value as of the New Maturity Date.
The Company believes that the 2098 Debentures should constitute indebtedness
for United States federal income tax purposes under current law and an
exercise of its right to shorten the maturity of the 2098 Debentures would not
be a taxable event to holders. Prospective investors should be aware, however,
that the Company's exercise of its right to shorten the maturity of the 2098
Debentures will be a taxable event to holders if the 2098 Debentures are
treated as equity for United States federal income tax purposes before the
maturity is shortened, assuming that the 2098 Debentures of shortened maturity
are treated as debt for such purposes.
"Tax Event" means that the Company shall have received an opinion of a
nationally recognized independent tax counsel to the effect that on or after
the date of the issuance of the 2098 Debentures, as a result of (a) any
amendment to, clarification of, or change (including any announced prospective
change) in laws, or any regulations thereunder, of the United States, (b) any
judicial decision, official administrative pronouncement, ruling, regulatory
procedure, notice or announcement, including any notice or announcement of
intent to adopt such procedures or regulations (an "Administrative Action"),
or (c) any amendment to, clarification of, or change in the official position
or the interpretation of such Administrative Action or judicial decision that
differs from the theretofore generally accepted position (including any
position taken in any Internal Revenue Service audit or similar proceeding, in
each event involving the Company), in each case, on or after, the date of the
issuance of the 2098 Debentures, such change in tax law creates a more than
insubstantial risk that interest paid by the Company on the 2098 Debentures is
not, or will not be, deductible, in whole or in part, by the Company for
purposes of United States federal income tax.
EVENTS OF DEFAULT
If any Event of Default (as defined in the accompanying Prospectus) with
respect to the 2098 Debentures occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount
S-14
outstanding of such 2098 Debentures may declare only such portion of the
principal amount that is represented by the Accreted Value of the 2098
Debentures as of the date of acceleration, plus accrued and unpaid interest
thereon, to be due and payable immediately.
BOOK-ENTRY SYSTEM
Upon issuance, each series of Offered Securities will be represented by one
or more global certificates (each, a "Global Note"). Each such Global Note
will be deposited with, or on behalf of, the Depositary and registered in the
name of Cede & Co., the nominee of the Depositary.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of its participating organizations
("Participants") and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its Participants through
electronic book-entry changes in accounts of the Participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own the Depositary. The Depositary is for
example owned by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the Depositary's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly. The
rules applicable to the Depositary and its Participants are on file with the
Commission.
Ownership of beneficial interests in the Offered Securities will be limited
to Participants or persons that may hold interests through Participants. The
Depositary has advised the Company that upon the issuance of the Global Notes
representing the Offered Securities, the Depositary will credit, on its book-
entry registration and transfer system, the Participants' accounts with the
respective principal amounts of the Offered Securities beneficially owned by
such Participants. Ownership of beneficial interests in such Global Note will
be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Depositary (with respect to interests
of Participants) and on the records of Participants (with respect to interests
of persons holding through Participants). The laws of some states may require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability of certain persons to own, transfer or pledge beneficial interests in
the Global Notes.
So long as the Depositary, or its nominee, is the registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the Offered Securities represented by
such Global Note for all purposes under the Indenture. Except as provided
herein, owners of beneficial interests in a Global Note will not be entitled
to have the Offered Securities represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
the Offered Securities in definitive form and will not be considered the
owners or holders thereof under the Indenture. Accordingly, each person owning
a beneficial interest in a Global Note must rely on the procedures of the
Depositary and, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest, to exercise any
rights of a holder under the Indenture. The Company understands that under
existing industry practices, if the Company requests any action of holders or
if an owner of a beneficial interest in such a Global Note desires to give or
take any action which a holder is entitled to give or take under the
Indenture, the Depositary would authorize the Participants holding the
relevant beneficial interests to give or take
S-15
such action, and such Participants would authorize beneficial owners owning
through such Participants to give or take such action or would otherwise act
upon the instructions of beneficial owners holding through them.
Payment of principal of, and premium, if any, and interest on, the Offered
Securities registered in the name of the Depositary or its nominee will be
made to the Depositary or its nominee, as the case may be, as the holder of
the Global Note representing such Offered Securities. None of the Company, the
Trustee or any other agent of the Company or agent of the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for supervising
or reviewing any records relating to such beneficial ownership interests. The
Company expects that the Depositary, upon receipt of any payment of principal,
premium, if any, or interest in respect of a Global Note, will credit the
accounts of the Participants with payment in amounts proportionate to their
respective beneficial interests in such Global Note as shown on the records of
the Depositary. The Company also expects that payments by Participants to
owners of beneficial interests in a Global Note will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such Participants.
Unless and until it is exchanged in whole or in part for certificated
Offered Securities in definitive form, each Global Note may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor depositary
or a nominee of such successor depositary.
The Global Notes will be transferable or exchangeable for Offered Securities
in definitive form of like tenor and of an equal aggregate principal amount,
in denominations of $1,000 and integral multiples thereof, only if (x) the
Depositary is at any time unwilling or unable to continue as Depositary or the
Depositary ceases to be a clearing agency registered under the Exchange Act,
(y) an Event of Default has occurred and is continuing with respect to the
Offered Securities or (z) the Company in its sole discretion determines that
such Global Notes shall be exchangeable for definitive Offered Securities in
registered form and notifies the Trustee thereof. Such definitive Offered
Securities shall be registered in such name or names as the Depositary shall
instruct the Trustee. It is expected that such instructions may be based upon
directions received by the Depositary from Participants with respect to
ownership of beneficial interests in such Global Notes.
REGARDING THE TRUSTEE
The Chase Manhattan Bank will be the trustee under the Indenture. The
Company maintains banking relationships in the ordinary course of business
with The Chase Manhattan Bank, including the making of investments through,
and borrowings from, The Chase Manhattan Bank.
UNITED STATES TAXATION
The following summary describes the principal United States federal income
tax consequences of ownership and disposition of the Offered Securities to
initial holders purchasing Offered Securities at the "'issue price" (as
defined below). This summary is based on the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), administrative pronouncements,
judicial decisions and existing and proposed Treasury Regulations, changes to
any of which subsequent to the date of this Prospectus Supplement may affect
the tax consequence described herein, possibly on a retroactive basis. This
summary discusses only Offered Securities held as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder in light of its particular
circumstances or to holders subject to special rules, such as certain
S-16
former citizens or long-term residents of the United States, financial
institutions, insurance companies, dealers in securities or foreign
currencies, or United States Holders whose functional currency (as defined in
Section 985 of the Code) is not the U.S. dollar. Persons considering the
purchase of Offered Securities should consult their tax advisors with regard
to the application of the United States federal income tax laws to their
particular situations as well as any tax consequences arising under the laws
of any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of an Offered
Security that is, for United States federal income tax purposes, (i) a citizen
or resident of the United States, (ii) a corporation created or organized in
or under the laws of the United States or of any political subdivision thereof
or (iii) an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
PAYMENTS OF INTEREST
Interest paid on an Offered Security will generally be taxable to a United
States Holder as ordinary interest income at the time it accrues or is
received in accordance with the United States Holder's method of accounting
for United States federal income tax purposes. Under the Treasury Regulations
(the "OID Regulations") governing indebtedness issued with original issue
discount ("OID"), a debt instrument will not be considered as having been
issued with OID if the difference between its stated redemption price at
maturity and its issue price is less than a de minimis amount (i.e., 1/4 of 1
percent of the principal amount multiplied by the number of complete years to
maturity from the issue date). For this purpose, the issue price of each
series of Offered Securities is the first price to the public at which a
substantial amount of such series of Offered Securities is sold for money
(which, with respect to each series of Offered Securities, is expected to be
its initial public offering price indicated on the cover of this Prospectus
Supplement) and the stated redemption price at maturity of each series of
Offered Securities is its principal amount. If the difference between the
stated redemption price at maturity and the issue price of the Offered
Security is less than the de minimis amount, the Offered Security will not be
considered as having been issued with OID under the OID Regulations. United
States Holders of the Offered Security will generally include the de minimis
OID in income, as capital gain, as principal payments are made on the Offered
Security. As an alternative, a United States Holder may also make an election
to include in gross income all interest that accrues on an Offered Security
(including de minimis OID) in accordance with a constant yield method based on
the compounding of interest. On the other hand, if the OID on the Offered
Security is more than de minimis, a United States Holder would be required to
include the OID in income for United States federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest and in advance of the receipt of the cash payments attributable to
such income.
The OID Regulations contain aggregation rules stating that, in certain
circumstances, if more than one type of debt instrument is issued as part of
the same issuance of securities to a single holder, some or all of such debt
instruments may be treated together as a single debt instrument with a single
issue price, maturity date, yield to maturity and stated redemption price at
maturity for purposes of calculating and accruing any OID. The Company does
not expect to treat any of the Offered Securities as being subject to the
aggregation rules for purposes of computing OID.
SALE, EXCHANGE OR RETIREMENT OF THE OFFERED SECURITIES
Upon the sale, exchange or retirement of an Offered Security, a United
States Holder will generally recognize capital gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement and
such Holder's adjusted tax basis in the Offered Security. For these purposes,
the amount realized does not include any amount attributable to accrued
interest on the Offered Security. Amounts attributable to accrued interest are
treated as interest as described under
S-17
"--Payments of Interest" above. A United States Holder's adjusted tax basis in
an Offered Security will generally equal the cost of the Offered Security to
such Holder, increased by any OID previously included in income by the Holder
with respect to such Offered Security (including any de minimis OID included
in income pursuant to an election described above under "--Payments of
Interest").
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate United States Holders may be subject to backup
withholding at a rate of 31% on payments of principal, premium and interest
on, and the proceeds of disposition of, an Offered Security. Backup
withholding will apply only if the Holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, would be the social
security number of such individual, (ii) furnishes an incorrect TIN, (iii) is
notified by the Internal Revenue Service that it has failed to properly report
payments of interest and dividends or (iv) under certain circumstances, fails
to certify, under penalty of perjury, that it has furnished a correct TIN and
has not been notified by the Internal Revenue Service that it is subject to
backup withholding for failure to report interest and dividend payments.
United States Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such Holder's United States federal
income tax liability and may entitle such Holder to a refund, provided that
the required information is furnished to the Internal Revenue Service.
S-18
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
and the Terms Agreement, each between the Company and the Underwriters, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters has severally agreed to purchase, the principal amount of
each series of Offered Securities set forth opposite its name below:
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF 2028 OF 2098
UNDERWRITER OF 2003 NOTES OF 2005 NOTES DEBENTURES DEBENTURES
----------- ---------------- ---------------- ---------------- ----------------
Goldman, Sachs & Co. ... $ 41,666,668 $ 75,000,000 $ 83,333,334 $ 55,000,000
Credit Suisse First
Boston Corporation..... 41,666,666 75,000,000 83,333,333 55,000,000
J.P. Morgan Securities
Inc. .................. 41,666,666 75,000,000 83,333,333 55,000,000
------------ ------------ ------------ ------------
Total................. $125,000,000 $225,000,000 $250,000,000 $165,000,000
============ ============ ============ ============
Under the terms and conditions of the Underwriting Agreement and the Terms
Agreement, the Underwriters are committed to take and pay for all of each
series of Offered Securities, if any of such series is taken. Each series of
the Offered Securities is hereby offered separately, and not as a unit. The
sale of any series of Offered Securities is not conditioned upon the sale of
any other series of Offered Securities.
The Underwriters propose to offer each series of Offered Securities in part
directly to the public at the respective initial public offering prices set
forth on the cover page of this Prospectus Supplement and in part to certain
securities dealers at such prices less a concession of 0.350% of the principal
amount of the 2003 Notes, 0.375% of the principal amount of the 2005 Notes,
0.500% of the principal amount of the 2028 Debentures and 0.675% of the
principal amount of the 2098 Debentures. The Underwriters may allow, and such
dealers may reallow, a concession not to exceed 0.250% of the principal amount
of each series of Offered Securities to certain brokers and dealers. After
each series of Offered Securities is released for sale to the public, the
offering price and other selling terms of such series may from time to time be
varied by the Underwriters.
Each series of Offered Securities is a new issue of securities with no
established trading market. The Company has been advised by the Underwriters
that the Underwriters intend to make a market in each series of Offered
Securities but are not obligated to do so and may discontinue market making in
respect of any series of Offered Securities at any time without notice. No
assurance can be given as to the liquidity of the trading market for any
series of Offered Securities.
In connection with this offering, the Underwriters may purchase and sell any
series of Offered Securities in the open market. These transactions may
include over-allotment and stabilizing transactions and purchases to cover
short positions created by the Underwriters in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the purpose
of preventing or retarding a decline in the market price of a series of
securities, and short positions created by the Underwriters involve the sale
by the Underwriters of a greater number of securities than they are required
to purchase from the Company in this offering. The Underwriters also may
impose a penalty bid, whereby selling concessions allowed to Underwriters or
broker-dealers in respect of the Offered Securities sold in this offering may
be reclaimed by the Underwriters if such securities are repurchased by the
Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of a series of the
Offered Securities, which may be higher than the price that might otherwise
prevail in the open market, and these activities, if commenced, may be
discontinued at any time. These transactions may be effected in the over-the-
counter market or otherwise.
S-19
Settlement for the Offered Securities will be made in immediately available
funds and all secondary trading in the Offered Securities will settle in
immediately available funds.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
EXPERTS
The consolidated financial statements and schedules of the Company for the
three years ended December 31, 1994, 1995 and 1996, have been audited by
Arthur Andersen L.L.P., independent public accountants, as indicated in their
reports with respect thereto, and are included or incorporated by reference
herein in reliance upon the authority of said firm as experts in giving said
reports.
VALIDITY OF SECURITIES
The validity of the Offered Securities will be passed upon for the Company
by Pamela F. Carter, Esq., Vice President--General Counsel of the Company,
Columbus, Indiana and for the Underwriters by Davis Polk & Wardwell, New York,
New York. Ms. Carter may rely as to matters of New York law upon the opinion
of Cravath, Swaine & Moore, New York, New York. Davis Polk & Wardwell will
rely as to matters of Indiana law upon the opinion of Ms. Carter.
S-20
PROSPECTUS
$1,000,000,000
CUMMINS ENGINE COMPANY, INC.
DEBT SECURITIES
PREFERRED STOCK
PREFERENCE STOCK
COMMON STOCK
WARRANTS
----------------
Cummins Engine Company, Inc. ("Cummins" or the "Company") may from time to
time offer (i) Debt Securities ("Debt Securities"), which may consist of
debentures, notes and/or other unsecured evidence of indebtedness in one or
more series, (ii) shares of Preferred Stock ("Preferred Stock") in one or more
series, including depositary shares ("Depositary Shares") representing
fractional interests in shares of Preferred Stock, (iii) shares of Preference
Stock ("Preference Stock") in one or more series, including Depositary Shares
representing fractional interests in shares of Preference Stock, (iv) shares
of Common Stock, $2.50 par value ("Common Stock"), or (v) Warrants to purchase
Debt Securities, Preferred Stock, Preference Stock, Depositary Shares or
Common Stock (Debt Securities, Preferred Stock, Preference Stock, Depositary
Shares, Common Stock and Warrants being herein collectively called the
"Securities"), at an aggregate initial offering price not to exceed U.S.
$1,000,000,000, at prices and on terms to be determined at the time of sale.
Securities will be offered at prices and on terms to be determined which
will be set forth in a supplement to this Prospectus (each a "Prospectus
Supplement"). Each Prospectus Supplement will set forth with regard to the
particular Securities being offered (i) in the case of Debt Securities, the
title, aggregate offering amount, denominations (which may be in United States
dollars, in any other currency, currencies or currency unit), maturity,
interest rate, if any (which may be fixed or variable) or method of
calculation thereof, and time of payment of any interest, any terms for
redemption at the option of the Company or the holder, any terms for sinking
fund payments, any conversion or exchange rights, any listing on a securities
exchange and the initial public offering price and any other terms in
connection with the offering and sale of such Debt Securities; (ii) in the
case of Preferred Stock or Preference Stock, the designation, aggregate
offering amount, stated value and liquidation preference per share, initial
public offering price, dividend rate (or method of calculation), dates on
which dividends shall be payable and dates from which dividends shall accrue,
any redemption or sinking fund provisions, any conversion or exchange rights,
whether the Company has elected to offer the Preferred Stock or Preference
Stock in the form of Depositary Shares, any listing of the Preferred Stock or
Preference Stock on a securities exchange, and any other terms in connection
with the offering and sale of such Preferred Stock or Preference Stock; (iii)
in the case of Common Stock, the number of shares of Common Stock and the
terms of the offering thereof; and (iv) in the case of Warrants, the number
and terms thereof, the designation and the number of Securities issuable upon
their exercise, the exercise price, any listing of the Warrants or the
underlying Securities on a securities exchange and any other terms in
connection with the offering, sale and exercise of the Warrants. The
Prospectus Supplement will also contain information, as applicable, about
certain United States Federal income tax considerations relating to the
particular Securities being offered.
The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange (Symbol: "CUM"). Any Common Stock offered will be
listed, subject to notice of issuance, on such exchanges. See "Price Range of
Common Stock and Dividends".
The Company may sell Securities to or through underwriters, and also may
sell Securities directly to other purchasers or through agents. The
accompanying Prospectus Supplement sets forth the names of any underwriters or
agents involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the principal amounts, if any, to be purchased
by underwriters and the compensation, if any, of such underwriters or agents.
See "Plan of Distribution" herein.
The date of this Prospectus is February 18, 1998.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained or incorporated in
this Prospectus or in any Prospectus Supplement, and, if given or made, such
information or representation must not be relied upon as having been
authorized. This Prospectus and any Prospectus Supplement do not constitute an
offer to sell or a solicitation of an offer to buy any of the Securities
offered hereby to any person in any jurisdiction in which it is unlawful to
make any such offer or solicitation to such person. Neither the delivery of
this Prospectus or any Prospectus Supplement nor any sale made hereunder or
thereunder shall under any circumstances imply that the information contained
herein is correct as of any date subsequent to the date hereof or thereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). The Company has filed with the
Commission a Registration Statement on Form S-3 (the "Registration Statement")
under the Securities Act of 1933 (the "Securities Act") with respect to the
Securities offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and reference is hereby made to the Registration
Statement and the exhibits thereto for further information with respect to the
Company and the Securities.
Such reports, proxy statements and other information filed by the Company
can be inspected and copied at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
Regional Offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding the Company. The address of such site is
http://www.sec.gov. In addition, such reports and proxy statements can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005 and the Pacific Stock Exchange Incorporated, 115 Sansome
Street, 2nd Floor, San Francisco, California 94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. Quarterly Reports on Form 10-Q for the quarterly periods ended
September 28, 1997, June 29, 1997, and March 30, 1997.
3. Current Report on Form 8-K, dated February 14, 1997.
4. Each document filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequently to the
date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference into this
Prospectus and to be made a part hereof from the date of filing of such
document.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein or in the Prospectus Supplement
modifies or
2
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the request of
such person, a copy of any of the documents incorporated by reference herein,
except for the exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Written requests
should be addressed to Linda J. Hall, Director--Investor Relations, Mail Code
60118, 500 Jackson Street, Box 3005, Columbus, Indiana 47202-3005. Telephone
requests may be directed to (812) 377-3121.
THE COMPANY
Cummins is a leading worldwide designer and manufacturer of diesel engines
ranging from 76 to 6000 horsepower. The Company also produces alternate fueled
engines and engine components and subsystems. Cummins provides power and
components for a wide variety of equipment in its key markets: automotive,
power generation, industrial and filtration.
Cummins sells its products to original equipment manufacturers ("OEMs"),
distributors and other customers worldwide and conducts manufacturing, sales,
distribution and service activities in most areas of the world. Sales of
products to major international firms outside North America are transacted by
exports directly from the United States and shipments from foreign facilities
(operated through subsidiaries, affiliates, joint ventures or licensees) which
manufacture and/or assemble Cummins' products.
In 1996, approximately 56% of net sales were in the United States. Major
international markets include Asia and Australia (17% of net sales); Europe
(14% of net sales); Canada (6% of net sales); and Mexico and South America (5%
of net sales).
The Company has its principal executive offices at 500 Jackson Street, Box
3005, Columbus, Indiana 47202-3005. Its telephone number is (812) 377-5000.
USE OF PROCEEDS
Except as otherwise described in the applicable Prospectus Supplement, the
net proceeds from the sale of Securities will be used for general corporate
purposes, which may include refinancings of indebtedness, working capital,
capital expenditures, acquisitions and repurchases and redemptions of
securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK AND PREFERENCE STOCK DIVIDENDS
FIRST NINE
YEAR ENDED DECEMBER 31, MONTHS
------------------------ ------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ----- -----
Consolidated ratio of earnings to fixed
charges.................................. 2.1 4.5 8.3 5.2 5.3 5.3 4.9
Consolidated ratio of earnings to fixed
charges and preferred stock and prefer-
ence stock dividends..................... 2.0 4.0 8.3 5.2 5.3 5.3 4.9
For purposes of calculating the ratio of earnings to fixed charges,
"earnings" include income before income taxes, extraordinary items and the
cumulative effects of changes in accounting principles and fixed charges.
"Fixed charges" consist of interest on all indebtedness, including interest
incurred by 50% or more owned unconsolidated companies, and that portion of
rental expense that management believes to be representative of interest.
3
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "CUM". The following table sets forth, for the calendar quarters
shown, the range of high and low composite prices of the Common Stock on the
New York Stock Exchange and the cash dividends declared on the Common Stock.
DIVIDENDS
HIGH LOW DECLARED
------- -------- ---------
1995
First quarter.................................. $46 7/8 $41 1/2 $.250
Second quarter................................. 48 5/8 42 1/4 .250
Third quarter.................................. 47 1/4 36 5/8 .250
Fourth quarter................................. 39 3/4 34 .250
1996
First quarter.................................. $42 7/8 $34 1/2 $.250
Second quarter................................. 47 3/4 40 1/4 .250
Third quarter.................................. 41 7/8 36 7/8 .250
Fourth quarter................................. 47 3/4 39 .250
1997
First quarter.................................. $55 5/8 $44 1/4 $.250
Second quarter................................. 72 3/4 47 3/4 .275
Third quarter.................................. 83 67 7/8 .275
Fourth quarter (through December 18, 1997) 82 1/2 55 5/16 .275
The declaration and payment of future dividends by the Board of Directors of
the Company will be dependent upon the Company's earnings and financial
condition, economic and market conditions and other factors deemed relevant by
the Board of Directors. Thus, no assurance can be given as to the amount or
timing of the declaration and payment of future dividends. For a description
of restrictions on the payment of dividends by the Company, see "Description
of Common Stock".
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of March
1, 1986, and supplemented as of September 18, 1990 (the "Indenture"), between
the Company and The Chase Manhattan Bank (as successor by merger to The Chase
Manhattan Bank, N.A.), Trustee (the "Trustee" or "Chase"), the form of which
is filed as an exhibit to the Registration Statement. The following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture, including the definitions therein of certain
terms. Wherever particular provisions or defined terms of the Indenture are
referred to, such provisions or defined terms are incorporated herein by
reference.
GENERAL. The Indenture does not limit the amount of debentures, notes or other
evidences of indebtedness that may be issued thereunder. The Indenture
provides that Debt Securities may be issued from time to time in one or more
series. As of December 19, 1997, $134.0 million principal amount of Debt
Securities were outstanding under the Indenture. The Debt Securities will be
unsecured obligations of the Company and will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Company.
The Prospectus Supplement relating to the particular Debt Securities offered
thereby (the "Offered Debt Securities") will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2)
any limit on the aggregate principal amount of the Offered Debt Securities;
4
(3) the date or dates on which the Offered Debt Securities will mature; (4)
the rate or rates at which the Offered Debt Securities will bear interest, if
any, and the date from which such interest will accrue; (5) the dates on which
such interest will be payable and the regular record dates for such interest
payment dates; (6) any mandatory or optional sinking fund or analogous
provisions; (7) the date, if any, after which, and the price or prices at
which, the Offered Debt Securities may be redeemed at the option of the
Company; (8) any obligation of the Company to convert the Offered Debt
Securities into stock or other securities of the Company or of any other
corporation; (9) any provision for the Offered Debt Securities to be
denominated, and payments thereon to be made, in currencies other than the
U.S. dollar or in units based on or relating to such other currencies
(including ECUs); and (10) any other terms of the series. Unless otherwise
indicated in the applicable Prospectus Supplement, principal of (and premium,
if any) and interest, if any, on the Offered Debt Securities will be payable,
and transfers of the Offered Debt Securities will be registrable, at the
office of the Trustee in the Borough of Manhattan, The City of New York,
provided that at the option of the Company payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in
the security register. (Sections 301, 305 and 1002)
Unless otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities will be issued only in fully registered form without coupons and,
unless otherwise indicated in such Prospectus Supplement, in denominations of
$1,000 or any integral multiple thereof. (Section 302)
No service charge will be made for any registration of transfer or exchange
of Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Section 305)
Special Federal income tax and other considerations relating to Debt
Securities denominated in foreign currencies or units of two or more foreign
currencies will be described in the Prospectus Supplement relating thereto.
Debt Securities may be issued under the Indenture as original issue discount
securities to be sold at a substantial discount below their stated principal
amount. Special Federal income tax and other considerations relating thereto
will be described in the applicable Prospectus Supplement.
BOOK-ENTRY DEBT SECURITIES. The Debt Securities of a series may be issued in
whole or in part in the form of one or more global securities that will be
deposited with, or on behalf of, a Depositary ("Global Security Depositary")
or its nominee identified in the applicable Prospectus Supplement. In such a
case, one or more global securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of outstanding Debt Securities of the series to be represented by such global
security or securities. Unless and until it is exchanged in whole or in part
for Debt Securities in registered form, a global security may not be
registered for transfer or exchange except as a whole by the Global Security
Depositary for such global security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a global security will be
described in the applicable Prospectus Supplement. However, the Company
expects that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a global security to be deposited
with or on behalf of a Global Security Depositary will be represented by a
global security registered in the name of such Depositary or its nominee. Upon
5
the issuance of such global security, and the deposit of such global security
with or on behalf of the Global Security Depositary for such global security,
such Depositary will credit, on its book-entry registration and transfer
system, the respective principal amounts of the Debt Securities represented by
such global security to the accounts of institutions that have accounts with
such Depositary or its nominee ("participants"). The accounts to be credited
will be designated by the underwriters or agents of such Debt Securities or by
the Company, if such Debt Securities are offered and sold directly by the
Company. Ownership of beneficial interests in such global security will be
limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such global
security will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by the Global Security Depositary or
its nominee for such global security. Ownership of beneficial interests in
such global security by persons that hold through participants will be shown
on, and the transfer of that ownership interest within such participant will
be effected only through, records maintained by such participant. The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations
and such laws may impair the ability to transfer beneficial interests in such
global securities.
So long as the Global Security Depositary for a global security, or its
nominee, is the registered owner of such global security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or Holder
of the Debt Securities represented by such global security for all purposes
under the Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such global security will not be
entitled to have Debt Securities of the series represented by such global
security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the Holders thereof for any purposes under the
Indenture. Accordingly, each person owning a beneficial interest in such
global security must rely on the procedures of the Global Security Depositary
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a
Holder under the Indenture. The Company understands that under existing
industry practices, if the Company requests any action of holders or an owner
of a beneficial interest in such global security desires to give any notice or
take any action a Holder is entitled to give or take under the Indenture, the
Global Security Depositary would authorize the participants to give such
notice or take such action, and participants would authorize beneficial owners
owning through such participants to give such notice or take such action or
would otherwise act upon the instructions of beneficial owners owning through
them.
Principal of and any premium and interest on a global security will be
payable in the manner described in the applicable Prospectus Supplement.
CERTAIN RESTRICTIONS.
Limitation on Debt of Restricted Subsidiaries. The Indenture provides that
the Company will not permit any Restricted Subsidiary to become liable for any
funded debt (as defined), other than to refund an equal aggregate principal
amount of funded debt and other than funded debt owned by the Company or a
wholly owned Restricted Subsidiary, unless after giving effect thereto the
aggregate amount of such funded debt outstanding does not exceed 15% of
Consolidated Net Tangible Assets. (Section 1004)
Limitation on Secured Debt. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, become liable for any
indebtedness for borrowed money secured by a mortgage or lien on a Principal
Property or on any shares of stock or indebtedness of any Restricted
Subsidiary ("Secured Debt") or secure the same without making effective
provision for securing the principal amount of the Debt Securities (and, if
the Company so elects, any indebtedness
6
ranking equally with the Debt Securities) equally and ratably with or prior to
such secured indebtedness. This covenant will not apply to debt secured by (a)
mortgages or liens on property, capital stock or indebtedness of any
corporation existing at the time it becomes a subsidiary, (b) mortgages
existing on property at the time of acquisition, purchase money mortgages and
mortgages to secure indebtedness incurred within 180 days after the time of
acquisition thereof to finance the purchase price, (c) mortgages or liens on
unimproved property to finance the cost of improvements to such property, (d)
mortgages or liens securing indebtedness owed by a Subsidiary to the Company
or a wholly owned Restricted Subsidiary, (e) certain mortgages in favor of
governmental entities including mortgages in connection with industrial
revenue financing or (f) extensions, renewals or replacements of any of the
foregoing. Notwithstanding this covenant, the Company and its Restricted
Subsidiaries may incur or guarantee any Secured Debt, provided that after
giving effect thereto the aggregate amount of such debt then outstanding (not
including Secured Debt permitted under the foregoing exceptions) and the
aggregate "value" of Sale and Leaseback Transactions (as defined), other than
Sale and Leaseback Transactions permitted under clauses (a) through (d) and
(f) in the following paragraph, at such time does not exceed 10% of
Consolidated Net Tangible Assets. (Section 1005)
Limitation on Sales and Leasebacks. The Indenture provides that sales and
leasebacks of a Principal Property by the Company or a Restricted Subsidiary
(except those for a temporary period of not more than three years and those
from the Company or a wholly owned Restricted Subsidiary) will be prohibited
unless (a) the transaction is entered into to finance the cost of acquiring
such property or within 180 days after such acquisition, (b) the transaction
is entered into to finance the cost of improvements to such unimproved
property, (c) the transaction is one of certain types in which the lessor is a
governmental entity, (d) the transaction involves the extension, renewal or
replacement of the transactions referred to in clauses (a) through (c) above,
(e) the property involved is property that could be mortgaged without equally
and ratably securing the Debt Security under the last sentence of the
preceding paragraph or (f) an amount equal to the proceeds of sale or the fair
value of the property sold (whichever is higher) is applied to the retirement
of funded debt of the Company. (Section 1006)
DEFINITIONS. The term "Restricted Subsidiary" means (a) any Subsidiary other
than (1) a Subsidiary substantially all the physical properties of which are
located, or substantially all the business of which is carried on, outside the
United States of America, its territories and possessions, or (2) a Subsidiary
the primary business of which consists of one or more of the following: (i)
purchasing accounts receivable, (ii) making loans secured by accounts
receivable or inventories or otherwise providing credit, (iii) making
investments in real estate or providing services directly related thereto or
otherwise engaging in the business of a finance or real estate investment
company, or (iv) leasing equipment, machinery, vehicles, rolling stock and
other articles for use of the business of the Company, or (3) certain named
Subsidiaries; (b) any Subsidiary described in Clauses (1), (2) and (3) of
paragraph (a) above which at the time of determination shall be a Restricted
Subsidiary pursuant to designation by the Board of Directors hereinafter
provided for.
The Company may by Board Resolution designate any Restricted Subsidiary to
be an Unrestricted Subsidiary, provided that it does not own a Principal
Property and, after giving effect thereto, such Subsidiary would be permitted
under the covenant described in "--Certain Restrictions--Limitations on Debt
of Restricted Subsidiaries" above to incur additional funded debt. The Company
may by Board Resolution designate any Unrestricted Subsidiary to be a
Restricted Subsidiary. The Company may by Board Resolution designate a newly
acquired or formed Subsidiary to be an Unrestricted Subsidiary, provided such
designation takes place not later than 90 days after such acquisition or
formation.
The term "Principal Property" will mean any manufacturing or research
property, plant or facility of the Company or any Restricted Subsidiary except
any property that the Board of Directors by resolutions declares is not of
material importance to the total business conducted by the Company and its
Restricted Subsidiaries as an entirety. The term "Consolidated Net Tangible
Assets" will mean at any date the total amount of assets that under generally
accepted accounting principles would be
7
included on a consolidated balance sheet of the Company and its Restricted
Subsidiaries as of such date, less the sum of the following items, which would
then also be so included in accordance with generally accepted accounting
principles: (a) related depreciation, amortization and other valuation
reserves, (b) investments (as defined), less applicable reserves in
Unrestricted Subsidiaries, (c) all treasury stock, goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles and (d) all liabilities and liability items of the Company and its
Restricted Subsidiaries (including minority interests in Restricted
Subsidiaries held by persons other than the Company or wholly owned Restricted
Subsidiaries) except (i) the reserves deducted as described in clauses (a) and
(b) above, (ii) funded debt, (iii) provisions for deferred income taxes and
(iv) capital stock, surplus and surplus reserves.
DEFEASANCE. The Indenture provides that the Company, at its option, (a) will
be discharged from any and all obligations in respect of any series of Debt
Securities (except for certain obligations to register the transfer or
exchange of Debt Securities of such series, replace stolen, lost or mutilated
Debt Securities of such series, maintain paying agencies and hold moneys for
payment in trust) or (b) need not comply with certain restrictive covenants of
the Indenture (including those described under "--Certain Restrictions" above)
if, in each case, the Company irrevocably deposits with the Trustee, in trust,
cash or U.S. government obligations (as defined) from which the payment of
interest thereon and principal thereof in accordance with their terms will
provide money in an amount sufficient to pay all the principal (including any
mandatory sinking fund payments) of, and interest on, such series on the dates
such payments are due in accordance with the terms of such series. To exercise
any such option, the Company is required to deliver to the Trustee an opinion
of counsel to the effect that the deposit and related defeasance would not
cause the holders of such series to recognize income, gain or loss for Federal
income tax purposes and, in the case of a discharge pursuant to clause (a)
above, accompanied by a ruling to such effect received from or published by
the United States Internal Revenue Service. (Section 402)
EVENTS OF DEFAULT. The following are Events of Default under the Indenture
with respect to Debt Securities of any series: (a) failure to pay principal of
or premium, if any, on any Debt Security of that series when due; (b) failure
to pay any interest on any Debt Security of that series when due, continued
for 30 days; (c) failure to deposit any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) failure to perform any other
covenant of the Company in the Indenture (other than a covenant included in
the Indenture solely for the benefit of a series of Debt Securities other than
that series), continued for 60 days after written notice as provided in the
Indenture; (e) acceleration of any indebtedness for money borrowed in an
aggregate principal amount exceeding $10,000,000 by the Company or any
Restricted Subsidiary under the terms of the instrument under which such
indebtedness is issued or secured, if such acceleration is not annulled within
10 days after written notice as provided in the Indenture; (f) certain events
in bankruptcy, insolvency or reorganization; and (g) any other Event of
Default provided with respect to Debt Securities of that series. (Section 501)
If any Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, either the Trustee or the holders
of at least 25% in principal amount of the outstanding Debt Securities of that
series (or, in the case of a default under clause (d), (e) or (f) above, of
all the outstanding Debt Securities) may declare the principal amount (or, if
the Debt Securities of that series are original issue discount securities,
such portion of the principal amount as may be specified in the terms of that
series) of all the Debt Securities of that series (or of all outstanding Debt
Securities, as the case may be) to be due and payable immediately. At any time
after a declaration of acceleration with respect to Debt Securities of any
series (or of all outstanding Debt Securities, as the case may be) has been
made, but before a judgment or decree based on acceleration has been obtained,
the holders of a majority in principal amount of the outstanding Debt
Securities of that series (or of all outstanding Debt Securities, as the case
may be) may, under certain circumstances, rescind and annul acceleration.
(Section 502)
8
The Indenture provides that the Trustee will be under no obligation, subject
to the duty of the Trustee during default to act with the required standard of
care, to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnity. (Section 603) Subject to such
provisions for indemnification of the Trustee, the holders of a majority in
principal amount of the outstanding Debt Securities of all series affected
(voting as one class) will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. (Section 512)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1007)
CERTAIN RIGHTS TO REQUIRE PURCHASE OF DEBT SECURITIES BY THE COMPANY UPON
SPECIFIED EVENTS. The terms of the Debt Securities may provide that upon the
occurrence of specified events affecting the Company and such Debt Securities,
each holder of Debt Securities shall have the right, at such holder's option,
to require the Company to repurchase all or any part of such holder's Debt
Securities within a specified period of time after such occurrence. The terms
and conditions of any such right will be described in the applicable
Prospectus Supplement.
MODIFICATION AND WAIVER. Modifications and amendments of the Indenture may be
made by the Company and the Trustee with the consent of the holders of 66 2/3%
in principal amount of the outstanding Debt Securities of all series affected
by such modification or amendment (voting as one class); provided that no such
modification or amendment may, without the consent of the holder of each
outstanding Debt Security affected thereby (a) change the stated maturity date
of the principal of, or any installment of principal of, or interest on, any
Debt Security; (b) reduce the principal amount of, or the premium (if any) or
interest on, any Debt Security; (c) reduce the amount of principal of an
original issue discount security payable upon acceleration of the maturity
thereof; (d) change the place or currency of payment of principal of, or
premium (if any) or interest on, any Debt Security; (e) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Debt Security; or (f) reduce the percentage in principal amount of outstanding
Debt Securities of any series, the consent of whose holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults.
(Section 902)
The holders of a majority in principal amount of the outstanding Debt
Securities may on behalf of the holders of all Debt Securities waive
compliance by the Company with certain restrictive provisions of the Indenture
(including the restrictive covenants noted above). (Section 1008) The holders
of a majority in principal amount of the outstanding Debt Securities of any
series may on behalf of the holders of all Debt Securities of that series
waive any past default for such series specified in the terms thereof, and the
holders of a majority in principal amount of all outstanding Debt Securities
may on behalf of the holders of all Debt Securities waive any past default
applicable to all series, except in any such case for a default in the payment
of the principal of or premium on, if any, or interest on any Debt Security or
in the payment of any sinking fund installment with respect to any Debt
Security or in respect of a provision that under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security of the series affected. (Section 513)
CONSOLIDATION, MERGER AND TRANSFER OF ASSETS. The Company, without the consent
of any holders of outstanding Debt Securities, may consolidate or merge with
or into, or transfer or lease its assets substantially as an entirety to any
corporation or may acquire or lease the assets of any person, provided that
the corporation formed by such consolidation or into which the Company is
merged or which acquired or leases the assets of the Company substantially as
an entirety is organized under the laws of any U.S. jurisdiction and has
assumed the Company's obligations on the Debt Securities and under the
Indenture, and that after giving effect to the transaction no Event of
Default, and no
9
event that, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing, and that certain other
conditions are met. (Article Eight)
REGARDING THE TRUSTEE. Cummins maintains banking relationships in the ordinary
course of business with The Chase Manhattan Bank, including the making of
investments through and borrowings from, Chase.
DESCRIPTION OF PREFERRED STOCK AND PREFERENCE STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock and the Preference Stock (collectively the "Priority
Stock"). This description does not purport to be complete and is subject to,
and qualified in its entirety by, the provisions of the Company's Restated
Articles of Incorporation and the certificate of designations relating to each
series of Priority Stock (the "Certificate of Designations"), which will be
filed as an exhibit to or incorporated by reference in the Registration
Statement of which this Prospectus is a part at or prior to the time of
issuance of such series of Priority Stock. The Company's Restated Articles of
Incorporation authorize the issuance of 1,000,000 shares of Preferred Stock
and 1,000,000 shares of Preference Stock, with no par or stated value. No
shares of Priority Stock are currently outstanding.
The Priority Stock may be issued from time to time in one or more series,
without stockholder approval. Subject to limitations prescribed by law and the
Company's Restated Articles of Incorporation, the Board of Directors of the
Company is authorized to determine the voting power (if any), designation,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, for each series of
Priority Stock that may be issued, and to fix the number of shares of each
such series. Thus, the Board of Directors, without stockholder approval, could
authorize the issuance of Priority Stock with voting, conversion and other
rights that could adversely affect the voting power and other rights of
holders of Common Stock or other series of Priority Stock or that could have
the effect of delaying, deferring or preventing a change in control of the
Company. See "Description of Common Stock" herein. Certain provisions
applicable to the Priority Stock are set forth below in "Description of Common
Stock". For a description of certain antitakeover provisions under Indiana law
and certain Investment Agreements, see "Description of Common Stock--
Antitakeover Provisions of Indiana Law" and "--Investment Agreements".
The Prospectus Supplement relating to the particular Priority Stock offered
thereby (the "Offered Priority Stock") will describe the following terms of
the Offered Priority Stock: (1) the designation and stated value per share of
the Offered Priority Stock and the number of shares offered; (2) the amount of
liquidation preference per share of the Offered Priority Stock; (3) the
initial public offering price at which the Offered Priority Stock will be
issued; (4) the dividend rate (or method of calculation), the dates on which
dividends shall be payable and the dates from which dividends shall commence
to cumulate, if any; (5) any redemption or sinking fund provisions; (6) any
conversion or exchange rights; (7) whether the Company has elected to offer
Depositary Shares as described below under "Description of Depositary Shares";
and (8) any additional voting, dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions.
The Priority Stock will have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in the applicable
Prospectus Supplement.
GENERAL. The Priority Stock will be, upon issuance against full payment
therefor, fully paid and nonassessable. The holders of Priority Stock will not
have any preemptive rights. The applicable Prospectus Supplement will contain
a description of certain United States Federal income tax consequences
relating to the purchase and ownership of the Offered Priority Stock.
10
RANK. With respect to dividend rights and rights upon the liquidation,
dissolution or winding up of the Company, each share of Preferred Stock will
rank on a parity with each other share of Preferred Stock, irrespective of
series, and will rank prior to the Common Stock and the Preference Stock and
any other class or series of capital stock of the Company hereafter authorized
over which the Preferred Stock has preference or priority in the payment of
dividends or in the distribution of assets on any liquidation, dissolution or
winding up of the Company. With respect to dividend rights and rights upon the
liquidation, dissolution or winding up of the Company, each share of
Preference Stock will rank on a parity with each other share of Preference
Stock, irrespective of series, and will rank prior to the Common Stock and any
other class or series of capital stock of the Company hereafter authorized
over which the Preference Stock has preference or priority in the payment of
dividends or in the distribution of assets on any liquidation, dissolution or
winding up of the Company.
The Priority Stock will be junior to all outstanding debt of the Company.
Each series of Priority Stock will be subject to creation of preferred or
preference stock ranking senior to, on a parity with or junior to such
Priority Stock to the extent not expressly prohibited by the Company's
Restated Articles of Incorporation.
DIVIDENDS. Holders of shares of Priority Stock will be entitled to receive,
when, as and if declared by the Board of Directors out of funds of the Company
legally available for payment, cash dividends, payable at such dates and at
such rates per share per annum as set forth in the applicable Prospectus
Supplement. Such rate may be fixed or variable or both. Each declared dividend
will be payable to holders of record as they appear at the close of business
on the stock books of the Company (or, if applicable, on the records of the
Depositary (as hereinafter defined) referred to below under "Description of
Depositary Shares") on such record dates, not more than 60 calendar days
preceding the payment dates thereof, as are determined by the Board of
Directors (each of such dates, a "Record Date").
Such dividends may be cumulative or noncumulative, as provided in the
applicable Prospectus Supplement. If dividends on a series of Priority Stock
are noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Priority Stock will have no right to receive a dividend in respect of such
dividend period, and the Company will have no obligation to pay the dividend
for such period, whether or not dividends are declared payable on any future
dividend payment date.
No full dividend will be declared or paid or set apart for payment on the
Preferred Stock of any series or the Preference Stock of any series for any
dividend period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on all the outstanding shares
of Preferred Stock or Preference Stock, as applicable, for all dividend
periods terminating on or prior to the end of such dividend period. When
dividends are not paid in full as aforesaid on all shares of Preferred Stock
or Preference Stock, as the case may be, any dividend payments (including
accruals, if any) on the Preferred Stock or Preference Stock, as applicable,
will be paid to the holders of the shares of the Preferred Stock or Preference
Stock, as the case may be, ratably in proportion to the respective sums which
such holders would receive if all dividends thereon accrued to the date of
payment were declared and paid in full. Accruals of dividends will not bear
interest. So long as any shares of Preferred Stock or Preference Stock are
outstanding, in no event will any dividends, whatsoever, whether in cash or
property, be paid or declared, nor will any distribution be made, on any class
of stock ranking subordinate to the Preferred Stock or Preference Stock, as
the case may be, nor will any shares of stock ranking subordinate to the
Preferred Stock or Preference Stock, as the case may be, be purchased,
redeemed or otherwise acquired for consideration by the Company or any
subsidiary of the Company, unless all dividends on the Preferred Stock or
Preference Stock, as applicable, for all past quarterly dividend periods will
have been paid or declared and a sum sufficient for the payment thereof set
apart. The foregoing provisions will not, however, apply to a dividend
11
payable solely in shares of any stock ranking subordinate to the Preferred
Stock or Preference Stock, as the case may be, or to the acquisition of shares
of any stock ranking subordinate to the Preferred Stock or Preference Stock,
as the case may be, in exchange solely for shares of any other stock ranking
subordinate to the Preferred Stock or Preference Stock, as applicable.
See "Description of the Common Stock--Dividends" for certain contractual
limitations on dividends.
LIQUIDATION. In the event of a liquidation, dissolution or winding up of the
Company, the holders of the Offered Priority Stock will be entitled, subject
to the rights of creditors, but before any distribution or payment to the
holders of Common Stock or any other security ranking junior to the Offered
Priority Stock, to receive an amount per share determined by the Board of
Directors and set forth in the applicable Prospectus Supplement plus accrued
and unpaid dividends to the distribution or payment date (whether or not
earned or declared). However, neither the merger, nor the sale, lease or
conveyance of all or substantially all of the assets of the Company will be
deemed a liquidation, dissolution or winding up of the Company for purposes of
this provision. In the event that the assets available for distribution with
respect to the Preferred Stock or Preference Stock, as the case may be, are
not sufficient to satisfy the full liquidation rights of all the outstanding
Preferred Stock or Preference Stock, as applicable, then such assets will be
distributed to the holders of such Preferred Stock or Preference Stock, as the
case may be, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled. After payment of the full amount of the
liquidation preference, the holders of Priority Stock will not be entitled to
any further participation in any distribution of assets by the Company.
VOTING RIGHTS. At any time dividends in an amount equal to six quarterly
dividend payments on the Preferred Stock of any series, whether or not
consecutive, or six quarterly dividend payments on the Preference Stock of any
series, whether or not consecutive, shall be unpaid in whole or in part,
holders of the Preferred Stock or Preference Stock, as the case may be, shall
have the right to a separate class vote to elect two members of the Board of
Directors at the next annual meeting of stockholders and thereafter until such
arrearages in dividends have been declared and paid or declared and a sum
sufficient for the payment thereof set apart in trust for the holders entitled
thereto, at which time the rights of the holders of the Preferred Stock or the
Preference Stock, as the case may be, to elect such directors will cease and
the terms of such two directors will terminate.
Without the affirmative vote of the holders of two-thirds of the Preferred
Stock or two-thirds of the Preference Stock, as the case may be, then
outstanding (voting separately as a class, without respect to series), the
Company may not adopt any proposed amendment to the Company's Restated
Articles of Incorporation which (i) authorizes, or increases the number of
authorized shares of, any capital stock (which, in the case of the Preference
Stock, includes any increase in the number of authorized shares of Preferred
Stock) or any security or obligation convertible into any other capital stock
ranking prior to the Preferred Stock or the Preference Stock, as the case may
be, in the distribution of assets on any liquidation, dissolution or winding
up of the Company or in the payment of dividends (and if an affirmative vote
of the holders of each series of Preferred Stock or each series of Preference
Stock is required by law, the affirmative vote of the holders of at least a
majority of the shares of each such series at the time outstanding will also
be required to adopt any such proposed amendment) or (ii) affects adversely
the relative rights, preferences, qualifications, limitations or restrictions
of the outstanding Preferred Stock or Preference Stock, as the case may be, or
the holders thereof, provided, that if any such amendment affects adversely
the relative rights, preferences, qualifications, limitations or restrictions
of less than all series of the Preferred Stock or less than all series of the
Preference Stock, as the case may be, at the time outstanding, then only the
affirmative vote of the holders of at least two-thirds of the shares of each
series so affected is necessary. However, any amendment to the Company's
Restated Articles of Incorporation to authorize, or to increase the number of
authorized shares of, any capital stock ranking on a parity with the Preferred
Stock or the Preference Stock, as
12
the case may be, in the distribution of assets on any liquidation, dissolution
or winding up of the Company or in the payment of dividends will not be deemed
to affect adversely the relative rights, preferences, qualifications,
limitations or restrictions of the Preferred Stock or the Preference Stock, as
the case may be, or any series thereof. Without the affirmative vote of the
holders of at least a majority of the shares of the Preferred Stock or a
majority of the shares of the Preference Stock, as the case may be, at the
time outstanding (or, if an affirmative vote of the holders of the shares of
the Preferred Stock or the Preference Stock of each series is required by law,
without the affirmative vote of holders of at least a majority of the shares
of the Preferred Stock or the Preference Stock, as the case may be, of each
series at the time outstanding), the Company may not adopt any proposed
amendment to the Company's Restated Articles of Incorporation which increases
the number of authorized shares of, the Preferred Stock or the Preference
Stock, as the case may be, or authorizes, or increases the number of
authorized shares of any capital stock or any security or obligation
convertible into any capital stock ranking on a parity with the Preferred
Stock or the Preference Stock, as the case may be, in the distribution of
assets on any liquidation, dissolution or winding up of the Company or in the
payment of dividends, or to authorize any sale, lease or conveyance of all or
substantially all of the assets of the Company, or to adopt any agreement of
merger of the Company with or into any other corporation or any agreement of
merger of any other company with or into the Company; provided that no such
vote of the holders of the Preferred Stock or the Preference Stock, as the
case may be, will be required to adopt any such agreement of merger if none of
the relative rights, preferences, qualifications, limitations or restrictions
of the outstanding Preferred Stock or Preference Stock, as applicable, or any
series thereof would be adversely affected thereby and if the corporation
resulting therefrom will have thereafter no authorized stock ranking prior to
or on a parity with the Preferred Stock or the Preference Stock, as the case
may be, in the distribution of assets on any liquidation, dissolution or
winding up of such resulting corporation or in the payment of dividends,
except the same number of authorized shares of stock with the same relative
rights, preferences, qualifications, limitations and restrictions thereof as
the stock of the Company authorized immediately preceding such merger and if
each holder of the shares of the Preferred Stock or the Preference Stock, as
the case may be, immediately preceding such merger receives the same number of
shares, with the same relative rights, preferences, qualifications,
limitations and restrictions thereof, of stock of such resulting corporation.
Except as described above or as required by law, the Priority Stock will not
be entitled to any voting rights unless provided for in the applicable
Certificate of Designations and set forth in the applicable Prospectus
Supplement. As more fully described under "Description of Depositary Shares"
below, if the Company elects to issue Depositary Shares, each representing a
fraction of a share of a series of the Priority Stock, each such Depositary
Share will, in effect, be entitled to such fraction of a vote per Depositary
Share.
NO OTHER RIGHTS. The shares of a series of Priority Stock will not have any
preferences, voting powers or relative, participating, optional or other
special rights except as set forth above or in the applicable Prospectus
Supplement, the Restated Articles of Incorporation and the Certificate of
Designations or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR. The transfer agent for the Offered Priority
Stock will be described in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The following is a description of certain general terms and provisions of
the Depositary Shares. The particular terms of any series of Depositary Shares
will be described in the applicable Prospectus Supplement. If so indicated in
a Prospectus Supplement, the terms of any such series may differ from the
terms set forth below. The summary of terms of the Deposit Agreement (as
defined below) and of
13
the Depositary Shares and Depositary Receipts (as defined below) contained in
this Prospectus does not purport to be complete and is subject to, and
qualified in its entirety by, reference to the forms of the Deposit Agreement
and Depositary Receipts which have been or will be filed with the Commission
at or prior to the time of the offering of such Depositary Shares.
GENERAL. The Company may, at its option, elect to offer fractional interests
in shares of Preferred Stock and Preference Stock, rather than shares of
Preferred Stock or Preference Stock. In the event such option is exercised,
the Company will provide for the issuance by a Depositary to the public of
receipts for Depositary Shares ("Depositary Receipts"), each of which will
represent a fractional interest.
The shares of any series of the Preferred Stock or Preference Stock
underlying the Depositary Shares will be deposited under a separate Deposit
Agreement (the "Deposit Agreement") between the Company and a bank or trust
company selected by the Company having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000 (the
"Depositary"). The Prospectus Supplement relating to a series of Depositary
Shares will set forth the name and address of the Depositary. Subject to the
terms of the Deposit Agreement, each owner of a Depositary Share will be
entitled, in proportion to the applicable fractional interest in a share of
Preferred Stock or Preference Stock underlying such Depositary Shares, to all
the rights and preferences of the Preferred Stock or Preference Stock
underlying such Depositary Share (including dividend, voting, redemption,
conversion and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts
but not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will
be exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to
the terms thereof, a holder of Depositary Shares is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock or
Preference Stock underlying the Depositary Shares evidenced by the surrendered
Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the applicable
Preferred Stock or Preference Stock to the record holders of Depositary Shares
relating to such Preferred Stock or Preference Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction
of one cent, and any balance not so distributed shall be added to and treated
as part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
14
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the Preferred Stock or Preference Stock shall be made available to holders of
Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES. If a series of the Preferred Stock or
Preference Stock underlying the Depositary Shares is subject to redemption,
the Depositary Shares will be redeemed from the proceeds received by the
Depositary resulting from the redemption, in whole or in part, of such series
of the Preferred Stock or Preference Stock held by the Depositary. The
Depositary shall mail notice of redemption not less than 30 and not more than
60 days prior to the date fixed for redemption to the record holders of the
Depositary Shares to be so redeemed at their respective addresses appearing in
the Depositary's books. The redemption price per Depositary Share will be
equal to the applicable fraction of the redemption price per share payable
with respect to such series of the Preferred Stock or Preference Stock.
Whenever the Company redeems shares of Preferred Stock or Preference Stock
held by the Depositary, the Depositary will redeem as of the same redemption
date the number of Depositary Shares relating to shares of Preferred Stock or
Preference Stock so redeemed. If less than all of the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected by lot or
pro rata as may be determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or other property to which
the holders of such Depositary Shares were entitled upon such redemption upon
surrender to the Depositary of the Depositary Receipts evidencing such
Depositary Shares.
VOTING THE PREFERRED STOCK AND PREFERENCE STOCK. Upon receipt of notice of any
meeting at which the holders of the Preferred Stock or Preference Stock are
entitled to vote, the Depositary will mail the information contained in such
notice of meeting to the record holders of the Depositary Shares relating to
such Preferred Stock or Preference Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the
record date for such Preferred Stock or Preference Stock) will be entitled to
instruct the Depositary as to the exercise of the voting rights pertaining to
the number of shares of Preferred Stock or Preference Stock underlying such
holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the number of shares of Preferred Stock or Preference
Stock underlying such Depositary Shares in accordance with such instructions,
and the Company will agree to take all action which may be deemed necessary by
the Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of Preferred Stock or Preference Stock to the
extent it does not receive specific instructions from the holders of
Depositary Shares relating to such Preferred Stock or Preference Stock.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which materially and adversely alters the
rights of the existing holders of Depositary Shares will not be effective
unless such amendment has been approved by the record holders of at least a
majority of the Depositary Shares then outstanding. The Deposit Agreement may
be terminated by the Company or the Depositary only if (i) all outstanding
Depositary Shares relating thereto have been redeemed or (ii) there has been a
final distribution in respect of the Preferred Stock or Preference Stock of
the relevant series in connection with any liquidation, dissolution or winding
up of the Company and such distribution has been distributed to the holders of
the related Depositary Shares.
CHARGES OF DEPOSITARY. The Company will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay
15
charges of the Depositary in connection with the initial deposit of the
Preferred Stock and the Preference Stock and any redemption of the Preferred
Stock and the Preference Stock. Holders of Depositary Shares will pay other
transfer and other taxes and governmental charges and such other charges as
are expressly provided in the Deposit Agreement to be for their accounts.
MISCELLANEOUS. The Depositary will forward to the holders of Depositary Shares
all reports and communications from the Company which are delivered to the
Depositary and which the Company is required to furnish to the holders of the
applicable Preferred Stock or Preference Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares,
Preferred Stock or Preference Stock unless satisfactory indemnity is
furnished. They may rely upon written advice of counsel or accountants, or
information provided by persons presenting Preferred Stock or Preference Stock
for deposit, holders of Depositary Shares or other persons believed to be
competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY. The Depositary may resign at any time
by delivering to the Company notice of its election to do so, and the Company
may at any time remove the Depositary, any such resignation or removal to take
effect upon the appointment of a successor Depositary and its acceptance of
such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
DESCRIPTION OF COMMON STOCK
The following is a description of certain terms of the Common Stock. This
description does not purport to be complete and is subject to, and qualified
in its entirety by, reference to the Company's Restated Articles of
Incorporation.
GENERAL. The Company is authorized to issue up to 150 million shares of Common
Stock. As of September 28, 1997, there were approximately 42 million shares of
Common Stock outstanding held by approximately 4,800 shareholders of record.
Subject to the limitations described below and the prior rights of the
Preferred Stock and Preference Stock, the Common Stock, $2.50 par value, of
the Company is entitled to dividends when and as declared by the Board of
Directors out of funds legally available therefor. Holders of Common Stock are
entitled to one vote per share. There is no provision for cumulative voting or
preemptive rights. The holders of Preferred Stock and the holders of
Preference Stock are each entitled to elect two directors of the Company upon
default in the payment of six quarterly dividends on any series of such class
and have voting rights with respect to amendments of the Restated Articles of
Incorporation affecting certain of their rights and in the case of certain
mergers, consolidations and dispositions of substantially all the Company's
assets. See "Description of Preferred Stock and Preference Stock--Voting
Rights". Upon any liquidation, voluntary or involuntary, of the Company,
holders of Common Stock are entitled ratably to all the assets of the Company
after payment of the Company's liabilities and satisfaction of the liquidation
preferences of the Preferred Stock and the Preference Stock. The outstanding
shares of Common Stock are, and any shares of Common Stock offered pursuant to
a Prospectus Supplement will be, upon issuance against full payment therefor,
fully paid and non-assessable.
16
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges. The transfer agent and registrar for the Common Stock is The First
National Bank of Chicago, Chicago, Illinois.
DIVIDENDS. No dividends or distributions may be declared or paid or made on,
or acquisitions made of, any Common Stock unless dividends on all outstanding
Preferred Stock and Preference Stock for all past quarterly dividend periods
have been declared and paid or a sum sufficient for payment set apart. A
number of the agreements under which the Company has borrowed money restrict
the Company's payment of dividends (other than stock dividends) and
distributions on and the redemption, purchase and acquisition by the Company
of its capital stock, including the Preferred Stock and the Preference Stock.
These restrictions typically limit the sum of all such payments,
distributions, redemptions, purchases and acquisitions from a given date to a
specified amount of retained earnings at such date plus consolidated net
income and the net proceeds to the Company from the sale of its capital stock
and indebtedness converted into such stock after such date. Several such
agreements require the Company to maintain minimum net worth and working
capital at specified levels. In addition, at any time the Company is in
default under its revolving credit facility or certain other financing
arrangements, the Company would be prohibited from paying dividends. The
Company is presently unaware of any facts or circumstances that would give
rise to any such default.
SHAREHOLDERS' RIGHTS PLAN. The Company has a Shareholders' Rights Plan which
it first adopted in 1986 (the "Rights Plan"). The Rights Plan provides that
each share of Common Stock has associated with it a stock purchase right. The
Rights Plan becomes operative when a person or entity acquires 15% of the
Common Stock or commences a tender offer to purchase 20% or more of the Common
Stock without the approval of the Company's Board of Directors. In the event a
person or entity acquires 15% of the Common Stock, each right, except for the
acquiring person's rights, can be exercised to purchase $400 worth of Common
Stock for $200. In addition, for a period of 10 days after such acquisition,
the Board of Directors can exchange such right for a new right which permits
the holders to purchase one share of Common Stock for $1. If a person or
entity commences a tender offer to purchase 20% or more of the Common Stock,
unless the Board of Directors redeems the rights within 10 days of the event,
each right can be exercised to purchase one share for $200. If the person or
entity becomes an acquiring person, then the provisions noted above apply. The
Rights Plan also allows holders of the rights to purchase shares of the
acquiring person's stock at a discount if the Company is acquired or 50% of
the assets or earnings power of the Company is transferred to an acquiring
person.
ANTITAKEOVER PROVISIONS OF INDIANA LAW. Indiana Code (S) 23-1-42 (the "Control
Share Act") provides that any person or group of persons that acquires the
power to vote more than one-fifth of certain corporations' shares shall not
have the right to vote such shares unless granted voting rights by the holders
of a majority of the outstanding shares of the corporation and by the holders
of a majority of the outstanding shares excluding "interested shares".
Interested shares are those shares held by the acquiring person, officers of
the corporation and employees of the corporation who are also directors of the
corporation. If the approval of voting power for the shares is obtained,
additional shareholder approvals are required when a shareholder acquires the
power to vote more than one-third and more than a majority of the voting power
of the corporation's shares. In the absence of such approval, the additional
shares acquired by the shareholder may not be voted.
If the shareholders grant voting rights to the shares after a shareholder
has acquired more than a majority of the voting power, all shareholders of the
corporation are entitled to exercise statutory dissenters' rights and to
demand the value of their shares in cash from the corporation. If voting
rights are not accorded to the shares, the corporation may have the right to
redeem them. The provisions of the Control Share Act do not apply to
acquisitions of voting power pursuant to a merger or share exchange agreement
to which the corporation is a party.
17
The Company's By-laws provide that Cummins is not subject to the Control
Share Act; however, such By-laws may be amended by the Board of Directors
without a shareholder vote.
Indiana Code (S) 23-1-43 (the "Business Combination Act") prohibits a person
who acquires beneficial ownership of 10% or more of certain corporations'
shares (an "Interested Shareholder"), or any affiliate or associate of an
Interested Shareholder, from effecting a merger or other business combination
with the corporation for a period of five years from the date on which the
person became an Interested Shareholder, unless the transaction in which the
person became an Interested Shareholder was approved in advance by the
corporation's Board of Directors. Following the five-year period, a merger or
other business combination may be effected with an Interested Shareholder only
if (a) the business combination is approved by the corporation's shareholders,
excluding the Interested Shareholder and any of its affiliates or associates,
or (b) the consideration to be received by shareholders in the business
combination is at least equal to the highest price paid by the Interested
Shareholder in acquiring its interest in the corporation, with certain
adjustments, and certain other requirements are met. The Business Combination
Act broadly defines the term "business combination" to include mergers, sales
or leases of assets, transfers of shares of the corporation, proposals for
liquidation and the receipt by an Interested Shareholder of any financial
assistance or tax advantage from the corporation, except proportionately as a
shareholder of the corporation.
The overall effect of the above provisions may be to render more difficult
or to discourage a merger, tender offer, proxy contest, the assumption of
control of the Company by a holder of a large block of the Company's stock or
other person, or the removal of incumbent management, even if such actions may
be beneficial to the Company's shareholders generally.
INVESTMENT AGREEMENTS. In July 1990, the Company entered into an Investment
Agreement with Kubota Corporation, a Japanese corporation ("Kubota"), pursuant
to which, among other things, in consideration of $49,985,000 received from
Kubota, Kubota was issued one share of a newly created series of the Company's
Preference Stock, designated Convertible Preference Stock, Series K (the
"Series K Preference Stock"), which Series K Preference Stock was subsequently
converted into 799,760 shares of Common Stock. The consideration received from
Kubota represented a price of $62.50 per share of Common Stock. On October 12,
1993, the Company's Board of Directors declared a 2-for-1 stock split of the
Common Stock, which stock split was effected on October 25, 1993. As a result
of the stock split, Kubota holds 1,599,520 shares of Common Stock, having a
basis of $31.25 per share of Common Stock.
The Investment Agreement with Kubota, among other things, prohibits Kubota
and its affiliates (as defined in Rule 12b-2 under the Exchange Act), except
in limited circumstances, from (i) acquiring additional securities of the
Company having the ordinary power to vote, in the absence of contingencies, in
the election of directors of the Company ("Voting Securities") in excess of
5.4%; (ii) making any public announcement or proposal regarding any merger,
consolidation or certain other extraordinary transactions unless solicited by
the Company's Board of Directors; (iii) participating in any solicitation of
proxies or election contest; (iv) proposing any matter for submission to a
vote of the Company's shareholders; (v) participating in a group with respect
to any Voting Securities; (vi) granting any proxy to any person not designated
by the Company; (vii) entering into any discussions, negotiations,
arrangements or understandings with respect to any of the foregoing
provisions; (viii) disclosing to any third party any intention, plan or
arrangement inconsistent with the foregoing provisions or the provisions
regarding restrictions on transfers of Voting Securities; and (ix) requesting
the Company to waive, amend or modify any standstill provision.
If Kubota's interest is diluted through subsequent issuances of Voting
Securities by the Company, Kubota has the right under its Investment Agreement
to purchase additional Voting Securities of the
18
Company in the open market, through privately negotiated transactions or
directly from the Company (on the same terms as such subsequent issuances in
the case of acquisitions directly from the Company), up to an amount that
would result in Kubota beneficially owning the same percentage of the total
Voting Securities as that owned immediately prior to such issuances. In the
event that Kubota elects to acquire some or all of such shares of Common
Stock, the Company could be required to issue new shares of Common Stock to
Kubota.
In the event the Board of Directors approves any transaction pursuant to
which the Company is to be acquired in a merger, consolidation or sale of
substantially all its assets, or pursuant to which a person is to acquire
voting securities representing a majority of the voting power of all then
outstanding Voting Securities, then, as long as that transaction is being
pursued, Kubota would be permitted to make a tender or exchange offer
notwithstanding the restrictions on acquiring additional Voting Securities and
on making acquisition proposals described above.
Except for the limited restrictions as set forth more fully in the
Investment Agreement, Kubota is not restricted from selling or transferring
any voting Securities.
Notwithstanding the transfer restrictions, Kubota is permitted to tender its
Voting Securities into a tender or exchange offer commenced by the Company (or
a subsidiary of the Company) or approved by the Board of Directors. If any
other tender or exchange offer is consummated and the bidder acquires Voting
Securities representing more than 50% of the voting power of the Voting
Securities then outstanding, Kubota has the right to require the Company to
purchase the amount of Voting Securities which would have been purchased in
that offer had Kubota tendered its shares.
Kubota is free to vote its Voting Securities as it sees fit on any matter
submitted to a vote of the Company's shareholders, except that Kubota is
required to vote for the election of all nominees included in the Company's
slate of directors.
The term of the Investment Agreement is until the earlier of (i) the later
of six years and the first date Kubota ceases to beneficially own Voting
Securities representing at least 5% of the total voting power of all then
outstanding Voting Securities and (ii) ten years; provided that certain
provisions of the Investment Agreement will explicitly survive its stated
term.
Pursuant to, and as provided in, the Investment Agreement the Company agreed
to amend the Rights Plan to permit acquisitions of Voting Securities permitted
by the Investment Agreement.
The foregoing descriptions of the Investment Agreement with Kubota and the
Amendment to the Rights Agreement are subject to, and qualified in their
entirety by, reference to each such agreement, certificate or document.
DESCRIPTION OF WARRANTS
GENERAL. The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), as well as other types of Warrants ("Other
Warrants"). Warrants may be issued independently or together with any
Securities and may be attached to or separate from such Securities. Each
series of Warrants will be issued under a separate warrant agreement (each a
"Warrant Agreement") to be entered into between the Company and a warrant
agent ("Warrant Agent"). The Warrant Agent will act solely as an agent of the
Company in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants. The summary of terms of the Debt Warrants and
the Other Warrants contained in this Prospectus does not purport to be
complete and is subject to, and qualified
19
in its entirety by reference to, the form of the Warrant Agreement which has
been or will be filed with the Commission at or prior to the time of the
offering of such Warrants.
DEBT WARRANTS. The Prospectus Supplement relating to particular Debt Warrants
offered thereby will describe the following terms of such Debt Warrants: (1)
the title of such Debt Warrants; (2) the aggregate number of such Debt
Warrants; (3) the price or prices at which such Debt Warrants will be issued;
(4) the currency or currencies, including composite currencies, in which the
price of such Debt Warrants may be payable; (5) the designation, aggregate
principal amount and terms of the Debt Securities purchasable upon exercise of
such Debt Warrants; (6) if applicable, the designation and terms of the Debt
Securities with which such Debt Warrants are issued and the number of such
Debt Warrants issued with each such Debt Security; (7) the currency or
currencies, including composite currencies, in which the principal of or any
premium or interest on the Debt Securities purchasable upon exercise of such
Debt Warrant will be payable; (8) if applicable, the date on and after which
such Debt Warrants and the related Debt Securities will be separately
transferable; (9) the price at which and currency or currencies, including
composite currencies, in which the Debt Securities purchasable upon exercise
of such Debt Warrants may be purchased; (10) the date on which the right to
exercise such Debt Warrants shall commence and the date on which such right
shall expire; (11) if applicable, the minimum or maximum amount of such Debt
Warrants which may be exercised at any one time; (12) information with respect
to book-entry procedures, if any; (13) if applicable, a discussion of certain
United States Federal income tax considerations; and (14) any other terms of
such Debt Warrants, including terms, procedures and limitations relating to
the exchange and exercise of such Debt Warrants.
OTHER WARRANTS. The Prospectus Supplement relating to particular Other
Warrants offered thereby will describe the following terms of such Other
Warrants: (1) the title of such Other Warrants; (2) the securities (which may
include Preferred Stock, Preference Stock, Depositary Shares or Common Stock)
for which such Other Warrants are exercisable; (3) the price or prices at
which such Other Warrants will be issued; (4) the currency or currencies,
including composite currencies, in which the price of such Other Warrants may
be payable; (5) if applicable, the designation and terms of the Debt
Securities, Preferred Stock, Preference Stock or Depositary Shares with which
such Other Warrants are issued and the number of such Other Warrants issued
with each such Debt Security, share of Preferred Stock or Preference Stock or
Depositary Share; (6) if applicable, the date on and after which such Other
Warrants and the related Debt Securities, Preferred Stock, Preference Stock or
Depositary Shares will be separately transferable; (7) if applicable, a
discussion of certain United States Federal income tax considerations; and (8)
any other terms of such Other Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Other Warrants.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale
of Securities will be named in the applicable Prospectus Supplement. Any sale
of Securities to one or more underwriters may include stand-by call
arrangements or other arrangements whereby an underwriter purchases Securities
directly or indirectly from the Company in connection with a redemption of
securities convertible into Securities.
The distribution of Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, or from
time to time at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Each
Prospectus Supplement will describe the method of distribution of the offered
Securities.
20
In connection with the sale of Securities, underwriters or agents acting on
the Company's behalf may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Securities for whom they may act as
agent. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions
or commissions allowed by underwriters to participating dealers, will be set
forth in the applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of Securities may be deemed to be
underwriting discounts and commissions under the Securities. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters acting as the Company's agents to solicit offers by
certain institutions to purchase Securities from the Company pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the amount of Securities sold pursuant to
Contracts shall be not less nor more than, the respective amounts stated in
such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investments companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. The obligations of any purchaser under any Contract
will not be subject to any conditions except that (i) the purchase by an
institution of the Securities covered by its Contract shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject, and (ii) if the Securities are also
being sold to underwriters, the Company shall have sold to such underwriters
the total principal amount of the Securities less the principal amount thereof
covered by the Contracts. The underwriters and such other persons will not
have any responsibility in respect of the validity or performance of the
Contracts.
VALIDITY OF SECURITIES
The validity of the Securities offered will be passed upon for the Company
by Pamela F. Carter, Esq., Vice President-General Counsel of the Company,
Columbus, Indiana and for the Underwriters or agents, if any, by Davis Polk &
Wardwell, New York, New York. Ms. Carter may rely as to matters of New York
law upon the opinion of Cravath, Swaine & Moore, New York, New York. Davis
Polk & Wardwell will rely as to matters of Indiana law upon the opinion of Ms.
Carter.
EXPERTS
The consolidated financial statements and schedules included or incorporated
by reference in this Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included or
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said reports. Reference is made to said report, which
includes an explanatory paragraph with respect to the change in the method of
accounting for the cost of retiree's health care and life insurance benefits,
post employment benefits and income taxes.
21
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPEC-
TUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUP-
PLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECU-
RITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Available Information...................................................... S-2
Incorporation of Certain Documents by Reference............................ S-2
The Company................................................................ S-3
Recent Developments........................................................ S-8
Use of Proceeds............................................................ S-10
Capitalization............................................................. S-10
Selected Financial Data.................................................... S-11
Description of Offered Securities.......................................... S-12
United States Taxation..................................................... S-16
Underwriting............................................................... S-19
Experts.................................................................... S-20
Validity of Securities..................................................... S-20
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Price Range of Common Stock and Dividends.................................. 4
Description of Debt Securities............................................. 4
Description of Preferred Stock and Preference Stock........................ 10
Description of Depositary Shares........................................... 13
Description of Common Stock................................................ 16
Description of Warrants.................................................... 19
Plan of Distribution....................................................... 20
Validity of Securities..................................................... 21
Experts.................................................................... 21
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$765,000,000
CUMMINS ENGINE
COMPANY, INC.
$125,000,000 6.25% NOTES DUE MARCH 1, 2003
$225,000,000 6.45% NOTES DUE MARCH 1, 2005
$250,000,000 7.125% DEBENTURES DUE MARCH 1, 2028
$165,000,000 5.65% DEBENTURES DUE MARCH 1, 2098
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LOGO CUMMINS ENGINE COMPANY, INC.
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GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
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