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CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
CMI051007
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CMI051007

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  • 1. A New Cummins: Sustainable Performance Investor Relations Presentation May 2007
  • 2. Disclosure Regarding Forward-Looking Statements & non-GAAP Financial Measures This presentation contains certain forward-looking information. Any forward-looking statement involves risk and uncertainty. The Company’s future results may be affected by changes in general economic conditions and by the actions of customers and competitors. Actual outcomes may differ materially from what is expressed in any forward-looking statement. A more complete disclosure about forward- looking statements begins on page 61 of our 2006 Form 10-K, and it applies to this presentation. This presentation contains certain non-GAAP financial measures such as earnings before interest and taxes (EBIT). Please refer to our website (www.cummins.com) for the reconciliation of EBIT to GAAP financial measures. 2
  • 3. Creating Greater Shareholder Value Doubled our revenue in 5 years Highest period of net earnings as a percent of sales in over 40 years Generated $4.2 billion in EBITDA since 2003 Improved debt to capital from 60% in 2003 to 19% today Actively repurchased 3.2 million shares in 2 years Exceeded both ROANA and ROE targets for over three years 3
  • 4. Continuing to Deliver on Commitments Target 2006 Revenue Growth 14.6% 8 to 10% EBIT Margin 10.4% 7 to 10% Cap Ex 2.2% of Sales 3% of Sales Debt to Capital Ratio 22% 30 to 40% Credit Rating Investment S&P: BBB- Moody’s: Baa3 Grade ROE 25% 18% ROANA 31% 22% 4
  • 5. We Have Outperformed Our Peer Group Growing net income 137% faster than revenue CAGR Since 2003 Converting 75% more income into cash 37% 22% 18% 13% Revenue Net Income Operating Cash Flow CMI Peer Group Median 5
  • 6. Confident in Our Ability to Perform in 2007 and Beyond We are executing on our Strategic Principles Our customers recognize Cummins for our technology leadership We are investing in the next generation of profitable growth opportunities 6
  • 7. Executing on Our Strategic Principles to... Diversify to mitigate the cyclicality of our end markets Aggressively pursue low cost leadership Build greater stability in earnings Utilize focused cash management strategy 7
  • 8. Diversified Global Power Leader Four Complementary Businesses Engines Power Components Distribution Generation 8
  • 9. Reducing Cyclicality through Geographic Diversity 1999 2006 39% 61% 50% 50% US Consolidated Net Sales ROW Consolidated Net Sales 9
  • 10. End Market Diversity Mitigates Economic Cycles 10
  • 11. Aggressively Pursuing Low Cost Leadership Drive for Productivity Net Sales and Net Earnings $11,362 Manufacturing $12,000 $800 $9,918 $700 $10,000 Technical $8,438 $600 $8,000 Net Earnings ($M) Shared Services Net Sales ($M) $500 $6,296 $6,000 $400 Six Sigma $300 $4,000 Global Sourcing $200 $2,000 $100 $0 $0 2003 2004 2005 2006 Net Sales Net Earnings 11
  • 12. Building Stable Diversified Earnings Base Significant contributor to total EBIT China Distribution India Aftermarket 12
  • 13. Focused Cash Management Strategy Operating Cash Flow ($M) $900 Maintaining strong $800 balance sheet $700 Investing in profitable $600 growth $500 Returning value to our $400 shareholders $300 $200 $100 $0 2003 2004 2005 2006 13
  • 14. Our Customers Recognize Cummins for Our Technology Leadership Virtually integrating through OEM partnerships Global technology leader in constantly changing emissions environment 14
  • 15. Virtually Integrating Through OEM Partnerships Low Cost Strong Brand Global Presence Strong Partnerships Technology Leadership 15
  • 16. Unique Technology Integration Fuel Systems Electronic Controls Air Handling Systems Filtration and Aftertreatment Combustion Technologies 16
  • 17. Technology Leadership: Growing to Support our Customers Cummins Turbo Medium-Duty Truck Technologies Revenue and Bus Shipments 5% p2 28% U p U 2006 2007 2006 2007 17
  • 18. Investing in Profitable Growth New Product Pursue underserved Increase share markets of wallet Current Product Increase share in Pursue untapped core markets markets Current Market/Customer New Market/Customer 18
  • 19. Growth From New Engine Platforms 1,400 Engine Production (Thousands) 1,200 1,000 800 600 400 200 0 2006 Organic New 2010 Growth Platforms 19
  • 20. Power Generation Growth Through Market Leadership Global Generator Set Consumption (Total Output) 35% Approximate $7 Billion Annual Global Market 30% Top 8 regions 92% of total 25% Market Leader (# 1 or # 2) Leader in some segments 20% Not a market leader 15% 10% 5% 0% North Western China Middle India Southeast Latin Africa All Others 20 America Europe East Asia America Source: Parkinson Associates
  • 21. Evolving Global Emission Standards Creates Growth Opportunities Global Market Size for On-highway Commercial Vehicle Diesel Catalytic Exhaust ($B) $0 $1 $2 $3 $4 $5 $6 2006 2010 21
  • 22. Investing in Our Distribution Channel Company-owned Joint Venture Independent 22
  • 23. Confident in Our Ability to Perform in 2007 and Beyond We are executing on our Strategic Principles Our customers recognize Cummins for our technology leadership We are investing in the next generation of profitable growth opportunities 23
  • 24. 24
  • 25. Non-GAAP Reconciliations
  • 26. Non-GAAP Reconciliation – EBIT Three Months Ended Millions April 1, April 2, December 31, 2007 2006 2006 Segment EBIT $ 243 $ 255 $ 303 Less: Interest Expense $ 16 $ 27 $ 20 Earnings before income taxes and minority $ 227 $ 228 $ 283 interests EBIT = Earnings before interest, taxes, and minority interests. We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. The table above reconciles EBIT, a non-GAAP financial measure, to our consolidated earnings before income taxes and minority interests, for each of the applicable periods. 26
  • 27. Non-GAAP Reconciliation – EBITDA Three Months Ended Millions April 1, April 2, December 31, 2007 2006 2006 Segment EBIT $ 243 $ 255 $ 303 Depreciation & Amortization $ 68 $ 74 $ 74 EBITDA $ 311 $ 329 $ 377 EBITDA = Earnings before interest, taxes, minority interests, depreciation, and amortization. 27
  • 28. Non-GAAP Reconciliation – Cash From Operations Excluding Pension Contributions Three Months Ended Millions April 1, 2007 April 2, 2006 Cash provided by operations $ (113) $ 18 Add back: pension contributions $ 61 $ 41 Cash provided by operations $ (52) $ 59 excluding pension contributions We believe cash provided by operations excluding pension contributions is a useful measure of our operating performance for the periods presented as it illustrates our operating performance without regard to funding decisions. This measure is not in accordance with, or an alternative for, GAAP and may not be consistent with measures used by other companies. It should be considered supplemental data. 28
  • 29. Non-GAAP Reconciliation – Net Assets April 1, April 2, Millions 2007 2006 Net assets for operating segments $ 4,041 $ 3,609 Liabilities deducted in computing net assets 3,516 3,385 Minimum pension liability excluded from net assets - (837) Pension and other postretirement liabilities (824) - Deferred tax assets not allocated to segments 689 814 Debt-related costs not allocated to segments 26 26 Total assets $ 7,448 $ 6,997 29
  • 30. Non-GAAP Reconciliation – Equity Used for Return on Equity Calculation April 1, April 2, Millions 2007 2006 Equity used for return on equity calculation $ 3,480 $ 2,501 less Defined other postretirement benefits 5 - less Defined benefit pension plans 538 - less Minimum pension liability adjustment - 523 Total shareholder’s equity $ 2,937 $ 1,978 30
  • 31. Appendix
  • 32. Cummins Inc. Q1 2007 LTM Revenue by Segment Components Q1 2007 – Great Quarter Segment 17% Strong global demand Engine for our product Segment 54% Distribution Year-over-year Segment 10% growth in revenue and earnings Investing in profitable growth opportunities Power Gen Segment 19% Q1 2007 LTM Data Sales: $11.5 billion EBIT: $1,167 million 32 EBIT Margin: 10.1% (Target: 7-10%)
  • 33. Cummins Inc. Q1 2007 LTM Revenue by Marketing Territory Africa/Middle East International revenue Canada 5% 6% is 49% of consolidated revenue Mexico/Latin America International revenue 8% was 54% in the first quarter United States Most international 49% areas growing at Asia/Australia 17% double digit rate Europe/CIS 15% 33
  • 34. Cummins – Historical Performance Sales EBIT $14,000 $1,400 $11,501 $1,179 $1,167 $12,000 $1,200 $11,362 $9,918 $10,000 $1,000 $907 $8,438 $ Millons $ Millons $8,000 $800 $6,296 $543 $6,000 $600 $4,000 $400 $181 $2,000 $200 $0 $0 2003 2004 2005 2006 Q1 '07 2003 2004 2005 2006 Q1 '07 LTM LTM 34
  • 35. Engine Segment Q1 2007 LTM Revenue by Product Emission regulations Parts and Service 21% create opportunities Midrange (3-9L) 37% Aftermarket revenue creates stable earnings Emerging markets Strategic OEM partnerships High Horsepower (19-91L) 15% Q1 2007 LTM Segment Data Heavy-Duty Sales: $7.5 billion (10-15L) 27% EBIT: $682 million 35 EBIT Margin: 9.1% (Target: 7-10%)
  • 36. Engine Segment Q1 2007 LTM Revenue by Market Application Heavy-duty Truck Stationary Power 10% demand remains strong Mining/Rail Heavy-duty Govt/O&G truck 31% Share gains in Medium- Marine 14% duty Truck & Bus Off-highway markets supported by non- Construction residential construction & Ag 16% and commodity markets Medium-duty Light-duty Truck & bus 13% Q1 2007 LTM Segment Data Automotive Sales: $7.5 billion & RV 16% EBIT: $682 million 36 EBIT Margin: 9.1% (Target: 7-10%)
  • 37. Engines – Historical Performance Sales Segment EBIT $8,000 $800 $7,511 $7,455 $733 $682 $6,657 $7,000 $700 $582 $6,000 $600 $5,424 $5,000 $500 $M $M $4,000 $3,582 $400 $328 $3,000 $300 $2,000 $200 $62 $1,000 $100 $0 $0 2003 2004 2005 2006 Q1 '07 2003 2004 2005 2006 Q1 '07 LTM LTM 37
  • 38. Power Generation Segment Q1 2007 LTM Revenue by Product Turnaround complete Alternators Commercial 19% Strengthening markets 56% Expanding market share Rental 2% Consumer growth opportunities Growing project business Consumer 13% capability Power Electronics 6% Q1 2007 LTM Segment Data Energy Sales: $2.6 billion Solutions 4% EBIT: $252 million 38 EBIT Margin: 9.9% (Target: 7-9%)
  • 39. Power Generation – Historical Performance Sales Segment EBIT $3,000 $300 $252 $2,555 $250 $2,416 $2,500 $220 $200 $1,999 $2,000 $1,842 $145 $150 $M $M $1,500 $1,329 $100 $60 $1,000 $50 $500 $0 ($19) $0 ($50) 2003 2004 2005 2006 Q1 '07 2003 2004 2005 2006 Q1 '07 LTM LTM 39
  • 40. Components Segment Q1 2007 LTM Revenue by Product Specialty Strategic advantage in Filtration 6% emissions compliance Air Intake Systems Turbocharger Significant future growth 11% 27% in revenue and earnings Multiple new product Acoustic introductions Exhaust 12% Winning non-CMI Fuel business Systems 16% Engine Filtration Q1 2007 LTM Segment Data Catalytic 20% Sales: $2.4 billion Exhaust EBIT: $100 million 8% 40 EBIT Margin: 4.2% (Target: 7-9%)
  • 41. Components – Historical Performance Sales Segment EBIT $120 $3,000 $107 $100 $2,383 $100 $2,500 $2,281 $89 $86 $84 $2,000 $80 $2,000 $1,783 $M $M $60 $1,500 $1,292 $40 $1,000 $20 $500 $0 $0 2003 2004 2005 2006 Q1 '07 2003 2004 2005 2006 Q1 '07 LTM LTM 41
  • 42. Distribution Segment Q1 2007 LTM Revenue by Product Service Broadening product 18% offering Engines 20% Expanding global coverage Increasing equity ownership Excelling in customer Parts, support Filters, & Consumables Power 37% Generation Q1 2007 LTM Segment Data 25% Sales: $1.4 billion EBIT: $152 million 42 EBIT Margin: 11.0% (Target: 8-10%)
  • 43. Distribution – Historical Performance Sales Segment EBIT $1,600 $160 $152 $144 $1,385 $1,377 $1,400 $140 $1,191 $1,200 $120 $107 $973 $1,000 $100 $79 $M $M $800 $80 $669 $600 $60 $51 $400 $40 $200 $20 $0 $0 2003 2004 2005 2006 Q1 '07 2003 2004 2005 2006 Q1 '07 LTM LTM 43

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