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cmi_070521
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cmi_070521

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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.
  • 3. 2006 – The Best Year in Our History Revenue $11.4B EBIT $ 1.2B Net earnings $715M EPS $ 7.10 Cash flow $840M Debt to capital 22% Return on Average Net Assets 31% Return on Equity 26%
  • 4. Outperforming Peer Group 137% Growing net income CAGR Since 2003 faster than revenue 75% Converting more income into cash 37% 22% 18% 13% Revenue Net Income Operating Cash Flow CMI Peer Group Median
  • 5. 2007 and Beyond – Building on Our Strategic Principles Complementary Businesses Low Cost Producer Create Shareholder Value Profitable Growth Create the Right Environment
  • 6. Diversified Global Power Leader Four Complementary Businesses Engines Power Distribution Components Generation
  • 7. Low Cost Producer Drive for Productivity Manufacturing Technical Shared Services Six Sigma Global Sourcing
  • 8. Creating Shareholder Value
  • 9. Profitable Growth – Engine Business 1.4 Light Duty Diesel in 1.2 Engine Production (Millions) U.S. and China 1.0 13- and 11-liter 0.8 0.6 Engines in China 0.4 Market Share Gains 0.2 0.0 Midrange Engine 2006 Organic New 2010 Growth Platforms Capacity In 2010, 25% of our engine volume will come from new engine platforms.
  • 10. Profitable Growth – Power Generation 35% Global Generator Set Consumption (Total Output) Pursuing market Approximate $7 Billion Annual Global Market 30% leadership in Top 8 regions 92% of total commercial 25% Market Leader (# 1 or # 2) generators 20% Leader in some segments Not a market leader Expanding into 15% adjacent consumer 10% markets 5% 0% North Western China Middle India Southeast Latin Africa All Others America Europe East Asia America
  • 11. Profitable Growth – Distribution 2011 2006 2001 $3.2B $5.4B $8B Joint Venture Company Owned Independent Revenues through our distribution channel are growing 10% CAGR. In 2011, nearly 90% of revenue will flow through fully or partially owned distributors.
  • 12. Profitable Growth – Components Evolving Global Emission Standards Strategic advantage in Accelerates Market Growth for Diesel Catalytic Exhaust emissions compliance $6 Significant future $5 Global Market Size ($B) growth in revenue and $4 earnings $3 Multiple new product introductions $2 We have 30% of Winning non-CMI the market today $1 business $0 2006 2010
  • 13. Today’s Business Environment Globalization OEM Consolidation Vertical Integration Emission Regulations
  • 14. Keys to Future Success Technology Leadership Global Growth Low Cost Producer Customer Support Excellence Create the Right Environment
  • 15. Appendix
  • 16. Cummins Inc. Q1 2007 LTM Revenue by Segment Components Q1 2007 – Great Segment 17% Quarter Engine Strong global demand Segment 54% Distribution for our product Segment 10% Year-over-year 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 EBIT Margin: 10.1% (Target: 7-10%)
  • 17. Cummins Inc. Q1 2007 LTM Revenue by Marketing Territory Africa/Middle East International revenue Canada 5% 6% is 51% 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%
  • 18. 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
  • 19. 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 EBIT Margin: 9.1% (Target: 7-10%)
  • 20. 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 EBIT Margin: 9.1% (Target: 7-10%)
  • 21. 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
  • 22. Power Generation Segment Q1 2007 LTM Revenue by Product Turnaround complete Alternators Commercial 19% 56% Strengthening markets 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 EBIT Margin: 9.9% (Target: 7-9%)
  • 23. 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
  • 24. Components Segment Q1 2007 LTM Revenue by Product Specialty Strategic advantage in Filtration 6% Air Intake emissions compliance Systems Turbocharger 11% Significant future growth 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% EBIT Margin: 4.2% (Target: 7-9%)
  • 25. 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
  • 26. 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 EBIT Margin: 11.0% (Target: 8-10%)
  • 27. 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
  • 28. Non-GAAP Reconciliations
  • 29. 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.
  • 30. 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.
  • 31. 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.
  • 32. 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
  • 33. 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

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