Cummins Inc.

Steve Chapman
Group Vice President, Emerging Markets

Citigroup’s Global Industrial
Manufacturing Conference...
Disclosure Regarding Forward-Looking Statements
& non-GAAP Financial Measures


This presentation contains certain forward...
Creating Greater Shareholder Value


  More than doubled our revenue in 5 years
  Highest period of net earnings as a perc...
Cummins Inc.
                                                                                           Where We’ve Been
 ...
Cultivating the Emerging Markets
Key Growth Drivers


 Robust and Sustainable GDP growth
 Significant infrastructure devel...
Robust and Sustainable GDP Growth
                            CIS
      Turkey              GDP 6-7%
     GDP 5%




     ...
Significant Infrastructure Development




                                         7
Tougher Global Emission Standards
                       Off-
                     highway
                     2011-14


...
Leveraging Leadership in Rapidly
               Growing Truck Market in China
                                            ...
Balanced Growth in Exports and
               Domestic Indian Markets
                                                    ...
Establishing Position in Nascent CIS
               Truck Market
                                                         ...
How We’re Getting There
Key Success Factors

  Focus on the local market and customer
  Understand differences in business...
Well Positioned for Growth in
Emerging Markets
  Long-term partnerships
  Strong network of complementary businesses
  Mar...
Thank You for Your Interest in




         For Additional Information Contact:
      Dean Cantrell, Director – Investor R...
Appendix
Evolution of Cummins in China

Imported                      Joint           Local IP
             Licensee
Products      ...
Beijing
                                                           • China Headquarters


Cummins in China
               ...
Evolution of Cummins in India

             Component        Tata        Majority
 Joint
            Investments    Partne...
Cummins in India
                                                              New Delhi
                                 ...
Cummins Inc.
                                      2007 Revenue by Segment
                                               ...
Cummins Inc.
                          2007 Revenue by Marketing Territory
                                             Af...
Cummins – Historical Performance

                                  Sales                                                 ...
Engine Segment
                                      2007 Revenue by Product
         Emission regulations
         create...
Engine Segment
                             2007 Revenue by Market Application
         Gaining market share in           ...
Engines – Historical Performance

                     Sales                                                  Segment EBIT...
Power Generation Segment
                                  2007 Revenue by Product
        Capitalize on industry         ...
Power Generation – Historical Performance

                         Sales                                              Seg...
Components Segment
                                    2007 Revenue by Product
                                           ...
Components – Historical Performance

                      Sales                                                 Segment E...
Distribution Segment
                                      2007 Revenue by Product
                                       ...
Distribution – Historical Performance

                        Sales                                             Segment E...
Joint Venture Sales Unconsolidated

                                       Engines                                        ...
Joint Venture Sales Unconsolidated

                     Power Generation                                             Comp...
Non-GAAP
Reconciliations
Non-GAAP Reconciliation – EBIT

                                                                            Years Ended

 ...
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Cummins_080304

  1. 1. Cummins Inc. Steve Chapman Group Vice President, Emerging Markets Citigroup’s Global Industrial Manufacturing Conference March 4, 2008
  2. 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 3 of our 2007 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. 3. Creating Greater Shareholder Value More than doubled our revenue in 5 years Highest period of net earnings as a percent of sales in over 40 years Generated $5.4 billion in EBITDA since 2003 Improved debt to capital from 60% in 2003 to 17% today Actively repurchased $500 million in equity in 2 years Exceeded both ROANA and ROE targets for 4th consecutive year Grew revenue nearly 30% per year in the emerging markets of China and India 3
  4. 4. Cummins Inc. Where We’ve Been Who We Are Historical Performance Geographic Segment Joint Venture Sales Consolidated Sales ($B) Components Unconsolidated ($B) Africa/Middle East Canada 19% 5% 3% United States GR $13.0 Engine CA 46% Mexico/Latin 52% % America $5.7 20 $11.4 R AG Distribution 9% %C 10% $9.9 22 $4.2 $8.4 Asia/Australia 19% $3.2 $6.3 $2.6 $2.6 Power Gen Europe/CIS 19% 18% 2007 Sales: $13.0B 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Where We’re Headed How We’re Getting There Future Performance Consolidated Sales ($B) Joint Venture Sales Unconsolidated ($B) Macro growth trends play to GR $20.0 CA $9.6 Cummins’ strengths % 12 GR CA 18% Disciplined growth model $11.4 $4.2 Demonstrated technology leadership 4 2006 2011 2006 2011
  5. 5. Cultivating the Emerging Markets Key Growth Drivers Robust and Sustainable GDP growth Significant infrastructure development Tougher Global Emission Standards 5
  6. 6. Robust and Sustainable GDP Growth CIS Turkey GDP 6-7% GDP 5% China GDP 9-11% Nigeria Vietnam GDP 7% GDP 7-8% India GDP 8% 6
  7. 7. Significant Infrastructure Development 7
  8. 8. Tougher Global Emission Standards Off- highway 2011-14 Europe 2009 China US / 2010 Canada 2010 Australia 2008 India Mexico Brazil 2010 2008 2009 8
  9. 9. Leveraging Leadership in Rapidly Growing Truck Market in China China EBIT China Revenue GR $450 CA GR % $4,000 CA 21 % $400 25 $3,500 US$ Millions $350 $3,000 $300 $2,500 $250 $2,000 $200 ` $1,500 $150 $1,000 $100 $50 $500 $0 $0 2003 2007 2011 2003 2007 2011 Consolidated Unconsolidated Net Sales JV Net Sales 9
  10. 10. Balanced Growth in Exports and Domestic Indian Markets India EBIT India Revenue GR $400 CA GR % $3,000 CA 34 % $350 24 US$ Millions $2,500 $300 $2,000 $250 $200 $1,500 ` $150 $1,000 $100 $500 $50 $0 $0 2003 2007 2011 2003 2007 2011 Consolidated Unconsolidated Net Sales JV Net Sales 10
  11. 11. Establishing Position in Nascent CIS Truck Market CIS EBIT CIS Revenue GR $120 CA GR % $600 CA 24 % 31 $100 US$ Millions $500 $80 $400 $60 $300 ` $40 $200 $20 $100 $0 $0 2003 2007 2011 2003 2007 2011 Consolidated Unconsolidated Net Sales JV Net Sales 11
  12. 12. How We’re Getting There Key Success Factors Focus on the local market and customer Understand differences in business environment Fully utilize the diversity of local leadership Diversify sources of value creation Build mutually beneficial relationships Negotiate from a position of strength 12
  13. 13. Well Positioned for Growth in Emerging Markets Long-term partnerships Strong network of complementary businesses Market leadership Capacity growth Local technology capability New products People 13
  14. 14. Thank You for Your Interest in For Additional Information Contact: Dean Cantrell, Director – Investor Relations (812) 377-3121 Dean.A.Cantrell@Cummins.com www.Cummins.com 14
  15. 15. Appendix
  16. 16. Evolution of Cummins in China Imported Joint Local IP Licensee Products Ventures and Support Manufacturing 1985 1995 Today 1975 - 1995 - 2005 -1985 Consolidated > $750M $25M $200M Growth Unconsolidated > $950M 16
  17. 17. Beijing • China Headquarters Cummins in China • Genset Assembly Plant • BFCEC JV Engine Plant (under construction) • Beijing Distributor • Emissions Solutions Plant (under construction) Xi’an Shenyang Wuxi • Shenyang Distributor • XCEC JV Engine Plant • CTT JV Plant • Xi’an Distributor • Vanewheel JV Plant • CGT Plant Chongqing Shanghai Shenyang • CCEC JV Engine Plant • Filtration Campus Urumqi • Filtration JV Plant Beijing Urumqi • IPO & Marine Offices • China PDC • Urumqi Distributor • Valvoline JV Xi’an • Shanghai Distributor Chengdu Wuxi Wuhan Wuhan Shanghai Chongqing • Chengdu Distributor • DCEC JV Engine Plant Chengdu • Nelson Exhaust JV Plant Taiwan Kunming • Fuel Systems Plant Kunming (under construction) Guangdong • Kunming Distributor • EA R&D Center • Wuhan Distributor Guangdong area Taiwan • Hong Kong Distributor • Taiwan Distributor • Guangzhou Distributor • Shenzhen JV Distributor 17
  18. 18. Evolution of Cummins in India Component Tata Majority Joint Investments Partnership Position Services Venture 1960s Late Mid Early -1970s 1980s 1990s 1997 2000s Filtration Kirloskar Tata Cummins Cummins KPIT and Cummins And India Cummins Generator and Tata Holset Ltd. and Technologies CDSS CRTI 18
  19. 19. Cummins in India New Delhi Valvoline Cummins Dewas Cummins Turbo Technologies New Delhi Daman Generators Daman Jamshedpur Cummins Exhaust Jamshedpur Tata Cummins Dewas Pune Ahmednagar Fleetguard Filters Cummins India Ltd. Ahmednagar Pune Cummins Sales & Service Cummins Generator KPIT Cummins Technologies Cummins Business Services Hosur International Purchasing Office Hosur Fleetguard Fleetguard Filters Filters Cummins Research & Technology India 19
  20. 20. Cummins Inc. 2007 Revenue by Segment Components Macro growth trends Segment 19% play to Cummins’ Engine strengths Segment 52% Disciplined Distribution Segment 10% investment for growth Demonstrated technology leadership Power Gen Segment 19% FYE 2007 Data Sales: $13.0 billion EBIT: $1,227 million 20 EBIT Margin: 9.4%
  21. 21. Cummins Inc. 2007 Revenue by Marketing Territory Africa/Middle East International revenue Canada 5% 3% is 54% of consolidated revenue in 2007 Mexico/Latin America Most international 9% areas growing at double digit rate United States Asia/Australia Demonstrates our 46% 19% geographic diversity Europe/CIS 18% 21
  22. 22. Cummins – Historical Performance Sales EBIT $13,048 $14,000 $1,400 $1,227 $1,179 $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 2007 2003 2004 2005 2006 2007 22
  23. 23. Engine Segment 2007 Revenue by Product Emission regulations create opportunities Midrange Parts and (3-9L) 40% Emerging markets Service 21% Strategic OEM partnerships New engine platforms Aftermarket revenue creates stable earnings High Horsepower (19-91L) 17% FYE 2007 Data Heavy-Duty Sales: $8.2 billion (10-15L) 22% EBIT: $589 million 23 EBIT Margin: 7.2%
  24. 24. Engine Segment 2007 Revenue by Market Application Gaining market share in Stationary Power 11% on-highway markets Heavy-duty truck 24% Industrial markets Mining/Rail Govt/O&G supported by non- Marine 15% residential construction and commodity markets Expanding capacity to meet growing demand Construction Medium-duty & Ag 18% Truck & bus 16% FYE 2007 Data Light-duty Sales: $8.2 billion Automotive EBIT: $589 million & RV 16% 24 EBIT Margin: 7.2%
  25. 25. Engines – Historical Performance Sales Segment EBIT $9,000 $800 $733 $8,182 $8,000 $7,511 $700 $6,657 $589 $7,000 $582 $600 $6,000 $5,424 $500 $5,000 $M $M $400 $328 $4,000 $3,582 $300 $3,000 $200 $2,000 $100 $62 $1,000 $0 $0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 25
  26. 26. Power Generation Segment 2007 Revenue by Product Capitalize on industry Alternators Commercial 20% growth 58% Leverage existing Rental market leadership 2% Establish leadership in all major markets Expand into new and Consumer 11% adjacent markets Power Electronics 4% FYE 2007 Segment Data Energy Sales: $3.1 billion Solutions 5% EBIT: $334 million 26 EBIT Margin: 10.9%
  27. 27. Power Generation – Historical Performance Sales Segment EBIT $3,500 $400 $3,060 $334 $350 $3,000 $300 $2,416 $2,500 $250 $220 $1,999 $2,000 $1,842 $200 $M $M $145 $150 $1,500 $1,329 $100 $60 $1,000 $50 $500 $0 ($19) $0 ($50) 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 27
  28. 28. Components Segment 2007 Revenue by Product Specialty New products launched Filtration Air Intake 6% Industry leading Systems 9% technology Turbocharger 29% Capacity expansion Acoustic Grow with CMI and non- Exhaust 10% CMI engine volumes Leverage global distribution to grow aftermarket Engine Fuel Filtration Systems 17% 14% FYE 2007 Segment Data Catalytic Sales: $2.9 billion Exhaust EBIT: $153 million 15% 28 EBIT Margin: 5.2%
  29. 29. Components – Historical Performance Sales Segment EBIT $180 $3,500 $153 $160 $2,932 $3,000 $140 $2,500 $2,281 $120 $107 $2,000 $2,000 $100 $1,783 $89 $M $M $86 $84 $80 $1,500 $1,292 $60 $1,000 $40 $500 $20 $0 $0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 29
  30. 30. Distribution Segment 2007 Revenue by Product Service Continue acquisitions, 17% consolidations and Engines 21% integrations Leverage Cummins equipment growth World-class customer support Build capabilities – invest in growing regions Power Parts, Generation Filters, & FYE 2007 Segment Data 25% Consumables Sales: $1.5 billion 37% EBIT: $187 million 30 EBIT Margin: 12.1%
  31. 31. Distribution – Historical Performance Sales Segment EBIT $1,800 $200 $187 $180 $1,540 $1,600 $1,385 $160 $1,400 $144 $1,191 $140 $1,200 $120 $973 $107 $1,000 $M $M $100 $800 $79 $669 $80 $600 $60 $51 $400 $40 $200 $20 $0 $0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 31
  32. 32. Joint Venture Sales Unconsolidated Engines Distribution $2,500 $4,000 $3,435 $3,500 $1,940 $2,000 $3,000 $2,497 $1,474 $2,500 $1,500 $ Millions $ Millions $1,316 $1,232 $1,285 $2,000 $1,715 $529 $1,000 $1,500 $1,204 $1,029 $1,000 $500 $500 $0 $0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 In 2003, sales from certain JVs (colored red above) were treated 32 as unconsolidated; adoption of FIN 46R in 2004 required the company to consolidate the results of certain JVs.
  33. 33. Joint Venture Sales Unconsolidated Power Generation Components $180 $200 $166 $162 $175 $180 $160 $160 $140 $130 $140 $120 $123 $105 $120 $110 $ Millions $ Millions $100 $94 $100 $80 $72 $72 $80 $60 $60 $40 $40 $20 $20 $0 $0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 33
  34. 34. Non-GAAP Reconciliations
  35. 35. Non-GAAP Reconciliation – EBIT Years Ended Millions 2003 2004 2005 2006 2007 EBIT $ 181 $ 543 $ 907 $ 1,179 $ 1,227 Less: Interest Expense $ 90 $ 111 $ 109 $ 96 $ 58 Earnings before income taxes $ 91 $ 432 $ 798 $ 1,083 $ 1,169 and minority interests We define EBIT as earnings before interest expense, provision for income taxes and minority interests in earnings of consolidated subsidiaries. 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. We believe EBIT is a useful measure of our operating performance for the periods presented as it illustrates our operating performance without regard to financing methods, capital structure or income taxes. This measure is not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) and may not be 35 consistent with measures used by other companies. It should be considered supplemental data.
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