A New Cummins
                         Tim Solso
Chairman and Chief Executive Officer
     Citigroup's 19th Annual Global
...
Disclosure Regarding Forward-Looking
Statements & non-GAAP Financial Measures

This presentation contains certain forward-...
Delivering on Commitments
                        Target       2005
Revenue Growth          8% - 10%     18%
EBIT Margin  ...
Delivering on Commitments

                                                      l de r
                    400           ...
Delivering on Commitments

• Six Sigma
• Market share
  gains
• Best products
• Recognition
Key Strategic Principles
                      • Increase Profitability
• Leverage
  Complementary         and Cash Flow
 ...
P/E Valuation – Opportunity
                  16                            14.5           14.1
                          ...
Investment Community Perception

• Cyclicality
• Volatility in performance
• Cash management
• OEM vertical integration
• ...
North America Heavy-duty Truck
Total Revenue
        1999                                      2005

                     ...
Heavy Duty Engine Business
                     Low Point                 2005
Revenue                $1.18B              ...
Growing Stable Diversified Earnings

                                                      • Larger contributor to
       ...
Distribution Ownership – 1999




 Company-owned

 Joint Venture

 Independent
Distribution Ownership – Today




 Company-owned

 Joint Venture

 Independent
Growing Total China Sales to
         $3B by 2010
                                                                   • Wel...
Growing Total India Sales to
         $2B by 2010
                                                                      • ...
Profitable Joint Venture Growth
     Number of Unconsolidated JV's         Earnings from Unconsolidated JV's
40           ...
Growth in Chrysler Shipments
180,000

160,000

140,000
                                              GR
                  ...
Focused Cash Management
                       Operating Cash Flow
               $800
                                   ...
Building a Strong Balance Sheet

• Reducing Debt         $292M in 2005
                        At least $250M in 2006

• F...
Investing in Growth
                                                Capital Expenditures
                        $450     ...
Focusing Capital on Returns

                    8%                                                            30%

      ...
Returning Value to Shareholders
       Total Shareholder Returns at
                 12/31/05

60%
                       ...
Living With Vertical Integration

• Cost
• Brand
• Global presence
• Technology
Confident about 2007

• No major change in product platform
• No degradation of fuel economy
• Proactively assuring custom...
This is the New Cummins

                       Profitable
      Global
                    Power-Generation
  Engine Busi...
A New Cummins
Appendix
Engine Segment
   2005 Revenue by Market                            2005 Revenue by Product
                              ...
Power Generation Segment

 2005 Revenue by Market          2005 Revenue by Product
                                       ...
Distribution Segment
                           2005 Revenue by Product
                                      Service
• Br...
Components Segment
   2005 Revenue by Product
                                                     • Strategic advantage
 ...
Non-GAAP Reconciliation –
EBIT
  Millions                                                                   Three Months E...
Non-GAAP Reconciliation – Net
  Assets
Millions                                        Dec. 31,   Dec. 31,   Sept. 25,
   ...
Non-GAAP Reconciliation – ROANA

Millions                                      Three Months       For the Year
           ...
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Cummins_Citigroup_Industrial_Conference0306

  1. 1. A New Cummins Tim Solso Chairman and Chief Executive Officer Citigroup's 19th Annual Global Industrial Manufacturing Conference March 8, 2006
  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 60 of our 2005 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. 3. Delivering on Commitments Target 2005 Revenue Growth 8% - 10% 18% EBIT Margin 7% - 10% 9% Cap Ex < D&A 63% of D&A Debt to Capital Ratio 30% - 40% 42% Credit Rating Investment S&P BBB- Grade Moody Ba1 ROE 18% 26% ROANA 22% 27%
  4. 4. Delivering on Commitments l de r 400 o areh 5 h tal S 003 - 0 o ge T for 2 350 vera turn A 50% Re 300 Stock Price Index 250 200 150 100 50 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 CMI S&P 500 Peer Avg.
  5. 5. Delivering on Commitments • Six Sigma • Market share gains • Best products • Recognition
  6. 6. Key Strategic Principles • Increase Profitability • Leverage Complementary and Cash Flow Businesses • Reduce Debt and • Create Invest in Growth Shareholder Value • Low-Cost Producer • Create Shareholder Value • Grow in Related Markets • Performance Ethic
  7. 7. P/E Valuation – Opportunity 16 14.5 14.1 13.0 14 12 P/E Multiplier 9.8 8.7 10 8.1 8 6 4 2 0 1999 2005 2006 CMI Peer Group
  8. 8. Investment Community Perception • Cyclicality • Volatility in performance • Cash management • OEM vertical integration • ’07 emission impact
  9. 9. North America Heavy-duty Truck Total Revenue 1999 2005 14% 19% 81% 86% NA HD Truck Original Equipment Sales Sales to All Other Markets
  10. 10. Heavy Duty Engine Business Low Point 2005 Revenue $1.18B $2.43B EBIT From loss to significant contribution NA Market Share 21% 26% Build Rate 135/day 430/day PED 8.6 3.6 Inventory Turns 30.2 36.7 Break Even Point Reduced by more than 50%
  11. 11. Growing Stable Diversified Earnings • Larger contributor to EBIT total EBIT $1,000 $907M • Less cyclical $750 US$ Millions • Growth demonstrates $500 return on investment $316M* – Distribution Channel $250 – Emerging Markets $0 – Aftermarket 1999* 2005 Stable Cyclical * Excludes restructuring charges
  12. 12. Distribution Ownership – 1999 Company-owned Joint Venture Independent
  13. 13. Distribution Ownership – Today Company-owned Joint Venture Independent
  14. 14. Growing Total China Sales to $3B by 2010 • Well Positioned 1200 R AG for Future Growth %C 26 1000 – East Asia R&D Center US$ Millions 800 – Medium duty 600 electronic products 400 – Heavy duty entry 200 – Expanded component manufacturing 0 2000 2001 2002 2003 2004 2005 Consolidated Unconsolidated Net Sales JV Net Sales
  15. 15. Growing Total India Sales to $2B by 2010 • Well Positioned 900 for Future Growth GR 800 CA % 18 – Increased exports 700 US$ Millions 600 – Local electronic products 500 400 ` – Major capacity 300 increases 200 • TCL ISB Engines 45% 100 • Turbochargers 46% 0 • KV Engines 70% 2000 2001 2002 2003 2004 2005 Consolidated Unconsolidated Net Sales JV Net Sales
  16. 16. Profitable Joint Venture Growth Number of Unconsolidated JV's Earnings from Unconsolidated JV's 40 140 35 120 30 100 25 80 20 60 15 40 10 20 5 0 0 1999 2005 -20 1999 2005 -40
  17. 17. Growth in Chrysler Shipments 180,000 160,000 140,000 GR CA 120,000 24% 100,000 80,000 60,000 40,000 20,000 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
  18. 18. Focused Cash Management Operating Cash Flow $800 $760 • Building a Strong $700 $614 Balance Sheet $600 $500 • Investing in growth $472 Millions USD $400 • Returning value to $307 $300 our shareholders $193 $200 $158 $152 $100 $0 1999 2000 2001 2002 2003 2004 2005
  19. 19. Building a Strong Balance Sheet • Reducing Debt $292M in 2005 At least $250M in 2006 • Funding Liabilities Pension funding: $151M in 2005 $170-180M in 2006
  20. 20. Investing in Growth Capital Expenditures $450 300% $405 $400 250% $304 $350 Capex in millions USD Capex as % of D&A $271 $300 200% $223 $250 $228 $250 $215 $206 150% $186 $200 $151 $150 100% $90 $111 $100 50% $50 $0 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006F
  21. 21. Focusing Capital on Returns 8% 30% 7% 25% 6% Capex/Revenue (%) 20% 5% ROANA 15% 4% 10% 3% 5% 2% 0% 1% 0% -5% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 ROANA % Capex/Revenue (%)
  22. 22. Returning Value to Shareholders Total Shareholder Returns at 12/31/05 60% • Dividends 50% 40% 30% • Share repurchase 20% 10% 0% -10% -20% 1 year 2 year 3 year CMI S&P 500 Index Peer Average
  23. 23. Living With Vertical Integration • Cost • Brand • Global presence • Technology
  24. 24. Confident about 2007 • No major change in product platform • No degradation of fuel economy • Proactively assuring customers of reliability • Field testing with end-users well underway • Limited OEM capacity to support pre-buy • Growing markets and share gains
  25. 25. This is the New Cummins Profitable Global Power-Generation Engine Business Business Strong Global Growing Key Distribution Technologies in Network Components
  26. 26. A New Cummins
  27. 27. Appendix
  28. 28. Engine Segment 2005 Revenue by Market 2005 Revenue by Product High Horsepower (19-91L) 18% Heavy-Duty Truck 36% Light-Duty / RV 19% Midrange (3-9L) 45% Heavy-Duty (10-15L) 37% Construction / Mining / Marine / Ag 17% Rail / O&G / Govt 13% Medium-Duty Truck and Bus 15% 2005 Segment Data Sales: $6.7 billion EBIT: $582 million EBIT Margin: 8.7% (Target: 7-10%)
  29. 29. Power Generation Segment 2005 Revenue by Market 2005 Revenue by Product Alternators 18% Distributed Power Rental Commercial 3% 54% Consumer 16% Mobile Power Standby Power Power Electronics 6% Energy Solutions 3% 2005 Segment Data Sales: $2.0 billion EBIT: $145 million EBIT Margin: 7.3% (Target: 7-9%)
  30. 30. Distribution Segment 2005 Revenue by Product Service • Broadening product 18% offering Engines 21% • Expanding global coverage • Increasing equity Parts, Filters, & ownership Consumables Power 41% • Excelling in Generation 20% customer support 2005 Segment Data Sales: $1.2 billion EBIT: $107 million EBIT Margin: 9.0% (Target: 8-10%)
  31. 31. Components Segment 2005 Revenue by Product • Strategic advantage Specialty Filtration 5% Air Intake in emissions Systems 11% Turbocharger compliance 26% • Significant future growth in revenue Exhaust Systems and earnings 18% • New product introductions Fuel Systems 16% Engine Filtration 22% 2005 Segment Data Sales: $2.0 billion Fuel EBIT: $89 millionSystems EBIT Margin: 4.5% 11% (Target: 7-9%)
  32. 32. Non-GAAP Reconciliation – EBIT Millions Three Months Ended For the Years Ended Dec. 31, Dec. 31, Sept. 25, Dec. 31, Dec. 31, 2005 2004 2005 2005 2004 Earnings before interest, income taxes, minority $ 269 $ 172 $ 240 $ 907 $ 543 interest and restructuring charges Restructuring, asset impairment and other $ - $ - $ - $ - $ - Earnings before interest, income taxes and $ 269 $ 172 $ 240 $ 907 $ 543 minority interest Interest Expense $ (26) $ (30) $ (27) $ (109) $ (111) Provision for income taxes $ (63) $ (12) $ (61) $ (216) $ (56) Minority Interests in earnings of unconsolidated $ (13) $ (11) $ (7) $ (32) $ (26) subsidiaries Net Earnings $ 167 $ 119 $ 145 $ 550 $ 350 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 net earnings, for each of the applicable periods.
  33. 33. Non-GAAP Reconciliation – Net Assets Millions Dec. 31, Dec. 31, Sept. 25, 2005 2004 2005 Net assets for operating segments $ 3,479 $ 3,151 $ 3,312 Liabilities deducted in computing net assets 3,354 3,168 3,421 Minimum pension liability excluded from net (837) (826) (826) assets Deferred tax assets not allocated to segments 863 990 928 Debt-related costs not allocated to segments 26 27 27 Total assets $ 6,885 $ 6,510 $ 6,862
  34. 34. Non-GAAP Reconciliation – ROANA Millions Three Months For the Year Ended Ended Dec. 31, 2005 Dec. 31, 2005 Earnings before interest, income taxes and $ 269 $ 907 minority interest Net Assets for operating segments at 3,312 3,151 beginning of period Net Assets for operating segments at end of 3,479 3,479 period Average Net Assets for operating segments 3,396 3,315 for period ROANA 32% 27%

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