This document is an investor presentation by Cummins that provides an overview of the company's business segments and financial performance. It summarizes that Cummins has diversified its business across engine, power generation, components and distribution segments. It has grown faster than its peer group since 2003 with higher net income and cash flow. Cummins is also more global now with over 50% of revenue from outside the US. The presentation provides details on each business segment and their growth strategies.
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.
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3. Since 2003 The New Cummins Has
Grown Faster Than Our Peer Group
134% Growing net income
CAGR Since 2003
faster than revenue
84% Converting more
income into cash
31%
21% 18%
13%
Revenue Net Income Operating Cash
Flow
CMI Peer Group Median
3
4. The New Cummins is Creating
Greater Value Than Ever Before
Excess Return (ROIC- WACC)
25%
r
de
20% l
ho
re
ha
15%
g S alue
n
ati V
10%
e
Cr
5%
0%
-5%
-10%
-15%
1999 2000 2001 2002 2003 2004 2005 Q306
LTM
4
5. 2007 Creates Investment Opportunity
We have fundamentally changed our business
2007 emission downturn is a known,
predictable, finite event
We are confident in our ability to perform in
2007 and beyond
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6. The New Cummins
Diversified to mitigate the cyclicality of our end
markets
Building greater stability in earnings
Focused cash management strategy
Virtually integrating through OEM partnerships
Global technology leader in constantly changing
emissions environment
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7. Diversified Global Power Leader
Four Complementary Businesses
Engines Power Components Distribution
Generation
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8. Lower Concentration of Revenue From
North America Heavy Duty Truck
Q3 2006LTM
1999
Engines 12%
Components 2%
14%
19%
81% 86%
NA HD Truck Original Equipment Sales
Sales to All Other Markets
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9. Greater Percentage of Revenue From
Outside US
Q3 2006LTM
1999
49%
39% 61%
51%
US Consolidated Net Sales
ROW Consolidated Net Sales
9
10. Capitalizing on Established Position
in Emerging Markets
India
China
$900
GR R
$1,200
CA AG
%C
$800
%
27 18
US$ Millions
$1,000 $700
$600
$800
$500
$600
$400 `
$300
$400
$200
$200
$100
$0
$0
2000 2001 2002 2003 2004 2005
2000 2001 2002 2003 2004 2005
Consolidated Unconsolidated
Net Sales JV Net Sales
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11. Growing Stable Diversified Earnings
EBIT
Larger contributor to
$1,250 $1,145M
total EBIT
$1,000
US$ Millions
Less cyclical
$750
Growth demonstrates
$306M *
$500
return on investment
$250 Distribution Channel
Emerging Markets
$0
Aftermarket
Q3 '06LTM
1999*
Stable Cyclical
* Excludes restructuring charges
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13. Growing Profits from Joint Venture
Earnings from Unconsolidated JVs
$160
Access local market $133
Develop new $120
US$ Millions
technologies
$80
Achieve low cost
leadership $40
$0
($40) ($27)
LTM
1999 Q3 '06
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14. Maintain Strong Balance Sheet
$550 M debt reduction
Reducing debt
in 2006
$255 - $260 M global
Funding our liabilities
pension funding in 2006
Target: 15.5% - 16.5%
Working capital
of sales
management
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15. Investing in Profitable Growth
New light-duty diesel in North America
New 13-liter engine – Dongfeng
11-liter engine – Shaanxi
New 2.8 to 3.8-liter engine – Foton
New product introductions for Components
Increased capacity
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19. Unique Technology Integration
Fuel Systems
Electronic Controls
Air Handling Systems
Filtration and Aftertreatment
Combustion Technologies
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20. Technology Leadership Creates
Advantage in 2007
Building on current product architecture
Comparable fuel economy
Field tests with end-users receiving very
positive feedback
EPA certification in process for MR and HD
platforms
Well positioned to grow on-highway market
share significantly in 2007
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21. This is the New Cummins
Improved
Improved
Global
Global Power-Generation
Power-Generation
Engine Business
Engine Business Business
Business
Strong Global
Growing Key Strong Global
Growing Key
Distribution
Technologies in Distribution
Technologies in
Network
Components Network
Components
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23. Cummins
Q3 2006LTM Revenue by Segment
Components
Best 3rd Quarter Ever Segment 17%
Double-digit revenue Engine
growth in each segment Segment 56%
Earnings grew faster
Distribution
than revenue Segment 10%
On pace for record
cash flow from
operations for the year
Power Gen
Segment 17%
Q3 2006LTM Data
Sales: $11.1 billion
EBIT: $1,145 million
EBIT Margin: 10.3% (Target: 7-10%)
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24. Cummins
Q3 2006LTM Revenue by Marketing Territory
Africa/Middle East
International revenue Canada 5%
7%
continues to be above
50% Mexico/Latin
America
Pre-emission demand 9%
has accelerated US
growth rate
United States
Most international 49%
areas growing at Asia/Australia
16%
double digit rate
Softer demand in Europe/CIS
China and SE Asia 14%
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35. Non-GAAP Reconciliation – EBIT
Twelve Months Ended
Millions
October 1, 2006
Segment EBIT $ 1,145
Interest Expense $ (102)
Earnings before income taxes and minority interests $ 1,043
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.
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36. Non-GAAP Reconciliation – Net
Assets
September 25, October 1,
Millions
2005 2006
Net assets for operating segments $ 3,312 $ 4,138
Liabilities deducted in computing net assets 3,421 3,541
Minimum pension liability excluded from net assets (826) (837)
Deferred tax assets not allocated to segments 928 712
Debt-related costs not allocated to segments 27 25
Total assets $ 6,862 $ 7,579
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