Steve Chapman Group Vice President, Emerging Markets Citigroup s Global Industrial Manufacturing Conference March 4, 2008

Transcription

1 Cummins Inc. Steve Chapman Group Vice President, Emerging Markets Citigroup s Global Industrial Manufacturing Conference March 4, 2008

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 ( for the reconciliation of EBIT to GAAP financial measures. 2

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 4 th consecutive year Grew revenue nearly 30% per year in the emerging markets of China and India 3

4 Cummins Inc. Who We Are Mexico/Latin America 9% Asia/Australia 19% Geographic Africa/Middle East Canada 5% 3% United States 46% Distribution 10% Components 19% Segment Engine 52% Where We ve Been Historical Performance Consolidated Sales ($B) $6.3 20% CAGR $8.4 $9.9 $11.4 $13.0 Joint Venture Sales Unconsolidated ($B) 22% CAGR $2.6 $2.6 $3.2 $4.2 $5.7 Europe/CIS 18% Power Gen 19% 2007 Sales: $13.0B Where We re Headed Future Performance Consolidated Sales ($B) $ % CAGR $20.0 Joint Venture Sales Unconsolidated ($B) $4.2 18% CAGR $9.6 How We re Getting There Macro growth trends play to Cummins strengths Disciplined growth model Demonstrated technology leadership

5 Cultivating the Emerging Markets Key Growth Drivers Robust and Sustainable GDP growth Significant infrastructure development Tougher Global Emission Standards 5

6 Robust and Sustainable GDP Growth Turkey GDP 5% CIS GDP 6-7% China GDP 9-11% Nigeria GDP 7% India GDP 8% Vietnam GDP 7-8% 6

7 Significant Infrastructure Development 7

8 Tougher Global Emission Standards Offhighway US / Canada 2010 Europe 2009 China 2010 Mexico 2008 Brazil 2009 India 2010 Australia

9 Leveraging Leadership in Rapidly Growing Truck Market in China US$ Millions $4,000 $3,500 $3,000 $2,500 $2,000 China Revenue 25 % CAGR $450 $400 $350 $300 $250 $200 China EBIT 21 % CAGR ` $1,500 $150 $1,000 $100 $500 $ Consolidated Net Sales Unconsolidated JV Net Sales 9

10 Balanced Growth in Exports and Domestic Indian Markets US$ Millions $3,000 $2,500 $2,000 $1,500 $1,000 India Revenue 24 % CAGR $400 $350 $300 $250 $200 $150 $100 India EBIT 34 % CAGR ` $500 $ Consolidated Net Sales Unconsolidated JV Net Sales 10

11 Establishing Position in Nascent CIS Truck Market US$ Millions $600 $500 $400 $300 CIS Revenue 31 % CAGR $120 $100 $80 $60 CIS EBIT 24 % CAGR ` $200 $40 $100 $ Consolidated Net Sales Unconsolidated JV Net Sales 11

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 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 Thank You for Your Interest in For Additional Information Contact: Dean Cantrell, Director Investor Relations (812)

15 Appendix

16 Evolution of Cummins in China Imported Products Licensee Manufacturing Joint Ventures Local IP and Support Today $25M $200M Consolidated > $750M Unconsolidated > $950M Growth 16

17 Cummins in China Xi an XCEC JV Engine Plant Xi an Distributor Shenyang Shenyang Distributor Beijing China Headquarters Genset Assembly Plant BFCEC JV Engine Plant (under construction) Beijing Distributor Emissions Solutions Plant (under construction) Wuxi CTT JV Plant Vanewheel JV Plant CGT Plant Chongqing CCEC JV Engine Plant Urumqi Urumqi Distributor Chengdu Chengdu Distributor Kunming Kunming Distributor Guangdong area Hong Kong Distributor Guangzhou Distributor Shenzhen JV Distributor Urumqi Chengdu Xi an Chongqing Kunming Beijing Wuhan Guangdong Shenyang Wuxi Shanghai Taiwan Shanghai Filtration Campus Filtration JV Plant IPO & Marine Offices China PDC Valvoline JV Shanghai Distributor Wuhan DCEC JV Engine Plant Nelson Exhaust JV Plant Fuel Systems Plant (under construction) EA R&D Center Wuhan Distributor Taiwan Taiwan Distributor 17

18 Evolution of Cummins in India Joint Venture Component Investments Tata Partnership Majority Position Services 1960s -1970s Late 1980s Mid 1990s 1997 Early 2000s Kirloskar Cummins and CDSS Filtration and Generator Technologies Tata Cummins And Tata Holset Cummins India Ltd. KPIT Cummins and CRTI 18

19 Cummins in India Dewas Cummins Turbo Technologies New Delhi New Delhi Valvoline Cummins Daman Generators Cummins Exhaust Pune Cummins India Ltd. Cummins Sales & Service KPIT Cummins Cummins Business Services International Purchasing Office Fleetguard Filters Cummins Research & Technology India Pune Dewas Hosur Daman Jamshedpur Ahmednagar Ahmednagar Cummins Generator Technologies Hosur Fleetguard Filters Jamshedpur Tata Cummins Fleetguard Filters 19

20 Cummins Inc Revenue by Segment Macro growth trends play to Cummins strengths Disciplined investment for growth Demonstrated technology leadership FYE 2007 Data Sales: $13.0 billion EBIT: $1,227 million EBIT Margin: 9.4% Distribution Segment 10% Power Gen Segment 19% Components Segment 19% Engine Segment 52% 20

21 Cummins Inc Revenue by Marketing Territory International revenue is 54% of consolidated revenue in 2007 Most international areas growing at double digit rate Demonstrates our geographic diversity Mexico/Latin America 9% Asia/Australia 19% Canada 3% Africa/Middle East 5% United States 46% Europe/CIS 18% 21

22 Cummins Historical Performance Sales EBIT $14,000 $13,048 $1,400 $12,000 $11,362 $1,200 $1,179 $1,227 $10,000 $8,438 $9,918 $1,000 $907 $ Millons $8,000 $6,000 $6,296 $ Millons $800 $600 $543 $4,000 $400 $2,000 $200 $

23 Engine Segment 2007 Revenue by Product Emission regulations create opportunities Emerging markets Strategic OEM partnerships New engine platforms Aftermarket revenue creates stable earnings FYE 2007 Data Sales: $8.2 billion EBIT: $589 million EBIT Margin: 7.2% Parts and Service 21% High Horsepower (19-91L) 17% Heavy-Duty (10-15L) 22% Midrange (3-9L) 40% 23

24 Engine Segment 2007 Revenue by Market Application Gaining market share in on-highway markets Industrial markets supported by nonresidential construction and commodity markets Expanding capacity to meet growing demand Mining/Rail Govt/O&G Marine 15% Construction & Ag 18% Stationary Power 11% Heavy-duty truck 24% Medium-duty Truck & bus 16% FYE 2007 Data Sales: $8.2 billion EBIT: $589 million EBIT Margin: 7.2% Light-duty Automotive & RV 16% 24

25 Engines Historical Performance Sales Segment EBIT $9,000 $8,000 $7,511 $8,182 $800 $700 $733 $7,000 $6,657 $600 $582 $589 $ M $6,000 $5,000 $4,000 $3,000 $3,582 $5,424 $ M $500 $400 $300 $328 $2,000 $200 $1,000 $100 $

26 Power Generation Segment 2007 Revenue by Product Capitalize on industry growth Leverage existing market leadership Establish leadership in all major markets Expand into new and adjacent markets Commercial 58% Alternators 20% Rental 2% Consumer 11% FYE 2007 Segment Data Sales: $3.1 billion EBIT: $334 million EBIT Margin: 10.9% Energy Solutions 5% Power Electronics 4% 26

27 Power Generation Historical Performance Sales Segment EBIT $3,500 $400 $3,000 $3,060 $350 $334 $ M $2,500 $2,000 $1,500 $1,329 $1,842 $1,999 $2,416 $ M $300 $250 $200 $150 $145 $220 $1,000 $100 $50 $60 $ ($50) ($19)

28 Components Segment 2007 Revenue by Product New products launched Industry leading technology Capacity expansion Grow with CMI and non- CMI engine volumes Leverage global distribution to grow aftermarket FYE 2007 Segment Data Sales: $2.9 billion EBIT: $153 million EBIT Margin: 5.2% Acoustic Exhaust 10% Engine Filtration 17% Air Intake Systems 9% Specialty Filtration 6% Catalytic Exhaust 15% Turbocharger 29% Fuel Systems 14% 28

29 Components Historical Performance Sales Segment EBIT $3,500 $180 $3,000 $2,932 $160 $153 $ M $2,500 $2,000 $1,500 $1,292 $1,783 $2,000 $2,281 $ M $140 $120 $100 $80 $86 $84 $89 $107 $1,000 $60 $40 $500 $

30 Distribution Segment 2007 Revenue by Product Continue acquisitions, consolidations and integrations Leverage Cummins equipment growth World-class customer support Build capabilities invest in growing regions FYE 2007 Segment Data Sales: $1.5 billion EBIT: $187 million EBIT Margin: 12.1% Service 17% Parts, Filters, & Consumables 37% Engines 21% Power Generation 25% 30

31 Distribution Historical Performance Sales Segment EBIT $1,800 $200 $187 $1,600 $1,540 $180 $ M $1,400 $1,200 $1,000 $800 $600 $669 $973 $1,191 $1,385 $ M $160 $140 $120 $100 $80 $60 $51 $79 $107 $144 $400 $40 $200 $

32 Joint Venture Sales Unconsolidated $2,500 Engines $4,000 Distribution $2,000 $1,940 $3,500 $3,000 $3,435 $ Millions $1,500 $1,000 $500 $1,316 $529 $1,232 $1,285 $1,474 $ Millions $2,500 $2,000 $1,500 $1,000 $1,029 $1,204 $1,715 $2,497 $ In 2003, sales from certain JVs (colored red above) were treated as unconsolidated; adoption of FIN 46R in 2004 required the company to consolidate the results of certain JVs. 32

33 Joint Venture Sales Unconsolidated Power Generation Components $180 $160 $162 $166 $200 $180 $175 $ Millions $140 $120 $100 $80 $60 $72 $105 $130 $ Millions $160 $140 $120 $100 $80 $60 $72 $94 $110 $123 $40 $40 $20 $

34 Non-GAAP Reconciliations

35 Non-GAAP Reconciliation EBIT Years Ended Millions EBIT $ 181 $ 543 $ 907 $ 1,179 $ 1,227 Less: Interest Expense $ 90 $ 111 $ 109 $ 96 $ 58 Earnings before income taxes and minority interests $ 91 $ 432 $ 798 $ 1,083 $ 1,169 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 consistent with measures used by other companies. It should be considered supplemental data. 35