Cummins Inc. Investor Relations Presentation February 2009

Transcription

1 Cummins Inc. Investor Relations Presentation February 2009

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 forwardlooking 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 Diversified Global Power Leader Four Complementary Businesses Engines Power Generation Distribution Components 3

4 Cummins Outperformed in Last Cycle 1,250 1, Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 4 Average Total Shareholder Return for % CMI S&P 500 Peer Avg. Stock Price Index

5 Strong Profitable Growth & Financial Position $16 $14 $12 $10 $8 $6 $4 $2 $0 Sales ($ billion) 18% CAGR $9.9 $11.4 $14.3 $13.0 $8.4 $ Performance Sales 10% growth EBIT 9% of sales ROANA 28% ROE 20% Operating CF $987 million Debt-to-capital 17.6% Liquidity $1.8 billion 5

6 Disciplined Growth Model Across the Cycle Earnings Growth Sales: 12% Growth EBIT: 10% (of sales) Capex: 3-4% (of sales) Disciplined Cash Management Creating Shareholder Value ROANA 25% ROE 20% Cash on hand: $300 to $500M Working capital: 16.5 to 17.5% of sales Debt/EBITDA: Liquidity: $2B Managing Risk 6

7 Cummins Positioned to Outperform Competitive Advantages Short Term Challenges Long Term Opportunities 7

8 Building upon Cummins Competitive Advantages Scale and Global Footprint Strong Partnerships Technology Leadership Diversification of End-Markets and Geography Global Distribution System 8

9 Leveraging Scale & Global Presence Nearly 900,000 Engines Produced in 2008 North America 325,000 South America 85,000 Europe 80,000 China 201,000 India 107,000 Japan 82,000 The world s largest independent manufacturer of diesel engines 9

10 Strategic OEM Partnerships MerCruiser Partnering with Our Customers for Success 10

11 Excellence at Integration of Technology Fuel System Filtration Alternator Turbocharger Engine Power Generation Set Catalytic Exhaust 11

12 Diversified Global Power Leader Early Cycle Heavy- and Medium-duty trucks #1 or 2 in North America, Australia, Brazil, India and China Construction and Agriculture Strong global player Late Mining and Commercial Marine #1 or 2 in most global markets Cycle Power Generation Equipment #1 or 2 in most regions 12

13 Customer Focused Distribution Channel 2008 Channel Revenue $6.7B $6.9B Front-end of customer focused value chain Standardized processes to serve global OEM s Working capital velocity through supply chain optimization Cummins participation 84% = $5.8B Consolidated Joint Venture Independent 13

14 Challenges in Current Environment Recessionary Environment Health of Customers and Suppliers Threat of Vertical Integration 14

15 Priorities in 2009 CMI Revenues ($ Billions) $15 $14 $13 $12 $11 $10 Reducing costs to earn a solid profit Focus on delivering positive cash flow Assessing risk of suppliers and customers $9 $ F Continuing to invest in critical technologies and products 15

16 The Right Technology to Meet EPA 2010 Market Cummins EPA 2010 Engine Size Horsepower Ratings 11L - 20% ISX L - 30% L - 50% ISX

17 Significant Long Term Opportunities Tougher Global Emission Standards Demand for Improved Fuel Efficiency Increasing Dependence on Electric Supply 17

18 Tougher Global Emission Standards Off-highway 2011 / 2014 Europe 2009 US / Canada 2010 Mexico 2011 Brazil 2012 India 2010 Australia 2011 China

19 Demand for Improved Fuel Efficiency Customers require better fuel efficiency Increasing regulation for fuel economy Diesel engines 30% more efficient than gasoline Integrating component subsystems critical for engine performance 19

20 Increasing Dependence on Electric Supply Electric grid availability and reliability Installed generating capacity and reserve margins Grid transmission and distribution infrastructure Government and environmental policy Economic growth Adoption of electricity usage in developing countries Construction and non-residential capital spending 20

21 Invest in Cummins Proven financial performance over the last 6 years Well positioned for the downturn Ready to seize long-term opportunities 21

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

23 Appendix

24 Four Complementary Segments Components Internal and external supplier of key engine technologies: Turbocharger, Fuel System, Exhaust Aftertreatment and Filtration products Engines On-highway, Industrial and Standby (Powergen) applications Power Generation System provider of diesel and natural gas powered generators Uses Cummins engines, alternators and electronics 2008 Revenue by Segment $14.3B Components 18% Distribution 12% Power Gen 20% Engines 50% Distribution Path to market for Industrial engines and Power Generation equipment Supply parts and service the equipment 24

25 Cummins Historical Performance Sales EBIT $16,000 $14,000 $14,342 $13,048 $1,400 $1,200 $1,179 $1,227 $1,293 $ Millons $12,000 $10,000 $8,000 $6,000 $11,362 $9,918 $8,438 $ Millons $1,000 $800 $600 $543 $907 $4,000 $400 $2,000 $200 $ $

26 Engine Segment Overview Diesel and natural gas engines from 1.4L to 91L and 31 hp to 3500 hp Long-term agreements with key customers to stabilize pricing and to jointly engineer better integrated vehicles to market Leading market share in multiple end-markets and geographies 2008 Revenue by Product Parts and Service 22% High Horsepower (19-91L) 19% Heavy-Duty (10-15L) 24% Midrange (3-9L) 35% 26

27 Engine Segment Overview $ M $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $5,424 $6,657 Sales $7,511 $8,810 $8, $ M $800 $700 $600 $500 $400 $300 $200 $100 $0 EBIT $733 $582 $589 $600 $ Leverage share gains in on-highway markets Technology leadership will benefit from tougher emission and fuel efficiency requirements. Developing new engine platforms 27

28 Engine Segment Overview Main Customers: PACCAR Navistar Daimler Truck NA Volvo Chrysler CNH Komatsu Brunswick Terex VW Primary Competitors: Caterpillar Volvo Powertrain Navistar Mercedes Benz Scania Weichai Power Nissan Diesel Mining, Marine, Rail, Oil & Gas and Government 16% Revenues by Application Construction & Ag 18% Stationary (Power Gen) 13% Light-duty Automotive & RV 9% Heavy-duty truck 26% Medium-duty Truck & bus 18% 28

29 Power Generation Segment Overview Global provider of power generation systems, components and services from 5 kw to 2700 kw Leading supplier of alternators from 0.6kVA to 30,000 kva Leading market share in multiple geographies 2008 Revenue by Product Commercial 63% Alternators 20% Rental 2% Consumer 7% Power Electronics 4% Energy Solutions 4% 29

30 Power Generation Segment Overview $ M $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Sales $3,500 $3,060 $2,416 $1,842 $1,999 $ M $400 $350 $300 $250 $200 $150 $100 $50 $60 EBIT $334 $220 $145 $376 Increase value-add in our products Leverage existing market leadership Establish leadership in all major markets $ $ Expand into new and adjacent markets 30

31 Power Generation Segment Overview Main Customers: Highly diversified customer base: Office buildings Hospitals Factories Municipalities Utilities Universities RVs & boats Homes Primary Competitors: Caterpillar Volvo Tognum AG Kohler / SDMO Generac Emerson Electric Marathon Electric Meccalte Revenues by Geography Latin America & Mexico 9% India 10% Asia-Pacific 7% Africa & Middle East 13% China 7% US & Canada 28% Europe / CIS 26% 31

32 Power Generation Segment Overview Increase Value-add in our Products Ave. Revenue per Installed kw $350 $300 $250 $200 $150 $100 $50 $0 Commercial Genset Accessible Market Components: $ 8.6 B Systems: $ 11.6 B Solution: $ 20.5 B Distribution: $ 23.6 B Engine Alternator Controls Generator set Transfer Switch Switchgear System design Components Systems Solutions Distribution Installation and Engineering Distribution Note: Includes gas and diesel. Source: Company Estimates 32

33 Components Segment Overview World s leading supplier of filtration, exhaust, coolant and chemical products Largest worldwide supplier of turbochargers from 3.8L to 25L for commercial applications Leading supplier of aftertreatment products for commercial applications Filtration 38% Emission Solutions 17% Revenue by Business Turbo Technologies 31% Fuel Systems 14% 33

34 Components Segment Overview $ M $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 Sales $3,152 $2,932 $2,281 $2,000 $1,783 $ M $200 $180 $160 $140 $120 $100 $80 $60 $40 $84 EBIT $153 $107 $89 $177 Critical for Engine Performance Tougher Emission Standards Fuel Economy regulation and customer preference $500 $ $20 $ Grow with Cummins and Non-Cummins Engines 34

35 Components Segment Overview Main Customers: Cummins Engines International Truck and Engine Detroit Diesel Scania Volvo Iveco CNH Aftermarket 36% Cummins Engine 35% Other Engine Manufacturers 29% 2008 Revenue by Customer Primary Competitors: Donaldson Company Clarcor Mann+Hummel Group Tokyo Roki Borg-Warner Bosch Honeywell International Tenneco 35

36 Components Segment Overview Emission Solutions: Successful 2007 product launches Operational Improvement Significant growth opportunity with new Emission requirements SCR+DPF in North America Turbo Technologies: Critical to emissions, fuel economy and engine performance Cummins has the leading technology Well Established in Emerging markets 36

37 Components Segment Overview Filtration: Most profitable business in the segment Nearly 60% Aftermarket Well established globally Emissions creating new growth opportunities Fuel Systems: Critical to engine performance and emissions Industry leading heavyduty common rail fuel system 37

38 Distribution Segment Overview Service and distribute products to end-users at approximately 300 locations in over 70 countries and territories Primary channel for Cummins industrial engines and power generation equipment Serve and complement OEM dealers by providing technical support, tools, training, parts and product information Revenue By Product Service 16% Engines 21% Parts & Consumables 34% Power Generation 29% 38

39 Distribution Segment Overview $ M $2,500 $2,000 $1,500 $1,000 $973 Sales $2,164 $1,540 $1,385 $1,191 $ M $300 $250 $200 $150 $100 $79 EBIT $187 $144 $107 $242 Continue acquisitions, consolidations and integrations Leverage aftermarket with Cummins equipment growth $500 $ $50 $ Build capabilities 39

40 Joint Venture Sales Unconsolidated $3,000 $2,500 Engines $2,513 $4,000 $3,500 Distribution $3,637 $3,435 $2,000 $1,940 $3,000 $2,500 $2,497 $ Millions $1,500 $1,000 $1,285 $1,316 $1,474 $ Millions $2,000 $1,500 $1,204 $1,715 $1,000 $500 $500 $ $

41 Joint Venture Sales Unconsolidated Power Generation Components $250 $228 $250 $232 $200 $166 $200 $175 $ Millions $150 $100 $72 $105 $130 $ Millions $150 $100 $94 $110 $123 $50 $50 $ $

42 Non-GAAP Reconciliations

43 Non-GAAP Reconciliation EBIT Years Ended Millions EBIT $ 543 $ 907 $ 1,179 $ 1,227 $ 1,293 Less: Interest Expense $ 111 $ 109 $ 96 $ 58 $ 42 Earnings before income taxes and minority interests $ 432 $ 798 $ 1,083 $ 1,169 $ 1,251 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. 43