A New Cummins Investor Presentation - IIS Windows...
Transcript of A New Cummins Investor Presentation - IIS Windows...
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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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Since 2003 The New Cummins Has Grown Faster Than Our Peer Group
21%
134%
84%
13%31%
18%
Revenue Net Income Operating CashFlow
CA
GR
Sin
ce 2
003
CMI Peer Group Median
Growing net income faster than revenue
Converting more income into cash
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Excess Return (ROIC- WACC)
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
1999 2000 2001 2002 2003 2004 2005 Q306LTM
The New Cummins is Creating Greater Value Than Ever Before
Creating Shareholder
Value
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2007 Creates Investment Opportunity
We have fundamentally changed our business2007 emission downturn is a known, predictable, finite eventWe are confident in our ability to perform in 2007 and beyond
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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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Diversified Global Power Leader
Four Complementary Businesses
Engines PowerGeneration
Components Distribution
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NA HD Truck Original Equipment Sales
Sales to All Other Markets
1999 Q3 2006LTM
86%
14%
Engines 12%Components 2%
19%
81%
Lower Concentration of Revenue From North America Heavy Duty Truck
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US Consolidated Net Sales
ROW Consolidated Net Sales
1999 Q3 2006LTM
51%49%61%39%
Greater Percentage of Revenue From Outside US
10
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
2000 2001 2002 2003 2004 2005
`
$0
$200
$400
$600
$800
$1,000
$1,200
2000 2001 2002 2003 2004 2005
Consolidated Net Sales
Unconsolidated JV Net Sales
Capitalizing on Established Position in Emerging Markets
China
US$
Mill
ions
18% CAGR
India
27% CAGR
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Growing Stable Diversified Earnings
EBIT
$0
$250
$500
$750
$1,000
$1,250
1999* Q3 '06
US$
Mill
ions
Stable Cyclical
Larger contributor to total EBITLess cyclicalGrowth demonstrates return on investment
Distribution ChannelEmerging MarketsAftermarket
*
LTM
$306M
$1,145M
* Excludes restructuring charges
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Growing Profits from Joint Venture
Access local marketDevelop new technologiesAchieve low cost leadership
($27)
$133
($40)
$0
$40
$80
$120
$160
1999 Q3 '06
US$
Mill
ions
LTM
Earnings from Unconsolidated JVs
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Reducing debt
Funding our liabilities
Working capital management
Maintain Strong Balance Sheet
$550 M debt reductionin 2006
$255 - $260 M global pension funding in 2006
Target: 15.5% - 16.5%of sales
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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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Focusing Capital on Returns
0%
1%
2%
3%
4%
5%
6%
7%
8%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Q3'06
Cap
ex/R
even
ue (%
)
-5%
0%
5%
10%
15%
20%
25%
30%
35%
RO
AN
A (%
)
ROANA Capex/Revenue
Reducing capex as % of revenue
Increasing ROANA
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Returning Value to Our Shareholders
Dividends
Share repurchase
Total shareholder return
$158
$614
$760
$988
$0
$200
$400
$600
$800
$1,000
$1,200
2003 2004 2005 Q3 '06LTM
US$
Mill
ions
Operating Cash Flow
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Virtually Integrating Through OEM Partnerships
Cost
Brand
Global presence
Technology
Strong partnerships
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Fuel Systems
Electronic Controls
Air Handling Systems
Filtration and Aftertreatment
Combustion Technologies
Unique Technology Integration
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Technology Leadership Creates Advantage in 2007
Building on current product architectureComparable fuel economyField tests with end-users receiving very positive feedbackEPA certification in process for MR and HD platformsWell positioned to grow on-highway market share significantly in 2007
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Improved Power-Generation
Business
Improved Power-Generation
Business Global
Engine BusinessGlobal
Engine Business
Strong GlobalDistribution
Network
Strong GlobalDistribution
Network
This is the New Cummins
Growing KeyTechnologies in
Components
Growing KeyTechnologies in
Components
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Cummins
Best 3rd Quarter EverDouble-digit revenue growth in each segmentEarnings grew faster than revenueOn pace for record cash flow from operations for the year
ComponentsSegment 17%
EngineSegment 56%
Power GenSegment 17%
DistributionSegment 10%
Q3 2006LTM DataSales: $11.1 billionEBIT: $1,145 millionEBIT Margin: 10.3% (Target: 7-10%)
Q3 2006LTM Revenue by Segment
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Cummins
Mexico/Latin America
9%
Africa/Middle East5%Canada
7%
United States49%
Asia/Australia16%
Europe/CIS14%
Q3 2006LTM Revenue by Marketing Territory
International revenue continues to be above 50%Pre-emission demand has accelerated US growth rateMost international areas growing at double digit rateSofter demand in China and SE Asia
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Cummins – Historical Performance
$139$181
$543
$907
$1,145
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2002 2003 2004 2005 Q3 '06
$ M$5,853
$6,296
$8,438
$9,918
$11,082
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2002 2003 2004 2005 Q3 '06
$ M
EBITSales
LTM LTM
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Engine Segment
Emission regulations create opportunitiesAftermarket revenue creates stable earningsEmerging marketsStrategic OEM partnerships High
Horsepower(19-91L) 14%
Midrange(3-9L) 37%
Heavy-Duty(10-15L) 29%
Parts andService 20%
Q3 2006LTM Segment DataSales: $7.4 billionEBIT: $708 millionEBIT Margin: 9.6% (Target: 7-10%)
Q3 2006LTM Revenue by Product
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Engine Segment
Heavy-duty Truck demand remains strongShare gains in Medium-duty Truck & BusOff-highway markets supported by non-residential construction and commodity markets
Light-duty Automotive & RV 17%
Heavy-dutytruck 33%
Medium-dutyTruck & bus 13%
StationaryPower 10%
Construction& Ag 15%
Mining/RailGovt/O&G
Marine 12%
Q3 2006LTM Segment DataSales: $7.4 billionEBIT: $708 millionEBIT Margin: 9.6% (Target: 7-10%)
Q3 2006LTM Revenue by Market Application
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Engines – Historical Performance
$37$62
$328
$582
$708
$0
$100
$200
$300
$400
$500
$600
$700
$800
2002 2003 2004 2005 Q3 '06
$ M
$3,435 $3,582
$5,424
$6,657
$7,397
0
1000
2000
3000
4000
5000
6000
7000
8000
2002 2003 2004 2005 Q3 '06
$ M
Segment EBITSales
LTM LTM
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Power Generation Segment
Commercial56%
Alternators18%
Rental2%
Consumer14%
PowerElectronics
7%Energy
Solutions 3%
Q3 2006LTM Revenue by Product
Turnaround completeStrengthening marketsExpanding market shareConsumer growth opportunitiesGrowing project business capability
Q3 2006LTM Segment DataSales: $2.3 billionEBIT: $207 millionEBIT Margin: 8.9% (Target: 7-9%)
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Power Generation – Historical Performance
($25) ($19)
$60
$145
$207
($50)
$0
$50
$100
$150
$200
$250
2002 2003 2004 2005 Q3 '06
$ M$1,226
$1,329
$1,842$1,999
$2,333
0
500
1000
1500
2000
2500
2002 2003 2004 2005 Q3 '06
$ M
Segment EBITSales
LTM LTM
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Components Segment
Strategic advantage in emissions complianceSignificant future growth in revenue and earningsMultiple new product introductionsWinning non-CMI business
SpecialtyFiltration
6%Air IntakeSystems
11% Turbocharger26%
FuelSystems
18%Engine
Filtration21%
AcousticExhaust
12%
Q3 2006LTM Revenue by Product
CatalyticExhaust
6%
Q3 2006LTM Segment DataSales: $2.2 billionEBIT: $106 millionEBIT Margin: 4.8% (Target: 7-9%)
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Components – Historical Performance
$94$86 $84
$89
$106
$0
$20
$40
$60
$80
$100
$120
2002 2003 2004 2005 Q3 '06
$ M
$951
$1,292
$1,783
$2,000
$2,216
0
500
1000
1500
2000
2500
2002 2003 2004 2005 Q3 '06
$ M
Segment EBITSales
LTM LTM
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Distribution Segment
Broadening product offeringExpanding global coverageIncreasing equity ownershipExcelling in customer support
Parts,Filters, &
Consumables40%
Service18%
Engines20%
PowerGeneration
22%
Q3 2006LTM Revenue by Product
Q3 2006LTM Segment DataSales: $1.3 billionEBIT: $138 millionEBIT Margin: 10.3% (Target: 8-10%)
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Distribution – Historical Performance
$33
$51
$79
$107
$138
$0
$20
$40
$60
$80
$100
$120
$140
$160
2002 2003 2004 2005 Q3 '06
$ M
$574$669
$973
$1,191
$1,345
0
200
400
600
800
1000
1200
1400
1600
2002 2003 2004 2005 Q3 '06
$ M
Segment EBITSales
LTM LTM
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Non-GAAP Reconciliation – EBIT
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.
Twelve Months Ended
MillionsOctober 1, 2006
Segment EBIT $ 1,145
Interest Expense $ (102)
Earnings before income taxes and minority interests $ 1,043
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Non-GAAP Reconciliation – Net Assets
Millions September 25, 2005
October 1, 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