Cummins_Citigroup_Industrial_Conference0306

A New CumminsA New CumminsTim Solso

Chairman and Chief Executive Officer

Citigroup's 19th Annual Global Industrial Manufacturing Conference

March 8, 2006

Disclosure Regarding Forward-Looking Statements & non-GAAP Financial MeasuresDisclosure 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 GAAPfinancial measures.

Delivering on CommitmentsDelivering on Commitments

27%22%ROANA

26%18%ROE

S&P BBB-Moody Ba1

Investment Grade

Credit Rating

42%30% - 40%Debt to Capital Ratio

63% of D&A< D&ACap Ex

9%7% - 10%EBIT Margin

18%8% - 10%Revenue Growth

2005Target


50

100

150

200

250

300

350

400

Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05

Sto

ck P

rice

Inde

x

Average Total Shareholder

Return for 2003 - 05

50%

CMI S&P 500 Peer Avg.

• Six Sigma

• Market share gains

• Best products

• Recognition


• Leverage Complementary Businesses

• Create Shareholder Value

• Low-Cost Producer

• Grow in Related Markets

• Performance Ethic

• Increase Profitability and Cash Flow

• Reduce Debt and Invest in Growth

• Create Shareholder Value

Key Strategic Principles

P/E Valuation – Opportunity P/E Valuation – Opportunity

9.88.7 8.1

13.014.5 14.1

02468

10121416

1999 2005 2006

P/E

Mul

tiplie

r

CMI Peer Group

Investment Community PerceptionInvestment Community Perception

• Cyclicality

• Volatility in performance

• Cash management

• OEM vertical integration

• ’07 emission impact

North America Heavy-duty TruckTotal RevenueNorth America Heavy-duty TruckTotal Revenue

NA HD Truck Original Equipment Sales

Sales to All Other Markets

1999

81%

19%

2005

86%

14%

Heavy Duty Engine BusinessHeavy Duty Engine Business

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%

Low Point 2005

Growing Stable Diversified EarningsGrowing Stable Diversified Earnings

EBIT$907M

$316M

$0

$250

$500

$750

$1,000

1999* 2005

Stable Cyclical

• Larger contributor to total EBIT

• Less cyclical• Growth demonstrates

return on investment– Distribution Channel– Emerging Markets– Aftermarket

* Excludes restructuring charges

US$

Mill

ions

*

Distribution Ownership – 1999 Distribution Ownership – 1999

Company-owned

Joint Venture

Independent

Company-owned

Joint Venture

Independent

Distribution Ownership – TodayDistribution Ownership – Today

0

200

400

600

800

1000

1200

2000 2001 2002 2003 2004 2005

Growing Total China Sales to $3B by 2010Growing Total China Sales to $3B by 2010

• Well Positionedfor Future Growth

– East Asia R&D Center

– Medium duty electronic products

– Heavy duty entry

– Expanded component manufacturing

Consolidated Net Sales

Unconsolidated JV Net Sales

US$

Mill

ions

26% CAGR

Growing Total India Sales to $2B by 2010Growing Total India Sales to $2B by 2010

Consolidated Net Sales

Unconsolidated JV Net Sales

• Well Positionedfor Future Growth– Increased exports – Local electronic

products– Major capacity

increases• TCL ISB Engines 45%• Turbochargers 46%• KV Engines 70%

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005

`

US$

Mill

ions

18% CAGR

Profitable Joint Venture GrowthProfitable Joint Venture GrowthNumber of Unconsolidated JV's

0

5

10

15

20

25

30

35

40

1999 2005

Earnings from Unconsolidated JV's

-40

-20

0

20

40

60

80

100

120

1999 2005

140

Growth in Chrysler ShipmentsGrowth in Chrysler Shipments

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

24% CAGR

Focused Cash ManagementFocused Cash Management

$307

$472

$152

$193

$158

$614

$760

$0

$100

$200

$300

$400

$500

$600

$700

$800

1999 2000 2001 2002 2003 2004 2005

Mill

ions

USD

• Building a Strong Balance Sheet

• Investing in growth• Returning value to

our shareholders

Operating Cash Flow

Building a Strong Balance SheetBuilding a Strong Balance Sheet

• Reducing Debt

• Funding Liabilities

$292M in 2005At least $250M in 2006

Pension funding:$151M in 2005$170-180M in 2006

$405

$215$228$206

$111

$151$186

$250

$90

$271

$304

$223

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006F

Cap

ex in

mill

ions

USD

0%

50%

100%

150%

200%

250%

300%

Cap

ex a

s %

of D

&A

Investing in GrowthInvesting in GrowthCapital Expenditures

Focusing Capital on ReturnsFocusing Capital on Returns

0%

1%

2%

3%

4%

5%

6%

7%

8%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Cap

ex/R

even

ue (%

)

-5%

0%

5%

10%

15%

20%

25%

30%

RO

AN

A

ROANA % Capex/Revenue (%)

Returning Value to ShareholdersReturning Value to ShareholdersTotal Shareholder Returns at

12/31/05

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

1 year 2 year 3 year

CMI S&P 500 Index Peer Average

• Dividends

• Share repurchase

Living With Vertical IntegrationLiving With Vertical Integration

• Cost

• Brand

• Global presence

• Technology

Confident about 2007Confident 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

Profitable Power-Generation

Business

Profitable Power-Generation

Business

GlobalEngine Business

GlobalEngine Business

Growing KeyTechnologies in

Components

Growing KeyTechnologies in

Components

Strong GlobalDistribution

Network

Strong GlobalDistribution

Network

This is the New CumminsThis is the New Cummins

A New CumminsA New Cummins

AppendixAppendix

Engine SegmentEngine Segment

2005 Segment DataSales: $6.7 billionEBIT: $582 millionEBIT Margin: 8.7% (Target: 7-10%)

2005 Revenue by Market 2005 Revenue by Product

Heavy-DutyTruck 36%

Construction /Ag 17%

Medium-Duty Truckand Bus 15%

Mining / Marine /Rail / O&G /Govt 13%

Light-Duty /RV 19%

High Horsepower(19-91L) 18%

Midrange(3-9L) 45%

Heavy-Duty(10-15L) 37%

Power Generation SegmentPower Generation Segment

DistributedPower

StandbyPower

MobilePower

Commercial 54%

Alternators18%

2005 Revenue by Market

Rental3%

Consumer16%

PowerElectronics

6%EnergySolutions 3%

2005 Revenue by Product


Distribution SegmentDistribution Segment

• Broadening product offering

• Expanding global coverage

• Increasing equity ownership

• Excelling in customer support

Parts,Filters, &

Consumables41%

Service18%

Engines21%

PowerGeneration

20%



Components SegmentComponents Segment

SpecialtyFiltration 5%

Air IntakeSystems 11% Turbocharger

26%

FuelSystems

16%


FuelSystems

11%

• Strategic advantage in emissions compliance

• Significant future growth in revenue and earnings

• New product introductions


EngineFiltration 22%

ExhaustSystems

18%

Non-GAAP Reconciliation –EBITNon-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 net earnings, for each of the applicable periods.

$ 350 $ 550 $ 145 $ 119 $ 167 Net Earnings

$ (26)$ (32)$ (7)$ (11)$ (13)Minority Interests in earnings of unconsolidated subsidiaries

$ (56)$ (216)$ (61)$ (12) $ (63)Provision for income taxes

$ (111)$ (109)$ (27)$ (30)$ (26)Interest Expense

$ 543 $ 907 $ 240 $ 172 $ 269 Earnings before interest, income taxes and minority interest

$ -$ -$ -$ -$ -Restructuring, asset impairment and other

$ 543 $ 907 $ 240 $ 172 $ 269 Earnings before interest, income taxes, minority interest and restructuring charges

Dec. 31, 2004

Dec. 31, 2005

Sept. 25, 2005

Dec. 31, 2004

Dec. 31, 2005

For the Years EndedThree Months EndedMillions

Non-GAAP Reconciliation – Net AssetsNon-GAAP Reconciliation – Net Assets

$ 6,88526

863

(837)3,354

$ 3,479

Dec. 31, 2005

$ 6,862$ 6,510Total assets2727Debt-related costs not allocated to segments

928990Deferred tax assets not allocated to segments

(826)(826)Minimum pension liability excluded from net assets

3,4213,168Liabilities deducted in computing net assets

$ 3,312$ 3,151Net assets for operating segments

Sept. 25, 2005

Dec. 31, 2004

Millions

Non-GAAP Reconciliation – ROANANon-GAAP Reconciliation – ROANA

32%

3,396

3,479

3,312

$ 269

Three Months Ended

Dec. 31, 2005

27%

3,315

3,479

3,151

$ 907

For the Year Ended

Dec. 31, 2005

ROANA

Average Net Assets for operating segments for period

Net Assets for operating segments at end of period

Net Assets for operating segments at beginning of period

Earnings before interest, income taxes and minority interest

Millions

Economy & Finance

Cummins_Citigroup_Industrial_Conference0306