__AnalystPresentation_Nov2008_Webcast_FINAL
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Transcript of __AnalystPresentation_Nov2008_Webcast_FINAL
![Page 1: __AnalystPresentation_Nov2008_Webcast_FINAL](https://reader034.fdocuments.us/reader034/viewer/2022051818/54bc9a804a79597d5c8b4588/html5/thumbnails/1.jpg)
Analyst DayComponents Segment
Charleston, SCNovember 12, 2008
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1
Agenda
Welcome
8:00 a.m. to 9:45 a.m. – Presentations / Q and A
9:45 a.m. to 10:00 a.m. – Break
10:00 a.m. to 12:00 p.m. – Presentations / Q and A
12:00 p.m. to 12:45 p.m. – Lunch / exhibits
12:45 p.m. to 3:00 p.m. – Turbocharger plant tour
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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 (www.cummins.com) for the reconciliation of those measures to GAAP financial measures.
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Analyst Day Components Segment:
Rich Freeland, President
Charleston, SCNovember 12, 2008
Components Group
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4
Presenters
Rich Freeland- President, Components
Jim Lyons- Vice President & President, Cummins Turbo Technologies
Ray Amlung- Vice President & General Manager, Cummins Fuel Systems
Joseph Saoud- Vice President & President, Cummins Filtration
Srikanth Padmanabhan- Vice President & General Manager, Cummins Emissions Solutions
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Components Overview
Who we are
Purpose
Growth drivers
Technology leadership
Improving financials
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Who we are
Four distinct business units
Cummins Turbo Technologies
Cummins Fuel Systems
Cummins Filtration
Cummins Emission Solutions
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Purpose
Differentiate Cummins engines
Revenue growth
Earnings growth opportunity Technology leadership
Large captive customer – provides scale
Long aftermarket annuity
Synergies between Components business
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Components Segment Business Unit Revenue
2011 - $6.0B
Emission Solutions 30%
Turbos33%
Fuel Systems 9%
Filtration28%
Fuel Systems 14%
Q308 LTM - $3.2B
Emission Solutions 17%
Filtration38%
Turbos31%
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9
Bridging the Revenue Growth
3.2
6.00.10.51.0
1.2
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
2008 LTM EmissionSolutions
Turbos Filtration Fuel Systems 2011
$ B
Components Segment Revenue
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Components Revenue by Marketing Territory
2011Q308 LTM
N America62%
LatinAmerica 5%
Other AsiaPac 2%
EMEA 17%
N America57%
EMEA26%
Other AsiaPac 6%
Latin America 4%
India 2%
China 5%
India 2%
China 12%
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Global Customers
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Long-term Trends
Tougher global emission standards
Demand for fuel efficiency
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Tougher Global Emission Standards
Mexico2008
Mexico2008
Australia2008
Australia2008
Brazil2009
Brazil2009
Europe2009
Europe2009US /
Canada2010
US / Canada
2010
India2010India2010
China2011
China2011
Off-highway2011-14
Off-highway2011-14
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Components Segment
$2,000
$3,253
$6,000
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2005 Q308LTM
2011
$ M
illon
s
Sales
23% CAGR
$89
$222
$540
$0
$100
$200
$300
$400
$500
$600
2005 Q308LTM
2011
$ M
illon
s
35% CAGR
EBIT
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4.5%4.7%
5.30%
6.80%
9%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2005 2006 2007 Q308 LTM 2011
Components Segment EBIT Percent
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Summary
Components group is well positioned to grow
Technology leadership creates a significant advantage
Demonstrating progress toward 9% EBIT target
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Analyst DayComponents Segment:
Jim Lyons, President
Charleston, SCNovember 12, 2008
Turbo Technologies
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Turbo Technologies Overview
Who we are
Competitive advantages
Technology leadership
Improving financials
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Cummins Turbo Technologies
By Marketing Territory
N America45%
China12%
India5%
Europe32%
Brazil3%
0.520.61
0.861.02
2.00
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2005 2006 2007 Q3'08LTM
2011
$ B
Sales Trends
Other3%
Q308 LTM $1,023M
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20
Bridging the Revenue Growth
1.0
2.0
$0.5
$0.7
$0.9
$1.1
$1.3
$1.5
$1.7
$1.9
$2.1
2008 LTM MarketShare
New CMIEngine
Platforms
Aftermarket NewProductsExisting
Customers
MarketGrowth
2011
$ B
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Creating SustainableEarnings Growth
Turbo Technologies is well positioned to capture long-term growth trends
Technology leadership creates a significant advantage
Improving operating margins
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Benefits of Turbocharging
Increased engine efficiencyFuel economyEngine performance
Meet emission requirements
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Competitive Advantages
Focused on commercial diesel applications
Cummins is only turbo manufacturer with in-house engine division
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Advantage of Technology Leadership
Industry-leading Variable Geometry Turbo
Modulating Two-stage for Light Duty ApplicationsEnables emissions to be metGood transient response/driveabilityControls IPIntegrated packaging to minimize space claim
Thermal management
Exhaust Gas Recirculation control
Exhaust braking
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Reward for Technology Leadership
Gaining Market ShareBenefiting from Cummins engine share gains
Leveraging Cummins relationships globally
Demonstrated capability to develop technology for multiple OEMs
CTT projecting revenue growth of 25% through 2011 compared to global turbo market size growth of 8%
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Financial Performance Improving
Focus on operational efficiencyProductivity gains
Cost reduction
Increasing capacity and output in low cost regions
Global sourcing
Pricing improvements for value of technology leadership
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27
Financial Performance Improving
Growth in OE business over last 4 years is delivering aftermarket growth
Leveraging global distribution network to maximize aftermarket opportunity
Well positioned in emerging markets
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Summary
Exciting growth opportunities
Industry leading technology
Improving operating margins
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Analyst Day Components Segment:
Ray Amlung, Vice President & General Manager
Charleston, SCNovember 12, 2008
Fuel Systems
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Overview
Who we are
Fuel Systems technology
Growth drivers
Growth opportunities
Earnings growth
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Fuel Systems Business
Design, develop, manufacture and remanufacture leading-edge fuel systems
Partner with ScaniaJV’s for the HPI and XPI fuel systems
Sharing of development and capital expenses
Currently limiting XPI sales to Cummins and Scania
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Cummins Fuel Systems
By Marketing Territory
N. America79%
EMEA16%
China3%0.45
0.5
0.40.4
0.3
$0.0
$0.1
$0.2
$0.3
$0.4
$0.5
$0.6
2005 2006 2007 Q3'08LTM
2011
$ B
Sales Trends
Latin America2%
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Fuel System TypesUnit Injector
System
Injector
Fuel Pump
Injector
High Pressure Fuel Pump Common Rail
Common Rail System
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Fuel System Technology
Fuel system capability is a key for current and future emission standards
Injection pressure is the key feature
Cummins Fuel Systems provides the highest injection pressure available in the industry today
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Spray Quality is Critical
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Growth Drivers
Global adoption of tougher emission standards
Focus on fuel economy improvements
Trend for bigger truck engines in developing countries
Technical complexity of modern fuel systems which drives higher share in the aftermarket
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37
Growth Opportunities
Cummins growth• Mid-range and heavy-duty growth in China
• Expanding down into Cummins mid-range engines
Continued growth of remanufacturedfuel systems
Sales to additional U.S. and Europeanengine manufacturers
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38
Earnings Growth
Operations efficiency
Material cost reduction
Fixed cost reduction as transition to XPIis completed
Continued growth of high marginaftermarket business
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Summary
Industry leading technology
Significant growth occurring in XPI JV
Consistently improving operating margins
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Break
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Analyst Day Components Segment:
Joseph Saoud, President
Charleston, SCNovember 12, 2008
Filtration
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Overview
Who we are
Growth drivers
Sustainable earnings growth
Summary
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43
Leading Technologies in Emissions
Crankcase
Air Systems
Coolant Systems
High Pressure Fuel System Filter
Soot
Low Ash Oils
Biodiesel
Insulated Tubes
ULSD Fuels
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44 Office Location Manufacturing Facility Joint VentureDistribution Center Sales Office
Cummins Filtration Global Locations
160 Countries5,600 Employees21 Manufacturing Facilities 14 Distribution Centers 3 Technology Centers30,000+ Points of Sale
160 Countries5,600 Employees21 Manufacturing Facilities 14 Distribution Centers 3 Technology Centers30,000+ Points of Sale
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45
Cummins Filtration
By Marketing Territory
N America55%
Latin America
12%
India1%
EMEA22%
Other AsiaPac13%
1.0 1.01.1
1.2
1.7
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
2005 2006 2007 Q3'08LTM
2011
$ B
Sales Trends
China1%
Q308 LTM
= non-strategic businesses exited
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Bridging the Revenue Growth
1.7
1.2
$0.5
$0.7
$0.9
$1.1
$1.3
$1.5
$1.7
$1.9
2008 LTM New Productsand Platforms
GlobalAftermarket
Growth
Inflation 2011
$ B
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Growth through New Productsand New Engine Platforms
New Products As a result of tougher emissions standards• Added content
• Added value
Focus on air filtration
New engine platforms
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Growth through Aftermarket
Growth of OE First Fit leads to sustainable aftermarket growth
Patented technology leads to sustainable aftermarket growth
Focus on Emerging Markets
World class delivery and customer support
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Sustainable Earnings Growth
Aftermarket growth
Leveraging Cummins global growth
Continuous improvement
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Summary
Cummins Filtration is well positioned for growth
New technologies, engine integration and the aftermarket will sustain earnings growth
Relentless focus on being low cost producer
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Analyst Day Components Segment:
Srikanth Padmanabhan, President
Charleston, SCNovember 12, 2008
Emission Solutions
![Page 53: __AnalystPresentation_Nov2008_Webcast_FINAL](https://reader034.fdocuments.us/reader034/viewer/2022051818/54bc9a804a79597d5c8b4588/html5/thumbnails/53.jpg)
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Overview
Who we are
Growth drivers
Why engine OEMs choose CES
Technology/Systems integration
Earnings improvement
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Cummins Emission Solutions
By Marketing Territory
N America71%
Europe28%
Asia Pac1%
0.10 0.15
0.450.55
1.80
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2005 2006 2007 Q3'08LTM
2011
$ B
Sales Trends
![Page 55: __AnalystPresentation_Nov2008_Webcast_FINAL](https://reader034.fdocuments.us/reader034/viewer/2022051818/54bc9a804a79597d5c8b4588/html5/thumbnails/55.jpg)
54
Bridging the Revenue Growth
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2008 LTM IncreasedContent
New Markets Market Growth -Existing Markets
2011
$ B
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55
Emission Solutions
By Marketing Territory
N America71%
Europe28%
Asia Pac1%
0.10 0.15
0.450.55
1.80
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2005 2006 2007 Q3'08LTM
2011
$ B
Sales Trends
![Page 57: __AnalystPresentation_Nov2008_Webcast_FINAL](https://reader034.fdocuments.us/reader034/viewer/2022051818/54bc9a804a79597d5c8b4588/html5/thumbnails/57.jpg)
56
Creating SustainableEarnings Growth
Cummins Emission Solutions is well-positioned to capture long-term growth trends
Technology leadership creates a significant advantage
Improving operating margins
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57
Long-term Growth Trends
Global adoption of tougher emission standardsNew markets (Emerging markets)New applications (off highway)More content (DPF + SCR)
Focus on fuel economy improvementsDelivering very high levels of NOx reductionReducing system back pressure (dP) significantlyReducing regeneration fuel consumption
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Tougher Emission Standards
Mexico2008
Mexico2008
Australia2008
Australia2008
Brazil2009-2011
Brazil2009-2011
Europe2009
Europe2009US /
Canada2010
US / Canada
2010
India2010India2010
China2011
China2011
Off-highway2011-14
Off-highway2011-14
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Function of Aftertreatment
Emissions reductionParticulate matter – soot and unburned hydrocarbons
Oxides of Nitrogen (NOx)
Acoustic performance
SociabilityNo odor, smoke
Unregulated emissions
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EPA ‘02
Fuel Injection
Aftertreatment System Architecture
NOX
Engine &Cooled EGR
EPA ‘07
DOCDiesel
ParticulateFilter
DOC
EPA ‘10
SCR Catalyst
Urea
NH3 Slip CatUrea Doser
AftertreatmentControls
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Why Do Engine OEMs Choose Us?
Component Technology excellence and system integration capabilities
Proven technology – reliability and durability
Developing new products for future emissions regulations
Full-system provider
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Component Technology Excellence
Filters and Substrates
AftertreatmentControls
Dosers
Packaging
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63 63
System Integration CapabilityApplication Platform Subsystems Rules, Tools, Technology Technology Technology Core Technology
Substrates Thermal Science &Coatings Fluid Mechanics
PackagingInstallation Hardware Materials & Catalysts
Urea DosingHydrocarbon Dosing Mechanical Design
ElectronicsControl Algorithms Applied Mechanics
SensorsWiring Harness Acoustics
Regeneration TechnologyAssembly/DFMA Electronic ControlsA
ftert
reat
men
t Sys
tem
In
tegr
atio
n
Vehi
cle
and
Pow
ertr
ain
Inte
grat
ion
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Emission Systems in Production & Development
Successfully introduced on-highway aftertreatment for: EPA 2004 Euro 4 EPA 2007Euro V
We are currently developing new products for:EPA 2010 Global Euro IV / V / VI platformLight Duty Diesel platformTier4 / Stage IIIB off-highway
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Improving Financial Performance
Operational excellence
Content addition
Emerging markets growth
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66
Summary
Exploding market in a ten-year window
Worldwide industry leading technology and system integration capabilities
Improving operating margins
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67
Thank You for Your Interest in Cummins
We will now take your questions.
Contact Information:Dean Cantrell
Director – Investor Relations(812) 377-3121
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Appendix
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69
Components Segment
New products launched
Industry leading technology
Capacity expansion
Grow with CMI and non-CMI engine volumes
Leverage global distribution to grow aftermarket
Filtration38% Turbocharger
31%
FuelSystems
14%Q3 2008 LTM Segment DataSales: $3.3 billionEBIT: $222 millionEBIT Margin: 6.8%
Q3 2008 LTM Revenue by Product
Emission Solutions 17%
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Components – Historical Performance
$84 $89$107
$153
$222
$0
$50
$100
$150
$200
$250
2004 2005 2006 2007 Q3'08LTM
$ M
$1,783$2,000
$2,281
$2,932
$3,253
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2004 2005 2006 2007 Q3'08LTM
$ M
Segment EBITSales
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Components Segment
CMI First Fit33%
Aftermarket35%
Other OEM's First
Fit32%
Q3 2008 LTM Sales: $3.3 Billion
Revenue by GeographyRevenue by Customer
EMEA26%
India2%
China5%
North America57%
Other AsiaPac6%
Latin America4%
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Revenue by Marketing TerritoryCummins Turbo Technologies
Latin America3%
Other AsiaPac3%
North America45%
China12%
India5%
EMEA32%
Latin America3%
Other AsiaPac3%
North America59%
China10%
India4%
EMEA21%
Q308 LTM 2011
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Revenue by Marketing Territory Cummins Fuel Systems
Q308 LTM 2011
Latin America2%
EMEA16%
China3%
North America79%
Latin America2%
North America84%
China9%
EMEA5%
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Revenue by Marketing Territory Catalytic Exhaust
Q308 LTM 2011Other AsiaPac
2%
North America68%
China2%
EMEA28%
Latin America6%
EMEA11%
India1%
China21%
North America61%
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Revenue by Marketing Territory Cummins Filtration
Q308 LTM 2011
EMEA22%
India1%
China1%
North America55%
Other AsiaPac13%
Latin America8%
Latin America8%
Other AsiaPac4%
North America57%
China4%
India2%
EMEA25%
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Cummins Turbo Technologies
CMI First Fit35%
Aftermarket25%
Other OEM's First
Fit40%
Q3 2008 LTM Sales: $1,023 Million
Revenue by GeographyRevenue by Customer
Latin America3%
Other AsiaPac3%
North America45%
China12%
India5%
EMEA32%
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Cummins Turbo Technologies
CMI30%
Other1%
MHI14%
Honeywell23%
Borg Warner
32%
Market Share / Competition
CMI17%
Other10%
Borg Warner
41%
Honeywell27%
MHI5%
North America Europe
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Cummins Turbo Technologies
CumminsFiat Power TrainVolvo ScaniaDaimlerDongfeng Cummins Engine CoFirst Auto Works, ChinaCNHTC, ChinaWeifang Diesel, ChinaTata Motors, India
Main Customers Major OperationsGuarulhos, BrazilCharleston, South CarolinaWuxi, China Huddersfield, EnglandDewas, IndiaPithampur, India
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Cummins Turbo TechnologiesProduct Offering
Fixed Geometry Variable GeometryPneumaticWaste Gate Turbo Compound
HX35/40
HX50-55
HX82-83
HX30/40W
HX20-25-27W
HX60W
HE400V
HE500V
HE300Ve
HE500Ve
HE400Ve
Variable GeometryElectric
HP72 Power turbine
HP841 Power turbine
HX50/55W
HY55V
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Cummins Fuel Systems
CMI First Fit65%
Aftermarket26%
Other OEM's First
Fit9%
Q3 2008 LTM Sales: $451 Million
Revenue by GeographyRevenue by Customer
North America79%
China3%
EMEA16%
Latin America2%
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Cummins Fuel Systems
CumminsScaniaKomatsu
Main Customers Major Operations
Columbus, IndianaCiudad Juarez, MexicoEl Paso, TexasWuhan, ChinaSödertälje, Sweden
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Cummins Filtration
CMI First Fit6%
Aftermarket59%
Other OEM's First
Fit35%
Q3 2008 LTM Sales: $1,227 Million
Revenue by GeographyRevenue by Customer
Latin America8%
Other AsiaPac13%
North America55%
China1%India
1%
EMEA22%
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Cummins Filtration
Q3 2008 LTM Sales: $1,227 Million
Revenue by Application
Air Intake Systems
22%
Intank Filters4%
Lube Filters22%Fuel
Filters/FWS
Hydraulic Filters
5%
Exhaust Systems
20%
Coolant / Chemicals
4%Industrial Silencers
3%
Water Filters3%
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Cummins Filtration
CMI4%
Other75%
Luberfiner4%
Clarcor8%
Donaldson9%
Market Share / Competition
North America EuropeCMI9%
Other50%
M&H28%
Mahle10%Donalson
3%
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Cummins Filtration
InternationalPaccar/KenworthCase/Case New HollandDeereVolvo/NovabusFreightliner / Western StarKomatsuCumminsDistributors
Main Customers Major OperationsDaman, IndiaPune, IndiaKilsyth & Scoresby, AustraliaSao Paulo, BrazilQuimper, FrancePietermaritzburg, South AfricaJohannesburg, South AfricaShanghai, ChinaSan Luis Potosi, MexicoKyungki-Do, KoreaSingaporeMultiple US locations in Tennessee, Iowa , Wisconsin and Ohio
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86 Office Location Manufacturing Facility Joint VentureDistribution Center Sales Office
Cummins Filtration Global Locations
Findlay, OHLDA/Specialty Filtration
San Luis Potosi, MexicoFiltration
Pietermaritzburg, South AfricaFiltration
Rugby, UKFiltration
Mechelen and Rumst, BelgiumFiltration
Sao Paulo, BrazilFiltration, Exhaust
Kilsyth and Scoresby, AustraliaFiltration, Coolant & Exhaust
Singapore,Filtration
Pune, IndiaFleetguard Filtrum JV
Daman, IndiaExhaust
Shanghai, ChinaCummins FiltrationShanghai Fleetguard
Quimper, FranceFiltration
Cookeville, TNFiltration
160 Countries5,600 Employees21 Manufacturing Facilities 14 Distribution Centers 3 Technology Centers30,000+ Points of Sale
Johannesburg, South AfricaFiltration
Xiangfan, ChinaXiangfan Fleetguard Exhaust
Lake Mills, IAFiltration
Nashville, TNFiltration Corporate
Tokyo, JapanFiltration
Kyungki-Do, KoreaFiltration
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Cummins Emission Solutions
CMI First Fit68%
Aftermarket3%
Other OEM's First
Fit29%
Q3 2008 LTM Sales: $552 Million
Revenue by GeographyRevenue by Customer
EMEA28%
China2%
North America68%
Other AsiaPac2%
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Cummins Emission SolutionsRevenue by Application
DPF 65%
SCR32%
Retrofit3%
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Cummins Emission Solutions
Market Share - EuropeMarket Share – N. America
Cummins26%
Emcon22%
Tenneco10%
Other22%
Eberspaecher20%
Cummins55%
Emcon20%
Tenneco10%
Other11%
Donaldson4%
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Cummins Emission Solutions
InternationalPaccar/KenworthVolvo/BlueBird/NovabusFreightliner / Western StarDistributors
Main Customers Major OperationsMineral Point, WisconsinDarlington, EnglandPretoria, South AfricaColumbus, IndianaStoughton, Wisconsin
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23
Thank You for Your Interest in Cummins
We will now take your questions.
Contact Information:Dean Cantrell
Director – Investor Relations(812) 377-3121