2. Participants
Tim Solso Chairman and Chief Executive Officer
Jean Blackwell Chief Financial Officer
Joe Loughrey Chief Operating Officer
Tom Linebarger President – Cummins Power Generation
Dean Cantrell Director – Investor Relations
2
3. 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 those measures to GAAP
financial measures.
3
4. Long-term Targets*
Distribution Segment Sales growth: 10%
EBIT margin: 8-10%
Selected Financial Data
Change Change
$ Millions Q406 Q405 Amount Percent
Sales 386 346 40 12%
EBIT 39 33 6 18%
% of Sales 10.1% 9.5%
Sales growth driven primarily by generation equipment in the Middle
East, Europe, and the South Pacific
Higher mix of power generation equipment dampened incremental
returns
Earnings from joint ventures increased 45% on organic growth and
three new distributor joint ventures in North American
*Targets represent averages across the economic cycle 4
5. Long-term Targets*
Power Generation Sales growth: 8-10%
EBIT margin: 7-9%
Segment
Selected Financial Data
Change Change
$ Millions Q406 Q405 Amount Percent
Sales 658 575 83 14%
EBIT 62 49 13 27%
% of Sales 9.4% 8.5%
Commercial generator sets and alternator equipment strength in North
America, the Middle East, Europe, India and Latin America
Consumer softness in RV and recreational marine in North America
Q406 earnings includes $9 million gain from disposition of SEG
Benefits from volume absorption and price were offset by higher freight
and material costs and inefficiencies caused by supply chain constraints
*Targets represent averages across the economic cycle 5
6. Long-term Targets*
Engine Segment Sales growth: 6-8%
EBIT margin: 7-10%
Selected Financial Data
Change Change
$ Millions Q406 Q405 Amount Percent
Sales 1,952 1,838 114 6%
EBIT 181 156 25 16%
% of Sales 9.3% 8.5%
Sales strength on North America heavy-duty truck and high-horsepower
industrial markets
Favorable volume leverage dampened by higher frequency of supplier
delivery issues
Higher R&E spend on new engine programs offset better SG&A leverage
JV income up 23% due to Dongfeng (China) and Tata (India) performance
*Targets represent averages across the economic cycle 6
7. Engine Segment
Sales by Market – On-highway
Change Change
$ Millions Q406 Q405 Amount Percent
Heavy-duty truck 640 568 72 13%
Medium-duty truck and bus 256 247 9 4%
Light-duty automotive 322 340 (18) (5%)
Total on-highway 1,218 1,155 63 5%
Global heavy-duty truck shipments up 12%; North America class 8, group 2
build was approximately 343,000 units in 2006 – up 10% from 2005
Medium-duty truck shipments down 5% due to Euro 3 implementation in
Brazil, offsetting market share gains in North America
Bus shipments up 18% due to North America school bus market share gains
Light-duty automotive shipments down 13% from record Q405 as the North
American pick-up truck market reacted to higher overall dealer inventory
7
8. Engine Segment
Sales by Market – Off-highway
Change Change
$ Millions Q406 Q405 Amount Percent
Total off-highway 559 507 52 10%
Total shipments up 6%, mostly for midrange engines to the
construction market
Shipments of construction equipment up 12% from strength in
international markets such as Korea, India, and the Middle East
Higher mix of high-horsepower industrial engines for mining,
marine, and oil & gas pushed revenue growth ahead of shipment
growth
8
9. Long-term Targets*
Components Segment Sales growth: 8-10%
EBIT margin: 7-9%
Selected Financial Data
Change Change
$ Millions Q406 Q405 Amount Percent
Sales 599 535 64 12%
EBIT 23 24 (1) (4%)
% of Sales 3.8% 4.5%
Growth in all four businesses in this segment; strongest growth from Emission
Solutions (up $22M) and Turbo Technologies (up $29M)
Filtration and Fuel Systems business achieved positive incremental return on
sales
New product introduction and aggressive production ramp up at Emission
Solutions and Turbo Technologies negatively impacted gross margins
Turbo Technologies experienced cost pressure related to metal markets
*Targets represent averages across the economic cycle 9
10. Cummins Inc.
Selected Income Statement Data
Q406 Q405
Net Earnings ($M) 189 167
Earnings Per Share $3.75 $3.31
Product Coverage (% of Net Sales) 2.3% 2.5%
Gross Margin (% of Net Sales) 22.1% 22.5%
SAR (% of Net Sales) 13.6% 13.9%
Net earnings increased 13% on 10% increase in sales
Higher material costs, freight expense and inefficiencies caused by
supply chain and machining constraints across our operating segments
squeezed gross margin %
Foreign exchange had $40M and $7M favorable impact to sales and
EBIT, respectively
10
11. Joint Venture Income
Change Change
$ Millions Q406 Q405 Amount Percent
Engine 16 13 3 23%
On-highway 10 7 3 43%
Off-highway 4 4 0 0%
Rec. Marine 2 2 0 0%
Power Generation 2 3 (1) (33%)
Distribution 16 11 5 45%
Components 1 1 0 0%
Total JV Income 35 28 7 25%
Engine joint venture income up 23% due primarily to on-highway
markets served by Dongfeng (China) and Tata (India) joint ventures
Distributor joint venture income increased 45% on organic growth
and three new distributor joint ventures in North American
11
12. Income Tax Provision
$ Millions Q406 Q405 FY2006 FY2005
Discrete items (10) (13) (26) (24)
Rate Provision 90 76 350 240
Recorded Tax Provision 80 63 324 216
Profit Before Tax 283 243 1,083 798
ETR 28.3% 25.9% 29.9% 27.1%
Q406 tax provision includes a $10 million credit ($0.20 per share)
for the retroactive extension of the R&D federal tax credit for 2006
FY2006 includes the $10 million credit ($0.21 per share) for the
R&D tax credit from Q4 plus additional net benefit of $16 million
($0.32 per share) recognized in Q1 and Q2 (re: favorable tax
resolution less new state tax legislation)
12
13. Cash Flow
Q406 Q405 FY2006 FY2005
Operating Cash Flow ($M) 227 375 840 760
Working Capital (% of Net Sales) 18.1% 17.1%
Pension contributions in Q406 of $112 million, up $82 million from Q405
Working capital net cash outflow of $10 million in Q406 compared to net
cash inflow of $38 million in Q405
13
14. Guidance for 2007
Consolidated Results
Item Full Year Guidance
Earning per Share $11.00 to $11.50
Revenue Up 0% to 5%
Joint Venture Earnings Up 5%
Effective Tax Rate 33%
Capital Expenditures ($M) $320 to $350
Global Pension Funding ($M) $230 to $240
14
15. Guidance for 2007
Segment Results
Power
Item Engine Generation Components Distribution
Revenue Flat Up 10-12% Up 18-22% Up 7-10%
Joint Venture
Down ~20% Flat Up ~35% Up ~35%
Earnings
Slightly Near or
EBIT Relative Below the Above top
below or at equal to top
to Target low end of end of target
low end of end of target
Range target range range
target range range
15
16. A New Cummins – 2006 Highlights
Improved debt to capital from 42% to 22%
Actively repurchased 1 million shares
Record $840 million from operating activities
6.3% – highest net earnings % since 1984
46% average total return to shareholders
since 2002
Third consecutive year to exceed both
ROANA and ROE targets
16
17. A New Cummins – 2006 Highlights
2000 2006
Earnings from China ($M) 3 65
Earnings from India ($M) 13 52
Earnings from North American Distributors 4 56
Earnings from Joint Ventures 7 140
17
18. A New Cummins – 2006 Highlights
2000 2006
Nearly doubled revenue $6.6B $11.4B
Exceeded targeted EBIT range as % 1.4% 10.4%
sales
Net Earnings increased more than $14M $715M
fifty-fold
EPS increased more than forty-fold $0.35 $14.21
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19. Confident in our ability to perform in
2007 and beyond
We have fundamentally changed our
business model
Our customers recognize Cummins for its
technology leadership
We are investing in the next generation of
profitable growth opportunities
19
20. Thank You for Your Interest in
Cummins
We will now take your questions.
Contact Information:
Dean Cantrell
Director – Investor Relations
(812) 377-3121
Investor_Relations@Cummins.com
www.cummins.com
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22. Non-GAAP Reconciliation – EBIT
Three Months Ended
Millions December 31, December 31, October 1,
2006 2005 2006
Segment EBIT $ 303 $ 269 $ 296
Less: Interest Expense $ 20 $ 26 $ 23
Earnings before income taxes and minority $ 283 $ 243 $ 273
interests
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.
22
23. Non-GAAP Reconciliation – EBIT
Year Ended
Millions December 31, December 31,
2006 2005
Segment EBIT $ 1,179 $ 907
Less: Interest Expense $ 96 $ 109
Earnings before income taxes and minority $ 1,083 $ 798
interests
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.
23
24. Non-GAAP Reconciliation – Cash From
Operations Excluding Pension Contributions
Year Ended
Millions December 31, December 31,
2006 2005
Cash provided by operations $ 840 $ 760
Add back: pension contributions $ 266 $ 151
Cash provided by operations
$ 1,106 $ 911
excluding pension contributions
We believe cash provided by operations excluding pension contributions is a useful measure of our operating performance for
the periods presented as it illustrates our operating performance without regard to funding decisions. This measure is not in
accordance with, or an alternative for, GAAP and may not be consistent with measures used by other companies. It should
be considered supplemental data.
24
26. Long-term Targets*
Sales growth: 8-10%
Cummins Inc. EBIT margin: 7-10%
ROANA: 22%
Selected Financial Data ROE: 18%
Change Change
$ Millions 2006 2005 Amount Percent
Sales 11,362 9,918 1,444 15%
EBIT 1,179 907 272 30%
% of Sales 10.4% 9.1%
ROANA 31% 27%
ROE 25% 26%
Record annual revenue and operating earnings for the company
and each of our operating segments
Record cash from operations and 21% increase in cash provided by
operations excluding pension contributions
Third consecutive year to exceed both ROANA and ROE targets
*Targets represent averages across the economic cycle 26
27. Cummins Inc.
2006 Revenue by Segment
Components
2006 – Outstanding Year Segment 17%
Record revenue and Engine
EBIT for the company Segment 55%
Distribution
and each operating Segment 10%
segment
Record net income
Record cash flow from
operations for the year
Power Gen
Segment 18%
2006 Data
Sales: $11.4 billion
EBIT: $1,179 million
EBIT Margin: 10.4% (Target: 7-10%)
27
28. Cummins Inc.
2006 Revenue by Marketing Territory
Africa/Middle East
International revenue Canada 5%
7%
is 50% of consolidated
revenue Mexico/Latin
America
Pre-emission demand 8%
has accelerated US
growth rate
United States
Most international 50%
areas growing at Asia/Australia
16%
double digit rate
Europe/CIS
14%
28
