Slide 1: Third Quarter 2020 Earnings Teleconference
Third Quarter 2020 Earnings Teleconference October 27, 2020
Slide 2: Contents
CONTENTS 2020 Summary 2020 Supplemental Information Appendix 2
Slide 3: Disclosure Regarding Forward-Looking Statements
Disclosure Regarding Forward-Looking Statements Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, e
Slide 4: 2020 Summary
2020 Summary
Slide 5: Q3 2020 Summary
Q3 2020 Summary • Third quarter revenues of $5.1 billion • GAAP1 Net Income of $501 million and Diluted EPS of $3.36 ▪ Discrete tax expense of $31 million or $0.21 Diluted EPS • EBITDA of $876 million or 17.1 percent of sales • The company produced record quarterly operating cash flow of $1.2 billio
Slide 6: Selected Financial Data - Quarter
Cummins Inc. Selected Financial Data - Quarter $ MILLIONS Q3 2020 Q3 2019 Sales 5,118 5,768 Gross Margin (% of Sales) 26.4% 25.9% SAR (% of Sales) 14.8% 14.6% EBITDA 876 958 EBITDA (% of Sales) 17.1% 16.6% GAAP Net Income attributable to Cummins Inc. 501 622 GAAP Net Income (% of Sales) 9.8% 10.8% D
Slide 7: Q3 2020 Income Statement by Segment
Q3 2020 Income Statement by Segment Engine Distribution Components Power New Power Intersegment Total Systems Eliminations $M Three months ended September 27, 2020 Net Sales 2,112 1,721 1,541 981 18 (1,255) 5,118 Sales growth vs 2019 (13)% (14)% (7)% (13)% 100% (13)% (11)% EBITDA 382 182 261 101 (40
Slide 8: Q3 2020 EBITDA Detail
Q3 2020 EBITDA Detail Power Engine Distribution Components New Power Q3 2019 CMI Segment Segment Segment Systems Segment Eliminations $ Millions Segment Reported EBITDA 958 341 186 286 158 (36) 23 Reported EBITDA included charges related to ending production of our 5 liter (33) (33) pickup truck eng
Slide 9: Cummins Inc. historical EBITDA
Cummins Inc. 12 1 2017 EBITDA excludes $39 million of joint venture tax charges related to Tax Legislation. 2 Q4 2019 EBITDA excludes $119 million of restructuring charges. 9
Slide 10: CMI Hydrogen Day
CMI Hydrogen Day Monday, November 16, 2020 10:30 a.m. ET Virtual To register for the event, please visit: http://rsvp.cummins.com/cumminshydrogenday Or contact: James Hopkins, Executive Director – Investor Relations (812) 377-3121 James.Hopkins@Cummins.com 10
Slide 11: Supplemental Information
2020 Supplemental Information
Slide 12: Engine Segment Selected Financial Data
Engine Segment Selected Financial Data • Sales declined due to lower $ MILLIONS Q3 2020 Q3 2019 CHANGE production in North America truck markets. Sales 2,112 2,416 (13)% • EBITDA margin as a percent of sales increased as the impact of EBITDA 382 341 12% lower volumes was more than offset by cost sav
Slide 13: Engine Segment - Sales by Market
Engine Segment - Sales by Market • On-highway revenues declined $ MILLIONS Q3 2020 Q3 2019 CHANGE due to decreased demand in North America truck and bus Heavy-Duty Truck 694 851 (18)% markets. Medium-Duty Truck & Bus 492 645 (24)% • Off-highway revenues decreased Light-Duty Automotive 522 478 +9% du
Slide 14: Distribution Segment Selected Financial Data
Distribution Segment Selected Financial Data • Sales decreased with revenues in $ MILLIONS Q3 2020 Q3 2019 CHANGE North America down 18% and international sales declining by 5%. Sales 1,721 2,004 (14)% • EBITDA margin as a percent of sales EBITDA 182 186 (2)% increased as we continue to realize the
Slide 15: Components Segment Selected Financial Data
Components Segment Selected Financial Data • Sales in North America declined 24% $ MILLIONS Q3 2020 Q3 2019 CHANGE driven by lower truck build rates, while revenues in international markets Sales 1,541 1,650 (7)% increased by 26% as a result of higher truck demand in China. EBITDA 261 286 (9)% • EBI
Slide 16: Power Systems Segment Selected Financial Data
Power Systems Segment Selected Financial Data • Industrial sales declined 21% driven by $ MILLIONS Q3 2020 Q3 2019 CHANGE continued weakness in oil and gas and mining markets. Power generation sales decreased by 7%, with lower Sales 981 1,126 (13)% revenues in both North America and International ma
Slide 17: New Power Segment Selected Financial Data
New Power Segment Selected Financial Data • EBITDA losses were $40 million for $ MILLIONS Q3 2020 Q3 2019 CHANGE the quarter driven by the development of new products and Sales 18 9 +100% the expected slow ramp of new technology adoption. EBITDA (40) (36) (11)% EBITDA (% of Sales) NM1 NM1 1 "NM" - n
Slide 18: Joint Venture Income - Quarter
Joint Venture Income - Quarter $ MILLIONS Q3 2020 Q3 2019 Engine 74 34 Distribution 13 12 Components 13 9 Power Systems — 13 New Power (2) — Total JV Income 98 68 18
Slide 19: Cash Flow - Quarter
Cash Flow - Quarter $ MILLIONS Q3 2020 Q3 2019 Operating Cash Flow 1,223 1,123 Capital Expenditures 116 153 Working Capital Measure 4,501 4,925 Working Capital Measure (% of Net Sales) 22.0% 21.3% Total Debt to Capital % 32.2% 23.3% Net Debt to Capital % 6.3% 7.0% 19
Slide 20: Appendix
Appendix
Slide 21: Q3 2020 LTM Revenue by Segment
Cummins Inc. Q3 2020 LTM Revenue by Segment • Strong product portfolio and global partners • Macro growth trends play to Cummins' strengths • Disciplined investment for growth • Demonstrated technology leadership Q3 2020 LTM Results Sales: $19.6 billion EBITDA1: $3.0 billion EBITDA%1: 15.1% 1 Q4 201
Slide 22: Q3 2020 LTM Revenue by Marketing Territory
Cummins Inc. Q3 2020 LTM Revenue by Marketing Territory • Capitalizing on global emissions regulations • Strong geographic diversification and leadership across multiple end-markets • Global distribution network with presence in more than 190 countries and territories 22
Slide 23: Joint Venture Sales Unconsolidated
Cummins - Joint Venture Sales Unconsolidated Q3 2020 LTM Revenue * Rest of world 23
Slide 24: Engine Segment - Overview
Engine Segment - Overview • Diesel and natural gas engines from Q3 2020 LTM Revenue by Product 2.8L to 15L and 48 hp to 715 hp • Long-term engine supply agreements with key customers to stabilize pricing and to jointly engineer better integrated vehicles to market • Leading market share in multiple
Slide 25: Engine Segment - Sales Mix
Engine Segment - Sales Mix Q3 2020 LTM Revenue: $8.0 billion 25
Slide 26: Engine Segment - Historical Performance
Engine Segment - Historical Performance 12 1 2017 EBITDA excludes $23 million of joint venture tax charges related to Tax Legislation. 2 Q4 2019 EBITDA excludes $18 million of restructuring charges. 26
Slide 27: Engine Segment - Joint Venture Sales Unconsolidated
Engine Segment - Joint Venture Sales Unconsolidated Q3 2020 LTM Revenue 27
Slide 28: Distribution Segment - Overview
Distribution Segment - Overview Q3 2020 LTM Revenue by Product • Provide aftermarket support and increase solution-based revenue • Increasing network capabilities in emerging markets to capture profitable growth Q3 2020 LTM Results Sales: $7.2 billion EBITDA1: $664 million EBITDA%1: 9.3% 1 Q4 2019 E
Slide 29: Distribution Segment - Sales Mix
Distribution Segment - Sales Mix • Key enabler for Cummins growth • Benefiting from increased population of products in the field Q3 2020 LTM Revenue $7.2 billion 29
Slide 30: Distribution Segment - Historical Performance
Distribution Segment - Historical Performance 12 1 2017 EBITDA excludes $4 million of joint venture tax charges related to Tax Legislation. 2 Q4 2019 EBITDA excludes $37 million of restructuring charges. 30
Slide 31: Distribution Segment - Joint Venture Sales Unconsolidated
Distribution Segment - Joint Venture Sales Unconsolidated Q3 2020 LTM Revenue * Rest of World 31
Slide 32: Components Segment - Overview
Components Segment - Overview Q3 2020 LTM Revenue by Business • Leading supplier of aftertreatment products for commercial vehicle applications • Largest worldwide supplier of turbochargers from 3.8L to 25L for commercial applications • World's leading supplier of filtration, coolant and chemical pr
Slide 33: Components Segment - Sales Mix
Components Segment - Sales Mix Q3 2020 LTM Revenue: $5.8 billion 33
Slide 34: Components Segment - Historical Performance
Components Segment - Historical Performance 12 1 2017 EBITDA excludes $12 million of joint venture tax charges related to Tax Legislation. 2 Q4 2019 EBITDA excludes $20 million of restructuring charges. 34
Slide 35: Components Segment - Joint Venture Sales Unconsolidated
Components Segment - Joint Venture Sales Unconsolidated Q3 2020 LTM Revenue 35
Slide 36: Power Systems Segment - Overview
Power Systems Segment - Overview • Global provider of power generation Q3 2020 LTM Revenue by Product systems, components and services from 2kW to 3.5 Megawatts (MW) • Leading supplier of alternators from 3kVA to 12,000kVa • Leading market share in multiple geographies Q3 2020 LTM Results Sales: $3.
Slide 37: Power Systems Segment - Sales Mix
Power Systems Segment - Sales Mix Q3 2020 LTM Revenue: $3.7 billion 37
Slide 38: Power Systems Segment - Historical Performance
Power Systems Segment - Historical Performance 1 1 Q4 2019 EBITDA excludes $12 million of restructuring charges. 38
Slide 39: Power Systems Segment - Joint Venture Sales Unconsolidated
Power Systems Segment - Joint Venture Sales Unconsolidated Q3 2020 LTM Revenue 39
Slide 40: Emerging Market Sales - India
Emerging Market Sales - India1 • Present in India for over 50 years • Market leadership • Strong OEM relationships • Expanding our markets 1 Consolidated & JV sales with eliminations 40
Slide 41: Emerging Market Sales - China
Emerging Market Sales - China1 • Present in China for over 40 years • Broad product portfolio for On and Off Highway • Strong OEM partners • Growth from new products and tightening emission standards 1 Consolidated & JV sales with eliminations 41
Slide 42: Non-GAAP Reconciliation - EBITDA
Non-GAAP Reconciliation - EBITDA Three Months Ended In Millions 27-Sep-20 29-Sep-19 Net income attributable to Cummins Inc. $ 501 $ 622 Net income attributable to noncontrolling interests 3 (6) Consolidated net income 504 616 Income tax expense 182 139 Income before taxes 686 755 Interest expense 25
Slide 43: Non-GAAP Reconciliation - EBITDA (LTM)
Non-GAAP Reconciliation - EBITDA (LTM) Twelve Months Ended In Millions 27-Sep-20 29-Sep-19 Net income attributable to Cummins Inc. $ 1,588 $ 2,539 Net income attributable to noncontrolling interests 11 41 Consolidated net income 1,599 2,580 Income tax expense 467 601 Income before taxes 2,066 3,181
Slide 44: Non-GAAP Reconciliation - Working Capital
Non-GAAP Reconciliation - Working Capital Three Months Ended In Millions 27-Sep-20 29-Sep-19 Accounts and notes receivable, net $ 3,628 $ 3,934 Inventories 3,470 3,821 Accounts Payable - (principally trade) (2,597) (2,830) Working capital measure $ 4,501 $ 4,925 Annualized Working capital measure (%
Slide 45: Non-GAAP Reconciliation - Net Assets
Non-GAAP Reconciliation - Net Assets In Millions 27-Sep-20 29-Sep-19 30-Sep-18 Total Assets $ 21,568 $ 20,346 $ 18,992 Less: Deferred debt costs 3 3 3 Less: Deferred tax assets 457 435 330 Less: Pension and other postretirement benefit 101 111 169 adjustments excluded from net assets Less: Liabiliti
Slide 46: Non-GAAP Reconciliation - Invested Capital Used for ROIC Calculation
Non-GAAP Reconciliation - Invested Capital Used for Return on Invested Capital Calculation In Millions 27-Sep-20 29-Sep-19 30-Sep-18 Total Equity $ 8,641 $ 8,753 $ 8,060 Less: Defined benefit postretirement plans (699) (669) (655) Equity used for return on invested capital 9,340 9,422 8,715 calculat
Slide 47: Non-GAAP Reconciliation - Net Operating Profit After Taxes
Non-GAAP Reconciliation - Net Operating Profit After Taxes Used for Return on Invested Capital Calculation Twelve Months Ended In Millions 27-Sep-20 29-Sep-19 Net income attributable to Cummins Inc. $ 1,588 $ 2,539 Net income attributable to noncontrolling interests 11 41 Consolidated net income 1,5
Slide 48: Net Debt to Capital Reconciliation
Net Debt to Capital Reconciliation Three Months Ended In Millions 27-Sep-20 29-Sep-19 Total Debt (A) $ 4,112 $ 2,661 Total Equity (B) 8,641 8,753 Total Capital (C) = (A+B) 12,753 11,414 Total Cash, Cash Equivalents & Marketable Securities (D) 3,312 1,863 Net Debt (E) = (A-D) $ 800 $ 798 Total Debt t
Slide 49: Thank you for your interest
Thank you for your interest For additional information: James Hopkins – Investor Relations Executive Director (812) 377-3121 | James.Hopkins@cummins.com www.cummins.com