Cummins Inc. · NYSE:CMI
Cummins — Q1 2020 Earnings Presentation
49 slides from Cummins's earnings presentation, Apr 28, 2020
Slide 1: First Quarter 2020 Earnings Teleconference
First Quarter 2020 Earnings Teleconference April 28, 2020
Slide 2: Contents
CONTENTS 2020 Summary 2020 Guidance 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: Q1 2020 Summary
Q1 2020 Summary • First quarter revenues of $5.0 billion • GAAP1 Net Income of $511 million and Diluted EPS of $3.41 • EBITDA of $846 million or 16.9 percent of sales • Cash, cash equivalents and marketable securities of $2.0 billion, up $560 million from fourth quarter 2019. Committed credit facili
Slide 6: Q1 2020 EBITDA Detail
Q1 2020 EBITDA Detail Power Engine Distribution Components New Power CMI Systems Eliminations Segment Segment Segment Segment $ Millions Segment Reported EBITDA 846 365 158 279 77 (43) 10 Reported EBITDA included benefits from India Tax Law 37 18 5 14 - - - Changes of In March 2020, India enacted ch
Slide 7: Q1 2020 EPS Detail
Q1 2020 EPS Detail EPS Reported EPS $ 3.41 Reported EPS included benefits from India Tax Law $ 0.23 Changes of In March 2020, India enacted changes to tax law which resulted in a benefit to our share of after-tax joint venture earnings and Net Income in the first quarter. 7
Slide 8: Selected Financial Data - Quarter
Cummins Inc. Selected Financial Data - Quarter $ MILLIONS Q1 2020 Q1 2019 Sales 5,011 6,004 Gross Margin (% of Sales) 25.8% 25.5% SAR (% of Sales) 15.6% 13.8% EBITDA 846 1,033 EBITDA (% of Sales) 16.9% 17.2% GAAP Net Income attributable to Cummins Inc. 511 663 GAAP Net Income (% of Sales) 10.2% 11.0
Slide 9: Q1 2020 Income Statement by Segment
Q1 2020 Income Statement by Segment Engine Distribution Components Power New Power Intersegment Total Systems Eliminations $M Three months ended March 29, 2020 Net Sales 2,158 1,814 1,502 884 10 (1,357) 5,011 Sales growth vs 2019 (19)% (9)% (19)% (18)% 233% (15)% (17)% EBITDA 365 158 279 77 (43) 10
Slide 10: Guidance for 2020 Consolidated Results
Guidance for 2020 Consolidated Results ITEM FULL YEAR GUIDANCE 2019 ACTUALS Capital Expenditures $500 to $525 M $700 M Global Pension Funding $91 M $121 M 10
Slide 11: Cummins Inc. historical performance
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. 11
Slide 12: 2020 Supplemental Information
2020 Supplemental Information
Slide 13: Engine Segment Selected Financial Data
Engine Segment Selected Financial Data • Sales declined due to lower $ MILLIONS Q1 2020 Q1 2019 CHANGE production in North America truck markets along with weaker demand from global construction Sales 2,158 2,653 (19)% customers. EBITDA 365 438 (17)% • EBITDA margin as a percent of sales increased d
Slide 14: Engine Segment - Sales by Market
Engine Segment - Sales by Market • On-highway revenues declined $ MILLIONS Q1 2020 Q1 2019 CHANGE due to decreased global demand in truck markets. Heavy-Duty Truck 750 979 (23)% Medium-Duty Truck & 618 721 (14)% • Off-highway revenues decreased Bus due to lower demand in Light-Duty Automotive 353 38
Slide 15: Distribution Segment Selected Financial Data
Distribution Segment Selected Financial Data • Sales decreased with revenues in $ MILLIONS Q1 2020 Q1 2019 CHANGE North America down 11% and international sales declining by 6%. Sales 1,814 2,001 (9)% • EBITDA margin as a percent of sales increased due to the benefits of our EBITDA 158 171 (8)% Nort
Slide 16: Components Segment Selected Financial Data
Components Segment Selected Financial Data • Sales in North America declined 24%, $ MILLIONS Q1 2020 Q1 2019 CHANGE driven by lower truck build rates, while revenues in international markets Sales 1,502 1,861 (19)% declined by 12% as a result of lower truck demand in Europe and India. EBITDA 279 325
Slide 17: Power Systems Segment Selected Financial Data
Power Systems Segment Selected Financial Data • Industrial sales declined 30% driven by $ MILLIONS Q1 2020 Q1 2019 CHANGE continued weakness in oil and gas and mining markets. Power generation sales decreased by 8%, with lower Sales 884 1,077 (18)% revenues in North America and international markets
Slide 18: New Power Segment Selected Financial Data
New Power Segment Selected Financial Data • EBITDA losses were $43 million for $ MILLIONS Q1 2020 Q1 2019 CHANGE the quarter driven by the development of new products and current low adoption rates of new Sales 10 3 +233% technology. EBITDA (43) (29) NM1 EBITDA (% of Sales) NM1 NM1 1 "NM" - not mean
Slide 19: Joint Venture Income - Quarter
Joint Venture Income - Quarter $ MILLIONS Q1 2020 Q1 2019 Engine 78 56 Distribution 21 11 Components 21 10 Power Systems 9 15 New Power — — Total JV Income 129 92 19
Slide 20: Cash Flow - Quarter
Cash Flow - Quarter $ MILLIONS Q1 2020 Q1 2019 Operating Cash Flow 379 412 Capital Expenditures 75 109 Working Capital Measure 4,436 4,900 Working Capital Measure 22.1% 20.4% (% of Net Sales) Debt to Capital % 29.5% 21.7% 20
Slide 21: Appendix
Appendix
Slide 22: Q1 2020 LTM Revenue by Segment
Cummins Inc. Q1 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 Q1 2020 LTM Results Sales: $22.6 billion EBITDA1: $3.5 billion EBITDA%1: 15.7% 1 Q4 201
Slide 23: Q1 2020 LTM Revenue by Marketing Territory
Cummins Inc. Q1 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 23
Slide 24: Joint Venture Sales Unconsolidated
Cummins - Joint Venture Sales Unconsolidated Q1 2020 LTM Revenue: * Rest of world 24
Slide 25: Engine Segment - Overview
Engine Segment - Overview ⦁ Diesel and natural gas engines from Q1 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 26: Engine Segment - Sales Mix
Engine Segment - Sales Mix Q1 2020 LTM Revenue: $9.6 billion 26
Slide 27: 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. 27
Slide 28: Engine Segment - Joint Venture Sales Unconsolidated
Engine Segment - Joint Venture Sales Unconsolidated Q1 2020 LTM Revenue 28
Slide 29: Distribution Segment - Overview
Distribution Segment - Overview Q1 2020 LTM Revenue by Product ⦁ Provide aftermarket support and increase solution-based revenue ⦁ Increasing network capabilities in emerging markets to capture profitable growth Q1 2020 LTM Results Sales: $7.9 billion EBITDA1: $680 million EBITDA%1: 8.6% 1 Q4 2019 E
Slide 30: Distribution Segment - Sales Mix
Distribution Segment - Sales Mix ⦁ Key enabler for Cummins growth ⦁ Benefiting from increased population of products in the field Q1 2020 LTM Revenue $7.9 billion 30
Slide 31: 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. 31
Slide 32: Distribution Segment - Joint Venture Sales Unconsolidated
Distribution Segment - Joint Venture Sales Unconsolidated Q1 2020 LTM Revenue * Rest of World 32
Slide 33: Components Segment - Overview
Components Segment - Overview Q1 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 34: Components Segment - Sales Mix
Components Segment - Sales Mix Q1 2020 LTM Revenue: $6.6 billion 34
Slide 35: 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. 35
Slide 36: Components Segment - Joint Venture Sales Unconsolidated
Components Segment - Joint Venture Sales Unconsolidated Q1 2020 LTM Revenue 36
Slide 37: Power Systems Segment - Overview
Power Systems Segment - Overview ⦁ Global provider of power generation Q1 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 Q1 2020 LTM Results Sales: $4.
Slide 38: Power Systems Segment - Sales Mix
Power Systems Segment - Sales Mix Q1 2020 LTM Revenue: $4.3 billion 38
Slide 39: Power Systems Segment - Historical Performance
Power Systems Segment - Historical Performance 1 1 Q4 2019 EBITDA excludes $12 million of restructuring charges. 39
Slide 40: Power Systems Segment - Joint Venture Sales Unconsolidated
Power Systems Segment - Joint Venture Sales Unconsolidated Q1 2020 LTM Revenue 40
Slide 41: 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 41
Slide 42: 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 42 1 Consolidated & JV sales with eliminations
Slide 43: Non-GAAP Reconciliation - EBITDA
Non-GAAP Reconciliation - EBITDA Three Months Ended In Millions 29-Mar-20 31-Mar-19 Net income attributable to Cummins Inc. $ 511 $ 663 Net income attributable to noncontrolling interests 17 6 Consolidated net income 528 669 Income tax expense 127 176 Income before taxes 655 845 Interest expense 23
Slide 44: Non-GAAP Reconciliation - EBITDA (LTM)
Non-GAAP Reconciliation - EBITDA (LTM) Twelve Months Ended In Millions 29-Mar-20 31-Mar-19 Net income attributable to Cummins Inc. $ 2,108 $ 2,479 Net income attributable to noncontrolling interests 19 52 Consolidated net income 2,127 2,531 Income tax expense 517 544 Income before taxes 2,644 3,075
Slide 45: Non-GAAP Reconciliation - Working Capital
Non-GAAP Reconciliation - Working Capital Three Months Ended In Millions 29-Mar-20 31-Mar-19 Accounts and notes receivable, net $ 3,505 $ 4,025 Inventories 3,579 3,893 Accounts Payable - (principally trade) (2,648) (3,018) Working capital measure $ 4,436 $ 4,900 Annualized Working capital measure (%
Slide 46: Non-GAAP Reconciliation - Net Assets
Non-GAAP Reconciliation - Net Assets In Millions 29-Mar-20 31-Mar-19 1-Apr-18 Total Assets $ 20,076 $ 19,846 $ 18,392 Less: Deferred debt costs 3 3 2 Less: Deferred tax assets 461 410 303 Less: Pension and other postretirement benefit adjustments excluded from net assets 60 51 163 Less: Liabilities
Slide 47: Non-GAAP Reconciliation - Invested Capital for ROIC
Non-GAAP Reconciliation - Invested Capital Used for Return on Invested Capital Calculation In Millions 29-Mar-20 31-Mar-19 1-Apr-18 Total Equity $ 8,018 $ 8,727 $ 8,296 Less: Defined benefit postretirement plans (732) (682) (681) Equity used for return on invested capital calculation 8,750 9,409 8,9
Slide 48: Non-GAAP Reconciliation - NOPAT for ROIC
Non-GAAP Reconciliation - Net Operating Profit After Taxes Used for Return on Invested Capital Calculation Twelve Months Ended In Millions 29-Mar-20 31-Mar-19 Net income attributable to Cummins Inc. $ 2,108 $ 2,479 Net income attributable to noncontrolling interests 19 52 Consolidated net income 2,1
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