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November 2017 Investor Presentation
PENTAIR Investor Presentation
November 2017
November 2017 Investor Presentation
FORWARD-LOOKING STATEMENTS CAUTION CONCERNING FORWARD-LOOKING STATEMENTS THIS PRESENTATION CONTAINS STATEMENTS THAT WE BELIEVE TO BE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT ARE FORWARD-LOOKING STATEMENTS. WITHOUT
LIMITATION, ANY STATEMENTS PRECEDED OR FOLLOWED BY OR THAT INCLUDE THE WORDS "TARGETS," "PLANS," "BELIEVES," "EXPECTS," "INTENDS," "WILL,"
"LIKELY," "MAY," "ANTICIPATES," "ESTIMATES," "PROJECTS," "SHOULD," "WOULD," "POSITIONED," "STRATEGY," "FUTURE" OR WORDS, PHRASES OR TERMS
OF SIMILAR SUBSTANCE OR THE NEGATIVE THEREOF, ARE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES
OF FUTURE PERFORMANCE AND ARE SUBJECT TO RISKS, UNCERTAINTIES, ASSUMPTIONS AND OTHER FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL,
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE
FACTORS INCLUDE THE ABILITY TO SATISFY THE NECESSARY CONDITIONS TO CONSUMMATE THE PLANNED SEPARATION OF OUR WATER BUSINESS AND
ELECTRICAL BUSINESS INTO TWO INDEPENDENT, PUBLICLY-TRADED COMPANIES (THE "PROPOSED SEPARATION") ON A TIMELY BASIS OR AT ALL; THE ABILITY
TO SUCCESSFULLY SEPARATE THE WATER AND ELECTRICAL BUSINESSES AND REALIZE THE ANTICIPATED BENEFITS FROM THE PROPOSED SEPARATION;
ADVERSE EFFECTS ON THE WATER AND ELECTRICAL BUSINESS OPERATIONS OR FINANCIAL RESULTS AND THE MARKET PRICE OF OUR SHARES AS A RESULT OF
THE ANNOUNCEMENT OR CONSUMMATION OF THE PROPOSED SEPARATION; UNANTICIPATED TRANSACTION EXPENSES, SUCH AS LITIGATION OR LEGAL
SETTLEMENT EXPENSES; FAILURE TO OBTAIN TAX RULINGS OR CHANGES IN TAX LAWS; CHANGES IN CAPITAL MARKET CONDITIONS; THE IMPACT OF THE
PROPOSED SEPARATION ON OUR EMPLOYEES, CUSTOMERS AND SUPPLIERS; OVERALL GLOBAL ECONOMIC AND BUSINESS CONDITIONS IMPACTING THE WATER
AND ELECTRICAL BUSINESSES; FUTURE OPPORTUNITIES THAT OUR BOARD MAY DETERMINE PRESENT GREATER POTENTIAL TO INCREASE SHAREHOLDER VALUE;
THE ABILITY OF THE WATER AND ELECTRICAL BUSINESSES TO OPERATE INDEPENDENTLY FOLLOWING THE PROPOSED SEPARATION; THE ABILITY TO ACHIEVE
THE BENEFITS OF OUR RESTRUCTURING PLANS; THE ABILITY TO SUCCESSFULLY IDENTIFY, FINANCE, COMPLETE AND INTEGRATE ACQUISITIONS; COMPETITION
AND PRICING PRESSURES IN THE MARKETS WE SERVE; THE STRENGTH OF HOUSING AND RELATED MARKETS; VOLATILITY IN CURRENCY EXCHANGE RATES AND
COMMODITY PRICES; INABILITY TO GENERATE SAVINGS FROM EXCELLENCE IN OPERATIONS INITIATIVES CONSISTING OF LEAN ENTERPRISE, SUPPLY
MANAGEMENT AND CASH FLOW PRACTICES; INCREASED RISKS ASSOCIATED WITH OPERATING FOREIGN BUSINESSES; THE ABILITY TO DELIVER BACKLOG AND
WIN FUTURE PROJECT WORK; FAILURE OF MARKETS TO ACCEPT NEW PRODUCT INTRODUCTIONS AND ENHANCEMENTS; THE IMPACT OF CHANGES IN LAWS AND
REGULATIONS, INCLUDING THOSE THAT LIMIT U.S. TAX BENEFITS; THE OUTCOME OF LITIGATION AND GOVERNMENTAL PROCEEDINGS; AND THE ABILITY TO
ACHIEVE OUR LONG-TERM STRATEGIC OPERATING GOALS. ADDITIONAL INFORMATION CONCERNING THESE AND OTHER FACTORS IS CONTAINED IN OUR FILINGS
WITH THE SEC, INCLUDING OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2017. ALL FORWARD-LOOKING STATEMENTS
SPEAK ONLY AS OF THE DATE OF THIS PRESENTATION. PENTAIR PLC ASSUMES NO OBLIGATION, AND DISCLAIMS ANY OBLIGATION, TO UPDATE THE INFORMATION
CONTAINED IN THIS PRESENTATION.
2
November 2017 Investor Presentation
Industry-Leading, Pure-Play Companies; Strong Financial Profiles 3
SEPARATION OF PENTAIR INTO TWO PUBLICLY-TRADED COMPANIES
WATER ELECTRICAL
A Leading Global Water Company Focused on Smart, Sustainable Water and Fluid
Processing Applications
A High-Performance Electrical Company Focused on Improving Utilization, Lowering
Costs, and Maximizing Customer Uptime
2017F Revenue: ~$2.1B 2017F ROS: ~22%
2017F Revenue: ~$2.8B 2017F ROS: ~19%
SUSTAINABILITY Maximizing the Use of the Resources People
Rely on Most
Connecting & Protecting Critical Processes, People,
and the Environment
CONNECTION & PROTECTION
November 2017 Investor Presentation 4
RATIONALE OF SEPARATION
The Next Step in the Evolution of Pentair
RATIONALE
FOUNDATION
STRATEGIC FOCUS
Improved Clarity into Performance and Growth Opportunities
CAPITAL ALLOCATION FLEXIBILITY
Unique Strategies to Deliver Growth for Each
FINANCIAL STRENGTH
Supports Plan to be Successful, Profitable, and Sustainable
PIMS
Pentair’s “Business System”
MANAGEMENT TEAM
Mix of Current & New Executives and Board Members to Lead
CAPITAL STRUCTURE
Expect Strong Balance Sheet and Investment Grade Metrics
November 2017 Investor Presentation 5
February 2018 Pentair and nVent Investor Meetings
SEPARATION UPDATE
We are Prepared to Stand Up Two Well Positioned Companies
April 2018 Report Q1’18 Earnings Results
Q2 2018 Expect nVent Spin to be Complete
January 2018 Report Q4’17 Results and Initial 2018 Outlook
October 2017 Filed Form 10 for nVent
May 2017 Announced Plan to Separate Water and Electrical
November 2017 Investor Presentation 6
PIMS IS KEY TO DRIVING HIGH PERFORMANCE
Our Standard Operating Model Across the Enterprise
PIMS PENTAIR INTEGRATED
MANAGEMENT SYSTEM
Rapid Growth Process 3D Innovation
Commercial Excellence
- TALENT & CULTURE -
Talent Mgmt. Org. Development “Win Right” Values
- LEAN ENTERPRISE -
Standard Work Creating Flow
Strategy Deployment
- GROWTH -
November 2017 Investor Presentation 7
DRIVING SHAREHOLDER VALUE
Pulling All Levers to Create Shareholder Value
ORGANIC GROWTH
Being in the Right Markets to Drive
Sustainable & Predictable Growth
MARGIN EXPANSION
Productivity Through PIMS and Sustainable
EPS Growth
FCF & CAPITAL ALLOCATION
Dividends, Accretive Acquisitions,
and Opportunistic Buybacks
November 2017 Investor Presentation
Residential
8
WATER BUSINESS
A Leader in Residential & Commercial Water Treatment
Infrastructure 11%
Industrial 6%
Company Characteristics Leadership
Vertical Markets Strategic Business Groups Geographies
US & Canada
65%
Developing
17%
Western Europe
13%
Other Developed 5%
56% Infrastructure
8%
Filtration & Process
35%
Aquatic Systems
33%
Flow Technologies
32%
Commercial 19%
Industrial 17%
• Industry-Leading Positions and Strong Brands
•Focused on Smart, Sustainable Water and Fluid Processing Applications
•Attractive Margin Profile
•Strong Free Cash Flow Generation
David Jones, Chairman
John Stauch, President & CEO
Karl Frykman, COO
Mark Borin, CFO
2017 Forecast
19% ROS
~$2.8B Revenue
November 2017 Investor Presentation 9
FILTRATION & PROCESS
A Leader in Residential & Commercial Filtration with Niche Industrial
2017 Forecasted Financials
Provides Innovative and Sustainable Solutions that Improve Water Quality, Beverage Systems, and Environmental Efficiency in a World with Limited Access to Healthy Sources of Drinking and Process Water
Description
Vertical Markets Geographies
High Teens ROS
~$1.0B Revenue
Infrastructure 11%
Industrial 6%
US & Canada
45% Other Developed 6%
Western Europe
21%
Developing
28% Residential
38%
Industrial & Infrastructure
42%
20%
Commercial
November 2017 Investor Presentation 10
AQUATIC SYSTEMS
A Leader in North America Pool
2017 Forecasted Financials
Provides Advanced, Efficient Technology, Expertise, and Service to Build Intimacy with Pool Professionals and Ensure Pool Owners Maximize Their Enjoyment
Description
Vertical Markets Geographies
>20% ROS
~$900M Revenue
Infrastructure 11%
Industrial 6%
US & Canada
86%
Western Europe
4%
Developing
8%
Residential
89%
11%
Commercial
Other Developed
2%
November 2017 Investor Presentation 11
FLOW TECHNOLOGIES
A Leader in Residential & Commercial Flow
2017 Forecasted Financials
Provides a Full Range of Best in Class Solutions for Water Supply, Disposal, and Movement Through a Dedicated Global Network of Sales, Service, and Support
Description
Vertical Markets Geographies
Mid Teens ROS
~$900M Revenue
Infrastructure 11%
Industrial 6%
US & Canada
64% Other Developed 6%
Western Europe
15%
Developing
15% Commercial & Infrastructure
33%
Residential/ Irrigation
50%
17%
Specialty
November 2017 Investor Presentation 12
Investing in our Strengths
• Increase Pool Content through New Product Introductions • Increase Connected Products • Build Further Channel Intimacy
PROTECT & GROW AQUATICS
• Create Water Filtration Franchise • Increase Connected Products • Look to Build/Add Service Capabilities
EXPAND RESIDENTIAL & COMMERCIAL FILTRATION
• Grow Point of Use Sales in China • Expand Foodservice Presence in China • Target Hospitality Market in SE Asia
ACCELERATE CHINA & SE ASIA INVESTMENT
COMPANY STRATEGY
TOP STRATEGIC PRIORITIES
November 2017 Investor Presentation
Industrial
13
ELECTRICAL BUSINESS
A High-Performance Electrical Company Focused on Connection and Protection
Infrastructure 11%
Industrial 6%
Company Characteristics Leadership
Vertical Markets Strategic Business Groups Geographies
US & Canada
65%
Western Europe
22%
Developing
11% Other Developed 2%
44% Infrastructure 12%
Enclosures
45%
Thermal Management
30%
Electrical & Fastening Solutions
25%
Commercial 28%
Energy 16%
• Industry-Leading Positions and Strong Brands
•Focused on Improving Utilization, Lowering Costs, and Maximizing Customer Uptime
•Attractive Margin Profile
•Strong Free Cash Flow Generation
Randall Hogan, Chairman
Beth Wozniak, CEO
Stacy McMahan, CFO
2017 Forecast
22% ROS
~$2.1B Revenue
November 2017 Investor Presentation 14
ENCLOSURES
A Leader in North American Enclosures
2017 Forecasted Financials
Provides Innovative Solutions That Protect, Connect, and Manage Heat in Critical Electronics, Communication, Control, and Power Equipment
Description
Vertical Markets Geographies
High Teens ROS
~$900M Revenue
Infrastructure 11%
Industrial 6%
US & Canada
70% Other Developed 2%
Developing
10%
Western Europe
18%
Infrastructure
19%
Industrial
60%
11%
Commercial
10%
Energy
November 2017 Investor Presentation 15
THERMAL MANAGEMENT
A Leader in Electric Heat Trace, both Industrial and Commercial
2017 Forecasted Financials
Provides Electric Thermal Solutions that Connect and Protect Critical Buildings, Infrastructure, Industrial Processes, and People
Description
Vertical Markets Geographies
>20% ROS
~$600M Revenue
Infrastructure 11%
Industrial 6%
US & Canada
54% Other Developed 2%
Developing
14%
Western Europe
30%
Energy
31%
Industrial
41%
28%
Commercial
November 2017 Investor Presentation 16
ELECTRICAL & FASTENING SOLUTIONS
Strong Positions in Commercial and Infrastructure Solutions
2017 Forecasted Financials
Provides Fastening Solutions that Connect and Protect Electrical and Mechanical Systems and Civil Structures
Description
Vertical Markets Geographies
>20% ROS
~$550M Revenue
Infrastructure 11%
Industrial 6%
US & Canada
70% Other Developed 2%
Developing
10%
Western Europe
18%
Industrial
19%
Commercial
57%
14%
Infrastructure
10%
Energy
November 2017 Investor Presentation 17
Driving Focused Growth Initiatives
• Digital Marketing • Driving Velocity • Improving the Customer Experience
ONE nVENT
• New Products and Solutions • Aligned Go-to-Market • Expanded Offerings with Connected and Prefab Solutions
INDUSTRIAL / COMMERCIAL / INFRASTRUCTURE
• Local Marketing and Sales • Local Product Offerings • Expand Distribution Channels
GROW IN EMEA AND FAST GROWTH REGIONS
COMPANY STRATEGY
TOP STRATEGIC PRIORITIES
November 2017 Investor Presentation 18
SUMMARY
Opportunity to Create Significant Value
Focus and Scaled Investments Should Accelerate Growth
We Have Great Growth Opportunities and Strong Processes
We Have Great People Running Great Businesses in Great Markets
Remain Disciplined in Our Capital Allocation
November 2017 Investor Presentation 19
APPENDIX GAAP to Non-GAAP Measurements & Reconciliations
November 2017 Investor Presentation 20
Q4’17 FINANCIAL OUTLOOK (YoY)
SUMMARY
Q4'17 PENTAIR OUTLOOK
• Residential and Short Cycle Industrial Strength Expected to Continue
• Productivity and Cost Out Actions Continue … Material Inflation Expected to Moderate
• Free Cash Flow Expected to be Seasonally Strong
Q4'17 Q4'16 Sales
Op. Income Seg. Income ROS
EPS (Rpt.)
EPS (Adj.)
~$1.24B
~$202M
~$227M
~18%
~$0.82
~$0.93
$1.19B
$162M
$204M
17.2%
$0.60
$0.78
Expect Continued Top Line, Margin, and EPS Strength
Adj. EPS Up ~19%
• Tax Rate of ~20%
• Net Interest ~$14M; Shares ~184M
Q4 Free Cash Flow Expected to be Strong and In Line with Seasonality
Adjusted Core Sales Up ~2%
• Water Up ~2%
• Electrical Up ~2%
Segment Income Up ~11%
ROS ~18% … Up ~80 bps
• Water ~19%
• Electrical ~21%
November 2017 Investor Presentation 21
FY'17 FINANCIAL OUTLOOK (YoY)
SUMMARY
FULL YEAR 2017 PENTAIR OUTLOOK
FY'17 FY'16 Sales
Op. Income Seg. Income ROS
EPS (Rpt.)
EPS (Adj.)
~$4.9B
~$745M
~$898M
~18%
~$2.41
~$3.53
$4.9B
$701M
$840M
17.2%
$2.47
$3.05
Adj. EPS Up ~16%
• Tax Rate of ~20%
• Net Interest ~$88M; Shares ~184M
Targeting Free Cash Flow ~100% of Adjusted Net Income
Adjusted Core Sales Up ~2%
• Water Up ~1%
• Electrical Up ~2%
Segment Income Up ~7%
ROS ~18% … Up ~100 bps
• Water ~19%
• Electrical ~22%
Building Momentum Exiting 2017
• Adjusted Core Sales Expected to Grow in Both Segments for the Full Year
• Margins Expected to Benefit from Growth Leverage and Improved Productivity
• Balance Sheet Significantly Improved and Cash Flow Strength
November 2017 Investor Presentation 22
REPORTED TO ADJUSTED 2017 RECONCILIATION
First Second Third
Quarter Quarter Quarter
Total Pentair
Net sales 1,183.5$ 1,265.3$ 1,226.8$ approx 1,238$ approx 4,914$
Operating income 138.4 212.8 192.2 approx 202 approx 745
% of net sales 11.7% 16.8% 15.7% approx 16% approx 15%
Adjustments:
Restructuring and other 20.9 17.4 4.9 approx — approx 43
Intangible amortization 24.0 24.6 24.6 approx 25 approx 99
Separation costs — — 9.9 approx — approx 10
Equity income of unconsolidated subsidiaries 0.2 0.4 0.3 approx — approx 1
Segment income 183.5 255.2 231.9 approx 227 approx 898
% of net sales 15.5% 20.2% 18.9% approx 18% approx 18%
Net income from continuing operations—as reported 80.7 68.3 127.1 approx 151 approx 442
Loss on sale of business — — 3.8 approx — approx 4
Loss on early extinguishment of debt — 101.4 — approx — approx 101
Adjustments to operating income 44.9 42.0 39.4 approx 25 approx 152
Income tax adjustments (6.9) (27.8) 4.1 approx (5) approx (51)
Net income from continuing operations—as adjusted 118.7$ 183.9$ 174.4$ approx 171$ approx 648$
Continuing earnings per ordinary share—diluted
Diluted earnings per ordinary share—as reported 0.44$ 0.37$ 0.69$ approx 0.82$ approx $2.41
Adjustments 0.21 0.63 0.26 approx 0.11 approx 1.12
Diluted earnings per ordinary share—as adjusted 0.65$ 1.00$ 0.95$ approx 0.93$ approx $3.53
In millions, except per-share data
Actual
Pentair plc and Subsidiaries
Reconciliation of the GAAP year ended December 31, 2017 to the non-GAAP
excluding the effect of 2017 adjustments (Unaudited)
Fourth
Quarter
Full
Year
Forecast
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