PENTAIR 2017 Electrical Products Group Conference
PentairElectrical Products Group Conference
Randall J. HoganChairman & Chief Executive Officer
May 22, 2017
PENTAIR 2017 Electrical Products Group Conference
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This press release 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,
including, but not limited to, statements that relate to the intent to create two independent companies following the proposed
separation, the anticipated benefits of the proposed separation, the tax-free nature of the proposed separation, the expected
credit profiles of the independent companies, and the expected timing of the proposed separation. 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 our ability to satisfy the necessary conditions to consummate the proposed
separation on a timely basis or at all; our ability to successfully separate the two companies and realize the anticipated benefits
from the proposed separation; adverse effects on the two companies’ 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 businesses of the two companies; future opportunities that our board may determine
present greater potential to increase shareholder value; and the ability of the two companies to operate independently
following the proposed separation. Additional information concerning these and other factors is contained in our filings with
the U.S. Securities and Exchange Commission, including in our 2016 Annual Report on Form 10-K. All forward-looking
statements speak only as of the date of this press release. We assume no obligation, and disclaim any obligation, to update the
information contained in this press release.
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FORWARD-LOOKING STATEMENTS
PENTAIR 2017 Electrical Products Group Conference 3
• Except as Otherwise Noted All References to 2017 and 2016 Represent Our Results fromContinuing Operations for the Period Indicated, Presented on an Adjusted Basis
• "Core Sales" Refers to GAAP Revenue from Continuing Operations Excluding (1) the Impact ofCurrency Translation and (2) the Impact of Revenue from Acquired Businesses Recorded Prior tothe First Anniversary of the Acquisition Less the Amount of Sales Attributable to Divested ProductLines Not Considered Discontinued Operations
• “Adjusted Core Sales” Represents “Core Sales” Excluding the Impact of 3 Large Canadian Oil SandsJobs in Electrical and 1 Large Dairy Job in Water
• Segment Income Represents Equity Income of Unconsolidated Subsidiaries and Operating Incomefrom Continuing Operations Exclusive of Non-Cash Intangible Amortization, Certain AcquisitionRelated Expenses, Costs of Restructuring Activities, "Mark-to-Market" Gain (Loss) for Pension andOther Post-Retirement Plans, Impairments, and Other Unusual Non-Operating Items
• Return on Sales ("ROS") Equals Segment Income Divided by Sales
• See Appendix for GAAP to Non-GAAP Reconciliations
KEY DEFINITIONS
PENTAIR 2017 Electrical Products Group Conference
Industry-Leading, Pure-Play Companies; Strong Brands & Financial Profiles
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SEPARATION OF PENTAIR INTO TWO PUBLICLY-TRADED COMPANIES
WATER ELECTRICAL
A Leading Global Water Company Focusedon Smart, Sustainable Water and Fluid
Processing Applications
A High-Performance Electrical CompanyFocused on Improving Utilization, Lowering
Costs and Maximizing Customer Uptime
2016 Revenue: ~$2.1B2016 ROS: ~21%
2016 Revenue: ~$2.8B2016 ROS: ~18%
SUSTAINABILITYMaximizing the Use ofthe Resources People
Rely on Most
Protecting CriticalProcesses, People
and the Environment
PROTECTION
PENTAIR 2017 Electrical Products Group Conference 5
STRATEGIC RATIONALE FOR SEPARATION
Creates Two Market-Leading, Pure-Play Public Companieswith Attractive Financial Profiles and Compelling MarketOpportunities; PIMS the Foundation of Both Companies
Market-Leading,Pure-Plays
Enables Enhanced Strategic Focus and Simplified CorporateStructure with Improved Clarity into Business Performanceand Growth Opportunities
Simplified &Focused Structure
Greater Flexibility to Pursue Their Own Strategies for Growthand Capital Allocation, Both Organic and through Acquisitions
Greater Ability toInvest in HighROI Growth
Both Businesses Expected to be Well-Capitalized and have theFinancial Profile and Management Talent to be Successful,Profitable and Sustainable Independent Companies
Strong FinancialPositioning
Enhanced Strategic & Operational Focus to Drive Shareholder Value
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SEPARATION TRANSACTION OVERVIEW
TransactionStructure
• Tax-Free Spin-Off of Electrical Business to Pentair Shareholders
• Water Expected to Maintain Pentair’s Existing Incorporation, Tax Residency,Name and Ticker Symbol
• Electrical to Become a New Publicly-Traded Company
• Electrical Anticipated to have Similar Incorporation and Tax Residency
Timing &Approvals
• Separation Expected to be Completed in the Second Quarter of 2018
• Subject to Market, Regulatory and Other Customary Conditions
CapitalStructure
• Capitalize Both Businesses to Support Long-Term Growth Objectives
• Expect Strong Balance Sheet and Investment Grade Credit Ratingsfor Both Businesses
ExpectedManagement
WATERCEO John Stauch
COO Karl FrykmanChairman David Jones
ELECTRICAL
CEO Beth Wozniak
Chairman Randall Hogan
Separation Costs • Expect One-Time Separation Costs and Fees of ~$100-$125 Million
Expect Transaction to be Completed in Second Quarter of 2018
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STRONG CULTURE SERVES AS FOUNDATION
DRIVEN BY PURPOSE LED BY VISION
Be the Next Great Industrial CompanyDestination Company for Customers,
Top Talent and Shareholders
GUIDED BY PROCESS
STRATEGIC PRINCIPLESInvest in Attractive Markets: Where We Compete
Control Our Destiny: How We Compete
OPERATING PRINCIPLES (PIMS)Growth MethodologyTalent Management
Lean Enterprise
UNITED BY OUR WIN RIGHT VALUES
WINCustomer First
Accountability for PerformanceInnovation and Adaptability
RIGHTPositive Energy
Respect and TeamworkAbsolute Integrity
We Are the Heart of ProgressWe Build a Safer, More Sustainable
World From the Inside Out
Creating Two Companies Driven by Pentair’s Values & DNA
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2016 Financials
Business Distribution
Geography Global Themes
63%
14%
18%
13%
87%
Water Quality& Availability
NorthAmerica
Europe
FastGrowth
Asia5%
Revenue: ~$2.8B
Return on Sales (ROS): ~18%
Food & BeverageProcessing15%
Water Quality& Availability
85%
John Stauch, CEOKarl Frykman, COODavid Jones, Chairman
Leadership
Company Characteristics
• Industry-Leading Positions and Strong Brands• Focused on Smart, Sustainable Water and
Fluid Processing Applications• Attractive Margin Profile• Strong Free Cash Flow Generation
Strategic Business Groups
Filtration & Process (Revenue ~$1.0B)
Flow Technologies (Revenue ~$0.9B)
Aquatic & Env. Systems (Revenue ~$0.9B)
A Leading Global Water Company
WATER OVERVIEW
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ALIGNED AROUND GLOBAL THEMES
Maximizing the Use of Resources People Rely on Most
$30B Addressable Segment $7B Addressable Segment
Residential• Home POE/POU• Pools & Spas• Well/Irrigation
OEM AgriculturalSolutions
Commercial• Building Solutions• Hospitality• POU Foodservice
Aquaculture
Industrial• Waste Water• General Industrial• Treatment• Power
Beverage, Dairy &Biogas solutions
Water Quality & Availability Food & Beverage Processing
Reduce, Recover and Reuse Water,While Requiring Less Energy
Increase Yield and Decrease Cost, Waste, Energy Useand Water Consumption – All While Maintaining
Taste and Quality
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WATER GROWTH OPPORTUNITIES
Prioritized Investment Should Accelerate Growth
OEMSolutions
Beverage, Dairy,& Biogas
WaterFiltration
Enjoyment
• Residential Water
• Commercial Water
• Global Filtration
• Industrial Fluid Processing
Opportunities
• Digital Customer Experience
• “Smart” Products
• Solutions and Services
Enablers
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2016 Financials
Business Distribution
Geography Global Themes
Revenue: ~$2.1B
Return on Sales (ROS): 21%
Beth Wozniak, CEORandall Hogan, Chairman
Leadership
Company Characteristics
• Industry-Leading Positions and Strong Brands• Focused on Improving Utilization, Lowering
Costs and Maximizing Customer Uptime• Attractive Margin Profile• Strong Free Cash Flow Generation
Strategic Business Groups
Enclosures (Revenue ~$0.9B)
Thermal Management (Revenue ~$0.7B)
Electrical & Fastening Sol. (Revenue ~$0.5B)
A High-Performance Electrical Company
ELECTRICAL OVERVIEW
67%
20%
11%NorthAmerica
Europe
FastGrowth
Asia2%
40%
60%
IndustrialEfficiency
BuildingProtection
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ALIGNED AROUND GLOBAL THEMES
Protecting Critical Processes, People and the Environment
$19B Addressable Segment $28B Addressable Segment
ElectronicsProtection
EquipmentProtection
Rail & BuildingProtection
Pipe Freeze &Protection
Fastening,Grounding &Bonding
IndustrialEnclosures
Building Protection Industrial Process & Efficiency
Protect Sensitive Equipment, Buildings and CriticalProcesses; Keep People Safe
Improve Utilization, Lower Costs and MaximizeUptime for Customers
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ELECTRICAL GROWTH OPPORTUNITIES
• Commercial Building Solutions
• Data Centers and Networking
• Electrical Protection Systems
• Infrastructure and Industrial
Opportunities
• Digital Customer Experience
• “Smart” Products
• Solutions and Services
Enablers
Electrical Protection Systems
Data Center Infrastructure
Thermal Pipe Freeze Protection
Electrical Fastening Systems
Prioritized Investment Should Accelerate Growth
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NEXT STEPS
Creating Two Industry-Leading, Pure Play Companies
• Preparation of Financial Statements and Form 10
• Various Closing Conditions, Including:
‒ SEC Review of Form 10
‒ Receipt of Tax Opinions and Rulings
• No Shareholder Vote Required
• Final Board of Directors Approval and Action to DeclareRecord and Distribution Dates
• Anticipated Completion by Q2-2018
PENTAIR 2017 Electrical Products Group Conference 15
SUMMARY
Opportunity to Create Significant Value
Focus and Scaled Investments Should Accelerate Growth
Reaffirm Our Q2 and Full Year 2017 Outlook
We Have Great Growth Opportunities
We are Aligned Around Attractive Global Themes
We Have Great Businesses
Remain Disciplined in Our Capital Allocation
PENTAIR 2017 Electrical Products Group Conference
PENTAIR 2017 Electrical Products Group Conference
APPENDIXGAAP to Non-GAAP Measurements & Reconciliations
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Q2'17 PENTAIR OUTLOOKQ2’17 FINANCIAL OUTLOOK (YoY)
SUMMARY
• Seasonally Important Quarter for ourResidential & Commercial Water Businesses
• Watching Short Cycle Industrial Closely to Seeif Q1 Trends are Sustainable
• Productivity and Cost Out ActionsAccelerating … Material Inflation RemainsHeadwind to Monitor
Q2'17 Q2'16Sales
Op. IncomeSeg. Income
ROS
EPS (Rpt.)
EPS (Adj.)
~$1.24B
~$227M
~$250M
~20%
$0.87 - $0.89
$0.97 - $0.99
$1.30B
$203M
$241M
18.5%
$0.73
$0.88
Expecting Seasonal Q2 EPS Strength Consistent with Historical Trends
Adj. EPS Up ~11%
• Tax Rate of ~20%
• Net Interest ~$24M; Shares ~183M
Q2 Free Cash Flow Expected to Be StrongConsistent With Historical Seasonality
Adjusted Core Sales Down ~1%
• Water ~Flat
• Electrical Down ~1%
Segment Income Up ~4%
ROS ~20% … Up >150 bps
• Water ~21%
• Electrical ~23%
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FULL YEAR 2017 PENTAIR OUTLOOKFY'17 FINANCIAL OUTLOOK (YoY)
SUMMARY
• Impact of 2016 Large Jobs Creates TopLine Headwind
• Strong Margin Expansion Expected Driven byStrong Productivity, Cost Out Actions, andImproved Mix
• EPS Growth Expected from Base Business andLower Interest Expense
FY'17 FY'16Sales
Op. IncomeSeg. Income
ROS
EPS (Rpt.)
EPS (Adj.)
~$4.8B
~$765M
~$880M
~18%
$2.95 - $3.05
$3.45 - $3.55
$4.9B
$701M
$840M
17.2%
$2.47
$3.05
Adj. EPS Up ~15%
• Tax Rate of ~20%
• Net Interest ~$85M; Shares ~183M
Free Cash Flow ~100% of Adjusted Net Income
Adjusted Core Sales ~Flat
• Water Up ~1%
• Electrical ~Flat
Segment Income Up ~5%
ROS ~18% … Up >100 bps
• Water ~19%
• Electrical ~23%
Maintaining Full Year Forecast … Will Assess Following Q2
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REPORTED TO ADJUSTED 2017 RECONCILIATION
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REPORTED TO ADJUSTED 2016 RECONCILIATION
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2015-2017 SBG SEGMENTATION (NET SALES)
($Ms) WATER ELECTRICAL PENTAIR
2015 2015 2015
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
Total 652$ 759$ 682$ 715$ 2,808$ Total 396$ 407$ 432$ 574$ 1,809$ Total 1,048$ 1,167$ 1,113$ 1,289$ 4,616$
F&P 238 260 261 265 1,024 Enclosures 243 253 236 230 962
Flow Tech 242 261 241 233 977 Thermal 153 155 184 211 703
AES 177 242 183 222 824 EFS 0 0 13 134 147
2016 2016 2016
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
Total 666$ 762$ 668$ 682$ 2,778$ Total 525$ 541$ 543$ 508$ 2,116$ Total 1,190$ 1,301$ 1,211$ 1,188$ 4,890$
F&P 234 267 242 243 985 Enclosures 225 238 235 212 911
Flow Tech 238 250 237 204 929 Thermal 179 162 174 177 692
AES 198 250 194 240 882 EFS 120 141 134 118 513
2017 2017 2017
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
Total 683$ 683$ Total 502$ 502$ Total 1,183$ -$ -$ -$ 1,183$
F&P 237 237 Enclosures 227 227
Flow Tech 231 231 Thermal 150 150
AES 224 224 EFS 130 130
PENTAIR 2017 Electrical Products Group Conference 23
FILTRATION & PROCESS (2016 SALES - $1.0B)
Investing in Residential Point of Use Systems
GEOGRAPHIC DISTRIBUTION
VERTICAL DISTRIBUTION APPLICATIONS
We Provide Innovative and SustainableSolutions that Improve Water Quality, Beverage
System & Environmental Efficiency in a Worldwith Limited Access to Healthy Sources of
Drinking & Process Water.
~40%~25%
~30%
NorthAmerica
Europe
FastGrowth
Asia~5%
40%25%
30%
IndustrialEurope
FastGrowth
Asia5%
~40%~40%
Resi &Commercial
Food &Beverage
Infrastructure Industrial
~10% ~10%
VALUE PROPOSITION
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FLOW TECHNOLOGIES (2016 SALES $0.9B)
Positioned for Profitable Growth
VALUE PROPOSITION
APPLICATIONS
We Provide a Full Range of Best in Class Solutionsfor Water Supply and Disposal Through a
Dedicated Global Network andDirect to the End Customer.
Agriculture Water Supply &Disposal
FireSuppression
GEOGRAPHIC DISTRIBUTION
VERTICAL DISTRIBUTION
~65%
~15%
~15%
NorthAmerica
Europe
FastGrowth
Asia~5%
40%25%
30%
IndustrialEurope
FastGrowth
Asia5%
~50%
~15%Resi &
Commercial
Food &Beverage
Industrial~20%
Infrastructure
~15%
PENTAIR 2017 Electrical Products Group Conference 25
AQUATIC & ENVIRONMENTAL SYSTEMS (2016 SALES - $0.9B)
Capitalizing with Innovative Technology
VALUE PROPOSITION
APPLICATIONS
We Provide Advanced, Efficient Technology andExpertise to the Swimming Pool and AquacultureIndustries to Ensure Their Profitable Operations.
GEOGRAPHIC DISTRIBUTION
VERTICAL DISTRIBUTION
~90%
~10%North
America
FastGrowth
40%25%
30%
IndustrialEurope
FastGrowth
Asia5%
~95%
~5%
Resi &Commercial
Food & Beverage
PENTAIR 2017 Electrical Products Group Conference 26
ENCLOSURES (2016 SALES - $0.9B)
Protecting Critical Automation and Equipment
VALUE PROPOSITION
APPLICATIONS
We Protect Critical Electronics, Communication,Control And Power Equipment Through A Broad
Portfolio Of Innovative Solutions. We OfferSuperior Customer Support With Our
Applications Expertise.
Industrial Enclosures Air to Air Heat Exchangers
Indoor & Outdoor Cabinets Electronics Subracks
GEOGRAPHIC DISTRIBUTION
VERTICAL DISTRIBUTION
~70%
~20%
~10%
NorthAmerica
Europe
FastGrowth
40%25%
30%
IndustrialEurope
FastGrowth
Asia5%
~10%
~10%
Resi &Commercial
Energy
Infra-structure
Industrial~25%
~55%
PENTAIR 2017 Electrical Products Group Conference 27
THERMAL MANAGEMENT (2016 SALES - $0.7B)
Growth through End User Focus Leading to Value Creation
VALUE PROPOSITION
APPLICATIONS
We Protect Critical Building and IndustrialProcesses by Providing Heat Management
Solutions that are Highly Reliable and Easy toInstall. We Provide Lower Total Cost ofOwnership to Building Owners, FacilityManagers, Operators and End Users.
INDUSTRIAL HEATTRACING SOLUTIONS
THERMAL BUILDINGSOLUTIONS
Oil and GasChemical
PetrochemicalPower Generation
CommercialResidential
GEOGRAPHIC DISTRIBUTION
VERTICAL DISTRIBUTION
~60%
~25%
~10%
NorthAmerica
Europe
FastGrowth
Asia~5%
40%25%
30%
IndustrialEurope
FastGrowth
Asia5%
~25%
~40%
Resi &Commercial
Energy Industrial~35%
PENTAIR 2017 Electrical Products Group Conference 28
ELECTRICAL & FASTENING SOLUTIONS (2016 SALES - $0.5B)
Strong Brands with Demonstrated Growth Capacity
VALUE PROPOSITION
APPLICATIONS
We Protect Electrical and Mechanical Systemsand Civil Structures through Engineered
Fastening Solutions that Reduce Total Cost ofOwnership and Increase Design Flexibility by
Providing Innovative Products through GlobalEnd User Application Expertise and Intimacy.
Ind, Comm, Energy &Infrastructure
Commercial
Infrastructure,Commercial & Energy
Industrial
GEOGRAPHIC DISTRIBUTION
VERTICAL DISTRIBUTION
~70%
~20%
~10%
NorthAmerica
Europe
FastGrowth
40%25%
30%
IndustrialEurope
FastGrowth
Asia5%
~55%
~10%
Resi &Commercial
Energy
Infrastructure
Industrial~15%
~20%