Zurn Elkay Water Solutions Corporation · NYSE:ZWS
Zurn Elkay Water Solutions — Rexnord — Q3 FY2020 Earnings Presentation
18 slides from Zurn Elkay Water Solutions's earnings presentation, Jan 29, 2020
Slide 1: Third Quarter Fiscal Year 2020 Financial Results
THIRD QUARTER FISCAL YEAR 2020 FINANCIAL RESULTS January 29, 2020
Slide 2: Cautionary Statement Under the Private Securities Litigation Reform Act
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT This presentation and discussion contains certain forward-looking statements that are subject to the Safe Harbor and Cautionary language contained in the press release we issued on January 28, 2020, as well as other factors that
Slide 3: Strategic Update
STRATEGIC UPDATE Consolidated Rexnord • 3Q net sales increase +1% year over year, core growth(1) +1%; Adjusted EBITDA(1) +4% yr/yr at $107 million • Simplification initiatives reduce sales growth by approximately 150 bps year over year Water Management • 3Q net sales increase +4% year over year, cor
Slide 4: Rexnord's Underlying Return on Invested Capital
REXNORD’S UNDERLYING RETURN ON INVESTED CAPITAL(1) $ millions Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 2006 LBO change-of-control premium resulted in $1.723 billion of goodwill & intangibles Total Debt 1,312 1,238 1,265 1,251 1,149 1 Adjust debt by unamortized portion of intangible assets Goodwill Intangi
Slide 5: Significant Portfolio Transition Toward Growth
SIGNIFICANT PORTFOLIO TRANSITION TOWARD GROWTH Rexnord Corporation 5
Slide 6: Value Creation Levers
VALUE CREATION LEVERS (1) Adjusted EBITDA, Free Cash Flow, Net Debt Leverage Ratio are non-GAAP measures and are defined in our SEC filings. Data in future periods are estimated and subject to change. (2) SCOFR = Supply Chain Optimization & Footprint Repositioning initiatives. Rexnord Corporation 6
Slide 7: Benchmarking vs Premier Industrials
BENCHMARKING VS PREMIER INDUSTRIALS 3-Year CAGR EV/EBITDA Adjusted Yr 1 Revenue EBITDA(1) Consensus Rexnord 6.4% 10.6% 10.6x Comp I 7.0% 8.5% 18.0x Comp II 6.7% 7.8% 18.2x Comp III 5.8% 8.9% 18.8x Average Comp ROIC = 17.2% Comp IV 2.1% 10.7% 15.2x Comp V 2.1% 6.4% 14.9x source: Company reports, Rexn
Slide 8: Illustrating Our Competitive Advantage
ILLUSTRATING OUR COMPETITIVE ADVANTAGE source: Company reports, Rexnord estimates. Enterprise Value = Market value of equity + total debt – cash & equivalents. Margins are L12M through September 2019 to aid comparability. (1) Non-GAAP measure defined, reconciled, and discussed in the earnings releas
Slide 9: Enhanced Capital Allocation Strategy
ENHANCED CAPITAL ALLOCATION STRATEGY Maintain net debt leverage ratio in 2x – 3x range • Strong free cash flow profile supports moderate financial leverage Initiate $0.08 / share quarterly common stock dividend = approximately 1.0% yield • Annual increases in dividend rate are anticipated Allocate $
Slide 10: Financial Update
FINANCIAL UPDATE Third Quarter Fiscal Year 2020 • Adjusted EBITDA(1) of $107 million increased +4% year over year • Net sales increased +1% year over year • Acquisitions increased sales by +1% • Foreign currency translation decreased sales by (1%) • Core sales(1) increased +1% year over year • Dilut
Slide 11: Fiscal Year 2020 Outlook
FISCAL YEAR 2020 OUTLOOK • Core sales growth(1) in low single-digit percentage range, net of 8020 PLS impact • 8020 PLS (product line simplification) to be approximately 150 bps headwind • Adjusted EBITDA(1) in $460 - $464 million range(2) • Free cash flow(1) to exceed net income (1) Non-GAAP measur
Slide 12: 3Q FY20 Summary
3Q FY20 SUMMARY $ millions 3Q FY20 3Q FY19 Change Net Sales $492 $485 1% Growth from: Core (1) 1% Acquisitions 1% Translation (1%) Adjusted EBITDA (1) $107 $103 4% % of Sales 21.8% 21.3% 50 bps (1) Non-GAAP measure defined, reconciled, and discussed in the earnings release included in the Form 8-K f
Slide 13: Process & Motion Control
PROCESS & MOTION CONTROL $ millions 3Q FY20 3Q FY19 Change End-Market Outlook Assumed in Guidance Industrial Distribution Net Sales $328 $327 0% US & Canada Growth from: Europe Core (1) 0% Rest of World Acquisitions 1% Translation (1%) Food & Beverage: Global Commercial Aerospace: Global (1) Adjuste
Slide 14: Water Management
WATER MANAGEMENT $ millions 3Q FY20 3Q FY19 Change Net Sales $164 $158 4% End-Market Outlook Assumed in Guidance Growth from: Nonresidential Construction: US & Canada Core (1) 3% Commercial & Industrial Acquisitions 1% Institutional Translation 0% Residential Construction: US & Canada Adjusted EBITD
Slide 15: Cash Flow & Balance Sheet
CASH FLOW & BALANCE SHEET (1) Free Cash Flow is defined as Cash from Operations less Capital Expenditures, and is a Non-GAAP measure defined, reconciled, and discussed in the earnings release included in the Form 8-K filed with the Securities and Exchange Commission on January 28, 2020. (2) Net Debt
Slide 16: Rexnord Corporation
1/28/2020 Rexnord Corporation 16
Slide 17: Appendix
REXNORD APPENDIX
Slide 18: Fiscal Year 2020 Outlook
FISCAL YEAR 2020 OUTLOOK Core sales % growth(1) + Low Single Digit (net of approximately 150 bps PLS impact) Adjusted EBITDA(1) $460 - $464 million Free Cash Flow(1) > Net Income Depreciation & Amortization(2) ~ $ 84 million Interest Expense (LIBOR < 3%) ~ $ 59 million Effective Tax Rate(3) ~ 25% Ca