Ingersoll Rand Inc. · NYSE:IR
Ingersoll Rand — Gardner Denver — Investor Presentation (July 2010)
36 slides from Ingersoll Rand's investor presentation, Jul 22, 2010
Slide 1: The Gardner Denver Way
Investor Presentation July 2010 The Gardner Denver Way
Slide 2: Safe Harbor Disclosure
All of the statements made by Gardner Denver in this presentation or made orally in connection with it, other than historical facts, are forward- looking statements. As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relatin
Slide 3: Agenda
A G E N D A Building The New Gardner Denver Transforming the Company Operational Excellence 1 Execution Update Execution Update 2 3 Future Growth
Slide 4: Gardner Denver Today
Gardner Denver Today 2009 Revenues $1.8 B % of revenues outside U.S. > 67% Global ranking in major products #1 or #2 Manufacturing facilities worldwide 40 Market capitalization $2.3 B
Slide 5: Successful Acquisition-Driven Growth Strategy
IN THE PAST Successful Acquisition-Driven Growth Strategy... (Actual Revenues $M) 99 00 01 02 03 04 05 06 07 08 09 United States 232.7 272.2 291.9 264.5 253.6 327.6 495.3 695.2 764.967 747.934 574.249 Europe 49.6 53.9 65.5 85.7 97.2 237.8 418.2 601.8 669.385 771.315 687.686 Asia 6.9 13.7 14.1 26 40
Slide 6: Built a Well-Diversified Business
United States Europe Asia Canada Latin America Other 574.249 687.686 287.383 45.056 75.535 108.236 Built a Well-Diversified Business Industrial Manufacturing Downstream Energy Upstream Energy Transportation Medical Mining and Construction Chemical Food and Beverage Environment Printing Paper Other 0
Slide 7: Market Outlook Snapshot
Economic Indicator Outlook Today Market Outlook Snapshot U.S. Industrial Production E.U. Industrial Production Oil and Gas China growth OEM applications Stable to positive; aftermarket products and services driven Well servicing demand improving; drilling pump demand promising Positive Positive Six
Slide 8: Realigned Operations in 2009: Two Focused Operating Segments
REALIGNED OPERATIONS IN 2009: Two Focused Operating Segments Industrial Products Group 58% of revenues Engineered Products Group Segment Key Products Top Industries Served Compressors (>50 psi) Blowers (<50 psi, vacuum) Manufacturing Transportation Mining / Construction Energy Reciprocating pumps Li
Slide 9: Industrial Products Group
United States Europe Asia Canada Latin America Other 24 47 16 2 3 8 Industrial Products Group Industrial Manufacturing Downstream Energy Transportation Medical Environmental Chemical Food and Beverage Printing Paper Auto Svcs Other Mining and Construction 0.41 0.06 0.11 0.04 0.02 0.02 0.09 0.04 0.01
Slide 10: Engineered Products Group
United States Europe Asia Canada Latin America Other 0.43 0.27 0.17 0.03 0.06 0.04 Engineered Products Group Industrial Manufacturing Upstream Energy Downstream Energy Transportation Medical Environmental Chemical Paper Other Mining & Construction 0.12 0.21 0.24 0.05 0.14 0.04 0.09 0.04 0.05 0.02 Re
Slide 11: Conditions Right for a Transformation
Conditions Right for a Transformation Last 10 years primary focus on external growth 22 acquisitions Significant integration, rationalization and margin expansion opportunities New CEO in 2008 Expertise in operational excellence Economic slowdown Added impetus Conditions right for transformation
Slide 12: A New Way Forward: The Gardner Denver Way
A NEW WAY FORWARD The Gardner Denver Way From a good company... .... To a great company CUSTOMERS SHAREHOLDERS EMPLOYEES Innovative High Velocity VALUE COMMITMENT RESOURCES
Slide 13: Our Vision for The New Gardner Denver
Our Vision for The New Gardner Denver Greater organic growth Operational excellence Improved profitability and cash flow Improved return on invested capital CUSTOMERS SHAREHOLDERS EMPLOYEES Innovative High Velocity VALUE COMMITMENT RESOURCES
Slide 14: Agenda
A G E N D A Building The New Gardner Denver Transforming the Company The Gardner Denver Way 1 Execution Update Execution Update 2 Future Growth 3
Slide 15: Priorities to Transform Gardner Denver
Priorities to Transform Gardner Denver Improve margins Streamline global footprint Reduce material costs Improve productivity Expand Cash Flow Accelerate inventory turns to 7-8X Targeted capital spending Divest excess assets Underpinned by operational excellence The new Gardner Denver
Slide 16: Improve Margins: Major Restructuring Projects Moving Forward
#1 IMPROVE MARGINS Major Restructuring Projects Moving Forward Completed Through 2Q10 CompAir administration integration Salaried staff reductions Facility rationalizations - - Hanover, MD - - Louisville, KY - - Piqua, OH - - Tulsa, OK Assembly - - Gloucester, UK - - Puchheim, Germany - - Sheboygan,
Slide 17: Case Study: Rationalization in Germany
Before After East 128500 67000 #1 IMPROVE MARGINS Case Study: Rationalization in Germany Merged Puchheim, Germany plant into Memmingen facility in 2009 Created efficient cells 108 manpower reduction 22% inventory reduction 48% reduction in manufacturing floor space (sq. ft.) Puchheim Memmingen
Slide 18: Delivering Significant Cost Savings
#1 IMPROVE MARGINS Delivering Significant Cost Savings Annual Savings Expected 2009 2010 Future years 2007 East 40 65 70 40 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Invested nearly $70M to realize these savings Reduced manpower by 2,100 or 25% since Sep-08
Slide 19: Increase Engineered Products Group Trough Margins 200 BPS
#1 IMPROVE MARGINS Increase Engineered Products Group Trough Margins 200 BPS Adjusted Operating Margins (1) Peak Trough New Trough Q110 Q210 East 0.245 0.13 0.15 0.16 0.195 Closed 3 facilities Reduced material costs Ongoing operational improvements Despite revenue decline of 20-25% (1) See note on s
Slide 20: Expand Margins in Industrial Products Group
#1 IMPROVE MARGINS Expand Margins in Industrial Products Group Adjusted Operating Margins (1) 2007* 2008* 1H09 2H09 Q110 Q210 2014 Goal East 0.103 0.088 0.02 0.074 0.083 0.086 0.14 Goal: "14 x 14" Integrated CompAir Closed 5 facilities Reduced material costs Ongoing operational improvements * Result
Slide 21: Strong Balance Sheet and Growing Free Cash Flow
#2 EXPAND CASH FLOW Strong Balance Sheet and Growing Free Cash Flow Excellent liquidity $111M cash $294M unused credit Debt to total capitalization of 23.0% Credit rating of BB/Ba1 Strong Balance Sheet (June 30, 2010) Growing Free Cash Flow * Capex 2004 2005 2006 2007 2008 2009 East 20 36 41 48 41 4
Slide 22: Gardner Denver Remains Solidly Profitable Despite Economic Headwinds
IN SUMMARY Gardner Denver Remains Solidly Profitable .... Despite Economic Headwinds 2008 2009 East 1000 800 Revenues ($) 2008 2009 East 3.54 2.4 Adjusted DEPS (1) ($) Transformation will lead to new peak earnings $1.8B (1) See note on slide 35
Slide 23: Agenda
A G E N D A Building The New Gardner Denver Transforming the Company The Gardner Denver Way 1 Future Growth Execution Update Future Growth 3 Execution Update 2
Slide 24: Powerful New Culture Will Drive Growth
Powerful New Culture Will Drive Growth Product focus Medium innovation Primary growth Acquisitions Top down culture Profitable Customer focus High innovation Balanced growth Organic and acquisitions Inclusive culture Highly profitable Past Present
Slide 25: Five Point Growth Strategy
Five Point Growth Strategy 5. Margin improvement 4. Selective acquisitions 3. Innovative products 2. Aftermarket growth 1. Organic growth
Slide 26: Innovative Products: Quantima Case Study
A CLOSER LOOK AT GROWTH INITIATIVES Innovative Products: Quantima Case Study Product CompAir Quantima Compressor Innovations No gear box, no oil, no mechanical bearings, no friction The customer Murray Goulburn Co-operative Co. Ltd. Results Energy use a 35% Service cost a 64% Annualized savings of 1
Slide 27: Growth Potential in Aftermarket
A CLOSER LOOK AT GROWTH INITIATIVES Growth Potential in Aftermarket Broaden direct service capabilities Enhance product offering Design in proprietary features Higher margin revenue growth Sales Sales Today 78 22 25-30% Aftermarket Today Sales Sales Today 60 40 40-45% Aftermarket Future (% of total
Slide 28: Aftermarket Growth: Vacuum Pumps Case Study
A CLOSER LOOK AT GROWTH INITIATIVES After Market Growth: Vacuum Pumps Case Study Existing Product Nash CL has a large installed base Recognized reliability Product design leads to durability in harsh environments Requires a constant flow of liquid to operate ECO-FLOTM Technology Developed New, innov
Slide 29: Driving >$120M Operating Margin Expansion With Zero Top Line Growth
RESULTS WE EXPECT Driving >$120M Operating Margin Expansion With Zero Top Line Growth Industrial Products Group Adjusted Operating Margin (1) 1H 2009 Goal 2014 East 2 2 6 10 14 4 4 4 Restructuring Productivity Sourcing "14 by 14" Impact Adds $120-$125 million to operating income Adds $1.62-$1.68 to
Slide 30: Gardner Denver 3-5 Years Out
Gardner Denver 3-5 years out Higher margins in both segments Aftermarket growth reduces revenue cyclicality Expanded share in target markets served Inventory turns improve 2-3 times Higher ROIC Balanced growth - organic and acquisitions
Slide 31: Wide Range of Growth Initiatives Underway
Quality improvements Extended service contracts Shorter lead times Share gains Low cost sourcing Employee development Reduced cyclicality ERP implementation Modified distribution model Penetrate key market segments Proprietary aftermarket Lean principles Customer-driven innovation Retrofit products
Slide 32: Building The New Gardner Denver
Lean principles ERP implementation Proprietary aftermarket Employee development Low cost sourcing Penetrate key market segments Quality improvements Share gains Modified distribution model Extended service contracts Customer-driven innovation Shorter lead times Retrofit products Process improvements
Slide 33: Why Invest in Gardner Denver
Why Invest in Gardner Denver Leading position in served market segments Multi-year profit improvement program underway Delivering > $120 M margin improvements with zero top line growth Building a new, high performance company
Slide 34: The Gardner Denver Way
Investor Presentation July 2010 The Gardner Denver Way
Slide 35: Presentation Notes
Presentation Notes Note 1: Adjusted Operating Income, Adjusted Operating Margins, Adjusted Net Income and Adjusted DEPS are financial measures that are not in accordance with US GAAP. Adjusted Operating Income, Adjusted Operating Margins and Adjusted DEPS excludes the net impact of expenses incurred
Slide 36: Significant Operating Margin Improvement Opportunities
Significant Operating Margin Improvement Opportunities The Company's long-term target of 14.0 percent operating margin in the IPG segment has the potential to yield approximately $1.63 in additional DEPS ($ in millions, except per share data) GDI Industrial Products Group 1H 2009 annualized segment