Slide 1: 2014 First Quarter Results
2014 First Quarter Results April 30, 2014
Slide 2: Forward-looking statements disclaimer
Certain statements contained in this presentation that are not historical facts, including any statements as to future market conditions, results of operations and financial projections, are forward-looking statements and are thus prospective. These forward-looking statements are subject to risks, u
Slide 3: Q1 Financial Overview
Q1 Financial Overview Key Financial Information Adjusted earnings per share from continuing operations of $0.27 Segment income increased 23% over the prior year to $98m Segment operating income margin improved 180 points year-over-year to 9.1%: Flow segment operating margin increased 170 points Ther
Slide 4: Capital Allocation and Strategic Update
Capital Allocation and Strategic Update Strategic Information Increased annual dividend by 50% to $1.50 per share To date, completed ~$200m of share repurchases (~2m shares) on $500m 10b5-1 share repurchase plan Completed U.S. Qualified Pension Plan actions Gross debt to EBITDA now at 2.0x after com
Slide 5: Restructuring Actions
Restructuring Actions Estimated Restructuring Over the Balance of 2014E Actual Restructuring Expense Q1 2014 Analysis: ($ millions) $32 Primarily actions to further reduce ClydeUnion’s European cost structure $23 ~$25 $21 ~$15 Q2-Q4E 2014 Full Year Target: ~$25m of full year restructuring expense $1
Slide 6: Flow End Market Trends
Flow End Market Trends Food & Beverage Power & Energy Industrial Flow Components Oil & Gas Q1 orders up over prior year Positive, steady aftermarket and Demand for pipeline valves driven by dehydration equipment component order trends steady at a high level and heat exchangers Aftermarket order acti
Slide 7: End Market Trends for Power Transformers and Thermal Equipment
End Market Trends for Power Transformers and Thermal Equipment Power Transformers (U.S.) No significant changes in market trends during Q1 Replacement demand for power transformers remained strong Market pricing remained competitive, with market lead times for medium power units stable Winter weathe
Slide 8: 2014 Financial Guidance
2014 Financial Guidance 2014 Guidance on a Continuing Operations Basis Revenue Segment Margin Growth Improvement Adjusted Earnings Per Share Flow segment +3% to +6% +100 points $5.00 to $5.50 Thermal segment (2%) to +2% +40 points Adjusted Free Cash Flow Industrial segment +6 to +10% +80 points $225
Slide 9: Financial Analysis
Financial Analysis Jeremy Smeltser
Slide 10: Q1 Earnings Per Share
Q1 Earnings Per Share Non-GAAP Reconciliation of EPS from Continuting Operations Diluted EPS from continuing operations $6.58 Gain on sale of joint venture interest ($7.00) Sale of interest in EGS joint venture Early extinguishment of debt $0.45 $500m bond redemption Non-service cost pension items $
Slide 11: Consolidated Q1 Results
Consolidated Q1 Results Q1 Year-Over-Year Analysis ($ millions) Revenue: Revenue Segment Income Margins (1.9%) year-over-year: (2.0%) organic decline $1,091 $1,069 0.1% currency benefit 9.1% 7.3% Segment Income: Consolidated segment income of $98m, up 23% versus prior year 180 points of margin impro
Slide 12: Flow Technology Q1 Results
Flow Technology Q1 Results Q1 Year-Over-Year Analysis Revenue increased modestly: Revenue ($ millions) 1% currency benefit Modest organic decline: Operating Margins Lower sales of ClydeUnion OE pumps, reflecting disciplined order acceptance $617 $613 Increased sales of: power and energy valves food
Slide 13: Flow Technology Backlog
Flow Technology Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog Q1 backlog up 4% over prior year period, $1,392 $1,387 $1,392 stable to prior quarter $1,337 $1,318 Strong pipeline of front log activity in longer cycle oil & gas and food & beverge projects Q1 2013 Q2 2013 Q3 2013
Slide 14: Thermal Equipment & Services Q1 Results
Thermal Equipment & Services Q1 Results Q1 Year-Over-Year Analysis ($ millions) Revenue decreased $26m, or 8.4%: Revenue (2.6%) currency impact Operating Margins (5.8%) organic decline: Expected ramp down in revenue related to $305 power projects in South Africa $280 Personal comfort heating revenue
Slide 15: Thermal Equipment & Services Backlog
Thermal Equipment & Services Backlog Sequential Backlog Analysis` ($ millions) Rest of World Backlog South Africa Backlog Core backlog up 16% in Q1 2014 Estimated contract price adjustments to South Africa backlog versus the prior year period $527 $538 $501 $507 $465 Continued progress on South Afri
Slide 16: Industrial Products & Services Q1 Results
Industrial Products & Services Q1 Results Q1 Year-Over-Year Analysis ($ millions) Revenue Operating Margins Revenue increased modestly: The severe winter weather delayed the $172 $173 shipment of 4 large power transformers, representing ~$10m in revenue Segment Income flat to prior year: 13.1% 12.9%
Slide 17: Industrial Products & Services Backlog
Industrial Products & Services Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog Q1 2014 backlog up 6% versus the prior year period and up 10% sequentially: $328 $313 $296 $303 $285 Includes $10m benefit from weather delayed transformer shipments Strong Q1 order volume for power t
Slide 18: Q2 Financial Targets and Financial Position Update
Q2 Financial Targets and Financial Position Update Jeremy Smeltser
Slide 19: Q2 Consolidated Financial Analysis
Q2 Consolidated Financial Analysis ($ millions, except per share data) Q2 2014 Q2 2013 Targets Comments Revenue $1,162 +1% to +5% Expect low to mid-single digit total growth Segment Income $115 $125 to $131 Targeting ~11% growth Segment Income % 9.9% 10.5% to 10.8% Targeting 60 to 90 points of margi
Slide 20: Financial Position
Financial Position Leverage and Balance Sheet Review Reduced total debt by $549m, or 33%, during Q1 Gross Leverage Gross leverage reduced to 2.0x, within target range Net Leverage 4.0x $486m of cash on hand at end of Q1 3.1x 3.1x Estimated Q2-Q4 2014 cash inflows: 3.0x 2.8x ~$320m of adjusted free c
Slide 21: Executive Summary
Executive Summary Chris Kearney
Slide 22: Capital Allocation Discipline
Capital Allocation Discipline Methodology Expected Outcome 1) Utilize strategic planning process to evaluate Quantify projected future cash flows and future revenue and earnings growth estimate total company valuation 2) Maintain target capital structure and Gross Debt to EBITDA(1) target range: 1.5
Slide 23: Executive Summary
Executive Summary Key Investor Messages 1) Solid Q1 operational performance with significant progress on strategic actions 2) Remain committed to leaner cost structure and continued operating improvement: Focused on achieving 2014 and long-term margin targets >100% conversion of net income to free c
Slide 24: Questions?
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Slide 25: Appendix
SI-><. Appendix
Slide 26: Q1 Earnings Per Share
Q1 Earnings Per Share Non-GAAP Reconciliation of EPS from Continuting Operations Diluted EPS from continuing operations $6.58 Gain on sale of joint venture interest ($7.00) Sale of interest in EGS joint venture Early extinguishment of debt $0.45 $500m bond redemption Non-service cost pension items $
Slide 27: Q1 2014 Organic Revenue Growth Reconciliation
Q1 2014 Organic Revenue Growth Reconciliation Q1 2014 Organic Growth Reconciliation Three Months Ended March 29, 2014 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology 0.6% 0.0% 1.2% -0.6% Thermal Equipment & Services -8.4% 0.0% -2.6% -5.8% Industrial Products & Services
Slide 28: Free Cash Flow
Free Cash Flow Reconciliation to GAAP Cash Flow Statement Q2 through Q4 Q1 2014 2014E 2014E ($ millions) Net cash from continuing operations ($59) $134 $50 to $100 Tax payments on asset sale gains $260 $260 $260 Capital expenditures ($11) ($74) ($85) ($85) Adjusted free cash flow from continuing ope
Slide 29: Debt Reconciliation
Debt Reconciliation December 31, 2013 Debt Reconciliation ($ millions) 3/29/2014 Short-term debt $ 35 Current maturities of long-term debt 2 Long-term debt 1,089 Gross Debt $ 1,127 Less: Puchase card program and extended A/P programs (30) 3 Adjusted Gross Debt $ 1,097 Less: Cash in excess of $50 (43
Slide 30: Bank EBITDA Reconciliation
Bank EBITDA Reconciliation LTM as of ($ mil l i ons ) 3/29/2014 2014E Net Income $509 $237 Income tax provision (benefit) 207 82 Net interest expense 103 76 Income before interest and taxes $819 $395 Depreciation, intangible amortization expense and write off of goodwill and intangibles 120 113 EBIT