Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll Rand — 2017 Barclays Industrial Select Conference
47 slides from Trane Technologies's conference presentation, Mar 23, 2017
Slide 1: Ingersoll Rand advances the quality of life
Ingersoll Rand advances the quality of life by creating comfortable, sustainable and efficient environments. Ingersoll Rand (NYSE:IR) advances the quality of life by creating comfortable, sustainable and efficient environments. Our people and our family of brands—including Club Car®, Ingersoll Rand®
Slide 2: Safe Harbor
Safe Harbor This presentation includes “forward-looking statements,” which are statements that are not historical facts, including statements that relate to the mix of and demand for our products; performance of the markets in which we operate; our share repurchase program including the amount of sh
Slide 3: Key Facts
Key Key Facts Facts Company Background Company Background Trades on NYSE • Ingersoll Rand is 145 years • Ingersoll Rand is • Ingersoll Rand has been old and was first incorporated in Swords, listed continuously on the incorporated in 1905 Ireland New York Stock Exchange since October 11, 1906 • $13.
Slide 4: Climate Segment An Unmatched Strategic Position
Climate Segment An Unmatched Strategic Position • A ~$10B group of six growth-oriented SBUs led by high-performing leaders and teams • Trane and Thermo King are world leaders in HVAC and refrigerated transportation • An outstanding network of global operations, channels and employees • Stronger toge
Slide 5: Our Industrial Businesses are in Leading Positions
Our Industrial Businesses are in Leading Positions • A $3.0B group of five growth-oriented Strategic Business Units • Ingersoll Rand, ARO and Club Car are #1 or #2 brands in their core markets • World-class engineered and mission-critical products, systems and services • Balanced across industries,
Slide 6: 2016 Revenue Profile
2016 Revenue Profile Represents Diverse End Markets and Geography By End Markets Adjusted Operating Margins By Segment Non-Res 31% 11.9 Building 11.4 Industrial 11.0 % (N. America) % % 23% 9.6 % Non-Res Building 16% Climate (Overseas) 77% 2013 2014 2015 2016 Residential, 14% (N. America) By Geograph
Slide 7: Ingersoll Rand: Foundational Strengths
Ingersoll Rand: Foundational Strengths • Leading global brands and market positions • Strong long-term growth drivers - Macro drivers are energy efficiency and sustainability - Large installed base drives replacement business and parts and service growth - Global footprint and exposure to attractive
Slide 8: Ingersoll Rand Possesses Expertise to Address Pressing World Challenges
Ingersoll Rand Possesses Expertise to Address Pressing World Challenges Energy Consumption Urbanization Food & Water Scarcity Climate Change Industrial Productivity & Efficiency 8 8
Slide 9: Strategic Foundation Continues to Underpin Top-Quartile Performance
Strategic Strategic Foundation Foundation Continues Continues toto Underpin Underpin Top-Quartile Top-Quartile Performance Performance Sustainable and Profitable Growth, Cash Flow and Shareholder Value Cash Flow / Sustained Operational Dynamic Winning Growth Excellence Capital Culture Allocation Wel
Slide 10: Steady Operating Performance Improvement
Steady SteadyOperating operatingPerformance performanceImprovement improvement In Billions Net Revenue Adjusted EPS $5.00 $14.0 $4.00 16% CAGR $13.5 3% CAGR $3.00 $13.0 $2.00 $12.5 $12.0 $1.00 $11.5 $0.00 2013 2014 2015 2016 2013 2014 2015 2016 Cash Flow ROIC Adjusted Operating Margin 14% 25% 2.3 Pp
Slide 11: Strong Balance Sheet and Free Cash Flow
Strong Balance Sheet and Free Cash Flow $ Millions YE 13 YE 14 YE 15 YE 16 Cash 1,937 1,705 737 1,715 Debt 3,521 4,224 4,218 4,070 Net Debt 1,584 2,519 3,481 2,355 $ Millions Free Cash Flow 1,345** 1,151* 985** 810 862 $5.14/share Post Security Spin 2013 2014 2015 2016 • 2011 to 2016 avg. FCF % of n
Slide 12: 2016 Dynamic Capital Allocation Focused on Delivering High Returns
2016 Dynamic Capital Allocation Focused on Delivering High Returns Competitive Dividend Payout Strategic Business Maintained Strong Investment Balance Sheet $1.60 at BBB Metrics $1.36 $1.16 $1.00 $0.84 $0.64 2012 2013 2014 2015 2016 2017F Digital 2016 dividend increased to $1.60/ No meaningful
Slide 13: Much Progress… More Opportunity Ahead
Much Progress… More Opportunity Ahead • Strong momentum and further upside ‒ Attractive end markets ‒ Leading brands and growth through innovation ‒ Substantial position in developing markets with significant potential • Excellent management team executing consistently on strategy • Value creation m
Slide 14: Appendix
LEY Ingersoll Rand. Appendix
Slide 15: Our Climate Businesses
Our Climate Businesses COMMERCIAL HVAC Air conditioning systems, services and solutions. Innovative solutions geared toward making high performance buildings reliable and safe, as well as healthy, comfortable and efficient RESIDENTIAL HVAC Heating, cooling, thermostat controls and home automation fo
Slide 16: Our Industrial Businesses
Our Industrial Businesses COMPRESSION TECHNOLOGIES AND SERVICES CLUB CAR Rotary, centrifugal and reciprocating air compressors, Golf, commercial and utility and treatment products with Comprehensive multi- vehicles for transportation year service agreements, audits, parts, and accessories POWER TOOL
Slide 17: Fourth-Quarter 2016 Results
Fourth-Quarter 2016 Results February 1, 2017
Slide 18: Strategic Foundation Continues to Underpin Top-Quartile Performance
Strategic Foundation Continues to Underpin Top-Quartile Performance Sustainable and Profitable Growth, Cash Flow and Shareholder Value Cash Flow / Sustained Operational Dynamic Winning Growth Excellence Capital Culture Allocation Well positioned in both Strong, recognized brands Leading market share
Slide 19: Consistent Progress Against Key Metrics
Consistent Progress Against Key Metrics* Full Year 2016 Versus 2015 +2% reported Net Revenue $13,509M +3% organic Operating Margin 11.6% +60 bps Adj. Continuing EPS* $4.13 +11% Free Cash Flow* $1.35B +37% >100% adj. net income • FCF was 121% of adjusted net income* • Full-year operating leverage of
Slide 20: Steady Operating Performance Improvement
Steady Operating Performance Improvement In Billions Net Revenue Adjusted EPS $5.00 $14.0 $4.00 16% CAGR $13.5 3% CAGR $3.00 $13.0 $2.00 $12.5 $12.0 $1.00 $11.5 $0.00 2013 2014 2015 2016 2013 2014 2015 2016 Cash Flow ROIC Adjusted Operating Margin 14% 25% 2.3 Ppts 6 Ppts 12% 20% 10% 15% 8% 6% 10% 4%
Slide 21: Key Takeaways Q4 2016
Key Takeaways Q4 2016 • Continued strong operating results – FCF $353M in Q4; $1.35B 2016 – Combined operating results for segments exceeded guidance • Robust Commercial & Residential performance – Commercial bookings up high-single digits & Residential bookings up low-teens – Margin expansion in bo
Slide 22: Q4 2016 Guidance to Actual Bridge
Q4 2016 Guidance to Actual Bridge Q4 2016 Adjusted EPS Guidance (at mid-point) $0.91 Operations earnings 0.01 Corporate Costs (0.04) Foreign Exchange Losses (0.01) Higher Tax rate (0.03) Q4 Actual Adjusted EPS $0.84 Highlights • Combined operating results for Climate & Industrial exceeded guidance.
Slide 23: Q4 Total Company Performance
Q4 Total Company Performance Net Revenue Operating Margin Adj. OI + D&A %** -80 bps +1% 14.2% -50 bps $3,326 $3,359 10.8% 13.4% +2% Organic 10.3% Adj. Operating Margin* 11.3% 10.8% Q4 '15 Q4 '16 Q4 '15 Q4 '16 Q4 '15 Q4 '16 Highlights • Revenue up 1%, +2% organic • Adj. margin 10.8%, down 50 bps Y-O-
Slide 24: Very Strong Q4 Bookings Led by Commercial and Residential Businesses
Very Strong Q4 Bookings Led by Commercial and Residential Businesses Y-O-Y Climate C Y-O-Y Change in Organic Bookings % Reported Organic Change Commercial HVAC + low-teens - N. America + low-teens Q1 2015 3% 5% - L. America + low-teens Q2 2% 4% - EMEA + mid-single digits - Asia + high-teens Q3 (2%)
Slide 25: Q4 Segment Organic Revenue Change by Region
CONSOLIDATED RESULTS Q4 Segment Organic Revenue Change by Region Europe North America Climate Climate Industrial Industrial Middle East/Africa Asia Climate Latin America Industrial Climate Climate Industrial Industrial Revenue change Y-O-Y Q4 Reported Q4 Organic Climate +3% +4% Industrial -4% -3% To
Slide 26: Lower Q4 Margin Primarily due to Steel Inflation and Higher Costs
Enterprise Lower Q4 Margin Primarily due to Steel Inflation and Higher Than Anticipated Corporate Costs -50 bps 10.8% 0.4 (0.4) (0.2) (0.3) 10.3% (0.2) Investment (0.1) Other/Rest 4Q 2015 Volume / Mix / FX Price/Material Productivity/Other Investment/Other 4Q 2016 Inflation Inflation Highlights • Im
Slide 27: Q4 Strong Commercial and Residential HVAC Offsetting Transport Results
CLIMATE SEGMENT Q4 Strong Commercial and Residential HVAC Offsetting Transport Results Net Revenue Operating Margin Adj. OI + D&A %** +70 bps +40 bps +3% 15.8% 15.4% $2,492 +4% $2,559 13.6% Organic 12.9% Adj. Operating Margin* 12.9% 13.6% Q4 '15 Q4 '16 Q4 '15 Q4 '16 Q4 '15 Q4 '16 Highlights • Strong
Slide 28: Q4 Organic Revenues Declined by 3%
INDUSTRIAL SEGMENT Q4 Organic Revenues Declined by 3% Net Revenue Operating Margin Adj. OI + D&A %** -4% -230 bps $834 15.8% $800 -220 bps -3% 13.5% Organic 12.7% 10.5% Adj. Operating Margin* 13.8% 11.4% Q4 '15 Q4 '16 Q4 '15 Q4 '16 Q4 '15 Q4 '16 Highlights • Q4 performance slightly exceeds revenue a
Slide 29: Strong Balance Sheet and Free Cash Flow
Strong Balance Sheet and Free Cash Flow $ Millions YE 13 YE 14 YE 15 YE 16 Cash 1,937 1,705 737 1,715 Debt 3,521 4,224 4,218 4,070 Net Debt 1,584 2,519 3,481 2,355 $ Millions Free Cash Flow 1,345** 1,151* 985** 810 862 $5.14/share Post Security Spin 2013 2014 2015 2016 • 2011 to 2016 avg. FCF % of n
Slide 30: 2016 Dynamic Capital Allocation Focused on Delivering High Returns
2016 Dynamic Capital Allocation Focused on Delivering High Returns Strategic Business Maintained Strong Competitive Dividend Payout Investment Balance Sheet $1.60 at BBB Metrics $1.36 $1.16 $1.00 $0.84 $0.64 2012 2013 2014 2015 2016 2017F Digital No meaningful debt Dividend increased to $1.60
Slide 31: Guidance
LEY Ingersoll Rand. Guidance
Slide 32: 2017 Forecast for End-Market Performance
2017 Forecast for End-Market Performance End Markets Organic Revenue Americas EMEA Asia Guidance Commercial HVAC Up mid-single digits Residential HVAC Up mid-single digits Transport Down low-single digits Compression-related Down low-single digits & Industrial Products Golf / Utility Flat/Up low-sin
Slide 33: 2017 Enterprise Guidance
2017 Enterprise Guidance FY Guidance Climate ‒ Revenue Reported ~3% ‒ Revenue Organic ~4% Adjusted Operating Margin 14.5% to 15.0% Industrial ‒ Revenue Reported ~-2% ‒ Revenue Organic ~-1% Adjusted Operating Margin 11.0% to 12.0% Total ‒ Revenue Reported ~2% ‒ Revenue Organic ~3% Adjusted Operating
Slide 34: 2017 Guidance: Full-year Continuing Adjusted EPS $4.30 to $4.50
2017 Guidance: Full-year Continuing Adjusted EPS $4.30 to $4.50 Full Year Y-O-Y change in revenue • Reported ~2% • Organic ~3% EPS continuing $4.15 to $4.35 Restructuring – (add back) ($0.15) EPS continuing – adjusted $4.30 to $4.50 EPS – discontinued ($0.13) Share Count – Millions ~262 Free Cash Fl
Slide 35: 2017 Capital Allocation Priorities
2017 Capital Allocation Priorities • 2017 expected FCF range of $1.1B to $1.2B • Continued investment in the core business - Technology, channel expansion and productivity enhancements • Dividends of ~$420M ($1.60 per share, annualized) • Target deployment of $1.5B for share buybacks and acquisition
Slide 36: Topics of Interest for 2017
Topics of Interest for 2017 • U.S. Manufacturing - In-region for-region manufacturing and supply chain strategy - Sourcing with local U.S. vendors to lower manufacturing cycle time - ~95% of finished goods sold in U.S. are manufactured in the U.S. Net Exporter • U.S. Corporate Tax Rate Reduction -
Slide 37: Topics of Interest for 2017
Topics of Interest for 2017 • Status of Industrial Segment - Solid Q4 results - Growth in food, pharma and tech verticals and aftermarket soft in general industrial, large compressors and energy - OPEX gains, restructuring and cost reductions drive improved operating margins in 2017 despite low-sing
Slide 38: Topics of Interest for 2017
Topics of Interest for 2017 • Currency impact on 2017 - ~35% of revenues outside U.S. - Expect weaker Euro and Asian currencies - Net currency expected to have a ~1 percentage point drag on revenues and a ~10 cent negative impact on 2017 EPS • Price/Cost 2017 - Material inflation in Q4 results - 201
Slide 39: Summary: Top Quartile Performance with Industrial Improving
Summary: Top Quartile Performance with Industrial Improving • Continued strong 2016 results driven by execution of our business operating system • Strong 2016 full-year cash conversion resulted in $1.35B of FCF • Top-quartile organic growth, EPS growth and cash flow percentage of net income • Commer
Slide 40: Appendix
LEY Ingersoll Rand. Appendix
Slide 41: Q4 Organic Revenue Up 2% Year-Over-Year
Q4 Organic Revenue Up 2% Year-Over-Year Reported 2015 2016 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Climate 6% 2% 4% 2% 3% 3% 4% 3% 3% 3% Industrial 7% (1%) (2%) 5% 2% (7%) (4%) Flat (4%) (4%) Total 6% 2% 3% 3% 3% Flat 2% 2% 1% 2% 2013 Organic* 2015 2016 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 4Q FY Climate 9% 5% 8% 5% 7% 4%
Slide 42: Q4 Revenue Up 1% and Organic Up 2%
Q4 Revenue Up 1% and Organic Up 2% Segment Revenue Change 3% Climate 4% Reported -4% Organic* Industrial -3% Geographic Revenue Change N.A. Organic +6% 5% Americas 5% Europe, Middle -10% East, Africa -7% Reported Organic* Asia -3% Flat Organic 42 *Organic revenues excludes acquisitions and currency
Slide 43: Q4 2016 Y-O-Y Revenue Change
Q4 2016 Y-O-Y Revenue Change Reported Organic Climate - Commercial HVAC + Low-single + Mid-single - Residential HVAC + Low teens + Low-teens - Transport - Mid-single - Mid-single Total Climate 3% 4% Industrial - Compression-related Products - Mid-single - Low-single - Industrial Products - High-sing
Slide 44: Full-Year 2017 Guidance Bridge
Full-Year 2017 Guidance Bridge 2016 EPS Continuing Operations (GAAP) $5.52 2016 Restructuring + other one-time items* (1.39) Operations – includes ($0.15) of restructuring 0.29 to 0.49 Currency (0.10) Investments (0.15) Tax rate/other (0.02) 2017 EPS Continuing Reported (GAAP) $4.15 to $4.35 2017 fo
Slide 45: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Organic revenue is defined as GAAP net revenues adjusted for the impact of currency and acquisitions. Organic bookings is defined as reported orders closed/completed in the current period adjusted for the impact of currency and acquisitions. • Currency impacts on net re
Slide 46: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Free cash flow in 2016 and 2015 is defined as net cash provided by operating activities, less capital expenditures, plus cash payments for restructuring. In 2015 this definition also excluded the cash impact of the IRS agreement which occurred in the third and fourth qu
Slide 47: Ingersoll Rand
am) Ingersoll Rand.
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