Zurn Elkay Water Solutions Corporation · NYSE:ZWS
Zurn Elkay Water Solutions — Rexnord — Barclays Industrial Select Conference 2019
28 slides from Zurn Elkay Water Solutions's conference presentation, Feb 21, 2019
Slide 1: Barclays Industrial Select Conference
BARCLAYS INDUSTRIAL SELECT CONFERENCE 21 February 2019
Slide 2: Safe Harbor Statements
SAFE HARBOR STATEMENTS This presentation contains “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looki
Slide 3: Rexnord Profile
REXNORD PROFILE $4.5 $1.85 20.9% 104% Enterprise Revenue Adjusted Free Cash Flow Value ($B) ($B) EBITDA Margin Conversion Concentrated Multi-Platform Industrial Sustainable Competitive Advantages Rexnord Business System Solving Smarter Note: Data are Fiscal Year 2018 Continuing Operations. Adjusted
Slide 4: Platform Approach
PLATFORM APPROACH Process & Motion Control 1400 28% 1200 26% 1000 24% The best provider of industrial digi-mechanical productivity 800 600 22% 20% and reliability solutions 400 18% 200 16% • Amplifying competitive advantages in scale & scope 0 FY17 FY18 9MFY18 9MFY19 14% • Expanding in product adjac
Slide 5: Solving Smarter
SOLVING SMARTER We Advance the Efficient Use of Resources through Smarter Solutions • Highly-engineered components • Specification for the application by end user • Small contribution to system cost • Large contribution to system reliability • Distribution channel complexity • Unmatched product scop
Slide 6: Rexnord Business System
REXNORD BUSINESS SYSTEM Integrated strategic planning & operational management system Structured approach to 17 Core Business Processes Four guiding principles: People Performance Process Plan •Health & Safety •Strategic •Continuous •Customer •Total Associate Planning Improvement Experience Engageme
Slide 7: RBS Focus: Amplify, Expand, Accelerate
RBS FOCUS: AMPLIFY, EXPAND, ACCELERATE • Competitive Advantages AMPLIFY • Customer Satisfaction • Adjacent Products & Targeted Verticals EXPAND • Strategic Acquisitions • Innovation • Structural Cost Reduction ACCELERATE Leveraging trusted brands, customer value delivery, scale & scope 7
Slide 8: Fiscal 2019 Strategic Priorities
FISCAL 2019 STRATEGIC PRIORITIES COMMERCIAL OPERATIONAL INNOVATION EXCELLENCE EXCELLENCE • Strategic Account • SCOFR 2.0 • PMC Connected Structure Product Line • Product Line Extension • inSpec Simplification Powered by Zurn • Zurn Connected Valves • Centa • Strategic Pricing Process Improvement • I
Slide 9: DiRXN = 'Direction' = Digital Rexnord
DIRXN = ‘DIRECTION’ = DIGITAL REXNORD Booking orders for SCMS digitally-connected component retrofit solutions 9
Slide 10: Cash Flow & Balance Sheet Update
CASH FLOW & BALANCE SHEET UPDATE Debt Reduction ✓ Target to operate over longer-term with Net Debt / Adjusted EBITDA ratio of 2x - 3x Strategic Acquisitions ✓ Strategic process focused on accelerating penetration of adjacent product categories, targeted verticals Net Debt Leverage Ratio (1) Free Cas
Slide 11: Structural Changes Since 2010
STRUCTURAL CHANGES SINCE 2010 ✓ Established innovation pipeline ✓ Fundamentally lower distribution channel inventory levels ✓ Divested low-return and lumpy project exposure ✓ Reduced mining sector exposure ✓ Increased consumer sector exposure ✓ SCOFR structural cost reductions ✓ Reduced plant footpr
Slide 12: Key Takeaways
KEY TAKEAWAYS • Rexnord Business System is a Differentiator • Amplify Competitive Advantages, Customer Satisfaction • Expand in Adjacencies via Focused Investments • Accelerate Innovation, Structural Cost Reduction • Digital Enterprise Strategy Leverages Competitive Advantages • Platforms with Above
Slide 13: Appendix
REXNORD APPENDIX
Slide 14: Rexnord Platform Profiles
REXNORD PLATFORM PROFILES PROCESS & MOTION CONTROL WATER MANAGEMENT Mechanical Power Transmission Solutions Specification-Grade Commercial Plumbing Products • Plastic, Metal & Hybrid Modular Conveying Chain • Linear Drainage & Effluent Separation • Woven Metal Mesh Conveying Chain • Backflow Prevent
Slide 15: Rexnord Value Creation Model
REXNORD VALUE CREATION MODEL 15
Slide 16: DiRXN = Digital Rexnord
DIRXN = “DIRECTION” = DIGITAL REXNORD • Enterprise-wide initiative to enable improved customer productivity via digitally-connected tools, products and services • Differentiate by digitally connecting traditional mechanical solutions to user control systems, engineering & asset management software a
Slide 17: Context Is the IIoT Differentiator
CONTEXT IS THE IIoT DIFFERENTIATOR Deep Precise data: Improved institutional Component * Component status asset product on-board data * Pending issues utilization & knowledge & analysis & * Root causes system applications computation * Corrective actions productivity expertise Excessive vibration ?
Slide 18: PMC 'Digi-Mechanical' Portfolio
PMC “DIGI-MECHANICAL” PORTFOLIO 18
Slide 19: PMC Strategic Update
PMC STRATEGIC UPDATE • First Fit share growth to drive installed base, future MRO growth ✓ Achieved 50% expansion in First Fit wins in FY18 ✓ Implementing Strategic Account model in FY19 • Consumer Goods / Food portfolio expansion ✓ Accelerated by Cambridge acquisition & European localization ✓ Co-d
Slide 20: Zurn Delivers Value
ZURN DELIVERS VALUE Zurn influence throughout the value chain 20
Slide 21: Nonresidential Project Lifecycle
NONRESIDENTIAL PROJECT LIFECYCLE Delivering value at each stage of construction 21
Slide 22: Connected Water Products
CONNECTED WATER PRODUCTS Smart products maximize water system productivity for building owners 22
Slide 23: WM Strategic Update
WM STRATEGIC UPDATE • Enabling contractor adoption of Lean Construction Las Vegas Raiders Stadium Golden State Warriors Arena ✓ Dedicated Lean Construction contractor team ✓ Single source supply & pre-fab capabilities ✓ Labor savings can exceed 25% • Driving above-market core growth with spec share
Slide 24: Rexnord Acquisitions
REXNORD ACQUISITIONS Proprietary Internal RBS Strategic Identification & Negotiation & Integration Planning Cultivation Transaction Process • Strategic process focuses on market leadership, leveraging competitive advantages • Accelerates penetration of adjacent product categories, targeted vertical
Slide 25: RBS Case Study World Dryer
RBS CASE STUDY WORLD DRYER Evolving capabilities to drive profitable growth through SSD Simplify, Standardize, DiRXNize Simplification Results • Acquired October 2017 ✓ Consolidated product families ✓ Structural cost reduction • Annual sales ~$20 million ✓ Focused commercial actions • Footprint redu
Slide 26: Capital Allocation
CAPITAL ALLOCATION • Debt reduction has been the primary use of capital ✓ December 2017 debt refinancing ✓ Issued $500 million 4.875% Senior Notes due 2025 ✓ Repaid approximately $300 million net under credit agreement ✓ Amended credit agreement to reduce pricing, extend maturities ✓ No significant
Slide 27: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Fiscal Year End - March 31, ($ millions) 2015 2016 2017 2018 Q3 2019 Net income from continuing operations $103.7 $86.9 $91.7 $206.6 $52.9 Interest expense, net 87.0 90.8 88.3 75.1 16.8 Provision (benefit) for income taxes 23.4 27.8 15.6 (19.5) 9.1 Depreciation and amortizat
Slide 28: Non-GAAP Reconciliations (Continued)
NON-GAAP RECONCILIATIONS (CONTINUED) Q3 FY 2019 Q3 FY 2018 ($ millions, except per share amounts) Net Income EPS Net Income EPS Net income attributable to common stockholders $19.6 $0.16 $75.8 $0.62 Amortization 8.4 0.07 8.2 0.07 Restructuring Expense 2.6 0.02 3.2 0.03 Earnings from equity method in