Slide 1: 2013 Third Quarter Results
2013 Third Quarter Results October 30, 2013
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: Introductory Comments: Q3 Overview
Introductory Comments Q3 Overview Q3 Financial Highlights: EPS of $1.40 including $0.12 per share related to businesses reported as discontinued operations beginning in Q3 2013: EPS from continuing operations of $1.28, up 39% year-over-year Segment income margins improved 70 points year-over-year Ge
Slide 4: Q3 Results Versus Q3 Targets
Q3 Results Versus Q3 Targets ($ millions, except per share data) Q3 2013 Targets Q3 2013 Q3 2013 Results from Published July 31st Comparable Results (1) Continuing Operations Revenue $1,240 to $1,270 $1,197 $1,146 Segment Income $132 to $140 $138 $130 Segment Income % 10.7% to 11.1% 11.5% 11.3% Earn
Slide 5: Consolidated Q3 Results from Continuing Operations
Consolidated Q3 Results from Continuing Operations Revenue and Segment Income ($ millions) Revenue: Revenue Segment Income Margins (2.6%) year-over-year decline: (2.1%) organic decline $1,177 $1,146 (0.5%) currency impact 11.3% Segment Income: 10.6% Consolidated segment income of $130m, up 4% versus
Slide 6: 2013 Restructuring Actions
2013 Restructuring Actions ($ millions) Key restucturing actions: 2013E Restructuring Expense Increased to ~$35m Flow Technology: o ClydeUnion cost reduction in Europe and North America o European cost reduction in other businesses o New operational alignment $25 Thermal Equipment & Services: o Redu
Slide 7: New Operational Leadership Alignment
New Operational Leadership Alignment Key Leadership Changes Don Canterna retired from the company after 16 years of service The Flow Technology segment’s reporting units are now aligned by end market: Tony Renzi promoted to President of Flow Power & Energy Marc Michael promoted to President of Flow
Slide 8: Flow End Market Trends
Flow End Market Trends Food & Beverage Power & Energy Industrial Flow Components Oil & Gas Generally, steady aftermarket and Steady aftermarket and Demand for pipeline valves component orders component order trends continued to be strong Increased demand for Aftermarket order activity Systems dehydr
Slide 9: Power-Related End Market Trends
Power-Related End Market Trends Power Transformers (U.S.) Replacement demand for power transformers remained strong Market pricing remained competitive, with market lead times for medium power units stable Flat electricity demand and conservation initiatives are differentiating factors from prior in
Slide 10: Consolidated Backlog
Consolidated Backlog Sequential Backlog Analysis Total backlog increased 3.3% sequentially: ($ millions) 1.5% organic growth 1.8% currency impact $2,350 $2,314 $2,392 $296 $303 $328 Industrial Flow increased $74m or +5.6%: $717 Large project awards in oil & gas and food & beverage $693 $672 Thermal
Slide 11: Financial Analysis
Financial Analysis Jeremy Smeltser
Slide 12: Q3 Earnings Per Share Versus Guidance
Q3 Earnings Per Share Versus Guidance Actual Q3 EPS Versuse Guidance EPS Including Businesses First Reported as Discontinued Operations in Q3 2013 Q3 2013 EPS Guidance Midpoint $1.25 EPS From Continuing Operations Discrete tax benefits $0.07 Segment Income $0.05 $1.20 to $1.40 $1.30 $1.08 to $1.28 N
Slide 13: Q3 EPS From Continuing Operations Versus the Prior Year
Q3 Earnings Per Share From Continuing Operations Versus the Prior Year Year-Over-Year Comparison Q3 2012 EPS from continuing operations $0.92 Segment income: $1.28 Industrial $0.11 Flow $0.07 EPS from $0.92 Thermal ($0.08) Continuing Equity earnings $0.04 Operations Reduced share count $0.13 Lower p
Slide 14: Flow Technology Q3 Results
Flow Technology Q3 Results Q3 Year-Over-Year Analysis Revenue increased 0.5%: Revenue ($ millions) 0.3% organic growth; 0.2% currency benefit Increased sales of oil and gas components… Operating Margins …largely offset by lower sales of food and beverage systems, $649 $652 primarily due to three lar
Slide 15: Flow Technology Sequential Analysis
Flow Technology Sequential Analysis Sequential Backlog Change Sequential Revenue & Margins ($ millions) ($ millions) $730 to $1,359 $1,337 $1,318 $1,392 $750 $613 $653 $652 Backlog Revenue +6% Sequential Operating 13.4% to Change Margins 12.8% 13.7% 9.0% 10.2% -2% -1% -5% Q4 2012 Q1 2013 Q2 2013 Q3
Slide 16: Thermal Equipment & Services Q3 Results
Thermal Equipment & Services Q3 Results Q3 Year-Over-Year Analysis ($ millions) Revenue decreased (13.7%): Revenue (1.9%) currency impact Operating Margins (11.8%) organic decrease: $376 o Expected ramp down in South Africa ($22m) $324 o Q3 2012 revenue included a large cooling tower retrofit projec
Slide 17: Thermal Equipment & Services Sequential Analysis
Thermal Equipment & Services Sequential Analysis Sequential Backlog Change Sequential Revenue & Margins ($ millions) ($ millions) $350 to $501 $507 $375 $483 $465 $350 Backlog Ex- Revenue +6% $324 8.7% to South Africa $304 Operating Sequential $252 $305 7.5% 9.2% $192 Margins 6.7% Change South Afric
Slide 18: Industrial Products & Services Q3 Results
Industrial Products & Services Q3 Results Q3 Year-Over-Year Analysis ($ millions) Revenue Revenue increased 11.5%: Operating Margins 0.2% currency benefit 11.3% organic increase: $170 o Revenue increase was primarily due to higher fare collection system and power transformer sales $153 Segment Incom
Slide 19: Industrial Products & Services Sequential Analysis
Industrial Products & Services Sequential Analysis Sequential Backlog Change Sequential Revenue & Margins ($ millions) $230 to $328 $240 $290 $296 $303 Backlog Revenue +8% $172 $158 $170 16.9% to Sequential +2% +2% Operating 17.6% Change Margins 13.8% 14.5% 13.1% -5% Q4 2012 Q1 2013 Q2 2013 Q3 2013
Slide 20: 2013 Financial Targets
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Slide 21: Q4 Consolidated Financial Analysis for Continuing Operations
Q4 Consolidated Financial Analysis for Continuing Operations ($ millions, except per share data) Q4 2013 Targets for Year-Over-Year Variance Q4 2012 (1) Continuing Operations In Continuting Operations Expect growth Modestincurrency Flow andheadwind Industrial revenue Revenue $1,366 (4%) to +0% and s
Slide 22: 2013 Full Year Segment Targets
2013 Full Year Segment Targets ($ millions) 2012 Revenue & Previous Updated Commentary on Changes to Targets Segment 2013 Targets 2013 Targets Income % (1) $2,682 +0% to +3% (1%) to 0% Flow Technology Timing of revenue recognition on OE pumps 10.6% 11.4% to 11.7% 11.4% to 11.6% $1,491 (7%) to (9%) (
Slide 23: 2013 Full Year EPS From Continuing Operations Guidance
2013 Full Year EPS From Continuing Operations Guidance ($ millions, except per share data) EPS Guidance Bridge Previous EPS Guidance Mid-Point $4.38 2013E EPS from Continuing Operations Operations discontinued in Q3 2013 ($0.42) Guidance Range: $3.80 to $3.95 Key modeling assumptions: Additional res
Slide 24: Capital Allocation
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Slide 25: Financial Position
Financial Position ($ millions) 6/29/2013 9/28/2013 2013 Capital Allocation Priorities 1) Operational improvements and organic Cash $353 $491 growth initiatives: Restructuring actions Accounts $1,237 $1,200 Capital expenditures Receivable Innovation Total Assets $6,400 $6,549 2) Annual dividend ($1
Slide 26: Projected Liquidity
Projected Liquidity Projected Liquidity ($ millions) Amount Cash on Hand at September 28, 2013 $491 Q4 2013E Cash Outflows and Inflows 2013 targeted share repurchases remaining ($55) Planned dividend payments ($12) Q4 projected free cash flow from continuing operations $183 Q4 projected free cash fl
Slide 27: 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 28: Historical Capital Allocation
Historical Capital Allocation Share Repurchases & Dividends ~45m shares repurchased (2005-today) $3.0b Annual dividend of $1 per share Total Capital Allocated: ~$6.1b Acquisitions 85% of acquisition capital has focused on $1.9b building out Flow Technology platforms Divestiture proceeds: ~$4.3b Net
Slide 29: Executive Summary
Executive Summary Chris Kearney
Slide 30: 2013 Earnings Accretive Actions
2013 Earnings Accretive Actions Action Estimated EPS Benefit 1) ~$35m of annual cost savings from 2013 Annualized: ~$0.60 per share restructuring actions 2014 Incremental Benefit: ~$0.35 per share Annualized: ~$0.26 per share 2) $200m of share repurchases 2014 Incremental Benefit: ~$0.10 per share 3
Slide 31: Executive Summary
Executive Summary Executive Summary Improved operational performance in Q3: Segment margins improved 70 points year-over-year and 140 points sequentially $141m of free cash flow Transitioning to new operational alignment and executing restructuring actions Backlog increased sequentially Divesting ce
Slide 32: Questions?
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Slide 33: Appendix
SF-><. Appendix
Slide 34: 2013 Full Year EPS From Continuing Operations Guidance
2013 Full Year EPS From Continuing Operations Guidance Full Year EPS from Continuing Operations ($ millions, except per share data) Mid-Point Guidance Model 2013E Revenue $4,736 Segment income % 10.5% Corporate expense ($109) Pension & post retirement health care ($25) Stock-based compensation ($34)
Slide 35: Reconciliation of Discontinued Operations
Reconciliation of Discontinued Operations Reconciliation of Discontinued Operations ($ millions, except per share data) Three Months Ended September 28, 2013 Total Discontinued Continuing Operations Operations (1) Operations Revenue $1,197 $51 $1,146 Segment Income $138 $8 $130 Segment Income Margin
Slide 36: 2013 Key Metrics Restated to Exclude Discontinued Operations
2013 Key Metrics Restated to Exclude Discontinued Operations 2013 Key Metrics from Continuing Operations ($ millions, except per share data) Q4 2013E FY 2013E Q1 2013 Q2 2013 Q3 2013 Mid-Point Mid-Point Revenue $1,091 $1,162 $1,146 $1,338 $4,736 Segment Income $79 $115 $130 $176 $499 Segment Income
Slide 37: Industrial Products and Services and Other Restated
Industrial Products and Services and Other Restated to Exclude Discontinued Operations Restated 2012 & 2013 Quarterly Results ($ millions) Industrial Products & Services & Other Q4 2013E FY 2013E Q1 2012 Q2 2012 Q3 2012 Q4 2012 FY 2012 Q1 2013 Q2 2013 Q3 2013 Mid-Point Mid-Point Revenue $158 $156 $1
Slide 38: Q3 2013 Organic Revenue Growth Reconciliation
Q3 2013 Organic Revenue Growth Reconciliation Q3 2013 Organic Growth Reconciliation Three Months Ended September 28, 2013 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology 0.5% 0.0% 0.2% 0.3% Thermal Equipment & Services -13.7% 0.0% -1.9% -11.8% Industrial Products & Ser
Slide 39: 2013 Adjusted Free Cash Flow Reconciliation
2013 Adjusted Free Cash Flow Reconciliation 2013 Adjusted Free Cash Flow ($ millions) Three Months Ended Nine Months Ended September 28, 2013 September 28, 2013 Full Year 2013E Net cash from continuing operations $149 ($150) $45 to $75 Tax payment on the gain from the sale of Service Solutions $0 $1
Slide 40: Debt Reconciliation
Debt Reconciliation September 28, 2013 Debt Reconciliation ($ millions) 9/28/2013 Short-term debt $ 30 Current maturities of long-term debt 98 Long-term debt 1,559 Gross Debt $ 1,687 Less: Puchase card program and extended A/P programs (28) Adjusted Gross Debt $ 1,659 Less: Cash in excess of $50 (44
Slide 41: Bank EBITDA Reconciliation
Bank EBITDA Reconciliation ($ mi lli ons ) LTM 2013E Net Income $245 $193 Income tax provision (benefit) 18 50 Net interest expense 113 111 Income before interest and taxes $375 $354 Depreciation, intangible amortization expense and write off of goodwill and intangibles 113 116 EBITDA $488 $470 Adju
Slide 42: Q4 2012 Restated Adjusted Earnings Per Share
Q4 2012 Restated Adjusted Earnings Per Share Q4 2012 Earnings Per Share Reconciliation notes Earnings from continuing operations ($3.67) Impairment of goodwill and other intangible assets $5.19 related to Thermal Equipment segment Adjusted earnings per share from continuing operations $1.52 Q4 2012